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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): October 28, 2010
CARRIZO OIL & GAS, INC.
(Exact name of registrant as specified in its charter)
         
Texas   000-29187-87   76-0415919
(State or other jurisdiction of
incorporation)
  (Commission
File Number)
  (I.R.S. Employer
Identification No.)
     
1000 Louisiana Street
Suite 1500
Houston, Texas
  77002
(Address of principal executive offices)   (Zip code)
Registrant’s telephone number, including area code: (713) 328-1000
Not applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 


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Item 1.01 Entry into a Material Definitive Agreement
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
Item 9.01 Financial Statements and Exhibits
SIGNATURES
Exhibit Index
EX-1.1
EX-4.2
EX-4.3
EX-10.1


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Item 1.01 Entry into a Material Definitive Agreement.
Purchase Agreement
     On October 28, 2010, Carrizo Oil & Gas, Inc. (the “Company”) and its wholly owned subsidiaries Bandelier Pipeline Holding, LLC, Carrizo (Marcellus) LLC, Carrizo (Marcellus) WV LLC, Carrizo Marcellus Holding Inc., CCBM, Inc., Chama Pipeline Holding LLC, CLLR, Inc, Hondo Pipeline, Inc. and Mescalero Pipeline, LLC (collectively, the “Subsidiary Guarantors”) entered into a Purchase Agreement (the “Purchase Agreement”) with Credit Suisse Securities (USA) LLC, Wells Fargo Securities, LLC and RBC Capital Markets Corporation (as predecessor in interest to RBC Capital Markets, LLC), as representatives of a group of initial purchasers (collectively, the “Initial Purchasers”), pursuant to which the Company agreed to sell $400 million aggregate principal amount of the Company’s 8.625% Senior Notes due 2018 (the “Senior Notes”). The Senior Notes were offered and sold in a transaction exempt from the registration requirements under the Securities Act of 1933, as amended (the “Securities Act”). The Senior Notes were resold to qualified institutional buyers in reliance on Rule 144A under the Securities Act and to non-U.S. persons in reliance on Regulation S. The offering closed on November 2, 2010.
     The Purchase Agreement contains customary representations and warranties of the parties and indemnification and contribution provisions under which the Company and the Subsidiary Guarantors, on one hand, and the Initial Purchasers, on the other, have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act.
     The Company intends to use a portion of the net proceeds from the offering, which net proceeds are expected to be approximately $387.7 million after deducting Initial Purchasers’ discounts and estimated offering expenses, to repay in full borrowings outstanding under its senior credit facility and to initially hold the remaining net proceeds in short-term investments. Upon closing of the concurrent tender offer for up to $300 million aggregate principal amount of its outstanding 4.375% convertible senior notes due 2028, Carrizo intends to use the net proceeds that were held in short-term investments, together with borrowings under its senior credit facility, to fund the tender offer. If the tender offer is not consummated, Carrizo intends to use the net proceeds from the offering that were held in short-term investments to fund in part its recently expanded capital expenditure program, including exploration in the Eagle Ford Shale and Niobrara formation, and for general corporate purposes.
     The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the agreement, which is attached as Exhibit 1.1 to this Current Report and incorporated by reference herein.
Registration Rights Agreement
     In connection with the issuance and sale of the Senior Notes, on November 2, 2010, the Company and the Subsidiary Guarantors entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with Credit Suisse Securities (USA) LLC, Wells Fargo Securities, LLC and RBC Capital Markets, LLC. Under the Registration Rights Agreement, the Company and the Subsidiary Guarantors agreed to use their commercially reasonable best efforts to file with the United States Securities and Exchange Commission and cause to become

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effective a registration statement relating to an offer to issue new notes having terms substantially identical to the Senior Notes in exchange for outstanding Senior Notes. In certain circumstances, the Issuers and the Subsidiary Guarantors may be required to use commercially reasonable efforts to file a shelf registration statement to cover resales of the Senior Notes. The Company may be required to pay additional interest to holders of the Senior Notes under certain circumstances in connection with its obligations under the Registration Rights Agreement.
     The foregoing description of the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the agreement, which is attached as Exhibit 10.1 to this Current Report and incorporated by reference herein.
     The information provided under Item 2.03 of this Current Report is incorporated into this Item 1.01 by reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
Indenture and Senior Notes
     On November 2, 2010, the Company, the Subsidiary Guarantors and Wells Fargo Bank, National Association, as trustee, entered into a fourth supplemental indenture (the “Fourth Supplemental Indenture”) to the indenture dated as of May 28, 2008 among the Company, certain of its subsidiaries named therein and Wells Fargo Bank, National Association, as trustee (the “Base Indenture” and, together with the Fourth Supplemental Indenture, the “Indenture”), pursuant to which the Company issued the Senior Notes. The Senior Notes are general unsecured senior obligations of the Company. The Senior Notes are unconditionally guaranteed jointly and severally on a senior unsecured basis by the Subsidiary Guarantors and certain future subsidiaries of the Company. The Senior Notes rank equal in right of payment with all existing and future senior indebtedness of the Company, and senior in right of payment to any future subordinated indebtedness of the Company. The Senior Notes are effectively junior in right of payment to any secured indebtedness of the Company to the extent of the collateral securing such indebtedness, and to any indebtedness and other liabilities of any non-guarantor subsidiaries. The subsidiary guarantees rank equal in right of payment with all existing and future senior indebtedness of each Subsidiary Guarantor, and senior in right of payment to any future subordinated indebtedness of each Subsidiary Guarantor. The subsidiary guarantees are effectively junior in right of payment to any secured indebtedness of each Subsidiary Guarantor to the extent of the collateral securing such indebtedness.
Interest and Maturity
     The Senior Notes will mature on October 15, 2018 and interest on the Senior Notes is payable in cash semi-annually in arrears on each October 15 and April 15, commencing April 15, 2011. Interest will be payable to holders of record on the October 1st and April 1st immediately preceding the related interest payment date, and will be computed on the basis of a 360-day year consisting of twelve 30-day months.

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Optional Redemption
     At any time prior to October 15, 2013, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Senior Notes issued under the Indenture at a redemption price of 108.625% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the redemption date), using the net cash proceeds of one or more equity offerings by the Company, provided that:
    at least 65% of the aggregate principal amount of Senior Notes issued under the Indenture remains outstanding immediately after the occurrence of such redemption (excluding Senior Notes held by the Company and its subsidiaries); and
 
    the redemption occurs within 180 days of the date of the closing of such equity offering.
     Prior to October 15, 2014, the Company may redeem all or part of the Senior Notes upon not less than 30 or more than 60 days’ notice, at a redemption price equal to the sum of:
    the principal amount thereof, plus
 
    accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the redemption date), plus
 
    the Make Whole Premium (as defined in the Indenture) at the redemption date.
     On and after October 15, 2014, the Company may redeem all or a part of the Senior Notes, upon not less than 30 or more than 60 days’ notice, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest, if any, to the applicable redemption date, on the Senior Notes redeemed to the applicable redemption date (subject to the right of holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the redemption date), if redeemed during the twelve-month period beginning on October 15 of the years indicated below:
         
YEAR   PERCENTAGE  
2014
    104.313 %
2015
    102.875 %
2016
    101.438 %
2017 and thereafter
    100.000 %
Change of Control
     If a Change of Control (as defined in the Indenture) occurs, each holder of Senior Notes may require the Company to repurchase all or a portion of that holder’s Senior Notes for cash at a price equal to 101% of the aggregate principal amount of the Senior Notes repurchased,

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plus any accrued but unpaid interest on the notes repurchased, to, but excluding, the date of repurchase (subject to the right of holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the repurchase date).
Certain Covenants
     The Indenture contains covenants that, among other things, limit the Company’s ability and the ability of the Company’s restricted subsidiaries to:
    pay distributions on, purchase or redeem the Company’s common stock or other capital stock or redeem its subordinated debt;
 
    make investments;
 
    incur or guarantee additional indebtedness or issue certain types of equity securities;
 
    create certain liens;
 
    sell assets;
 
    consolidate, merge or transfer all or substantially all of the Company’s assets;
 
    enter into agreements that restrict distributions or other payments from the Company’s restricted subsidiaries to the Company;
 
    engage in transactions with affiliates; and
 
    create unrestricted subsidiaries.
Events of Default
     Upon a continuing event of default, the trustee or the holders of 25% of the principal amount of the Senior Notes may declare the Senior Notes immediately due and payable, except that a default resulting from a bankruptcy, insolvency or reorganization with respect to the Company, any restricted subsidiary of the Company that is a significant subsidiary or any group of its restricted subsidiaries that, taken together, would constitute a significant subsidiary of the Company, will automatically cause all Senior Notes to become due and payable. Each of the following constitutes an event of default under the Indenture:
    default for 30 days in the payment when due of interest on the Senior Notes;
 
    default in payment when due of the principal of, or premium, if any, on the Senior Notes;
 
    failure by the Company to comply with the covenant relating to consolidations, mergers or transfers of all or substantially all of the Company’s assets or failure by the Company to purchase notes when required pursuant to the asset sale or change of control provisions of the Indenture;

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    failure by the Company for 120 days after notice to comply with its reporting obligations under the Indenture;
 
    failure by the Company for 60 days after notice to comply with any of the other agreements in the Indenture;
 
    default under any mortgage, indenture or instrument governing any indebtedness for money borrowed or guaranteed by the Company or any of its restricted subsidiaries, if such default: (i) is caused by a failure to pay principal, interest or premium on such indebtedness within any applicable grace period; or (ii) results in the acceleration of such indebtedness prior to its stated maturity, and, in each case, the principal amount of the indebtedness, together with the principal amount of any other such indebtedness under which there has been a payment default or acceleration of maturity, aggregates $30.0 million or more, subject to cure and waiver provision;
 
    failure by the Company or any of its restricted subsidiaries to pay final judgments aggregating in excess of $30.0 million, which judgments are not paid, discharged or stayed for a period of 60 days;
 
    any subsidiary guarantee is held in any judicial proceeding to be unenforceable or invalid, or ceases for any reason to be in full force and effect, or any Subsidiary Guarantor, or any person acting on behalf of any Subsidiary Guarantor, denies or disaffirms its obligations under its subsidiary guarantee; and
 
    certain events of bankruptcy, insolvency or reorganization described in the Indenture with respect to the Company or any of the Company’s restricted subsidiaries that is a significant subsidiary or any group of its restricted subsidiaries that, taken as a whole, would constitute a significant subsidiary of the Company.
Fifth Supplemental Indenture
     On November 2, 2010, the Company, the Subsidiary Guarantors and Wells Fargo Bank, National Association, as trustee, entered into a fifth supplemental indenture (the “Fifth Supplemental Indenture”) to the Base Indenture, as previously amended by the first supplemental indenture thereto (the “First Supplemental Indenture”), pursuant to which the Subsidiary Guarantors guaranteed the Company’s 4.375% Convertible Notes due 2028 (the “Convertible Notes”). The guarantee of the Convertible Notes by the Subsidiary Guarantors pursuant to the Fifth Supplemental Indenture was required under the First Supplemental Indenture as a result of the issuance of the Senior Notes, because the Senior Notes are guaranteed by the Subsidiary Guarantors.

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Item 9.01 Financial Statements and Exhibits
     (d) Exhibits.
     
Exhibit Number   Description
1.1
  Purchase Agreement, dated October 28, 2010, by and between Carrizo Oil & Gas, Inc., the Subsidiary Guarantors named therein and Credit Suisse Securities (USA) LLC, Wells Fargo Securities, LLC and RBC Capital Markets Corporation (as predecessor in interest to RBC Capital Markets, LLC), as representatives of the several Initial Purchasers.
 
   
4.1
  Indenture between Carrizo Oil & Gas, Inc., the subsidiaries named therein and Wells Fargo Bank, National Association, as trustee, dated May 28, 2008 (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on May 28, 2008).
 
   
4.2
  Fourth Supplemental Indenture among Carrizo Oil & Gas, Inc., the Subsidiary Guarantors named therein and Wells Fargo Bank, National Association, as trustee, dated November 2, 2010.
 
   
4.3
  Fifth Supplemental Indenture among Carrizo Oil & Gas, Inc., the Subsidiary Guarantors named therein and Wells Fargo Bank, National Association, as trustee, dated November 2, 2010.
 
   
10.1
  Registration Rights Agreement, dated November 2, 2010, among Carrizo Oil & Gas, Inc., the Guarantors named therein and Credit Suisse Securities (USA) LLC, Wells Fargo Securities, LLC and RBC Capital Markets, LLC.

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SIGNATURES
     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
         
  CARRIZO OIL & GAS, INC.
 
 
  By:   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President and
Chief Financial Officer 
 
 
Date: November 2, 2010

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Exhibit Index
     
Exhibit Number   Description
1.1
  Purchase Agreement, dated October 28, 2010, by and between Carrizo Oil & Gas, Inc., the Subsidiary Guarantors named therein and Credit Suisse Securities (USA) LLC, Wells Fargo Securities, LLC and RBC Capital Markets Corporation (as predecessor in interest to RBC Capital Markets, LLC), as representatives of the several Initial Purchasers.
 
   
4.1
  Indenture between Carrizo Oil & Gas, Inc., the subsidiaries named therein and Wells Fargo Bank, National Association, as trustee, dated May 28, 2008 (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on May 28, 2008).
 
   
4.2
  Fourth Supplemental Indenture among Carrizo Oil & Gas, Inc., the Subsidiary Guarantors named therein and Wells Fargo Bank, National Association, as trustee, dated November 2, 2010.
 
   
4.3
  Fifth Supplemental Indenture among Carrizo Oil & Gas, Inc., the Subsidiary Guarantors named therein and Wells Fargo Bank, National Association, as trustee, dated November 2, 2010.
 
   
10.1
  Registration Rights Agreement, dated November 2, 2010, among Carrizo Oil & Gas, Inc., the Guarantors named therein and Credit Suisse Securities (USA) LLC, Wells Fargo Securities, LLC and RBC Capital Markets, LLC.

Exhibit 1.1
$400,000,000
Carrizo Oil & Gas, Inc.
8.625% Senior Unsecured Notes due 2018
Fully and unconditionally guaranteed on a senior unsecured basis by the Guarantors
PURCHASE AGREEMENT
October 28, 2010
Credit Suisse Securities (USA) LLC
Wells Fargo Securities, LLC
RBC Capital Markets Corporation
   As Representatives of the Several Purchasers,
     c/o Credit Suisse Securities (USA) LLC,
          Eleven Madison Avenue,
               New York, N.Y. 10010-3629
Ladies and Gentlemen:
     1.  Introductory. Carrizo Oil & Gas, Inc., a Texas corporation (the “ Company ”), agrees with the several initial purchasers named in Schedule A hereto (the “ Purchasers ”) subject to the terms and conditions stated herein, to issue and sell to the several Purchasers U.S.$400,000,000 principal amount of its 8.625% Senior Unsecured Notes due 2018 (the “ Initial Notes ”) to be issued under a Senior Indenture, dated as of May 28, 2008 (the “ Base Indenture ”) and as supplemented by the Fourth Supplemental Indenture thereto dated as of the Closing Date (the “ Fourth Supplemental Indenture ” and, together with the Base Indenture, the “ Indenture ”), among the Company, the Subsidiary Guarantors named therein and Wells Fargo Bank, National Association, as Trustee. The Offered Securities will be unconditionally guaranteed as to the payment of principal and interest by Bandelier Pipeline Holding, LLC, Carrizo (Marcellus) LLC, Carrizo (Marcellus) WV LLC, Carrizo Marcellus Holding Inc., CCBM, Inc., Chama Pipeline Holding LLC, CLLR, Inc., Hondo Pipeline, Inc. and Mescalero Pipeline, LLC, each a Delaware limited liability company or corporation (the “ Guarantors ” and such guarantees, the “ Initial Guarantees ” and the Initial Guarantees, together with the Initial Notes, the “ Offered Securities ”).
     The holders of the Offered Securities will be entitled to the benefits of a Registration Rights Agreement dated as of the Closing Date among the Company, the Guarantors, Credit Suisse Securities (USA) LLC, Wells Fargo Securities, LLC and RBC Capital Markets Corporation (the “ Registration Rights Agreement ”), pursuant to which the Company and the Guarantors shall agree to file a registration statement with the Commission registering (a) the exchange of the Initial Notes for debt securities with identical terms as the Initial Notes (the “ Exchange Notes ”) and of the Initial Guarantees for guarantees with identical terms as the Initial Guarantees (the “ Exchange Guarantees ” and together with the Exchange Notes, the “ Exchange Securities ”) that will be registered under the Securities Act (the “ Exchange Offer ”) or (b) under certain circumstances, the resale of the Offered Securities under the Securities Act.

 


 

     Each of the Company and each Guarantor hereby agrees with the several Purchasers as follows:
     2.  Representations and Warranties of the Company and each Guarantor. Each of the Company and each Guarantor jointly and severally represents and warrants to, and agrees with, the several Purchasers that as of the date hereof:
     (a) Offering Memoranda; Certain Defined Terms . The Company has prepared or will prepare a Preliminary Offering Memorandum and a Final Offering Memorandum.
     For purposes of this Agreement:
     “ Applicable Time ” means 12:45 pm (Eastern time) on the date of this Agreement.
     “ Closing Date ” has the meaning set forth in Section 3 hereof.
     “ Commission ” means the Securities and Exchange Commission.
     “ Disclosure Package ” means the Preliminary Offering Memorandum together with any Issuer Free Writing Communication specified in Schedule B hereto and the other information which is intended for general distribution to prospective investors, as evidenced by its being specified in Schedule B hereto.
     “ Exchange Act ” means the United States Securities Exchange Act of 1934, as amended.
     “ Final Offering Memorandum ” means the final offering memorandum, relating to the Offered Securities to be offered by the Purchasers, that discloses the offering price and other final terms of the Offered Securities and is dated as of the date of this Agreement (even if finalized and issued subsequent to the date of this Agreement), including the documents incorporated by reference therein.
     “ Free Writing Communication ” means a written communication (as such term is defined in Rule 405) that constitutes an offer to sell or a solicitation of an offer to buy the Offered Securities and is made by means other than the Preliminary Offering Memorandum or the Final Offering Memorandum.
     “ Issuer Free Writing Communication ” means a Free Writing Communication prepared by or on behalf of the Company, used or referred to by the Company or containing a description of the final terms of the Offered Securities or of their offering, in the form retained in the Company’s records.
     “ Preliminary Offering Memorandum ” means the preliminary offering memorandum, dated October 25, 2010, relating to the Offered Securities to be offered by the Purchasers, including the documents incorporated by reference therein.
     “ Rules and Regulations ” means the rules and regulations of the Commission.
     “ Securities Act ” means the United States Securities Act of 1933, as amended.
     “ Subsidiary ” has the meaning set forth in Rule 405.
     Unless otherwise specified, a reference to a “ Rule ” or a “ Regulation ” is to the indicated rule or regulation under the Securities Act.
     (b) Disclosure . As of the date hereof and the Closing Date (as defined below), the Final Offering Memorandum does not and, as supplemented or amended through the Closing Date, will not, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; the Disclosure Package, as of the Applicable Time, did not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the

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statements therein, in the light of the circumstances under which they were made, not misleading; and any Issuer Free Writing Communication, when read together with the Disclosure Package, does not and, at the Closing Date will not, include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation or warranty with respect to any statements or omissions made in the Offering Memorandum, the Disclosure Package or any Free Writing Communication in reliance upon and in conformity with information relating to the Purchasers furnished to the Company in writing by the Representatives expressly for use in the Offering Memorandum, the Disclosure Package or any Free Writing Communication, it being understood and agreed that the only such information furnished by the Representatives consists of the information described as such in Section 8(b) hereof; provided, further , that the Company makes no representation and warranty with respect to any statements or omissions made in any Free Writing Communication prepared by, or on behalf of, or used by an offering participant other than the Company (an “ Offering Participant Free Writing Communication ”). Each Free Writing Communication, as of its issue date and at all subsequent times through the completion of the offering and sale of the Offered Securities did not, does not and will not include any information that conflicted, conflicts or will conflict with the information contained in the Preliminary Offering Memorandum or the Final Offering Memorandum, including any document incorporated by reference therein, that has not been superseded or modified. The information required to be delivered to holders and prospective purchasers of the Offered Securities pursuant to the Indenture and in accordance with Rule 144A(d)(4) (the “ Additional Issuer Information ”) does not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to statements in or omissions from the Preliminary Offering Memorandum or the Final Offering Memorandum based upon written information furnished to the Company by the Representatives specifically for use therein, it being understood and agreed that the only such information is that described as such in Section 8(b) hereof.
     (c) Documents Incorporated by Reference . No documents incorporated by reference in the Final Offering Memorandum, when read together with the other information in the Disclosure Package, included an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and any further documents so filed and incorporated by reference in the Final Offering Memorandum or the Disclosure Package will not, when read together with the other information in the Disclosure Package, when such documents are filed with the Commission, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading.
     (d) Good Standing of the Company and the Guarantors . The Company, each of the Guarantors and each of their respective subsidiaries listed in Schedule C hereto, which list includes all “significant subsidiaries” as defined in Rule 405, is duly organized, validly existing and in good standing under the laws of their respective jurisdictions of incorporation or organization. The Company, each of the Guarantors and each of their respective Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted by it or location of the assets or properties owned, leased or licensed by it requires such qualification, except for such jurisdictions where the failure to so qualify individually or in the aggregate would not have a material adverse effect on the assets, properties, condition, financial or otherwise, or in the results of operations, business affairs or business prospects of the Company, the Guarantors and their respective Subsidiaries considered as a whole (a “ Material Adverse Effect ”); and to the Company and the Guarantors’ knowledge, no proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such power and authority or qualification. Other than the Subsidiaries and as disclosed in the Final Offering Memorandum and the Disclosure Package,

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neither the Company nor any Guarantor owns, directly or indirectly, any shares of capital stock and does not have any other equity or ownership or proprietary interest in any corporation, partnership, association, trust, limited liability company, joint venture or other entity.
     (e) Indenture; Offered Securities . The Indenture has been duly authorized by the Company and each Guarantor, and when the Indenture is executed and delivered by the Company and each Guarantor, assuming the due authorization, execution and delivery of the Indenture by the Trustee, the Indenture will be a legal, valid and binding agreement of the Company and each Guarantor, enforceable against the Company and each Guarantor in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). The Initial Notes have been duly authorized by the Company, and when the Initial Notes are duly executed, authenticated, issued, delivered and paid for pursuant to the Indenture and this Agreement on the Closing Date, such Initial Notes will have been duly and validly issued and outstanding and will constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). The Initial Guarantees have been duly authorized by each Guarantor and when the Initial Notes and the Initial Guarantees are duly executed, authenticated, issued, delivered and paid for pursuant to the Indenture and this Agreement on the Closing Date, such Initial Guarantees Notes will have been duly and validly issued and outstanding and will constitute legal, valid and binding obligations of each Guarantor, enforceable against each Guarantor in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles (regardless of whether such enforceability is considered in a proceeding in equity or at law).
     (f) Accurate Disclosure. The Offered Securities will conform in all material respects to the information in the Disclosure Package and to the description of such Offered Securities contained in the Final Offering Memorandum. The statements in the Disclosure Package and the Final Offering Memorandum under the headings “Description of the Notes” and “Material U.S. Federal Income and Estate Tax Considerations,” insofar as such statements summarize legal matters, agreements, document or proceedings discussed therein, are accurate and fair summaries of such legal matters, agreements, documents or proceedings and present the information required to be shown.
     (g) Exchange Securities. On the Closing Date, the Exchange Notes will have been duly authorized by the Company; and when the Exchange Notes are issued, executed and authenticated in accordance with the terms of the Exchange Offer and the Indenture, the Exchange Notes will constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). On the Closing Date, the Exchange Guarantees will have been duly authorized by each Guarantor; and when the Exchange Notes and the Exchange Guarantees are issued, executed and authenticated in accordance with the terms of the Exchange Offer and the Indenture, the Exchange Guarantees will constitute legal, valid and binding obligations of each Guarantor, enforceable against each Guarantor in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles (regardless of whether such enforceability is considered in a proceeding in equity or at law).

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     (h) No Preemptive Rights . There are no statutory preemptive or other similar rights to subscribe for or to purchase or acquire any of the Offered Securities or any such rights pursuant to any provision of the charter, bylaws, certificate of formation, limited liability company agreement, or constitutive documents, as applicable (the “ Organizational Documents ”), of the Company or any of the Guarantors or any agreement or instrument to or by which the Company or any of the Guarantors is a party or bound.
     (i) No Finder’s Fee . Neither the Company nor any of its Subsidiaries is a party to any contract, agreement or understanding with any person (other than this Agreement) that would give rise to a valid claim against the Company or any of its Subsidiaries or any Purchaser for a brokerage commission, finder’s fee or like payment in connection with the offering and sale of the Offered Securities.
     (j) Registration Rights Agreement . The Registration Rights Agreement has been duly authorized by the Company and the Guarantors; and, when the Offered Securities are delivered and paid for pursuant to this Agreement on the Closing Date, the Registration Rights Agreement will have been duly executed and delivered by the Company and the Guarantors and will constitute legal, valid and binding obligations of the Company and the Guarantors, enforceable against the Company and the Guarantors in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles (regardless of whether such enforceability is considered in a proceeding in equity or at law).
     (k) Absence of Further Requirements . Each approval, consent, order, authorization, designation, declaration or filing of, by or with any regulatory, administrative or other governmental body necessary in connection with the execution and delivery by the Company and the Guarantors of this Agreement, the Indenture and the Registration Rights Agreement and the consummation of the transactions herein and therein contemplated, required to be obtained or performed by the Company and the Guarantors has been obtained or made and is in full force and effect, except as would not have a Material Adverse Effect and except for the filing of the Exchange Offer Registration Statement or, if required, the Shelf Registration Statement (each as defined in the Registration Rights Agreement), the order of the Commission declaring effective the Exchange Offer Registration Statement or, if required, the Shelf Registration Statement, and except for those that have been made or obtained, or will be made or obtained, under the Securities Act, the Trust Indenture Act and the Rules and Regulations or as may be required under state securities or “blue sky” laws or by the Nasdaq Stock Market in connection with the sale of the Securities and except for any Form 8-K filing.
     (l) Title to Property . Except as disclosed in the Final Offering Memorandum and the Disclosure Package, the Company, the Guarantors and each of their respective Subsidiaries have (i) defensible title to all their interests in the oil and gas properties described in the Final Offering Memorandum and the Disclosure Package as being owned or leased by them, title investigations having been carried out by the Company or the Guarantors in accordance with customary practice in the oil and gas industry, and (ii) good and marketable title to all other real property and all personal property described in the Final Offering Memorandum and the Disclosure Package as being owned by them, in each case free and clear of all liens, encumbrances, claims, security interests and defects, except (A) such as would not have a Material Adverse Effect, (B) security interests securing loans under the Company’s senior secured revolving credit facility, (C) royalties, overriding royalties and other similar burdens under oil and gas leases, (D) easements, restrictions, rights-of-way and other matters that commonly affect oil and gas properties and (E) liens and encumbrances under gas sales contracts, geophysical exploration agreements, operating agreements, farm-out agreements, participation agreements, unitization, pooling and commutation agreements, declarations and orders and gas sales contracts, securing payment of amounts not yet due and payable and of a scope and nature customary in the oil and gas industry. All property held under lease by the Company, the Guarantors and each of their

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respective Subsidiaries is held by them under valid, existing and enforceable leases, free and clear of all liens, encumbrances, claims, security interests and defects, except such as would not have a Material Adverse Effect.
     (m) Absence of Defaults and Conflicts Resulting from Transaction . Neither the execution, delivery and performance of this Agreement, the Indenture or the Registration Rights Agreement, nor the consummation of any of the transactions contemplated hereby (including, without limitation, the issuance and sale by the Company and the Guarantors of the Offered Securities and Guarantees), will give rise to a right to terminate or accelerate the due date of any payment due under, or conflict with or result in the breach of any term or provision of, or constitute a default (or an event which with notice or lapse of time or both would constitute a default) under, or require any consent or waiver under, or result in the execution or imposition of any lien, charge or encumbrance upon any properties or assets of the Company, the Guarantors or their respective Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust or other agreement or instrument to which the Company, the Guarantors or any of their respective Subsidiaries is a party or by which the Company, the Guarantors or their respective Subsidiaries or any of their properties or businesses are bound, or any franchise, license, permit, judgment, decree, order, statute, rule or regulation applicable to the Company, the Guarantors or any of their respective Subsidiaries or violate any provision of the Organizational Documents of the Company, the Guarantors or any of their respective Subsidiaries, except for such consents or waivers which have already been obtained and are in full force and effect and except as would not have a Material Adverse Effect and assuming the closing of the sale of the Offered Securities as contemplated by this Agreement.
     (n) Description of Certain Documents; Absence of Existing Defaults and Conflicts . None of the Company, the Guarantors or any of their respective Subsidiaries is (i) in violation of any term or provision of its Organizational Documents or (ii) in violation of any franchise, license, permit, judgment, decree, order, statute, rule or regulation, where the consequences of such violation in this subsection (ii), individually or in the aggregate, would have a Material Adverse Effect.
     (o) Authorization of Agreement. All necessary corporate action has been duly and validly taken by the Company and the Guarantors to authorize the execution, delivery and performance of this Agreement and the issuance and sale of the Offered Securities and Guarantees by the Company and the Guarantors. This Agreement has been duly and validly authorized by all necessary corporate action, executed and delivered by the Company and the Guarantors and constitutes and will constitute legal, valid and binding obligations of the Company and the Guarantors enforceable against the Company and the Guarantors in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws relating to or affecting the enforcement of creditors’ rights generally and by general principles of equity or public policy (regardless of whether enforcement is sought in a proceeding at law or in equity).
     (p) Possession of Licenses and Permits . The Company, the Guarantors and each of their respective Subsidiaries have all requisite corporate power and authority, and all necessary authorizations, approvals, consents, orders, licenses, certificates and permits of and from all governmental or regulatory bodies or any other person or entity (collectively, the “Permits”), to own, lease and license their assets and properties and conduct their business, all of which are valid and in full force and effect, except where the lack of such Permits, individually or in the aggregate, would not have a Material Adverse Effect. The Company, the Guarantors and each of their respective Subsidiaries have fulfilled and performed in all material respects all of their material obligations with respect to such Permits and no event has occurred that allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other material impairment of the rights of the Company or the Guarantors thereunder. None of the Company, the Guarantors or any of their respective Subsidiaries has received notice of any reservation or

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modification of any such Permits or has any reason to believe that any such Permits will not be reserved in the ordinary course, except as would not have a Material Adverse Effect.
     (q) Absence of Labor Dispute . None of the Company, the Guarantors or any of their respective Subsidiaries is involved in any labor dispute nor, to the knowledge of the Company or the Guarantors, is any such dispute threatened, which dispute would have a Material Adverse Effect. The Company and the Guarantors are not aware of any existing or imminent labor disturbance by the employees of any of its principal suppliers or contractors which would have a Material Adverse Effect. The Company and the Guarantors are not aware of any threatened or pending litigation between the Company, the Guarantors or any of their respective Subsidiaries and any of its executive officers which, if adversely determined, could have a Material Adverse Effect and has no reason to believe that such officers will not remain in the employment of the Company, the Guarantors or any of their respective Subsidiaries.
     (r) Environmental Laws . Except as described in the Final Offering Memorandum and the Disclosure Package, (i) each of the Company, the Guarantors and each of their respective Subsidiaries is in compliance in all material respects with all rules, laws and regulations relating to the use, treatment, storage and disposal of toxic substances and protection of health or the environment (“ Environmental Law ”) which are applicable to its business; (ii) none of the Company, the Guarantors or any of their respective Subsidiaries has received any notice from any governmental authority or third party of an asserted claim under Environmental Laws, which claim if determined adverse to the Company, the Guarantors or any of their respective Subsidiaries could reasonably be expected to have a Material Adverse Effect; (iii) each of the Company, the Guarantors or any of their respective Subsidiaries has received all material permits, licenses or other approvals required of it under applicable Environmental Laws to conduct its business and is in compliance with all terms and conditions of any such permit, license or approval, except where the absence of such permit, license, approval or compliance would not result in a Material Adverse Effect; (iv) to the Company and the Guarantors’ knowledge, no facts currently exist that will require the Company, the Guarantors or any of their respective Subsidiaries to make future material capital expenditures to comply with Environmental Laws; (v) no property which is or has been owned, leased or occupied by the Company, the Guarantors or their respective Subsidiaries has been designated as a Superfund site pursuant to the Comprehensive Environmental Response, Compensation of Liability Act of 1980, as amended (42 U.S.C. Section 9601, et. seq.) (“ CERCLA ”) or otherwise designated as a contaminated site under applicable state or local law; (vi) none of the Company, the Guarantors or any of their respective Subsidiaries has been named as a “potentially responsible party” under CERCLA; (vii) there has been no storage, disposal, generation, transportation, handling or treatment of hazardous substances or solid wastes by the Company, the Guarantors or any of their respective Subsidiaries (or to the knowledge of the Company or the Guarantors, any of their predecessors or Subsidiaries’ predecessors in interest) at, upon or from any of the property now or previously owned or leased by the Company, the Guarantors or any of their respective Subsidiaries in violation of any applicable law, ordinance, rule, regulation, order, judgment, decree or permit or which would require remedial action by the Company, the Guarantors or any of their respective Subsidiaries under any applicable law, ordinance, rule, regulation, order, judgment, decree or permit, except for any violation or remedial action which would not result in, or which would not be reasonably likely to result in, singularly or in the aggregate with all such violations and remedial actions, a Material Adverse Effect; and (viii) there has been no spill, discharge, leak, emission, injection, escape, dumping or release of any kind onto such property or into the environment surrounding such property of any solid wastes or hazardous substances due to or caused by the Company or the Guarantors, except for any spill, discharge, leak, emission, injection, escape, dumping or release which would not result in or would not be reasonably likely to result in, singularly or in the aggregate will all such spills, discharges, leaks, emissions, injections, escapes, dumpings and releases, a Material Adverse Effect; and the terms “hazardous substances” and “solid wastes” shall have the meanings specified in any applicable local, state and federal laws or regulations with respect to environmental protection.

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     In the ordinary course of their business, the Company and the Guarantors periodically review the effect of Environmental Laws on the business, operations and properties of the Company, the Guarantors and their respective Subsidiaries, in the course of which the Company and the Guarantors identify and evaluate associated costs and liabilities (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws, or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties). On the basis of such review, the Company and the Guarantors reasonably concluded that such associated costs and liabilities would not, singly or in the aggregate, have a Material Adverse Effect.
     (s) Compliance with ERISA . The Company and the Guarantors have fulfilled their obligations, if any, under the minimum funding standards of Section 302 of the U.S. Employee Retirement Income Security Act of 1974 (“ ERISA ”) and the regulations and published interpretations thereunder with respect to each “plan” as defined in Section 3(3) of ERISA and such regulations and published interpretations in which the Company’s and the Guarantors’ employees are eligible to participate and each such plan is in compliance in all material respects with the presently applicable provisions of ERISA and such regulations and published interpretations. No “Reportable Event” (as defined in Section 12 of ERISA) has occurred with respect to any “Pension Plan” (as defined in ERISA) for which the Company or Guarantors could have any liability.
     (t) Absence of Manipulation. None of the Company or the Guarantors has taken, or will take, directly or indirectly, any action designed to or which might reasonably be expected to cause or result in, or which has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the Offered Securities or any security of the Company to facilitate the sale or resale of any of the Offered Securities.
     (u) Internal Controls . The Company maintains a system of “internal control over financial reporting” (as defined in Rule 13a-15(f) of the Exchange Act) that complies with the requirements of the Exchange Act and has been designed by, or under the supervision of, its principal executive and principal financial officer, or persons performing similar functions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, including, but not limited to, internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
     (v) Compliance with the Sarbanes-Oxley Act of 2002 . The principal executive officer and principal financial officer of the Company have made all certifications required by the Sarbanes-Oxley Act of 2002 (“ Sarbanes-Oxley ”) or any related rules and regulations promulgated by the Commission, and the statements contained in any such certification are true and correct in all material respects. The Company maintains “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act), and such controls and procedures are designed (i) to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and (ii) to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow

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timely decisions regarding required disclosure. The Company does not have any material weaknesses in internal controls, and there has been no material fraud that involves management or other employees who have a significant role in the Company’s internal controls. The Company is in compliance in all material respects with all applicable effective provisions of the Sarbanes-Oxley Act and the rules and regulations promulgated thereunder by the Commission (and intends to comply with all applicable provisions that are not yet effective upon effectiveness). The Company’s auditors and the Audit Committee of the Board of Directors of the Company have been advised of: (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.
     (w) Independent Accountants. Each of (i) KPMG LLP and (ii) Pannell Kerr Forster of Texas, P.C., which has certified certain financial statements of the Company and delivered its opinion with respect to the audited financial statements and schedules included or incorporated by reference in the Final Offering Memorandum, is an independent registered public accounting firm with respect to the Company within the meaning of the Securities Act, the Exchange Act and the rules and regulations of the Commission thereunder.
     (x) Litigation . There are no legal governmental or regulatory actions, suits, proceedings or investigations to which the Company, the Guarantors or any of their respective Subsidiaries are subject or which is pending or, to the knowledge of the Company or any of the Guarantors, threatened, against the Company, the Guarantors or any of their respective Subsidiaries, which, individually or in the aggregate, might have a Material Adverse Effect, affect the consummation of the transactions contemplated by this Agreement or the Registration Rights Agreement, or which are otherwise material in the context of the sale of the Offered Securities, in each case, that are not disclosed in the Final Offering Memorandum and the Disclosure Package.
     (y) Financial Statements . The financial statements of the Company (including all notes and schedules thereto) included or incorporated by reference in the Final Offering Memorandum and the Disclosure Package present fairly in all material respects the financial position of the Company and its consolidated subsidiaries at the dates indicated and the statement of operations, shareholders’ equity and cash flows of the Company and its consolidated subsidiaries for the periods specified; and such financial statements and related schedules and notes thereto have been prepared in conformity with U.S. generally accepted accounting principles, consistently applied throughout the periods involved. The summary and selected financial data included or incorporated by reference in the Disclosure Package present fairly in all material respects the information shown therein as of the respective dates and for the respective periods specified and have been presented on a basis consistent with the consolidated financial statements set forth in the Final Offering Memorandum and the Disclosure Package and other financial information.
     (z) No Material Adverse Change in Business . Subsequent to the respective dates as of which information is given in the Disclosure Package, except as described therein, (i) there has not been any Material Adverse Effect; (ii) none of the Company, the Guarantors or any of their respective Subsidiaries has sustained any loss or interference with its assets, businesses or properties (whether owned or leased) from fire, explosion, earthquake, flood or other calamity, whether or not covered by insurance, or from any labor dispute or any court or legislative or other governmental action, order or decree which would have a Material Adverse Effect; and (iii) since the date of the latest balance sheet included or incorporated by reference in the Final Offering Memorandum and the Disclosure Package, none of the Company, the Guarantors or their respective Subsidiaries has (A) issued any securities, other than shares issued pursuant to employee benefit plans, qualified stock options plans or other employee compensation plans or pursuant to outstanding options, rights or warrants or incurred any liability or obligation, direct or contingent, for borrowed money, except such liabilities or obligations incurred in the ordinary

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course of business and except for warrants to purchase 48,385 shares of the Company’s common stock issued in connection with land bank transactions, (B) entered into any transaction or incurred any material liability or obligation, direct or contingent, that were not in the ordinary course of business or (C) declared or paid any dividend or made any distribution on any shares of its stock or redeemed, purchased or otherwise acquired or agreed to redeem, purchase or otherwise acquire any shares of its capital stock, other than with respect to the acquisition of shares of its common stock in connection with payment of taxes required in connection with the exercise of options for the purchase of common stock or the vesting of restricted stock; provided, however , that the foregoing clause (C) shall not apply to transactions solely between the Company and the Guarantors.
     (aa) Investment Company Act . Neither the Company nor any Guarantor is, and after giving effect to the offering and sale of the Offered Securities and the application of proceeds thereof as described in the Final Offering Memorandum and the Disclosure Package, will not be, an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission thereunder (collectively, the “ 1940 Act ”).
     (bb) Ratings . No “nationally recognized statistical rating organization” as such term is defined for purposes of Rule 436(g)(2) as in effect on July 20, 2010 (i) has imposed (or has informed the Company that it is considering imposing) any condition (financial or otherwise) on the Company’s retaining any rating assigned to the Company or any securities of the Company or (ii) has indicated to the Company or any Guarantor that it is considering any of the actions described in Section 12(a)(v) hereof.
     (cc) Class of Securities Not Listed . No securities of the same class (within the meaning of Rule 144A(d)(3)) as the Offered Securities are listed on any national securities exchange registered under Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer quotation system.
     (dd) No Registration . The offer and sale of the Offered Securities in the manner contemplated by this Agreement will be exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereof and Regulation S thereunder; and it is not necessary to qualify an indenture in respect of the Offered Securities under the United States Trust Indenture Act of 1939, as amended (the “ Trust Indenture Act ”).
     (ee) No General Solicitation; No Directed Selling Efforts . Neither the Company, nor any Guarantor, nor any of their respective affiliates, nor any person acting on its or their behalf (i) has, within the six-month period prior to the date hereof, offered or sold in the United States or to any U.S. person (as such terms are defined in Regulation S under the Securities Act) the Offered Securities or any security of the same class or series as the Offered Securities or (ii) has offered or will offer or sell the Offered Securities (A) in the United States by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) or (B) with respect to any such securities sold in reliance on Rule 903 of Regulation S (“ Regulation S ”) under the Securities Act, by means of any directed selling efforts within the meaning of Rule 902(c) of Regulation S. The Company, the Guarantors, their respective affiliates and any person acting on its or their behalf have complied and will comply with the offering restrictions requirement of Regulation S. Neither the Company nor any Guarantor has entered and neither the Company nor any Guarantor will enter into any contractual arrangement with respect to the distribution of the Offered Securities except for this Agreement.
     (ff) Foreign Corrupt Practices Act . None of the Company, the Guarantors or any other person associated with or acting on behalf of the Company or the Guarantors including, without limitation, any director, officer, agent or employee of the Company, the Guarantors or their respective Subsidiaries, has, directly or indirectly, while acting on behalf of the Company, any

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Guarantor or their respective Subsidiaries (i) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; (ii) made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns from corporate funds; (iii) violated any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any other unlawful payment.
     (gg) Compliance with Money Laundering Laws. The operations of the Company, the Guarantors and their Subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “ Money Laundering Laws ”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company, and Guarantor or any of their respective subsidiaries with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company and the Guarantors, threatened.
     (hh) Compliance with OFAC. None of the Company, the Guarantors or any of their respective Subsidiaries or, to the knowledge of the Company or the Guarantors, any director, officer, agent, employee or Affiliate of the Company or the Guarantors or any of their respective subsidiaries is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“ OFAC ”); and neither the Company nor any Guarantor will directly or indirectly use the proceeds of the offering of the Offered Securities hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.
     (ii) Tax Returns. The Company, the Guarantors and their respective subsidiaries have filed all federal, state, local and foreign tax returns which are required to be filed through the date hereof, except where the failure to so file would not have a Material Adverse Effect, which returns are true and correct in all material respects or have received timely extensions thereof, and have paid all taxes shown on such returns and all assessments received by them to the extent that the same are material and have become due, except for such taxes as are being contested in good faith and except as would not result in a Material Adverse Effect. There are no tax audits or investigations pending, which if adversely determined would have a Material Adverse Effect; nor are there any material proposed additional tax assessments against the Company, the Guarantors or any of their respective Subsidiaries.
     (jj) Insurance. The Company, the Guarantors and their respective Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are customary in the businesses in which they are engaged or propose to engage after giving effect to the transactions described in the Final Offering Memorandum and the Disclosure Package; all policies of insurance and fidelity or surety bonds insuring the Company, the Guarantors or any of their respective Subsidiaries or the Company’s, the Guarantors’ or their respective Subsidiaries’ respective businesses, assets, employees, officers and directors are in full force and effect; the Company, the Guarantors and each of their respective Subsidiaries are in compliance with the terms of such policies and instruments in all material respects; and none of the Company or the Guarantors has any reason to believe that the Company, the Guarantors or any of their respective Subsidiaries will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that is not materially greater than the current cost, except as would not have a Material Adverse Effect.
     (kk) Reserve Information. The written engineering reports prepared by (i) Ryder Scott Company, L.P., (ii) Fairchild & Wells, Inc. and (iii) LaRoche Petroleum Consultants, Ltd.

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(together, the “ Independent Petroleum Engineers ”), as of December 31, 2009 setting forth the engineering values attributed to the oil and gas properties of the Company and its Subsidiaries accurately reflect in all material respects the ownership interests of the Company and its Subsidiaries in the properties therein as of December 31, 2009, except as otherwise disclosed in the Final Offering Memorandum and the Disclosure Package. The information furnished by the Company to the Independent Petroleum Engineers for purposes of preparing their reports, including, without limitation, production, costs of operation and development, current prices for production, agreements relating to current and future operations and sales of production, was true, correct and complete in all material respects on the date supplied and was prepared in accordance with customary industry practices; each of the Independent Petroleum Engineers, who prepared estimates of the extent and value of proved oil and natural gas reserves, are independent with respect to the Company.
     3.  Purchase, Sale and Delivery of Offered Securities. On the basis of the representations, warranties and agreements and subject to the terms and conditions set forth herein, the Company agrees to sell to the several Purchasers, and each of the Purchasers agrees, severally and not jointly, to purchase from the Company, at a purchase price of 97.052% of the principal amount thereof plus accrued interest from November 2, 2010 to the Closing Date (as hereinafter defined), the respective principal amounts of the Offered Securities set forth opposite the names of the several Purchasers in Schedule A hereto.
     The Company will deliver against payment of the purchase price the Offered Securities to be offered and sold by the Purchasers in reliance on Regulation S (the “ Regulation S Securities ”) in the form of one or more permanent global Securities in registered form without interest coupons (the “ Offered Regulation S Global securities ”) which will be deposited with the Trustee as custodian for The Depository Trust Company (“ DTC ”) for the respective accounts of the DTC participants for Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System (“ Euroclear ”), and Clearstream Banking, société anonyme (“ Clearstream, Luxembourg ”) and registered in the name of Cede & Co., as nominee for DTC. The Company will deliver against payment of the purchase price the Offered Securities to be purchased by each Purchaser hereunder and to be offered and sold by each Purchaser in reliance on Rule 144A (the “ 144A Securities ”) in the form of one permanent global security in definitive form without interest coupons (the “ Restricted Global Securities ”) deposited with the Trustee as custodian for DTC and registered in the name of Cede & Co., as nominee for DTC. The Regulation S Global Securities and the Restricted Global Securities shall be assigned separate CUSIP numbers. The Restricted Global Securities shall include the legend regarding restrictions on transfer set forth under “Transfer Restrictions” in the Final Offering Memorandum. Until the termination of the distribution compliance period (as defined in Regulation S) with respect to the offering of the Offered Securities, interests in the Regulation S Global Securities may only be held by the DTC participants for Euroclear and Clearstream, Luxembourg. Interests in any permanent global Securities will be held only in book-entry form through Euroclear, Clearstream, Luxembourg or DTC, as the case may be, except in the limited circumstances described in the Final Offering Memorandum.
     Payment for the Regulation S Securities and the 144A Securities shall be made by the Purchasers in Federal (same day) funds by wire transfer to an account at a bank designated in writing by the Company at the office of Baker Botts L.L.P., counsel for the Company, 910 Louisiana Street, Houston, Texas 77002, at 9:00 A.M., (New York time), on November 2, 2010, or at such other time not later than seven full business days thereafter as the Representatives and the Company agree, such time being herein referred to as the “ Closing Date, ” against delivery to the Trustee as custodian for DTC of (i) the Regulation S Global Securities representing all of the Regulation S Securities for the respective accounts of the DTC participants for Euroclear and Clearstream, Luxembourg and (ii) the Restricted Global Securities representing all of the 144A Securities. The Regulation S Global Securities and the Restricted Global Securities will be made available for checking at the above office of Baker Botts L.L.P. at least 24 hours prior to the Closing Date.

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     4.  Representations by Purchasers; Resale by Purchasers. (a) Each Purchaser severally represents and warrants to the Company and the Guarantors that it is an “accredited investor” within the meaning of Regulation D.
     (b) Each Purchaser severally acknowledges that the Offered Securities have not been registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S or pursuant to an exemption from the registration requirements of the Securities Act. Each Purchaser severally represents and agrees that it has offered and sold the Offered Securities, and will offer and sell the Offered Securities (i) as part of its distribution at any time and (ii) otherwise until 40 days after the later of the commencement of the offering and the Closing Date, only in accordance with Rule 903 or Rule 144A. Accordingly, neither such Purchaser nor its affiliates, nor any persons acting on its or their behalf, have engaged or will engage in any directed selling efforts with respect to the Offered Securities, and such Purchaser, its affiliates and all persons acting on its or their behalf have complied and will comply with the offering restrictions requirement of Regulation S. Each Purchaser severally agrees that, at or prior to confirmation of sale of the Offered Securities, other than a sale pursuant to Rule 144A, such Purchaser will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases the Offered Securities from it during the restricted period a confirmation or notice to substantially the following effect:
“The Securities covered hereby have not been registered under the U.S. Securities Act of 1933 (the “Securities Act”) and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the date of the commencement of the offering and the closing date, except in either case in accordance with Regulation S (or Rule 144A if available) under the Securities Act. Terms used above have the meanings given to them by Regulation S.”
    Terms used in this subsection (b) have the meanings given to them by Regulation S.
     (c) Each Purchaser severally agrees that it and each of its affiliates has not entered and will not enter into any contractual arrangement with respect to the distribution of the Offered Securities except for any such arrangements with the other Purchasers or affiliates of the other Purchasers or with the prior written consent of the Company.
     (d) Each Purchaser severally agrees that it and each of its affiliates will not offer or sell the Offered Securities in the United States by means of any form of general solicitation or general advertising within the meaning of Rule 502(c), including, but not limited to (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. Each Purchaser severally agrees, with respect to resales made in reliance on Rule 144A of any of the Offered Securities, to deliver either with the confirmation of such resale or otherwise prior to settlement of such resale a notice to the effect that the resale of such Offered Securities has been made in reliance upon the exemption from the registration requirements of the Securities Act provided by Rule 144A.
     (e) In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), each of the Purchasers severally represents and agrees that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the “Relevant Implementation Date”) it has not made and will not make an offer of Offered Securities to the public in that Relevant Member State prior to the publication of a prospectus in relation to the Offered Securities which has been approved by the competent authority in that Relevant Member

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State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of Offered Securities to the public in that Relevant Member State at any time:
     (i) to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;
     (ii) to any legal entity which has two or more of (A) an average of at least 250 employees during the last financial year; (B) a total balance sheet of more than €43,000,000 and (C) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; or
     (iii) in any other circumstances which do not require the publication by the Company of a prospectus pursuant to Article 3 of the Prospectus Directive.
     For the purposes of this provision, the expression an “offer of Offered Securities to the public” in relation to any Offered Securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Offered Securities to be offered so as to enable an investor to decide to purchase or subscribe the Offered Securities, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression “Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.
     (f) Each of the Purchasers severally represents and agrees that
     (i) (A) it is a person whose ordinary activities involve it in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of its business and (B) it has not offered or sold and will not offer or sell the Offered Securities other than to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or as agent) for the purposes of their businesses or who it is reasonable to expect will acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of their businesses where the issue of the Offered Securities would otherwise constitute a contravention of Section 19 of the Financial Services and Markets Act 2000 (the “FSMA”) by the Company;
     (ii) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of the Offered Securities in circumstances in which Section 21(1) of the FSMA does not apply to the Company or the Guarantors; and
     (iii) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Offered Securities in, from or otherwise involving the United Kingdom.
     5.  Certain Agreements of the Company and each Guarantor. The Company and each Guarantor jointly and severally agrees with the several Purchasers that:
     (a) Amendments and Supplements to Offering Memoranda . The Company and the Guarantors will promptly advise the Representatives of any proposal to amend or supplement the Preliminary Offering Memorandum or Final Offering Memorandum and will not effect such

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amendment or supplement of which the Representatives shall not previously have been advised and furnished with a copy or to which the Representatives shall have reasonably objected in writing. If, at any time prior to the completion of the resale of the Offered Securities by the Purchasers, there occurs an event or development as a result of which any document included in the Preliminary Offering Memorandum or the Final Offering Memorandum, the Disclosure Package or any Free Writing Communication, if republished immediately following such event or development, included or would include an untrue statement of a material fact or omitted or would omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Company and the Guarantors promptly will notify the Representatives of such event and, if requested by the Representatives, promptly will prepare and furnish, at their own expense, to the Purchasers, an amendment or supplement which will correct such statement or omission.
     (b) Furnishing of Offering Memoranda . The Company and the Guarantors will deliver to, or upon the order of, the Representatives, as many copies of the Final Offering Memorandum in final form, or as thereafter amended or supplemented, as the Representatives may reasonably request. For so long as any of the Offered Securities remain outstanding and are “restricted securities” with the meaning of Rule 144(a)(3), at any time when the Company is not subject to Section 13 or 15(d) of the Exchange Act, the Company and the Guarantors will promptly furnish or cause to be furnished to the Representatives (and, upon request, to each of the other Purchasers) and, upon request of holders and prospective purchasers of the Offered Securities, to such holders and purchasers, copies of the information required to be delivered to holders and prospective purchasers of the Offered Securities pursuant to Rule 144A(d)(4) (or any successor provision thereto) in order to permit compliance with Rule 144A in connection with resales by such holders of the Offered Securities. The Company will pay the expenses of printing and reasonable distribution to the Purchasers, such holders or prospective purchasers of all such documents.
     (c) Blue Sky Qualifications . The Company and the Guarantors will cooperate with the Representatives in endeavoring to qualify the Securities for sale under the securities laws of such jurisdictions as the Representatives may reasonably have designated in writing and will make such applications, file such documents, and furnish such information as may be reasonably required for that purpose, provided none of the Company or the Guarantors shall be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction where it is not now so qualified or required to file such a consent or subject itself to taxation as doing business in any jurisdiction or qualify as a dealer of securities in any jurisdiction. The Company and the Guarantors will, from time to time, prepare and file such statements, reports, and other documents, as are or may be required to continue such qualifications in effect for so long a period as the Representatives may reasonably request for distribution of the Securities.
     (d) Reporting Requirements . The Company covenants and agrees with the several Purchasers that it will file on a timely basis all reports and any definitive proxy or information statements required to be filed by the Company with the Commission subsequent to the date of the Final Offering Memorandum and prior to the termination of the offering of the Offered Securities by the Purchasers. So long as the Company is subject to the reporting requirements of either Section 13 or Section 15(d) of the Exchange Act and is filing reports with the Commission on its Electronic Data Gathering, Analysis and Retrieval system (“ EDGAR ”), the Company is not required to furnish such reports or statements to the Purchasers.
     (e) Transfer Restrictions . During the period of one year after the Closing Date, the Company will, upon request, furnish to the Representatives, each of the other Purchasers and any holder of Offered Securities a copy of the restrictions on transfer applicable to the Offered Securities.
     (f) No Resales by Affiliates . So long as any of the Offered Securities are not freely transferable by persons (other than any affiliate (as defined in Rule 144) of the Company), the

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Company will not, and will use its commercially reasonable efforts to cause its affiliates not to, resell any of the Offered Securities or Exchange Securities that have been reacquired by any of them.
     (g) Investment Company . Neither the Company nor the Guarantors shall invest, or otherwise use the proceeds received by the Company from its sale of the Offered Securities in such a manner as would require the Company, the Guarantors or any of their respective Subsidiaries to register as an investment company under the 1940 Act.
     (h) Payment of Expenses . The Company and the Guarantors jointly and severally agree to pay all costs, expenses and fees incident to the performance of the obligations of the Company and the Guarantors under this Agreement, including, without limiting the generality of the foregoing, the following: all fees and expenses of legal counsel to the Company and the Guarantors, accountants’ fees of the Company; any fees charged by investment rating agencies for the rating of the Offered Securities or the Exchange Securities, the cost of printing and delivering to, or as requested by, the Purchasers copies of the Preliminary Offering Memorandum (including any amendments or supplements thereto), any other documents comprising any part of the Disclosure Package and the Final Offering Memorandum; the preparation, printing, authentication, issuance and delivery of the Offered Securities and Guarantees, including any stamp or transfer taxes in connection with the original issuance and sale of the Offered Securities by the Company and the Guarantors to the Purchasers; the printing (or reproduction) and delivery of this Agreement and all other agreements, including the Indenture and Registration Rights Agreement, or documents approved by the Company and printed (or reproduced) and delivered in connection with the offering of the Offered Securities; the transportation and other expenses of the Company’s and the Guarantors’ officers and employees in connection with presentations to prospective purchasers of the Offered Securities; and all other costs and expenses of the Company and the Guarantors and their representatives incident to the performance by the Company and the Guarantors of their obligations hereunder.
The Company and the Guarantors shall not, however, be required to pay for any of the Purchasers’ expenses (other than those related to qualification under state securities or blue sky laws) except that, if this Agreement shall not be consummated because the conditions in Section 7 hereof are not satisfied (except Section 7(d) hereof), or by reason of any failure, refusal or inability on the part of the Company or the Guarantors to perform any undertaking or satisfy any condition of this Agreement or to comply with any of the terms hereof on its part to be performed, unless such failure to satisfy said condition or to comply with said terms (i) is due to the default or omission of any Purchaser, or (ii) by reason of a termination of this Agreement by the Representatives as a result of any suspension of trading of any securities of the Company by the Nasdaq Stock Market, the Commission or any governmental authority as contemplated by Section 12(a)(iv) hereof arising out of an action or omission of the Company or the Guarantors, then the Company or the Guarantors shall reimburse the several Purchasers for reasonable out-of-pocket expenses reasonably incurred in connection with investigating, marketing and proposing to market the Offered Securities or in contemplation of performing their obligations hereunder; but the Company and the Guarantors shall not in any event be liable to any of the several Purchasers for damages on account of loss of anticipated profits from the sale by them of the Offered Securities.
     (i) Use of Proceeds . The Company shall apply the net proceeds of its sale of the Offered Securities as described under the heading “Use of Proceeds” in the Disclosure Package.
     (j) Absence of Manipulation . None of the Company or the Guarantors will take, directly or indirectly, any action designed to or that could reasonably be expected to cause or result in stabilization or manipulation of the price of the Offered Securities.
     (k) Restriction on Sale of Securities . For a period of 60 days after the date of the initial offering of the Offered Securities by the Purchaser, neither the Company nor any Guarantors will

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offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Commission a registration statement under the Securities Act relating to, any United States dollar-denominated debt securities issued or guaranteed by the Company or any Guarantor and having a maturity of more than one year from the date of issue, or publicly disclose the intention to make any such offer, sale, pledge, disposition or filing, without the prior written consent of Credit Suisse Securities (USA) LLC; provided that the Company and the Guarantors may file with the Commission one or more universal shelf and/or resale registration statements under the Securities Act. Neither the Company nor any Guarantor will at any time offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any securities under circumstances where such offer, sale, pledge, contract or disposition would cause the exemption afforded by Section 4(2) of the Securities Act or Rule 144A or the safe harbor of Regulation S thereunder to cease to be applicable to the offer and sale of the Offered Securities.
     6.  Free Writing Communications . (a) Issuer Free Writing Communications . The Company and each Guarantor each represents and agrees that, unless it obtains the prior consent of the Representatives, and each Purchaser represents and agrees that, unless it obtains the prior consent of the Company and the Representatives, it has not made and will not make any offer relating to the Offered Securities that would constitute an Issuer Free Writing Communication.
     (b) Term Sheets . The Company consents to the use by any Purchaser of a Free Writing Communication that (i) contains only (A) information describing the preliminary terms of the Offered Securities or their offering or (B) information that describes the final terms of the Offered Securities or their offering and that is included in or is subsequently included in the Final Offering Memorandum, including by means of a pricing term sheet in the form of Exhibit A hereto, or (ii) does not contain any material information about the Company or any Guarantor or their securities that was provided by or on behalf of the Company or any Guarantor, it being understood and agreed that the Company and each Guarantor shall not be responsible to any Purchaser for liability arising from any inaccuracy in such Free Writing Communications referred to in clause (i) or (ii) as compared with the information in the Preliminary Offering Memorandum, the Final Offering Memorandum or the Disclosure Package.
     7.  Conditions of the Obligations of the Purchasers . The obligation of the Purchasers to purchase the Offered Securities on the Closing Date is subject to the accuracy, as of the Closing Date, of the representations and warranties of the Company and the Guarantors contained herein, and to the performance in all material respects by the Company and the Guarantors of their covenants and obligations hereunder and to the following additional conditions:
     (a) Accountants’ Comfort Letter . The Purchasers shall have received, on the date hereof and the Closing Date, a letter dated the date hereof and the Closing Date, in form and substance satisfactory to the Representatives, from each of (i) KPMG LLP and (ii) Pannell Kerr Forster of Texas, P.C. confirming that they are an independent registered public accounting firm within the meaning of the Securities Act and the applicable published Rules and Regulations thereunder and stating that in their opinion the financial statements and schedules examined by them and included or incorporated by reference in the Preliminary Offering Memorandum, the Final Offering Memorandum and the Disclosure Package comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the related published Rules and Regulations; and containing such other statements and information as is ordinarily included in accountants’ “comfort letters” to the Purchasers with respect to the financial statements and certain financial and statistical information contained in the Preliminary Offering Memorandum, the Final Offering Memorandum and the Disclosure Package.
     (b) Reserve Engineers’ Comfort Letters . The Purchasers shall have received, on the date hereof and the Closing Date, letters dated the date hereof and the Closing Date, in form and substance satisfactory to the Purchasers, from each of (i) Ryder Scott Company, L.P., (ii) Fairchild & Wells, Inc. and (iii) LaRoche Petroleum Consultants, Ltd, confirming the conclusions and

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findings of such firm with respect to the oil and natural gas reserves of the Company and its Subsidiaries.
     (c) Opinion of Counsel for Company . The Purchasers shall have received on the Closing Date an opinion of Baker Botts L.L.P., counsel for the Company and the Guarantors, and an opinion of Gerald A. Morton, as General Counsel of the Company and for the Guarantors, each dated the Closing Date, addressed to the Purchasers in substantially the forms attached hereto as Exhibit B-1 and Exhibit B-2, respectively.
     (d) Opinion of Counsel for Purchasers . The Purchasers shall have received from Davis Polk & Wardwell LLP, counsel for the Purchasers, an opinion dated the Closing Date in such form as the Purchasers reasonably may request, and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters.
     (e) Officers’ Certificate . The Purchasers shall have received on the Closing Date a certificate or certificates of the Company’s Chief Executive Officer and Chief Financial Officer and each Guarantor’s President and Vice President to the effect that, as of the Closing Date, each of them severally represents as follows:
     (i) The representations and warranties of the Company and each Guarantor contained in Section 2 hereof are true and correct as of the Closing Date;
     (ii) They have carefully examined the Preliminary Offering Memorandum, the Final Offering Memorandum and the Disclosure Package and, in their opinion, such Preliminary Offering Memorandum, Final Offering Memorandum and Disclosure Package did not include any untrue statement of a material fact and did not omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and since the date of the Final Offering Memorandum, no event has occurred which should have been set forth in a supplement to or an amendment of the Final Offering Memorandum which has not been so set forth in such supplement or amendment; and
     (iii) Since the respective dates as of which information is given in the Disclosure Package, except as disclosed in the certificate, (1) there has not been any material adverse change in the assets, properties, condition, financial or otherwise, or in the results of operations, business affairs or business prospects of the Company, the Guarantors and their respective Subsidiaries considered as a whole, whether or not arising in the ordinary course of business otherwise than as set forth or contemplated in the Disclosure Package; and (2) none of the Company, the Guarantors or any of their respective Subsidiaries have sustained any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree which would have a Material Adverse Effect otherwise than as set forth or contemplated in the Disclosure Package.
     (f) Further Certificates and Documents. The Company and the Guarantors shall have furnished to the Purchasers such further certificates and documents confirming the representations and warranties, covenants and conditions contained herein and related matters as the Representatives may reasonably have requested.
     If any of the conditions hereinabove provided for in this Section shall not have been fulfilled when and as required by this Agreement to be fulfilled, the obligations of the Purchasers hereunder may be terminated by the Representatives. In such event, the Company, the Guarantors and the Purchasers shall not be under any obligation to each other (except to the extent provided in Sections 5(h) and 8 hereof).

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     8.  Indemnification and Contribution . (a) Indemnification of Purchasers . The Company and the Guarantors, jointly and severally, agree (i) to indemnify and hold harmless each Purchaser, its partners, members, directors, officers, employees and agents and each person, if any, who controls such Purchaser within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (each, an “Indemnified Party”), against any and all losses, claims, damages or liabilities, joint or several, to which such Indemnified Party may become subject under the Securities Act, Exchange Act, other federal or state statutory law or regulation or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon (A) any untrue statement or alleged untrue statement of any material fact contained in the Preliminary Offering Memorandum or the Final Offering Memorandum or any amendment or supplement thereto, or any Issuer Free Writing Communication or (B) the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however , that the Company and the Guarantors will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement, or omission or alleged omission made in the Preliminary Offering Memorandum or the Final Offering Memorandum, or such amendment or supplement thereto, or any Issuer Free Writing Communication in reliance upon and in conformity with written information furnished to the Company or the Guarantors by the Purchasers through the Representatives specifically for use in the preparation thereof, such information being listed in subsection (b) below; and (ii) to reimburse each Indemnified Party upon demand for any legal or other out-of-pocket expenses reasonably incurred by such Indemnified Party or such controlling person in connection with investigating or defending any such loss, claim, damage or liability, action or proceeding or in responding to a subpoena or governmental inquiry related to the offering of the Offered Securities, whether or not such Indemnified Party is a party to any action or proceeding. In the event that it is finally judicially determined that such Purchaser was not entitled to receive payments for legal and other expenses pursuant to this subparagraph, such Purchaser will promptly return all sums that had been advanced pursuant hereto.
     (b) Indemnification of Company . Each Purchaser will severally and not jointly indemnify and hold harmless the Company, the Guarantors and each of their respective directors and officers and each person, if any, who controls the Company or such Guarantor within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses, claims, damages or liabilities to which the Company or any Guarantor or any such respective director, officer or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the Preliminary Offering Memorandum or the Final Offering Memorandum or any amendment or supplement thereto, any Issuer Free Writing Communication or any Offering Participant Free Writing Communication; or (ii) the omission or the alleged omission of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and will reimburse any legal or other out-of-pocket expenses reasonably incurred by the Company or any Guarantor or any such respective director, officer or controlling person in connection with investigating or defending any such loss, claim, damage, liability, action or proceeding; provided, however , that such Purchaser will be liable in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission has been made in the Preliminary Offering Memorandum or Final Offering Memorandum or any amendment or supplement thereto, any Issuer Free Writing Communication or any Offering Participant Free Writing Communication in reliance upon and in conformity with written information furnished to the Company by such Purchaser through the Representatives specifically for use in the preparation thereof. The Company, the Guarantors and the Purchasers acknowledge and agree that the only information furnished or to be furnished on behalf of each Purchaser to the Company for inclusion in the Preliminary Offering Memorandum and the Final Offering Memorandum consists of the information contained in the third, thirteenth and fourteenth paragraphs and the second sentence of the twelfth paragraph under the caption “Plan of Distribution.”

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     (c) Actions against Parties; Notification . In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to this Section, such person (the “indemnified party”) shall promptly notify the person against whom such indemnity may be sought (the “indemnifying party”) in writing. No indemnification provided for in Section 8(a) or (b) shall be available to any party who shall fail to give notice as provided in this Subsection if the party to whom notice was not given was unaware of the proceeding to which such notice would have related and was materially prejudiced by the failure to give such notice, but the failure to give such notice shall not relieve the indemnifying party or parties from any liability which it or they may have to the indemnified party for contribution or otherwise than on account of the provisions of Section 8(a) or (b). In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party and shall pay as incurred the fees and disbursements of such counsel related to such proceeding, and shall not be liable to such indemnified party for any legal or other expenses, except as provided below and except for the reasonable costs of investigation subsequently incurred by such indemnified party in connection with the defense thereof. In any such proceeding, any indemnified party shall have the right to retain its own counsel at its own expense. Notwithstanding the foregoing, the indemnifying party shall pay as incurred (or within 30 days of presentation) the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel, (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and the indemnified party shall have reasonably concluded that representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them or (iii) the indemnifying party shall have failed to assume the defense and employ counsel reasonably acceptable to the indemnified party within a reasonable period of time after notice of commencement of the action.
     It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm for all such indemnified parties. Such firm shall be designated in writing by the Purchasers in the case of parties indemnified pursuant to Section 8(a) and by the Company or the Guarantors in the case of parties indemnified pursuant to Section 8(b). The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but if settled with such consent or if there be a final judgment for the plaintiff (other than a final judgment entered into pursuant to a settlement as to which the indemnifying party did not consent), the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment; provided, however , that if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for reasonable fees and expenses of counsel in accordance with the provisions hereof, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 8(a) or (b) effected without its written consent if (i) such settlement is entered into in good faith by the indemnified party more than 60 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 45 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. In addition, the indemnifying party will not, without the prior written consent of the indemnified party, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding of which indemnification may be sought hereunder (whether or not any indemnified party is an actual or potential party to such claim, action or proceeding) unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such claim, action or proceeding and (ii) does not include a statement as to, or an admission of, fault or culpability to act by or on behalf of an indemnified party.

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     (d) Contribution . If the indemnification provided for in this Section 8 is unavailable to or insufficient to hold harmless an indemnified party under Section 8(a) or (b) above in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors on the one hand and the Purchasers on the other from the offering of the Offered Securities. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company and the Guarantors on the one hand and the Purchasers on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions or proceedings in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company and the Guarantors on the one hand and the Purchasers on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total discounts and commissions received by the Purchasers. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Guarantors on the one hand or the Purchasers on the other and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
     The Company, the Guarantors and the Purchasers agree that it would not be just and equitable if contributions pursuant to this Section 8(d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 8(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to in this Section 8 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8, (i) the Purchaser shall not be required to contribute any amount in excess of the amount by which the total price at which the Offered Securities purchased by it were offered exceeds the amount of damages which such Purchaser has otherwise been required to pay by reason of any such untrue or alleged untrue statement or omission or alleged omission and (ii) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Purchasers’ obligations in this subsection (d) to contribute are several in proportion to their respective purchase obligations and not joint. For purposes of this Section 8(d), each person, if any, who controls such Purchaser within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as such Purchaser, and each director of the Company and the Guarantors, respectively, the officers of the Company and the Guarantors, respectively, and each person, if any, who controls the Company or the Guarantors within the meaning of the Section 15 of the Securities Act or Section 20 of the Exchange Act, shall have the same rights to contribution as the Company and the Guarantors. Any party entitled to contribution will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party or parties under this Section 8(d), notify in writing such party or parties from whom contribution may be sought, but the omission to so notify such party or parties from whom contribution may be sought shall not relieve the party or parties from whom contribution may be sought from any other obligation it or they may have hereunder or otherwise than under this Section 8(d).

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     9.  Default of Purchasers. If on the Closing Date any Purchaser shall fail to purchase and pay for the portion of the Offered Securities which such Purchaser has agreed to purchase and pay for on such date (otherwise than by reason of any default on the part of the Company or the Guarantors), you, as Representatives, shall use your reasonable efforts to procure within 36 hours thereafter one or more of the other Purchasers, or any others, to purchase from the Company such amounts as may be agreed upon and upon the terms set forth herein, the Offered Securities, as the case may be, which the defaulting Purchaser or Purchasers failed to purchase. If, however, the Representatives shall not have completed such arrangements within such 36-hour period, then the Company shall be entitled to a further period of 36 hours within which to procure another party or other parties satisfactory to the Purchasers to purchase such Offered Securities on such terms. After giving effect to any arrangements for the purchase of the Offered Securities of a defaulting Purchaser or Purchasers by the Representatives and the Company as provided above, if during such period the Representatives or the Company shall not have procured such other Purchasers, or any others, to purchase the Offered Securities agreed to be purchased by the defaulting Purchaser or Purchasers, then (a) if the aggregate principal amount of Offered Securities with respect to which such default shall occur does not exceed 10% of the aggregate principal amount of all Offered Securities covered hereby, the other Purchasers shall be obligated, severally, in proportion to the respective principal amount of Offered Securities which they are obligated to purchase hereunder, to purchase the Offered Securities which such defaulting Purchaser or Purchasers failed to purchase, or (b) if the aggregate principal amount of Offered Securities with respect to which such default shall occur exceeds 10% of the principal amounts of Offered Securities covered hereby, the Company or the Representatives will have the right to terminate this Agreement without liability on the part of the non-defaulting Purchasers or of the Company except to the extent provided in Section 8 hereof. In the event of a default by any Purchaser or Purchasers, as set forth in this Section, the Closing Date may be postponed for such period, not exceeding seven days, as you, as the Representatives or the Company, may determine in order that the required changes in the Final Offering Memorandum or in any other documents or arrangements may be effected. The term “Purchaser” includes any person substituted for a defaulting Purchaser. Any action taken under this Section shall not relieve any defaulting Purchaser from liability in respect of any default of such Purchaser under this Agreement.
     10.  Survival of Certain Representations and Obligations. The respective indemnities, agreements, representations and warranties of the Company, the Guarantors and the several Purchasers set forth in or made pursuant to this Agreement, and certifications made by certain officers of the Company and the Guarantors pursuant to this Agreement, will remain in full force and effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of any Purchaser, the Company, the Guarantors or any of their respective representatives, officers or directors or any controlling person, and will survive delivery of and payment for the Offered Securities. If this Agreement is terminated pursuant to Section 9 or if for any reason the purchase of the Offered Securities by the Purchasers is not consummated, the respective obligations of the Company, the Guarantors and the Purchasers pursuant to Section 8 shall remain in effect.
     11.  Notices. All communications hereunder will be in writing and, if sent to the Purchasers, will be mailed, delivered or faxed and confirmed to the Purchasers, c/o Credit Suisse Securities (USA) LLC, Eleven Madison Avenue, New York, N.Y. 10010-3629, Attention: LCD-IBD, or, if sent to the Company or the Guarantors, will be mailed, delivered or faxed and confirmed to it at Carrizo Oil & Gas, Inc., 1000 Louisiana Street, Suite 1500, Houston, TX 77002, Facsimile: (713) 328-1035, Attention: Gerald A. Morton, General Counsel.
     12.  Termination.
     (a) Material Adverse Change. If, subsequent to the execution and delivery of this Agreement, any of the following has occurred: (i) any change or any development or event involving a prospective change, in the condition (financial or otherwise), results of operations, business or properties of the Company, the Guarantors and their subsidiaries taken as a whole, which, in the judgment of the Representatives, is material and adverse and makes it impractical or inadvisable to market and deliver the Offered Securities; (ii) any change in U.S. or international

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financial, political or economic conditions the effect of which is such as to make it, in the judgment of the Representatives, impractical to market or to enforce contracts for the sale of the Offered Securities, whether in the primary market or in respect of dealings in the secondary market; (iii) any suspension or material limitation of trading in securities generally on The Nasdaq Stock Market, or any setting of minimum prices for trading on such exchange; (iv) any suspension of trading of any securities of the Company or the Guarantors on any exchange or in the over-the-counter market; (v) any downgrading in the rating of any debt securities of the Company by any “nationally recognized statistical rating organization” (as defined for purposes of Rule 436(g) as in effect on July 20, 2010), or any public announcement that any such organization has under surveillance or review with possible negative implications its rating of any debt securities of the Company or any announcement that the Company has been placed on negative outlook; (vi) any banking moratorium declared by any U.S. federal or New York state authorities; (vii) any major disruption of settlements of securities, payment, or clearance services in the United States or any other country where such securities are listed; or (viii) any attack on, outbreak or escalation of hostilities or act of terrorism involving the United States, except as existing with similar severity on the date hereof involving the United States, any declaration of war by Congress or any other national or international calamity or emergency if, in the judgment of the Representatives, the effect of any such attack, outbreak, escalation, act, declaration, calamity or emergency is such as to make it impractical or inadvisable to market and deliver the Offered Securities or to enforce contracts for the sale of the Offered Securities, this Agreement may be terminated by the Representatives.
     (b) Costs and Expenses . This Agreement may be terminated by the Representatives as provided in the final paragraph of Section 7 hereof.
     13.  Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors, officers, directors and the controlling persons referred to in Section 8, and no other person will have any right or obligation hereunder. No purchaser of any of the Offered Securities from the Purchasers shall be deemed a successor or assign merely because of such purchase.
     14.  Representation of Purchasers. You will act for the several Purchasers in connection with this sale and purchase contemplated hereby, and any action under this Agreement taken by you jointly or by Credit Suisse will be binding upon all the Purchasers.
     15.  Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement.
     16.  Absence of Fiduciary Relationship. The Company and the Guarantors acknowledge and agree that:
     (a) No Other Relationship . The Representatives have been retained solely to act as initial purchasers in connection with the initial purchase, offering and resale of the Offered Securities and that no fiduciary, advisory or agency relationship between the Company or the Guarantors and the Representatives has been created in respect of any of the transactions contemplated by this Agreement or the Preliminary Offering Memorandum or the Final Offering Memorandum, irrespective of whether the Representatives have advised or are advising the Company or the Guarantors on other matters;
     (b) Arm’s-Length Negotiations . The purchase price of the Offered Securities set forth in this Agreement was established by the Company and the Guarantors following discussions and arms-length negotiations with the Representatives and the Company and the Guarantors are capable of evaluating and understanding and understand and accept the terms, risks and conditions of the transactions contemplated by this Agreement;

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     (c) Absence of Obligation to Disclose . The Company has and the Guarantors have been advised that the Representatives and their affiliates are engaged in a broad range of transactions which may involve interests that differ from those of the Company or the Guarantors and that the Representatives have no obligation to disclose such interests and transactions to the Company or the Guarantors by virtue of any fiduciary, advisory or agency relationship; and
     (d) Waiver . The Company and the Guarantors waive, to the fullest extent permitted by law, any claims it may have against the Representatives for breach of fiduciary duty or alleged breach of fiduciary duty pursuant to this Agreement and agree that the Representatives shall have no liability (whether direct or indirect) to the Company or the Guarantors in respect of such a fiduciary duty claim or to any person asserting a fiduciary duty claim on behalf of or in right of the Company, including stockholders, employees or creditors of the Company or the Guarantors.
      17.  Applicable Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.
     The Company and the Guarantors hereby submit to the non-exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. The Company and the Guarantors irrevocably and unconditionally waive any objection to the laying of venue of any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby in Federal and state courts in the Borough of Manhattan in The City of New York and irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such suit or proceeding in any such court has been brought in an inconvenient forum.
     18.  Entire Agreement . This Agreement, together with all other written agreements of the parties executed on the date hereof in connection with the offering of the Offered Securities, constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof.
     19.  Amendment. This Agreement may only be amended or modified in writing, signed by all of the parties hereto, and no condition herein (express or implied) may be waived unless waived in writing by each party whom the condition is meant to benefit.

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     If the foregoing is in accordance with the Purchasers’ understanding of our agreement, kindly sign and return to us one of the counterparts hereof, whereupon it will become a binding agreement among the Company, the Guarantors and the several Purchasers in accordance with its terms.
         
  Very truly yours,

Carrizo Oil & Gas, Inc.
 
 
  By:   /s/ Paul F. Boling    
    Title: Vice President, Chief Financial   
    Officer, Secretary and Treasurer   
 
  Bandelier Pipeline Holding, LLC
 
 
  By:   /s/ Paul F. Boling    
    Title: Vice President   
       
 
  Carrizo (Marcellus) LLC
 
 
  By:   /s/ Paul F. Boling    
    Title: Vice President   
       
 
  Carrizo (Marcellus) WV LLC
 
 
  By:   /s/ Paul F. Boling    
    Title: Vice President   
       
 
  Carrizo Marcellus Holdings, Inc.
 
 
  By:   /s/ Paul F. Boling    
    Title: Vice President   
       
 
  CCBM, Inc.
 
 
  By:   /s/ Paul F. Boling    
    Title: Vice President   
       
 
  Chama Pipeline Holding LLC
 
 
  By:   /s/ Paul F. Boling    
    Title: Vice President   
       
 

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  CLLR, Inc.
 
 
  By:   /s/ Paul F. Boling    
    Title: Vice President   
       
 
  Hondo Pipeline Inc.
 
 
  By:   /s/ Paul F. Boling    
    Title: Vice President   
       
 
  Mescalero Pipeline, LLC
 
 
  By:   /s/ Paul F. Boling    
    Title: Vice President   
       

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The foregoing Purchase Agreement
     is hereby confirmed and accepted
     as of the date first above written.
         
Credit Suisse Securities (USA) LLC
 
   
By:   /s/ David S. Alterman      
  Name:   David S. Alterman     
  Title:   Managing Director     
 
Wells Fargo Securities , LLC
 
   
By:   /s/ David Humphreys      
  Name:   David Humphreys     
  Title:   Managing Director     
 
RBC Capital Markets Corporation
 
   
By:   /s/ David Capaldi      
  Name:   David Capaldi     
  Title:   Managing Director     
 
Acting on behalf of themselves
and as the Representatives of
the several Purchasers

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SCHEDULE A
         
    Principal
    Amount of
Purchaser   8.625% Senior Notes due 2018
Credit Suisse Securities (USA) LLC
  $ 160,000,000  
Wells Fargo Securities, LLC
    96,000,000  
RBC Capital Markets Corporation
    68,000,000  
Capital One Southcoast, Inc.
    16,553,968  
Credit Agricole Securities (USA) Inc.
    16,553,968  
BBVA Securities Inc.
    13,243,372  
Mitsubishi UFJ Securities (USA), Inc.
    12,746,356  
U.S. Bancorp Investments, Inc.
    9,932,120  
BNP Paribas Securities Corp.
    6,970,216  
Total
  $ 400,000,000  
 
       

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SCHEDULE B
Issuer Free Writing Communications Included in the Disclosure Package
1.   Final term sheet, dated October 28, 2010, the form of which is attached hereto as Exhibit A.

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SCHEDULE C
List of Subsidiaries
Bandelier Pipeline Holding, LLC
CCBM, Inc.
CLLR, Inc.
Carrizo UK North Sea Limited
Carrizo (Marcellus) LLC
Carrizo Marcellus Holding Inc.
Chama Pipeline Holding LLC
Hondo Pipeline, Inc.
Mescalero Pipeline, LLC

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Exhibit A
Form of Pricing Term Sheet
High Yield Capital Markets
     
Issuer:
  Carrizo Oil & Gas, Inc.
Security Description:
  Senior Notes due 2018
Face:
  $400,000,000*
Gross Proceeds:
  $397,208,000
Net Proceeds:
  $387,708,000
Coupon:
  8.625%
Maturity:
  October 15, 2018
Offering Price:
  99.302%
Yield to Maturity:
  8.750%
Spread to Treasury:
  650 bps
Benchmark:
  3.750% UST due November 15, 2018
Interest Payment Dates:
  October 15 and April 15
Record Dates:
  October 1 and April 1
Commencing:
  April 15, 2011
Equity Clawback:
  Redeem until October 15, 2013 at 108.625% for up to 35.0%
Make-Whole:
  Callable at make-whole call of T+50 bps prior to October 15, 2014
Optional Redemption:
  Callable, on or after the following dates, and at the following prices:
         
  Date   Price
 
 
October 15, 2014
  104.313 %
 
 
October 15, 2015
  102.875 %
 
 
October 15, 2016
  101.438 %
 
 
October 15, 2017 and thereafter
  100 %
     
Change of Control:
  Put at 101%
Trade Date:
  October 28, 2010
Settlement Date:
  November 2, 2010 (T+3)
CUSIP Numbers:
  144A CUSIP: 144577 AB9
 
  144A ISIN: US144577AB97
 
  Regulation S CUSIP: U14535 AA3
 
  Regulation S ISIN: USU14535AA30
Min. Allocation:
  $2,000
Increments:
  $1,000
Joint Book-Running Managers:
  Credit Suisse Securities (USA) LLC
 
  Wells Fargo Securities, LLC
 
  RBC Capital Markets Corporation
Senior Co-Managers:
  Capital One Southcoast, Inc.
 
  Credit Agricole Securities (USA) Inc.
Co-Managers:
  BBVA Securities Inc.
 
  Mitsubishi UFJ Securities (USA), Inc.
 
  U.S. Bancorp Investments, Inc.
 
  BNP Paribas Securities Corp.

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*   This face amount represents an upsize from the originally announced $325 million face amount. As a result of this upsize and the offering price listed above, in the Capitalization table under “As further adjusted for the tender offer,” borrowings outstanding under the Senior secured revolving credit facility will be $122,391, Total long-term debt will be $588,470, and Total capitalization will be $937,728 (dollars in thousands).
This term sheet to the preliminary offering memorandum dated October 25, 2010 should be read together with the preliminary offering memorandum before making a decision in connection with an investment in the securities. The information in this term sheet supersedes the information in the preliminary offering memorandum to the extent that it is inconsistent therewith. Terms used but not defined herein have the meanings ascribed to them in the preliminary offering memorandum.
This communication is for informational purposes only and does not constitute an offer to sell, or a solicitation of an offer to buy any security. No offer to buy securities described herein can be accepted, and no part of the purchase price thereof can be received, unless the person making such investment decision has received and reviewed the information contained in the preliminary confidential offering memorandum in making their investment decisions. This communication is not intended to be a confirmation as required under Rule 10b-10 of the Securities Exchange Act of 1934. A formal confirmation will be delivered to you separately. This notice shall not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of the notes in any state or jurisdiction in which such offer, solicitation or sale would be unlawful. The notes will be offered and sold to qualified institutional buyers in the United States in reliance on Rule 144A under the Securities Act of 1933, as amended (the “Act”), and to persons in offshore transactions in reliance on Regulation S under the Act. The notes have not been registered under the Act or any state securities laws, and may not be offered or sold in the United States or to U.S. persons absent registration or an applicable exemption from the registration requirements.

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Exhibit B-1
Form of Opinion of Baker Botts L.L.P.
1. The Company is a corporation validly existing and in good standing under the laws of the State of Texas. The Company has all necessary corporate power and authority to own, lease and operate its properties and to conduct its business as it is now being conducted and as such business is described in the Preliminary Offering Memorandum, the Disclosure Package and the Final Offering Memorandum.
2. The Company has all requisite corporate power and authority to enter into and perform its obligations under the Agreement and to issue and sell the Initial Notes, and each Guarantor has all requisite corporate or limited liability company power and authority to enter into and perform its obligations under the Agreement and to issue the Initial Guarantee of such Guarantor.
3. The Agreement has been duly authorized and validly executed and delivered by the Company and each Guarantor.
4. The Base Indenture has been duly authorized and validly executed and delivered by the Company, CCBM, Inc., CLLR, Inc. and Hondo Pipeline, Inc. and the Fourth Supplemental Indenture has been duly authorized, executed and delivered by the Company and each Guarantor, and assuming the due authorization, execution and delivery of each of the Base Indenture and the Fourth Supplemental Indenture by the Trustee, each of the Base Indenture and the Fourth Supplemental Indenture constitutes a valid and legally binding obligation of the Company and each Guarantor party thereto, enforceable against the Company and each such Guarantor in accordance with its terms, except as the enforceability thereof may be subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other laws of general applicability relating to or affecting creditors’ rights and to general principles of equity and public policy (regardless of whether enforcement is sought in a proceeding at law or in equity) and to the discretion of the court before which any proceeding may be brought.
5. The Initial Notes have been duly authorized and validly executed and delivered by the Company, and, when authenticated in accordance with the provisions of the Indenture and delivered to and paid for by the Purchasers under this Agreement, will constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms, except as the enforceability thereof may be subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other laws of general applicability relating to or affecting creditors’ rights and to general principles of equity and public policy (regardless of whether enforcement is sought in a proceeding at law or in equity) and to the discretion of the court before which any proceeding may be brought.
6. The Initial Guarantee of each Guarantor has been duly authorized and validly executed and delivered by such Guarantor, and when the Initial Notes are authenticated in accordance with the provisions of the Indenture and delivered to and paid for by the Purchasers under this Agreement, the Initial Guarantee of each Guarantor will constitute a valid and legally binding obligation of such Guarantor, enforceable against such Guarantor in accordance with its terms, except as the enforceability thereof may be subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other laws of general applicability relating to or affecting creditors’ rights and to general principles of equity and public policy (regardless of whether enforcement is sought in a proceeding at law or in equity) and to the discretion of the court before which any proceeding may be brought.

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7. No registration under the Securities Act of the Offered Securities is required in connection with the sale of the Offered Securities to the Purchasers as contemplated by this Agreement and the Disclosure Package and the Final Memorandum or in connection with the initial resale of the Offered Securities by the Purchasers (it being understood that we do not pass upon any subsequent offer or resale of any Offered Securities), and prior to the commencement of the Exchange Offer (as defined in the Registration Rights Agreement) or the effectiveness of the Shelf Registration Statement (as defined in the Registration Rights Agreement), the Indenture is not required to be qualified under the Trust Indenture Act, in each case assuming (i) the Offered Securities are sold to the Purchasers, and initially resold by the Purchasers, in accordance with the terms of, and in the manner contemplated by, this Agreement and the Final Memorandum, (ii) the accuracy of the Purchasers’ representations in Section 4 of this Agreement and those of the Company and the Guarantors contained in this Agreement, (iii) the due performance by the Company, the Guarantors and the Purchasers of the agreements set forth in this Agreement and (iv) the Purchasers’ compliance with and the transfer procedures and restrictions described in the Final Memorandum.
8. The Exchange Notes have been duly authorized by the Company; and when the Exchange Notes are issued, executed and authenticated in accordance with the terms of the Exchange Offer and the Indenture, the Exchange Notes will constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms, except as the enforceability thereof may be subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other laws of general applicability relating to or affecting creditors’ rights and to general principles of equity and public policy (regardless of whether enforcement is sought in a proceeding at law or in equity) and to the discretion of the court before which any proceeding may be brought.
9. The Registration Rights Agreement has been duly authorized and validly executed and delivered by the Company and each Guarantor.
10. The Exchange Guarantee of each Guarantor has been duly authorized by such Guarantor; and when the Exchange Notes are issued, executed and authenticated in accordance with the terms of the Exchange Offer and the Indenture and the Exchange Guarantee of each Guarantor has been executed and delivered by such Guarantor, the Exchange Guarantee of each Guarantor will constitute a valid and legally binding obligation of such Guarantor, enforceable against such Guarantor in accordance with its terms, except as the enforceability thereof may be subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other laws of general applicability relating to or affecting creditors’ rights and to general principles of equity and public policy (regardless of whether enforcement is sought in a proceeding at law or in equity) and to the discretion of the court before which any proceeding may be brought.

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11. The execution and delivery by the Company and each Guarantor of this Agreement and the consummation of the transactions provided for herein do not and will not with the passage of time (a) result in a breach or violation of any of the terms or provisions of, or constitute a default under the Organizational Documents of the Company or any Guarantor; (b) to our knowledge, result in any breach or violation of any terms, provisions or conditions of, or constitute a default of or result in the creation of any lien, charge or encumbrance upon any property or assets of the Company or any Guarantor pursuant to any indenture, mortgage, deed of trust, note, contract, commitment, instrument or document filed as an exhibit to the Company’s Form 10-K for the fiscal year ended December 31, 2009, as filed with the Commission on March 16, 2010, Form 10-Q for the quarter ended March 31, 2010, as filed with the Commission on May 5, 2010, Form 10-Q for the quarter ended June 30, 2010, as filed with the Commission on August 9, 2010 or Form 8-K as filed with the Commission on October 25, 2010 (the “Material Agreements”), except for such contracts for which consents or waivers have been obtained as of the date hereof; or (c) to our knowledge, result in a violation by the Company or any Guarantor of any law, statute, rule or regulation of the United States, the State of Texas or the State of Delaware applicable to the Company and the Guarantors (other than securities laws or anti-fraud laws); which, in the case of either (b) or (c), breach, violation, default or creation of a lien, charge or encumbrance would, singularly or in the aggregate, be reasonably expected to have a material adverse effect on the business and operations of the Company or any Guarantor or on its legal ability to perform its obligations under the Agreement.
12. No consent, approval or authorization of, or filing with, any governmental authority or agency of the United States, the State of Texas or the State of Delaware is required on the part of the Company or any Guarantor as a condition to the Company’s and each Guarantor’s valid execution, delivery and performance of its obligations under this Agreement, or to the offer, sale or issuance of the Initial Notes by the Company and the issuance of the Initial Guarantee of a Guarantor by such Guarantor other than those that have been made or obtained under the Securities Act, the Trust Indenture Act and the Rules and Regulations or as may be required under state securities or “blue sky” laws or by the Nasdaq Stock Market LLC in connection with the sale of the Initial Notes and except for any Form 8-K filing.
13. The statements in the Preliminary Offering Memorandum and the Final Offering Memorandum under the caption “Description of the Notes” insofar as such statements constitute a summary of the terms of the Offered Securities are accurate summaries of the terms of the Offered Securities, in all material respects.
14. The statements in the Preliminary Offering Memorandum and the Final Offering Memorandum under the caption “Material U.S. Federal Income and Estate Tax Considerations,” insofar as they purport to describe provisions of U.S. federal income tax laws or legal conclusions with respect thereto, fairly and accurately summarize the matters referred to therein in all material respects.
15. Neither the Company nor any Guarantor is an “investment company” or an entity controlled by an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended.

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We have reviewed the Disclosure Package and the Final Offering Memorandum and have participated in conferences with officers and other representatives of the Company and the Guarantors, with representatives of the Company’s independent registered public accounting firm and independent petroleum engineers and with you and your counsel, at which the contents of the Disclosure Package, the Final Offering Memorandum and related matters were discussed. The purpose of our professional engagement was not to establish or confirm factual matters set forth in the Disclosure Package or the Final Offering Memorandum, and we have not undertaken to verify independently any of the factual matters in such documents. Moreover, many of the determinations required to be made in the preparation of the Disclosure Package and the Final Offering Memorandum involve matters of a non-legal nature. Accordingly, we are not passing upon, and do not assume any responsibility for, the accuracy, completeness or fairness of the statements included in the Disclosure Package and the Final Offering Memorandum (except to the extent stated in paragraphs 13 and 14 above). Subject to the foregoing, and on the basis of the information we gained in the course of performing the services referred to above, we advise you that nothing came to our attention that caused us to believe that:
(1) the Disclosure Package, as of the Applicable Time, included an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or
(2) the Final Offering Memorandum, as of its date or as of the date hereof, included or includes an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;
it being understood that in each case we have not been asked to, and do not, express any belief with respect to (a) the financial statements and other financial, accounting or statistical information contained or included or incorporated by reference therein or omitted therefrom, (b) the summary reserve reports of the Company’s independent petroleum engineers and reserve information included or incorporated by reference therein or omitted therefrom, or (c) the representations and warranties included in the exhibits to the documents incorporated by reference therein.
In connection with our opinion expressed above in paragraph 11, we have reviewed only the Material Agreements and our opinion is limited in all respects to such review.
As to the opinion expressed above in paragraph 1 as to the existence and good standing of the Company, we have relied solely upon certificates issued by the Office of the Secretary of State of Texas and the Office of the Comptroller of the State of Texas.
Our opinion is limited in all respects to matters governed by the Federal laws of the United States, the laws of the State of Texas, the Delaware General Corporation Law, the Delaware Limited Liability Company Act and the contract laws of the State of New York, in each case as in effect on the date hereof. The opinions expressed herein are for your benefit and may be relied upon only by you and may not be given or described to any other person without our prior written consent. The opinions given are strictly limited to the matters stated herein and no implied opinions are to be inferred from anything stated herein, and without limiting the generality of the foregoing we express no opinion with respect to any bankruptcy or creditors rights laws or any federal or state securities or antifraud law, rule or regulation except as otherwise specifically stated herein. This opinion speaks as of the date hereof, and we disclaim any obligation to update this opinion.
TO COMPLY WITH TREASURY DEPARTMENT CIRCULAR 230, YOU ARE HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF FEDERAL TAX ISSUES IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE RELIED UPON, AND CANNOT BE RELIED UPON BY YOU, FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON YOU UNDER THE INTERNAL REVENUE CODE; (B) SUCH DISCUSSION IS WRITTEN IN CONNECTION WITH THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED HEREIN; AND (C) YOU SHOULD SEEK ADVICE BASED ON YOUR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

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Exhibit B-2
Form of Opinion of Gerald A. Morton,
as General Counsel of the Company and for the Guarantors
          1. Each of Carrizo Marcellus Holding Inc., CCBM, Inc., CLLR, Inc. and Hondo Pipeline, Inc. is a corporation validly existing and in good standing under the laws of the State of Delaware. Each of Bandelier Pipeline Holding, LLC, Carrizo (Marcellus) LLC, Carrizo (Marcellus) WV LLC, Chama Pipeline Holding LLC and Mescalero Pipeline LLC is a limited liability company validly existing and in good standing under the laws of the State of Delaware. Each Guarantor has all necessary corporate power and authority to own, lease and operate its properties and conduct its business as described in the Preliminary Offering Memorandum, the Disclosure Package and the Final Offering Memorandum.
          2. The issuance and sale of the Initial Notes by the Company is not subject to any preemptive or other similar rights of any security holder of the Company or the Guarantors under the Company’s or any Guarantor’s Organizational Documents or, to my knowledge, any agreement. To my knowledge, except as disclosed in the Preliminary Offering Memorandum and the Final Offering Memorandum, there are no preemptive or other rights to subscribe for or to purchase or any restriction upon the voting or transfer of any securities of the Company or any Guarantor pursuant to the Company’s or any Guarantor’s Organizational Documents or any agreements known to me. To my knowledge, there are no persons with registration rights or other similar rights to have any securities registered pursuant to any Registration Statement, other than as described in any Registration Statement and the Registration Rights Agreement or as have been waived or satisfied.
          3. To my knowledge, other than as set forth in the Preliminary Offering Memorandum, the Disclosure Package or the Final Offering Memorandum, there is no action, suit or proceeding, in each case pending or threatened against the Company or any Guarantor before any court, administrative agency or governmental authority of the United States, the State of Texas or the State of Delaware which, if adversely determined, would have a material adverse effect on the business and operations of the Company or any Guarantor or on its legal ability to perform its obligations under this Agreement.
          I have participated in conferences with officers and other representatives of the Company and the Guarantors, your representatives, your counsel and representatives of the independent registered public accounting firms and reserve engineering firms of the Company and the Guarantors at which conferences the contents of the Preliminary Offering Memorandum, the Final Offering Memorandum and the Disclosure Package and related matters were discussed and, although I did not independently verify such information and am not passing upon and do not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Preliminary Offering Memorandum, the Final Offering Memorandum and the Disclosure Package, I advise you that on the basis of the foregoing, no facts have come to my attention which lead me to believe that (A) the Final Offering Memorandum (except for (i) the financial statements and schedules contained therein or omitted therefrom (including the notes thereto and the auditor’s report thereon), (ii) the summary reserve reports of each of the Company’s independent petroleum engineers included therein, (iii) the other accounting, financial, statistical or reserve engineering data contained therein or omitted therefrom, or (iv) the representations and warranties included in the exhibits to the documents incorporated by reference therein, as to which I have not been asked to comment) on the date thereof includes any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or (B) the Disclosure Package (except for (i) the financial statements and

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schedules contained therein or omitted therefrom (including the notes thereto and the auditor’s report thereon), (ii) the summary reserve reports of each of the Company’s independent petroleum engineers included therein, (iii) the other accounting, financial, statistical or reserve engineering data contained therein or omitted therefrom, or (iv) the representations and warranties included in the exhibits to the documents incorporated by reference therein, as to which I have not been asked to comment) as of the Applicable Time, included any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
          The opinions herein expressed are subject to the following qualifications:
A. The opinions expressed herein are limited to matters governed by the laws of the State of Texas, the corporate and limited liability company laws of the State of Delaware and the federal laws of the United States of America. I am only admitted to practice law in the State of Texas.
B. The opinions expressed herein are limited to the matters stated herein, and no opinion is implied or may be inferred beyond the matters expressly stated herein and without limiting the generality of the foregoing I express no opinion with respect to any bankruptcy or creditors rights laws or any federal or state securities or antifraud law, rule or regulation except as otherwise specifically stated herein. The opinions expressed herein are based upon and rely upon the current status of the law in the applicable jurisdiction and in all respects are subject to and may be limited by future legislation as well as by developing case law. The opinions expressed herein are based solely upon applicable laws, statutes, ordinances, rules and regulations and facts, all as in existence on this date, and I express no opinion as to the effect which any future amendments, changes, additions or modifications thereof may have upon the opinions expressed herein, and I assume no obligation to update or supplement such opinions to reflect any facts or circumstances which may hereafter come to my attention or any changes in law which may hereafter occur.
C. The opinions expressed herein are legal opinions only and do not constitute a guarantee or warranty of the matters discussed herein.
D. The opinions expressed herein are rendered solely for your benefit in connection with the transactions described above. Except as expressly permitted by me in writing, these opinions may not be used or relied upon by any other person and may not be disclosed, quoted, filed with a governmental agency or otherwise referred to without my prior written consent in each instance.
E. In the foregoing opinions, phrases such as “to my knowledge,” “known to me” and those with equivalent wording refer to my conscious awareness of information. In my capacity as General Counsel, I have participated in numerous internal company meetings, made inquiries of such individuals as I deemed appropriate and have examined records that I deemed relevant as a basis for the opinions expressed above.

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Exhibit 4.2
EXECUTION VERSION
 
 
FOURTH SUPPLEMENTAL INDENTURE
among
CARRIZO OIL & GAS, INC.
as Issuer
and
THE SUBSIDIARY GUARANTORS NAMED ON THE SIGNATURE PAGE HEREOF
as Subsidiary Guarantors
and
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Trustee
 
8.625% Senior Notes due 2018
 
November 2, 2010
 
 

 


 

TABLE OF CONTENTS
             
ARTICLE ONE THE NOTES     2  
 
           
SECTION 101
  Designation of Notes; Establishment of Form     2  
SECTION 102
  Amount     2  
SECTION 103
  Interest     3  
SECTION 104
  Denominations     3  
SECTION 105
  Place of Payment     3  
SECTION 106
  Redemption     3  
SECTION 107
  Maturity     3  
SECTION 108
  Repurchase     4  
SECTION 109
  Global Securities; Book-Entry Provisions     4  
SECTION 110
  Guarantee     4  
SECTION 111
  Other Terms of Notes     4  
 
           
ARTICLE TWO AMENDMENTS TO THE INDENTURE     4  
 
           
SECTION 201
  Definitions     4  
SECTION 202
  Other Definitions     41  
SECTION 203
  Mutilated, Destroyed, Lost and Stolen Securities     42  
SECTION 204
  Amendment of Indenture Without Consent of Holders     42  
SECTION 205
  Limitation on Mergers and Consolidations     42  
SECTION 206
  Issuance of Additional Notes     44  
SECTION 207
  Redemption     45  
SECTION 208
  Covenants     49  
SECTION 209
  Amendment to Events of Default     74  
SECTION 210
  Guarantees     77  
SECTION 211
  Other Amendments     79  
 
           
ARTICLE THREE MISCELLANEOUS PROVISIONS     79  
 
           
SECTION 301
  Integral Part     79  
SECTION 302
  General Definitions     80  
SECTION 303
  Adoption, Ratification and Confirmation     80  
SECTION 304
  Counterparts     80  
SECTION 305
  Governing Law     80  

i


 

CARRIZO OIL & GAS, INC.
FOURTH SUPPLEMENTAL INDENTURE
     THIS FOURTH SUPPLEMENTAL INDENTURE, dated as of November 2, 2010 (the “Fourth Supplemental Indenture”), among Carrizo Oil & Gas, Inc., a Texas corporation (the “Company”), the subsidiary guarantors listed on the signature page hereof (each, a “Subsidiary Guarantor” and, collectively, the “Subsidiary Guarantors”) and Wells Fargo Bank, National Association (the “Trustee”).
WITNESSETH :
     WHEREAS, the Company has heretofore executed and delivered to the Trustee an Indenture, dated as of May 28, 2008 (the “Original Indenture”) and, as supplemented by this Fourth Supplemental Indenture, the “Indenture”), providing for the issuance from time to time of one or more series of the Company’s Securities;
     WHEREAS, Sections 2.01 and 9.01(9) of the Original Indenture provide that the Company and the Trustee may from time to time enter into one or more indentures supplemental thereto to establish the form or terms of Securities of a new series;
     WHEREAS, Section 9.01(6) of the Original Indenture permits the execution of supplemental indentures without the consent of any Holders to add to the covenants of the Company for the benefit of, and to add any additional Events of Default with respect to, all or any series of Securities;
     WHEREAS, Section 9.01(8) of the Original Indenture permits the execution of supplemental indentures without the consent of any Holders to change or eliminate any of the provisions of the Indenture; provided that such change or elimination does not adversely affect in any material respect any outstanding Security of any series created prior to the execution of such supplemental indenture;
     WHEREAS, the Company desires to issue 8.625% Senior Notes due 2018 (the “Notes”), a new series of Securities the issuance of which was authorized by or pursuant to resolution of the Board of Directors of the Company;
     WHEREAS, the Company, pursuant to the foregoing authority, proposes in and by this Fourth Supplemental Indenture to supplement and amend the Original Indenture insofar as it will apply only to Notes in certain respects; and
     WHEREAS, all things necessary have been done to make the Notes, when executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid obligations of the Company, and to make this Fourth Supplemental Indenture a valid agreement of the Company and of the Subsidiary Guarantors, in accordance with their and its terms; and
     WHEREAS, all things necessary have been done to make the Guarantee of each Subsidiary Guarantor, when the Notes are executed by the Company and authenticated and

 


 

delivered hereunder and duly issued by the Company, the valid obligation of such Subsidiary Guarantee, and to make this Fourth Supplemental Indenture a valid agreement of the Subsidiary Guarantors, in accordance with its terms.
     NOW, THEREFORE:
     In consideration of the premises provided for herein, the Company, the Subsidiary Guarantors and the Trustee mutually covenant and agree for the equal and proportionate benefit of all Holders of the Notes as follows:
ARTICLE ONE
THE NOTES
SECTION 101 Designation of Notes; Establishment of Form.
     There shall be a series of Securities designated “8.625% Senior Notes due 2018” of the Company (the “Notes”). The provisions relating to the Notes set forth in the Appendix hereto are incorporated into and shall be deemed a part of this Fourth Supplemental Indenture, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by the Indenture. The Initial Notes shall be substantially in the form of Exhibit 1 to the Appendix. The Exchange Notes shall be substantially in the form of Exhibit 2 to the Appendix. The Notes may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers of the Company executing such Notes, as evidenced by their execution of the Notes.
     All of the Notes will initially be issued in permanent global form, substantially in the respective form set forth in the Appendix (the “Global Securities”). Each Global Security shall represent such of the Notes as shall be specified therein and shall provide that it shall represent the aggregate amount of Outstanding Notes from time to time endorsed thereon and that the aggregate amount of Outstanding Notes represented thereby may from time to time be reduced to reflect exchanges and redemptions. Any endorsement of a Global Security to reflect the amount, or any increase or decrease in the amount, of Outstanding Notes represented thereby shall be made by the Trustee in accordance with written instructions or such other written form of instructions as is customary for the Depositary, from the Depositary or its nominee on behalf of any Person having the beneficial interest in the Global Security.
     The Company initially appoints The Depository Trust Company to act as Depositary with respect to the Global Securities.
     The Company initially appoints the Trustee to act as Registrar and Paying Agent with respect to the Notes.
SECTION 102 Amount.
     The Notes may be issued in unlimited aggregate principal amount. The Trustee shall authenticate and deliver Notes for original issue in an aggregate Principal Amount of up to

2


 

$400,000,000 upon Company Order without any further action by the Company. Upon Company Request, the Trustee shall authenticate and deliver additional Notes, provided that such additional Notes are fungible with the Notes then outstanding for U.S. Federal income taxation purposes.
SECTION 103 Interest.
     The Notes shall bear interest at the rate set forth under the caption “Interest” in the Notes. Interest on the Notes shall be payable to the persons in whose name the Notes are registered at the close of business on the Regular Record Date for such interest payment. Interest on the Notes shall accrue on the Notes from the date specified in the Notes. The Interest Payment Dates on which interest on the Notes shall be payable are April 15 and October 15, commencing on April 15, 2011. The Regular Record Dates for the interest payable on the Notes on any Interest Payment Date shall be April 1 or October 1, as the case may be, immediately preceding such Interest Payment Date.
SECTION 104 Denominations.
     The Notes shall be in fully registered form without coupons in denominations of $2,000 of Principal Amount and integral multiples of $1,000 in excess of $2,000.
SECTION 105 Place of Payment.
     The Place of Payment for the Notes and the place or places where the principal of and interest on the Notes shall be payable, the Notes may be surrendered for registration of transfer, the Notes may be surrendered for exchange, repurchase or redemption and where notices may be given to the Company in respect of the Notes is at the office or agency of the Trustee in Dallas, Texas; provided that payment of interest may be made at the option of the Company by check mailed to the address of the person entitled thereto as such address shall appear in the register of Securities; provided , further if a Holder has given wire transfer instructions to the Company, the Company will pay all principal, interest and premium, if any, on that Holder’s Notes in accordance with such instructions by wire transfer of immediately available funds to the accounts specified by the Holder of such Notes.
SECTION 106 Redemption.
     There shall be no sinking fund for the retirement of the Notes.
     The Company, at its option, may redeem the Notes in accordance with the provisions of and at the Redemption Prices set forth in accordance with the provisions of the Indenture, including, without limitation, Article III of the Original Indenture.
SECTION 107 Maturity.
     The date on which the principal of the Notes is payable, unless accelerated pursuant to the Indenture, shall be October 15, 2018.

3


 

SECTION 108 Repurchase.
     The Notes shall be repurchased by the Company in accordance with the provisions and at the Repurchase Prices set forth under the caption “Repurchase by the Company at the Option of Holder” in the Notes and in accordance with the provisions of the Indenture, including, without limitation, Sections 4.12 and 4.16 of the Indenture.
SECTION 109 Global Securities; Book-Entry Provisions.
     Section 2.17 of the Original Indenture shall not apply to the Notes. Instead, the provisions under Section 2.1 of the Appendix shall apply to the Notes.
SECTION 110 Guarantee.
     The Notes shall be entitled to the benefits of a Guarantee by each of the Subsidiary Guarantors as provided in Article X of the Original Indenture.
SECTION 111 Other Terms of Notes.
     Without limiting the foregoing provisions of this Article One, the terms of the Notes shall be as set forth in the form of the Notes set forth in the Appendix hereto and as provided in the Indenture.
ARTICLE TWO
AMENDMENTS TO THE INDENTURE
     The amendments contained herein shall apply to the Notes only and not to any other series of Security issued under the Indenture and any covenants provided herein are expressly being included solely for the benefit of the Notes. These amendments shall be effective for so long as there remain any Notes Outstanding.
SECTION 201 Definitions.
     Section 1.01 of the Original Indenture is amended by inserting or restating, as the case may be, in their appropriate alphabetical position, the following definitions:
          “Additional Assets” means:
     (1) any assets used or useful in the Oil and Gas Business, other than Indebtedness or Capital Stock;
     (2) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or any of its Restricted Subsidiaries; or
     (3) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary;

4


 

provided, however, that any such Restricted Subsidiary described in clause (2) or (3) is primarily engaged in the Oil and Gas Business.
     “Additional Interest” means all additional interest then owing pursuant to Section 6 of the Registration Rights Agreement referred to in clause (1) of the definition of “Registration Rights Agreement” in the Appendix. Unless the context indicates otherwise, all references to “interest” in this Indenture or the Notes shall be deemed to include any Additional Interest.
     “Additional Notes” means, subject to the Company’s compliance with Section 4.11, 8.625% Senior Notes due 2018 issued from time to time after the Initial Issuance Date under the terms of this Indenture (other than pursuant to Section 2.08, 2.09, 2.12, 3.07, 4.12, 4.16 or 9.05 of this Indenture or Sections 2.3 or 2.4 of the Appendix and other than Exchange Notes issued pursuant to an exchange offer for Initial Notes outstanding under this Indenture).
     “Adjusted Consolidated Net Tangible Assets” of a specified Person means (without duplication), as of the date of determination:
     (1) the sum of:
     (a) discounted future net revenue from proved crude oil and natural gas reserves of such Person and its Restricted Subsidiaries calculated in accordance with SEC guidelines before any state or federal or other income taxes, as estimated by the Company in a reserve report prepared as of the end of the fiscal year of such Person for which audited financial statements are available, as increased by, as of the date of determination, the estimated discounted future net revenue from:
     (i) estimated proved crude oil and natural gas reserves of such Person and its Restricted Subsidiaries attributable to acquisitions consummated since the date of such reserve report, which reserves were not reflected in such reserve report, and
     (ii) estimated crude oil and natural gas reserves of such Person and its Restricted Subsidiaries attributable to extensions, discoveries and other additions and upward revisions of estimates of proved crude oil and natural gas reserves (including previously estimated development costs incurred during the period and the accretion of discount since the prior period end) due to exploration, development or exploitation, production or other activities which would, in accordance with standard industry practice, cause such revisions, in the case of clauses (i) and (ii) calculated in accordance with SEC guidelines,
and decreased by, as of the date of determination, the estimated discounted future net revenue attributable to:

5


 

     (A) estimated proved crude oil and natural gas reserves of such Person and its Restricted Subsidiaries reflected in such reserve report produced or disposed of since the date of such reserve report, and
     (B) reductions in the estimated crude oil and natural gas reserves of such Person and its Restricted Subsidiaries reflected in such reserve report since the date of such reserve report due to changes in geological conditions or other factors which would, in accordance with standard industry practice, cause such revisions, in the case of clauses (A) and (B) calculated in accordance with SEC guidelines;
provided, however, that, in the case of each of the determinations made pursuant to clauses (i), (ii), (A) and (B) above, such increases and decreases shall be estimated by the Company’s petroleum engineers or any independent petroleum engineers engaged by the Company for that purpose;
     (b) the capitalized costs that are attributable to crude oil and natural gas properties of such Person and its Restricted Subsidiaries to which no proved crude oil and natural gas reserves are attributable, based on such Person’s books and records as of a date no earlier than the date of such Person’s latest available annual or quarterly financial statements;
     (c) the Net Working Capital of such Person as of a date no earlier than the date of such Person’s latest available annual or quarterly financial statements; and
     (d) the greater of:
     (i) the net book value of other tangible assets of such Person and its Restricted Subsidiaries as of a date no earlier than the date of such Person’s latest available annual or quarterly financial statements, and
     (ii) the appraised value, as estimated by independent appraisers, of other tangible assets of such Person and its Restricted Subsidiaries as of a date no earlier than the date of such Person’s latest available annual or quarterly financial statements (provided that such Person shall not be required to obtain such an appraisal of such assets if no such appraisal has been performed);
minus
(2) the sum of:
     (a) Minority Interests;

6


 

     (b) to the extent not otherwise taken into account in determining Adjusted Consolidated Net Tangible Assets, any net natural gas balancing liabilities of such Person and its Restricted Subsidiaries reflected in such Person’s latest audited financial statements;
     (c) to the extent included in clause (1)(a) above, the discounted future net revenue, calculated in accordance with SEC guidelines (utilizing the prices utilized in such Person’s year end reserve report), attributable to reserves subject to participation interests, overriding royalty interests or other interests of third parties, pursuant to participation, partnership, vendor financing or other agreements then in effect, or which otherwise are required to be delivered to third parties;
     (d) to the extent included in clause (1)(a) above, the discounted future net revenue calculated in accordance with SEC guidelines (utilizing the prices utilized in such Person’s year end reserve report), attributable to reserves that are required to be delivered to third parties to fully satisfy the obligations of such Person and its Restricted Subsidiaries with respect to Volumetric Production Payments on the schedules specified with respect thereto; and
     (e) the discounted future net revenue, calculated in accordance with SEC guidelines, attributable to reserves subject to Dollar-Denominated Production Payments that, based on the estimates of production and price assumptions included in determining the discounted future net revenue specified in clause (1)(a) above, would be necessary to satisfy fully the obligations of such Person and its Restricted Subsidiaries with respect to Dollar-Denominated Production Payments on the schedules specified with respect thereto.
If the Company changes its method of accounting from the full cost method to the successful efforts method or a similar method of accounting, “Adjusted Consolidated Net Tangible Assets” of the Company will continue to be calculated as if the Company were still using the full cost method of accounting.
     “Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control,” as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. For purposes of this definition, the terms “controlling,” “controlled by” and “under common control with” have correlative meanings.
     “Applicable Law,” except as the context may otherwise require, means all applicable laws, rules, regulations, ordinances, judgments, decrees, injunctions, writs and orders of any court or governmental or congressional agency or authority and rules,

7


 

regulations, orders, licenses and permits of any United States federal, state, municipal, regional, or other governmental body, instrumentality, agency or authority.
     “Asset Sale” means:
     (1) the sale, lease, conveyance or other disposition of any assets (including by way of a Production Payment or a Sale Leaseback Transaction or mergers, consolidations or otherwise); provided, however, that the disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole will not be an “Asset Sale,” but will be governed by the provisions of Section 4.16 and/or the provisions of Section 5.01 and not by the provisions of Section 4.12; and
     (2) the issuance of Equity Interests in any of the Company’s Restricted Subsidiaries or the sale of Equity Interests in any of its Restricted Subsidiaries (other than directors’ qualifying shares or shares required by Applicable Law to be held by a Person other than the Company or a Restricted Subsidiary of the Company).
     Notwithstanding the preceding, the following items will not be deemed to be Asset Sales:
     (1) any single transaction or series of related transactions that involves assets having a Fair Market Value of less than the greater of (i) $10.0 million and (ii) 1.0% of the Company’s Adjusted Consolidated Net Tangible Assets determined as of the date of such transaction;
     (2) a disposition of assets between or among any of the Company and its Restricted Subsidiaries;
     (3) an issuance or sale of Equity Interests by a Restricted Subsidiary to the Company or to another Restricted Subsidiary;
     (4) any disposition, abandonment, relinquishment or expiration of equipment, inventory, products, accounts receivable or other assets in the ordinary course of business;
     (5) the disposition of cash or Cash Equivalents, Hedging Contracts or other financial instruments in the ordinary course of business;
     (6) a Restricted Payment that is permitted by Section 4.09 or a Permitted Investment (or a disposition that would constitute a Restricted Payment but for the exclusion from the definition thereof);
     (7) the farm-out, lease or sublease of developed or undeveloped crude oil or natural gas properties owned or held by the Company or any of its Restricted Subsidiaries in the ordinary course of business or in exchange for crude oil and natural gas properties or interests owned or held by another Person;

8


 

     (8) (i) any trade or exchange by the Company or any of its Restricted Subsidiaries of Hydrocarbon properties or other assets for Hydrocarbon properties or other assets owned or held by one or more other Persons, and (ii) any transfer or sale of assets, or lease, assignment or sublease of any real or personal property, (A) in exchange for services (including in connection with any outsourcing arrangements), and/or (B) in exchange for such transferee, lessee or assignee (or an Affiliate thereof) agreeing to pay all or a portion of the costs and expenses related to the exploration, development, completion and/or production (and related activities) of properties of the Company or any Restricted Subsidiary, and/or (C) in exchange for assets satisfying the requirements of clause (i) above ((A), (B) and (C) being referred to herein as a “carry”); provided that (except in the case of land purchase option arrangements granted by or to the Company or any Restricted Subsidiary of the Company) the Fair Market Value of the assets traded, exchanged, transferred, sold, leased, assigned or subleased by the Company or such Restricted Subsidiary (together with any cash and Cash Equivalents) is reasonably equivalent or of less market value to the Fair Market Value of the properties, assets, services or carry (together with any cash and Cash Equivalents) expected to be received by the Company or such Restricted Subsidiary, as determined in good faith by the Company, and provided further that any cash received must be applied in accordance with the provisions of Section 4.12;
     (9) the creation or perfection of a Lien (but not, except to the extent contemplated in clause (10) below, the sale or other disposition of the assets subject to such Lien);
     (10) the creation or perfection of a Permitted Lien and the exercise by any Person in whose favor a Permitted Lien is granted of any of its rights in respect of that Permitted Lien;
     (11) a surrender or waiver of contract rights or the settlement, release or surrender of contract, tort or other claims of any kind;
     (12) the licensing or sublicensing of intellectual property or other general intangibles in the ordinary course of business to the extent that such license does not prohibit the licensor from using the intellectual property and licenses, leases or subleases of other property;
     (13) the disposition of oil and natural gas properties in connection with tax credit transactions complying with Section 45K of the Code or any successor or analogous provisions of the Code, provided that the sale or other disposition is for not less than the Fair Market Value of such oil and natural gas properties, as determined in good faith by the Company;
     (14) the transfer of property received in settlement of debts owing to such Person as a result of foreclosure, perfection or enforcement of any Lien or

9


 

debt, which debts were owing to such Person in the ordinary course of its business,
     (15) any Production Payments and Reserve Sales, provided that any such Production Payments and Reserve Sales (other than incentive compensation programs on terms that are reasonably customary in the Oil and Gas Business for geologists, geophysicists and other providers of technical services to the Company or a Restricted Subsidiary of the Company), shall have been created, incurred, issued, assumed or guaranteed in connection with the acquisition or financing of, and within 60 days after the acquisition of, the property that is subject thereto;
     (16) the sale or other disposition (whether or not in the ordinary course of business) of oil and gas properties, provided at the time of such sale or other disposition such properties do not have associated with them any proved reserves, and provided further that the sale or other disposition is for not less than the Fair Market Value of such oil and gas properties, as determined in good faith by the Company;
     (17) any sale or other disposition of Equity Interests in, or other ownership interests in or assets or property, including Indebtedness, or other securities of, an Unrestricted Subsidiary;
     (18) any disposition of Equity Interests of a Restricted Subsidiary pursuant to an agreement or other obligation with or to a Person (other than the Company or a Restricted Subsidiary of the Company) from whom such Restricted Subsidiary was acquired or from whom such Restricted Subsidiary acquired its business and assets (having been newly formed in connection with such acquisition), made as part of such acquisition and in each case comprising all or a portion of the consideration in respect of such sale or acquisition; and
     (19) the sale and leaseback of any asset within 180 days of the acquisition thereof.
     “Attributable Debt” in respect of a Sale Leaseback Transaction means, at the time of determination, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in such Sale Leaseback Transaction including any period for which such lease has been extended or may, at the option of the lessor, be extended. Such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with GAAP. As used in the preceding sentence, the “net rental payments” under any lease for any period shall mean the sum of rental and other payments required to be paid with respect to such period by the lessee thereunder, excluding any amounts required to be paid by such lessee on account of maintenance and repairs, insurance, taxes, assessments, water rates or similar charges. In the case of any lease that is terminable by the lessee upon payment of penalty, such net rental payment shall also include the amount of such penalty, but no

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rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated.
     “Avista” means Avista Capital Partners II, L.P., a Delaware limited partnership, and its successors and permitted assigns.
     “Avista Marcellus Joint Venture” means that certain Joint Venture between Carrizo (Marcellus) LLC (or other wholly owned Subsidiaries of the Company), Avista and ACP II Marcellus LLC pursuant to that certain Participation Agreement dated as of November 3, 2008 and such other documents delivered in connection therewith, as the same may be amended, modified or supplemented from time to time (provided that such amendment, modification or supplement does not materially and adversely affect the rights of any Holder of Notes under the Indenture).
     “Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the Exchange Act), such “person” will be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms “Beneficially Owns” and “Beneficially Owned” have correlative meanings.
     “Board of Directors” means:
     (1) with respect to the Company, the board of directors of the Company or any authorized committee thereof; and
     (2) with respect to any other Person, the board or committee of such Person serving a similar function.
     “Board Resolution” means a copy of a resolution certified by the Secretary or an Assistant Secretary of the applicable Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee.
     “Capital Lease Obligation” means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP, and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be prepaid by the lessee without payment of a penalty.
     “Capital Stock” means:
     (1) in the case of a corporation, corporate stock;

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     (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;
     (3) in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and
     (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person,
but excluding from all of the foregoing any debt securities convertible into Capital Stock, regardless of whether such debt securities include any right of participation with Capital Stock.
“Cash Equivalents” means:
     (1) United States dollars;
     (2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality of the United States government (provided that the full faith and credit of the United States is pledged in support of those securities) having maturities of not more than one year from the date of acquisition;
     (3) marketable general obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition thereof, having a credit rating of “A” or better from either S&P or Moody’s;
     (4) certificates of deposit, demand deposits and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers’ acceptances with maturities not exceeding one year and overnight bank deposits, in each case, with any domestic commercial bank having capital and surplus in excess of $500.0 million;
     (5) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2), (3) and (4) above entered into with any financial institution meeting the qualifications specified in clause (4) above;
     (6) commercial paper having one of the two highest ratings obtainable from Moody’s or S&P and, in each case, maturing within one year after the date of acquisition; and

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     (7) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (6) of this definition.
     “Change of Control” means the occurrence of any of the following:
     (1) the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets (including Capital Stock of the Restricted Subsidiaries) of the Company and its Restricted Subsidiaries taken as a whole, or a Successor Parent of the Company and its Restricted Subsidiaries taken as a whole, to any “person” (as that term is used in Section 13(d)(3) of the Exchange Act) other than a Permitted Holder;
     (2) the adoption by the shareholders of the Company of a plan relating to the liquidation or dissolution of the Company;
     (3) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any “person” (as that term is used in Section 13(d)(3) of the Exchange Act), other than Permitted Holders, becomes the Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock of the Company, or any Successor Parent of the Company, measured by voting power rather than number of shares, units or the like; provided that no Change of Control shall be deemed to occur by reason of the Company becoming a Subsidiary of any Successor Parent; or
     (4) the first day on which a majority of the members of the Board of Directors of the Company or any Successor Parent of the Company are not Continuing Directors.
     “Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute.
     “Consolidated Cash Flow” means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period plus, without duplication:
     (1) an amount equal to any net loss realized by such Person or any of its Restricted Subsidiaries in connection with an Asset Sale, to the extent such losses were deducted in computing such Consolidated Net Income; plus
     (2) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus
     (3) the Fixed Charges of such Person and its Restricted Subsidiaries for such period, to the extent that such Fixed Charges were deducted in computing such Consolidated Net Income; plus

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     (4) depreciation, depletion, amortization (including amortization of intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period), impairment and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, depletion, amortization, impairment and other non-cash expenses were deducted in computing such Consolidated Net Income; plus
     (5) unrealized non-cash losses resulting from foreign currency balance sheet adjustments required by GAAP to the extent such losses were deducted in computing such Consolidated Net Income; plus
     (6) all extraordinary, unusual or non-recurring items of gain or loss, or revenue or expense; minus
     (7) non-cash items increasing such Consolidated Net Income for such period, other than items that were accrued in the ordinary course of business; and minus
     (8) to the extent increasing such Consolidated Net Income for such period, the sum of (a) the amount of deferred revenues that are amortized during such period and are attributable to reserves that are subject to Volumetric Production Payments and (b) amounts recorded in accordance with GAAP as repayments of principal and interest pursuant to Dollar-Denominated Production Payments;
     in each case, on a consolidated basis and determined in accordance with GAAP.
     “Consolidated Net Income” means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP, provided that:
     (1) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting will be included, but only to the extent of the amount of dividends or distributions paid in cash to the specified Person or a Restricted Subsidiary of the Person;
     (2) the Net Income of any Restricted Subsidiary of the Company will be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, partners or members;

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     (3) the cumulative effect of a change in accounting principles will be excluded;
     (4) any gain (loss) realized upon the sale or other disposition of any property, plant or equipment of such Person or its consolidated Restricted Subsidiaries (including pursuant to any sale or leaseback transaction) which is not sold or otherwise disposed of in the ordinary course of business and any gain (loss) realized upon the sale or other disposition of any Capital Stock of any Person will be excluded;
     (5) any asset impairment writedowns on oil and gas properties under GAAP or SEC guidelines will be excluded;
     (6) unrealized losses and gains under Hedging Contracts included in the determination of Consolidated Net Income, including, without limitation, those resulting from the application of FASB ASC Topic 815, “Derivatives and Hedging,” will be excluded;
     (7) to the extent deducted in the calculation of Net Income, any non-cash or nonrecurring charges relating to any premium or penalty paid, write off of deferred financing costs or other financial recapitalization charges in connection with redeeming or retiring any Indebtedness prior to its Stated Maturity will be excluded;
     (8) items classified as extraordinary or nonrecurring gains and losses (less all fees and expenses related thereto) and the related tax effects, in each case according to GAAP, will be excluded; and
     (9) income resulting from transfers of assets (other than cash) between such Person or any of its Restricted Subsidiaries, on the one hand, and an Unrestricted Subsidiary of such Person, on the other hand, will be excluded.
     “Consolidated Net Worth” means, with respect to any specified Person as of any date, the sum of:
     (1) the consolidated equity of the common shareholders of, or the consolidated capital of the unitholders of, such Person and its consolidated Subsidiaries as of such date; plus
     (2) the respective amounts reported on such Person’s balance sheet as of such date with respect to any series of preferred stock (other than Disqualified Stock) that by its terms is not entitled to the payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such preferred stock.
     “Continuing Directors” means, as of any date of determination, any member of the Board of Directors of the Company who:

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     (1) was a member of such Board of Directors on the Initial Issuance Date; or
     (2) was nominated for election or elected or appointed to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination, election or appointment.
     “Credit Agreement” means that certain Credit Agreement, dated as of May 25, 2006, among the Company, Wells Fargo Bank, N.A., as Administrative Agent, and the other lenders party thereto, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, in each case as amended, restated, modified, renewed, refunded, replaced or refinanced from time to time.
     “Credit Facilities” means one or more debt facilities (including, without limitation, the Credit Agreement), commercial paper facilities or Debt Issuances, in each case with banks or other institutional lenders or institutional investors providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables), letters of credit or other borrowings or Debt Issuances, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced (including refinancing with any capital markets transaction) in whole or in part from time to time.
     “Customary Recourse Exceptions” means, with respect to any Non-Recourse Debt of an Unrestricted Subsidiary, exclusions from the exculpation provisions with respect to such Non-Recourse Debt for the voluntary bankruptcy of such Unrestricted Subsidiary, fraud, misapplication of cash, environmental claims, waste, willful destruction, and other circumstances customarily excluded by lenders from exculpation provisions and/or included in separate indemnification agreements in non-recourse financings.
     “Debt Issuance” means, with respect to the Company or any of its Restricted Subsidiaries, one or more issuances after the Initial Issuance Date of Indebtedness evidenced by notes, debentures, bonds or other similar securities or instruments.
     “De Minimis Guaranteed Amount” means a principal amount of Indebtedness that does not exceed $5.0 million.
     “Disqualified Stock” means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the earlier of the final stated maturity date of the Notes or the date the Notes are no longer outstanding; provided that only the portion of Capital Stock which so matures or is mandatorily redeemable, is so convertible or exchangeable or is so redeemable at the option of the holder thereof prior to such date

16


 

shall be deemed to be Disqualified Stock; provided, further , that if such Capital Stock is issued to any employee or to any plan for the benefit of employees of the Company or its Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Company in order to satisfy applicable statutory or regulatory obligations or as a result of such employee’s termination, death or disability; provided, further , that any class of Capital Stock of such Person that by its terms authorizes such Person to satisfy its obligations thereunder by delivery of Capital Stock that is not Disqualified Stock shall not be deemed to be Disqualified Stock. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require the Company to repurchase or redeem such Capital Stock upon the occurrence of a change of control or an asset sale will not constitute Disqualified Stock if (x) the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.09 or (y) the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions prior to the Company’s purchase of the Notes as is required to be purchased pursuant to the terms of this Indenture. The amount (or principal amount) of Disqualified Stock deemed to be outstanding at any time for purposes of this Indenture will be the maximum amount that the Company and its Restricted Subsidiaries may become obligated to pay upon the maturity of, or pursuant to any mandatory redemption provisions of, such Disqualified Stock, exclusive of accrued dividends.
     “Dollar-Denominated Production Payments” means production payment obligations recorded as liabilities in accordance with GAAP, together with all undertakings and obligations in connection therewith.
     “Domestic Subsidiary” means any Restricted Subsidiary of the Company that was formed under the laws of the United States or any state of the United States or the District of Columbia.
     “Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).
     “Equity Offering” means any public or private sale of Capital Stock (other than Disqualified Stock) made for cash on a primary basis by the Company after the Initial Issuance Date.
     “Exchange Notes” has the meaning provided in the Appendix.
     “Existing Indebtedness” means the aggregate principal amount of Indebtedness of the Company and its Restricted Subsidiaries (other than Indebtedness under the Credit Agreement and intercompany Indebtedness) in existence on the Initial Issuance Date, until such amounts are repaid.

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     “Fair Market Value” means, with respect to any asset, the sale value that would be obtained in an arm’s-length free market transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy, determined on the date of contractually agreeing to such sale, or in circumstances in which the Company or a Restricted Subsidiary of the Company grants a third party the right to purchase an asset, the date of such grant.
     “Fixed Charge Coverage Ratio” means with respect to any specified Person for any four-quarter reference period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the specified Person or any of its Restricted Subsidiaries incurs, assumes, guarantees, repays, repurchases, redeems, defeases or otherwise discharges any Indebtedness (other than ordinary working capital borrowings) or issues, repurchases or redeems preferred stock subsequent to the commencement of the applicable four-quarter reference period and on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the “Calculation Date”), then the Fixed Charge Coverage Ratio will be calculated giving pro forma effect to such incurrence, assumption, guarantee, repayment, repurchase, redemption, defeasance or other discharge of Indebtedness, or such issuance, repurchase or redemption of preferred stock, and the use of the proceeds therefrom, as if the same had occurred at the beginning of the applicable four-quarter reference period.
     In addition, for purposes of calculating the Fixed Charge Coverage Ratio:
     (1) acquisitions that have been made by the specified Person or any of its Restricted Subsidiaries, including through mergers, consolidations or otherwise (including acquisitions of assets used or useful in the Oil and Gas Business), or any Person or any of its Restricted Subsidiaries acquired by the specified Person or any of its Restricted Subsidiaries, and including in each case any related financing transactions and increases in ownership of Restricted Subsidiaries, during the applicable four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date, will be given pro forma effect as if they had occurred on the first day of the four-quarter reference period, and the Consolidated Cash Flow for such reference period will be calculated giving pro forma effect to any expense and cost reductions or synergies that have occurred or are reasonably expected to occur, in the reasonable judgment of the chief financial or accounting officer of the Company (provided those cost savings or operating improvements could then be reflected in pro forma financial statements in accordance with Regulation S-X promulgated under the Securities Act or any other regulation or policy of the SEC related thereto);
     (2) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses (and ownership interests therein) disposed of prior to the Calculation Date, will be excluded;

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     (3) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses (and ownership interests therein) disposed of prior to the Calculation Date, will be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the specified Person or any of its Restricted Subsidiaries following the Calculation Date;
     (4) any Person that is a Restricted Subsidiary of the specified Person on the Calculation Date will be deemed to have been a Restricted Subsidiary of the specified Person at all times during such four-quarter period;
     (5) any Person that is not a Restricted Subsidiary of the specified Person on the Calculation Date will be deemed not to have been a Restricted Subsidiary of the specified Person at any time during such four-quarter period; and
     (6) if any Indebtedness bears a floating rate of interest, the interest expense on such Indebtedness will be calculated as if the rate in effect on the Calculation Date had been the applicable rate for the entire period (taking into account any obligations arising under any Hedging Contract applicable to such Indebtedness if such Hedging Contract has a remaining term as at the Calculation Date in excess of 12 months).
     “Fixed Charges” means, with respect to any specified Person for any period, the sum, without duplication, of:
     (1) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (excluding any interest attributable to Dollar-Denominated Production Payments but including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers’ acceptance financings), and net of the effect of all payments made or received pursuant to interest rate Hedging Contracts; plus
     (2) the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period; plus
     (3) any interest expense on Indebtedness of another Person that is guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries, whether or not such guarantee or Lien is called upon (other than a Lien of the type described in clause (9) of the definition of “Permitted Liens”); plus
     (4) all dividends on any Disqualified Stock or series of preferred securities of such Person or any of its Restricted Subsidiaries, whether paid or

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accrued and whether or not in cash, other than dividends on Equity Interests payable solely in Equity Interests of the Company (other than Disqualified Stock) or to the Company or a Restricted Subsidiary of the Company,
     in each case, on a consolidated basis and in accordance with GAAP.
     “GAAP” means generally accepted accounting principles in the United States, which are in effect on the Initial Issuance Date.
     The term “guarantee” means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness or entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part). When used as a verb, “guarantee” has a correlative meaning.
     “Hedging Contracts” means, with respect to any specified Person:
     (1) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements entered into with one of more financial institutions and designed to protect the Person or any of its Restricted Subsidiaries entering into the agreement against fluctuations in interest rates, or to otherwise reduce the cost of borrowing of such Person or any of such Restricted Subsidiaries, with respect to Indebtedness incurred;
     (2) foreign exchange contracts and currency protection agreements entered into with one of more financial institutions and designed to protect the Person or any of its Restricted Subsidiaries entering into the agreement against fluctuations in currency exchange rates;
     (3) any commodity futures contract, commodity swap, commodity option, commodity forward sale or other similar agreement or arrangement designed to protect against fluctuations in the price of Hydrocarbons used, produced, processed or sold by that Person or any of its Restricted Subsidiaries at the time; and
     (4) other agreements or arrangements designed to protect such Person or any of its Restricted Subsidiaries against fluctuations in interest rates, commodity prices or currency exchange rates,
     and in each case are entered into only in the normal course of business and not for speculative purposes.
     “Holder” or “Noteholder” means a Person in whose name a Note is registered.

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     “Hydrocarbons” means crude oil, natural gas, casinghead gas, drip gasoline, natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all constituents, elements or compounds thereof and products refined or processed therefrom.
     “Indebtedness” means, with respect to any specified Person:
     (1) any indebtedness of such Person, whether or not contingent in respect of borrowed money;
     (2) all obligations evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) (other than performance, surety and appeal bonds arising in the ordinary course of business);
     (3) all obligations in respect of bankers’ acceptances;
     (4) all Capital Lease Obligations or Attributable Debt in respect of Sale Leaseback Transactions;
     (5) all obligations representing the balance deferred and unpaid of the purchase price of any property (other than (i) property purchased, and expense accruals and deferred compensation items arising in the ordinary course of business, (ii) obligations payable solely in Capital Stock that is not Disqualified Stock and (iii) purchase price holdbacks in respect of a portion of the purchase price of an asset to satisfy warranty or other unperformed obligations of the respective seller);
     (6) all obligations under Hedging Contracts; and
     (7) with respect to Production Payments, any warranties or guarantees of production or payment by such Person with respect to such Production Payment, but excluding other contractual obligations of such Person with respect to such Production Payment;
if and to the extent any of the preceding items (other than letters of credit and obligations under Hedging Contracts) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term “Indebtedness” includes all Indebtedness of other Persons secured by a Lien on any asset of the specified Person, whether or not such Indebtedness is assumed by the specified Person (provided that the amount of such Indebtedness will be the lesser of (a) the Fair Market Value of such asset at such date of determination and (b) the amount of such Indebtedness of such other Person), and, to the extent not otherwise included, the guarantee by the specified Person of any Indebtedness of any other Person (including, with respect to any Production Payment, any warranties or guarantees of production or payment by such Person with respect to such Production Payment, but excluding other contractual obligations of such Person with respect to such Production Payment).

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     Notwithstanding the foregoing, the following shall not constitute or be deemed “Indebtedness”:
     (i) any indebtedness which has been defeased in accordance with GAAP or defeased pursuant to the deposit of cash or Cash Equivalents (in an amount sufficient to satisfy all such indebtedness obligations at maturity or redemption, as applicable, and all payments of interest and premium, if any) in a trust or account created or pledged for the sole benefit of the holders of such indebtedness, and subject to no other Liens, and the other applicable terms of the instrument governing such indebtedness;
     (ii) any obligation of a Person in respect of the balance deferred and unpaid of the purchase price of any property, a farm-in agreement, joint venture, participation or similar arrangement whereby such Person agrees to pay all or a share of the exploration, development, completion or production or other expenses of an exploratory or development well or program (which agreement may be subject to a maximum payment obligation, after which expenses are shared in accordance with the working or participation interest therein or in accordance with the agreement of the parties) or perform the drilling, completion or other operation on such well or program, or transfer of overriding royalty interests or other interests in Hydrocarbon properties in exchange for an ownership interest in an oil or gas property;
     (iii) any obligations arising from agreements of a Person providing for indemnification, guarantees, adjustment of purchase price, holdbacks, contingent payment obligations based on a final financial statement or performance of acquired or disposed of assets or similar obligations (other than guarantees of Indebtedness), in each case, incurred or assumed by such Person in connection with the acquisition or disposition of assets (including through mergers, consolidations or otherwise);
     (iv) subject to clause (7) above, any Dollar-Denominated Production Payments or Volumetric Production Payments;
     (v) any Lien of the type described in clause (9) of the definition of “Permitted Liens;”
     (vi) obligations with respect to letters of credit in support of trade obligations or incurred in connection with public liability insurance, workers’ compensation, unemployment insurance, old-age pensions and other social security benefits other than in respect of employee benefit plans subject to the Employee Retirement Income Security Act of 1974, as amended;
     (vii) the obligations described in clause (13) of Section 4.09;
     (viii) the repayment or reimbursement obligations of the Company or any Restricted Subsidiary with respect to Customary Recourse Exceptions shall not be considered Indebtedness unless and until an event or circumstance occurs

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that triggers the Company’s or such Restricted Subsidiary’s direct payment liability or reimbursement obligation (as opposed to contingent or performance obligations) to the lender or other party to whom such obligation is actually owed, in which case the amount of such direct payment liability to such lender or other party shall, to the extent otherwise applicable, constitute Indebtedness; and
     (ix) in connection with the purchase by the Company or any Restricted Subsidiary of any property, the term “Indebtedness” will exclude post-closing payment adjustments to which the seller may become entitled to the extent such payment is determined by a closing purchase price adjustment or such payment depends on the performance of such property after the closing; provided, however, that, at the time of closing, the amount of any such payment is not determinable and, to the extent such payment at a later date becomes finally fixed and determined by the parties to the purchase, the amount is paid within 30 days after such date.
     The amount (or principal amount) of any Indebtedness outstanding as of any date will be:
     (1) the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount;
     (2) in the case of obligations under any Hedging Contracts, the termination value of the agreement or arrangement giving rise to such obligations that would be payable by such Person at such date; and
     (3) the principal amount of the Indebtedness, together with any interest on the Indebtedness that is more than 30 days past due, in the case of any other Indebtedness.
     The amount of Indebtedness of any Person at any date will be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date.
     “Initial Issuance Date” means November 2, 2010.
     “Initial Notes” has the meaning provided in the Appendix.
     “Initial Purchasers” has the meaning provided in the Appendix.
     “Investment Grade Rating” means a rating equal to or higher than Baa3 (or the equivalent) by Moody’s and BBB- (or the equivalent) by S&P (or an equivalent rating by another nationally recognized rating agency if both of the two named rating agencies cease publishing ratings of investments), in each case, with a stable or better outlook.
     “Investments” means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans,

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advances or extensions of credit (including guarantees or similar arrangements, but excluding (1) commission, travel and similar advances to officers, directors, employees and consultants made in the ordinary course of business and (2) advances to Persons in the ordinary course of business that are recorded as accounts receivable on the balance sheet of the lender), or capital contributions or purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities (excluding any interest in a crude oil or natural gas leasehold to the extent constituting a security under applicable law), together with all items that are or would be classified as investments on a balance sheet of such Person prepared in accordance with GAAP. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary of the Company, the Company will be deemed to have made an Investment on the date of any such sale or disposition in an amount equal to the Fair Market Value of the Equity Interests of such Restricted Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of Section 4.09. The acquisition by the Company or any Subsidiary of the Company of a Person that holds an Investment in a third Person will be deemed to be an Investment made by the Company or such Subsidiary in such third Person in an amount equal to the Fair Market Value of the Investment held by the acquired Person in such third Person on the date of any such acquisition in an amount determined as provided in the final paragraph of Section 4.09. Except as otherwise provided in this Indenture, the amount of an Investment will be determined at the time the Investment is made and without giving effect to subsequent changes in value or write-ups, write-downs or write-offs with respect to such Investment.
     “Joint Venture” means any Person that is not a direct or indirect Subsidiary of the Company in which the Company or any of its Restricted Subsidiaries makes any Investment.
     “Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under Applicable Law, including any conditional sale or other title retention agreement, or any lease in the nature thereof, other than a precautionary financing statement respecting a lease not intended as a security agreement.
     “Make Whole Premium” means, with respect to a Note at any time, the excess, if any, of (a) the present value at such time of (i) the Redemption Price of such Note at October 15, 2014 pursuant to Section 3.12(a) plus (ii) any required interest payments due on such Note through October 15, 2014 (except for currently accrued and unpaid interest), computed using a discount rate equal to the Treasury Rate at such time plus 50 basis points, discounted to the Redemption Date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months), over (b) the principal amount of such Note.
     “Measurement Date” means October 1, 2010.

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     “Minority Interest” means the percentage interest represented by any shares of stock of any class of Capital Stock of a Restricted Subsidiary of the Company that are not owned by the Company or a Restricted Subsidiary of the Company.
     “Moody’s” means Moody’s Investors Service, Inc. or any successor to the rating agency business thereof.
     “Net Income” means, with respect to any specified Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however:
     (1) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with: (a) any Asset Sale; or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries; and
     (2) any extraordinary gain (but not loss), together with any related provision for taxes on such extraordinary gain (but not loss).
     “Net Proceeds” means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of:
     (1) the direct costs relating to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, title and recording tax expenses and sales commissions, and any relocation and severance expenses and charges of personnel incurred as a result of the Asset Sale,
     (2) taxes paid or payable or required to be accrued as a liability under GAAP as a result of the Asset Sale, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements,
     (3) amounts required to be applied to the repayment of Indebtedness secured by a Lien on the assets that were the subject of such Asset Sale, or which must by its terms, or in order to obtain a necessary consent to such Asset Sale or by Applicable Law, be repaid out of the proceeds from such Asset Sale,
     (4) all distributions and other payments required to be made to minority interest holders in Restricted Subsidiaries or Joint Ventures as a result of such Asset Sale, and
     (5) any amounts to be set aside in any reserve established in accordance with GAAP or any amount placed in escrow, in either case for adjustment in respect of the sale price of such assets or for liabilities associated with such Asset Sale and retained by the Company or any of its Restricted Subsidiaries until such time as such reserve is reversed or such escrow

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arrangement is terminated, in which case Net Proceeds shall include only the amount of the reserve so reversed or the amount returned to the Company or its Restricted Subsidiaries from such escrow arrangement, as the case may be.
     “Net Working Capital” means (a) all current assets of the Company and its Restricted Subsidiaries except current assets from commodity price risk management activities arising in the ordinary course of business, less (b) all current liabilities of the Company and its Restricted Subsidiaries, except current liabilities included in Indebtedness and any current liabilities from commodity price risk management activities arising in the ordinary course of business, in each case as set forth in the consolidated financial statements of the Company prepared in accordance with GAAP (excluding any adjustments made pursuant to FASB ASC Topic 815, “Derivatives and Hedging”).
     “Non-Recourse Debt” means Indebtedness:
     (1) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable as a guarantor or otherwise, or (c) is the lender, except (i) pursuant to a Lien of the type permitted by item (9) in the definition of “Permitted Lien,” (ii) as described in clause (13) of Section 4.09, (iii) Customary Recourse Exceptions and (iv) a guarantee by the Company or any Restricted Subsidiary of Indebtedness of any Affiliate of the Company, in which case (unless the incurrence of such guarantee resulted in a Restricted Payment at the time of incurrence) the Company shall be deemed to have made a Restricted Payment equal to the principal amount of any such Indebtedness to the extent guaranteed at the time such Affiliate is designated an Unrestricted Subsidiary; and
     (2) no default with respect to which (including any rights that the holders of the Indebtedness may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness (other than the Notes and any guarantee permitted by clause (ii) or (iv) in the preceding paragraph) of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment of the Indebtedness to be accelerated or payable prior to its Stated Maturity.
For purposes of determining compliance with Section 4.11, in the event that any Non-Recourse Debt of any of the Company’s Unrestricted Subsidiaries ceases to be Non-Recourse Debt of such Unrestricted Subsidiary, such event will be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Company.
     “North Sea Properties” means the UK Petroleum Production Licence No. P1114 governing Blocks 22/14b and 22/19b, together with any other licences unitized therewith and all associated property, plant and equipment located on, or related to such licenses.

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     “Obligations” means any principal, premium, if any, interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization, whether or not a claim for post-filing interest is allowed in such proceeding), penalties, fees, charges, expenses, indemnifications, reimbursement obligations, damages, guarantees, and other liabilities or amounts payable under the documentation governing any Indebtedness or in respect thereto.
     “Oil and Gas Business” means:
     (1) the acquisition, exploration, development, production, operation and disposition of interests in oil, gas, liquid natural gas, carbon dioxide and other Hydrocarbon properties;
     (2) the gathering, marketing, treating, processing, refining, storage, distribution, selling and transporting of any production from such interests or properties;
     (3) any business relating to exploration for or development, production, treatment, processing, refining, storage, transportation or marketing of, oil, gas and other minerals and products produced in association therewith;
     (4) any activity that is ancillary, complementary or incidental to or necessary or appropriate for the activities described in clauses (1) through (3) of this definition.
     “Outstanding,” when used with respect to the Notes, means, as of the date of determination, all Notes theretofore authenticated and delivered under this Indenture, except:
     (i) Notes theretofore cancelled by the Trustee or delivered to the Trustee for cancellation;
     (ii) Notes for whose payment, repurchase, redemption or defeasance money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Notes; provided that, if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and
     (iii) Notes which have been cancelled pursuant to Section 2.13 or in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to this Indenture, other than any such Notes in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Notes are held by a bona fide purchaser in whose hands such Notes are valid obligations of the Company;

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provided , however , that in determining whether the Holders of the requisite principal amount of the Outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Notes owned by the Company or any other obligor upon the Notes or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes which the Trustee knows to be so owned shall be so disregarded. Notes so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right so to act with respect to such Notes and that the pledgee is not the Company or any other obligor upon the Notes or any Affiliate of the Company or of such other obligor.
     “Pari Passu Indebtedness” means, with respect to any Excess Proceeds from Asset Sales, Indebtedness of the Company or any Subsidiary Guarantor that ranks equally in right of payment with the Notes or the Subsidiary Guarantees, as the case may be, and the terms of which require the Company or any of its Restricted Subsidiaries to apply such Excess Proceeds to offer to repurchase such Indebtedness.
     “Permitted Acquisition Indebtedness” means Indebtedness or Disqualified Stock of the Company or any of its Restricted Subsidiaries to the extent such Indebtedness or Disqualified Stock was Indebtedness or Disqualified Stock of any other Person existing at the time (a) such Person became a Restricted Subsidiary of the Company, (b) such Person was merged or consolidated with or into the Company or any of its Restricted Subsidiaries, or (c) assets of such Person were acquired by the Company or any of its Restricted Subsidiaries and such Indebtedness was assumed in connection therewith (excluding any such Indebtedness that is repaid contemporaneously with such event), provided that on the date such Person became a Restricted Subsidiary of the Company or the date such Person was merged or consolidated with or into the Company or any of its Restricted Subsidiaries, or on the date of such asset acquisition, as applicable, either
     (1) immediately after giving effect to such transaction on a pro forma basis as if the same had occurred at the beginning of the applicable four-quarter period, the Company or such Restricted Subsidiary, as applicable, would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.11,
     (2) immediately after giving effect to such transaction on a pro forma basis as if the same had occurred at the beginning of the applicable four-quarter period, the Fixed Charge Coverage Ratio of the Company would be equal to or greater than the Fixed Charge Coverage Ratio of the Company immediately prior to such transaction, or
     (3) immediately after giving effect to such transaction on a pro forma basis, the Consolidated Net Worth of the Company would be greater than the Consolidated Net Worth of the Company immediately prior to such transaction.

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     “Permitted Business Investments” means Investments made in the ordinary course of, and of a nature that is or shall have become customary in, the Oil and Gas Business, including investments or expenditures for actively exploring for, acquiring, developing, producing, processing, gathering, marketing or transporting Hydrocarbons through agreements, transactions, interests or arrangements that permit one to share risk or costs, comply with regulatory requirements regarding local ownership or satisfy other objectives customarily achieved through the conduct of the Oil and Gas Business jointly with third parties, including without limitation:
     (1) direct or indirect ownership of crude oil, natural gas, other restricted Hydrocarbon properties or any interest therein, gathering, transportation, processing, storage or related systems, or ancillary real property interests and interests therein; and
     (2) the entry into operating agreements, Joint Ventures, processing agreements, working interests, royalty interests, mineral leases, farm-in agreements, farm-out agreements, development agreements, production sharing agreements, area of mutual interest agreements, contracts for the sale, transportation or exchange of crude oil and natural gas and related Hydrocarbons and minerals, unitization agreements, pooling arrangements, joint bidding agreements, service contracts, partnership agreements (whether general or limited), or other similar or customary agreements, transactions, properties, interests or arrangements, and Investments and expenditures in connection therewith or pursuant thereto, in each case made or entered into in the ordinary course of the Oil and Gas Business, excluding, however, Investments in corporations and publicly-traded limited partnerships.
     “Permitted Holders” means (1) the Company or any Subsidiary of the Company, as long as such Subsidiary of the Company remains a Subsidiary following completion of the transaction that would have constituted a Change of Control, had the transaction not been effected with a Permitted Holder and (2) the directors, officers and other management employees of the Company that are shareholders of the Company on the Initial Issuance Date and their respective Affiliates.
     “Permitted Investments” means:
     (1) any Investment in the Company or in a Restricted Subsidiary of the Company;
     (2) any Investment in cash and Cash Equivalents;
     (3) any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment:
     (a) such Person becomes a Restricted Subsidiary of the Company; or

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     (b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company;
     (4) any Investment made as a result of the receipt of non-cash consideration from, or consisting of any deferred portion of the sales price received by the Company or any Restricted Subsidiary in connection with:
     (a) an Asset Sale that was made pursuant to and in compliance with Section 4.12;
     (b) pursuant to clause (8) of the items deemed not to be Asset Sales under the definition of “Asset Sale;”
     (5) any Investment in any Person solely in exchange for, or with the net cash proceeds from a substantially concurrent (i) contribution (other than from a Restricted Subsidiary of the Company) to the equity capital of the Company or (ii) issuance of, Equity Interests (other than Disqualified Stock) of the Company, with an issuance being deemed substantially concurrent of such Investment occurring not more than 120 days after such issuance; provided that the amount of any such net cash proceeds will be excluded from clause (II) of Section 4.09;
     (6) any Investments received in compromise or resolution of, or upon satisfaction of judgments with respect to, (a) obligations of trade creditors or customers that were incurred in the ordinary course of business, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer, or (b) litigation, arbitration or other disputes (including pursuant to any bankruptcy or insolvency proceedings) with Persons who are not Affiliates;
     (7) Hedging Contracts;
     (8) guarantees by the Company or any of its Restricted Subsidiaries of operating leases (other than Capital Lease Obligations) or of other obligations that do not constitute Indebtedness, in each case entered into by the Company or any Restricted Subsidiary of the Company in the ordinary course of business or otherwise customary in the Oil and Gas Business;
     (9) Investments in property, plant and equipment used in the ordinary course of business and Permitted Business Investments;
     (10) Investments that are in existence on the Initial Issuance Date;
     (11) Investments in any Person to the extent such Investments consist of prepaid expenses, negotiable instruments held for collection and lease, utility and workers’ compensation, performance and other similar deposits made in the ordinary course of business by the Company or any of its Restricted Subsidiaries;

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     (12) guarantees of performance or other obligations (other than Indebtedness) arising in the ordinary course in the Oil and Gas Business, including obligations under oil and natural gas exploration, development, joint operating and related agreements and licenses or concessions related to the Oil and Gas Business;
     (13) loans or advances to officers, directors, employees or consultants made in the ordinary course of business or otherwise customary in the Oil and Gas Business and otherwise in compliance with Section 4.13 of this Indenture;
     (14) Investments of a Restricted Subsidiary acquired after the Initial Issuance Date or of any entity merged into or consolidated with the Company or a Restricted Subsidiary in accordance with Section 5.01 of this Indenture, the extent that such Investments were not made in contemplation of or in connection with such acquisition, merger or consolidation and were in existence on the date of such acquisition, merger or consolidation;
     (15) Investments received as a result of a foreclosure by, or other transfer of title to, the Company or any of its Restricted Subsidiaries with respect to any secured Investment in default;
     (16) Liens of the type described in clause (9) of the definition of “Permitted Liens;” and
     (17) other Investments having an aggregate Fair Market Value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (17) that are at the time outstanding, not to exceed the greater of $30.0 million and 3.0% of the Company’s Adjusted Consolidated Net Tangible Assets determined at the time of such Investment (after giving effect to any dividends, interest payments, return of capital and subsequent reduction in the amount of any Investment made pursuant to this clause (17) as a result of the repayment or other disposition thereof, in an amount not to exceed the amount of such Investments previously made pursuant to this clause); provided, however , that if any Investment pursuant to this clause (17) is made in any Person that is not a Restricted Subsidiary of the Company at the date of the making of such Investment and such Person becomes a Restricted Subsidiary of the Company after such date, such Investment shall thereafter be deemed to have been made pursuant to clause (1) above and shall cease to have been made pursuant to this clause (17) for so long as such Person continues to be a Restricted Subsidiary;
provided, however, that with respect to any Investment, the Company may, in its sole discretion, allocate all or any portion of any Investment and later re-allocate all or any portion of any Investment to one or more of the above clauses (1) through (17) so that the entire Investment would be a Permitted Investment.
“Permitted Liens” means:

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     (1) Liens securing any Indebtedness and other Obligations under any of the Credit Facilities incurred under clause (1) of the second paragraph of Section 4.11 of this Indenture;
     (2) Liens in favor of the Company or the Subsidiary Guarantors;
     (3) Liens on property (including Capital Stock) of a Person existing at the time such Person is merged with or into or consolidated with the Company or any Restricted Subsidiary of the Company, provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company or the Restricted Subsidiary;
     (4) Liens on property existing at the time of acquisition of the property by the Company or any Restricted Subsidiary of the Company, provided that such Liens were in existence prior to the contemplation of such acquisition;
     (5) any interest or title of a lessor to the property subject to a Capital Lease Obligation;
     (6) Liens on any asset or property acquired, constructed or improved by the Company or any of its Restricted Subsidiaries; provided that (a) such Liens are in favor of the seller of such asset or property, in favor of the Person or Persons developing, constructing, repairing or improving such asset or property, or in favor of the Person or Persons that provided the funding for the acquisition, development, construction, repair or improvement cost, as the case may be, of such asset or property, (b) such Liens are created within 360 days after the acquisition, development, construction, repair or improvement, (c) the aggregate principal amount of the Indebtedness secured by such Liens is otherwise permitted to be incurred under this Indenture and does not exceed the greater of (i) the cost of the asset or property so acquired, constructed or improved plus related financing costs and (ii) the Fair Market Value (as determined by an executive officer involved in or otherwise familiar with such acquisition, construction or improvement of such asset or property, or, if such Fair Market Value is $40.0 million or more, the Board of Directors of the Company) of the asset or property so acquired, constructed or improved, measured at the date of such acquisition, or the date of completion of such construction or improvement, and (d) such Liens are limited to the asset or property so acquired, constructed or improved (including the proceeds thereof, accessions thereto, upgrades thereof and improvements thereto);
     (7) Liens existing on the Initial Issuance Date other than Liens securing the Credit Facilities;
     (8) Liens to secure the performance of tenders, bids, statutory obligations, surety or appeal bonds, government contracts, performance bonds or other obligations of a like nature incurred in the ordinary course of business;

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     (9) Liens on and pledges of the Equity Interests of any Unrestricted Subsidiary or any Joint Venture owned by the Company or any Restricted Subsidiary of the Company to the extent securing Non-Recourse Debt or other Indebtedness of such Unrestricted Subsidiary or Joint Venture;
     (10) Liens in respect of Production Payments and Reserve Sales;
     (11) Liens on pipelines or pipeline facilities that arise by operation of law;
     (12) Liens arising under oil and gas leases, overriding royalty interest agreements, operating agreements, joint venture agreements, partnership agreements, oil and gas leases, farm-out agreements, farm-in agreements, division orders, contracts for the sale, transportation or exchange of crude oil and natural gas and related Hydrocarbons and minerals, unitization and pooling declarations and agreements, area of mutual interest agreements, land purchase option arrangements, participation and development agreements, joint operating agreements, and other agreements (including, without limitation, options, put and call arrangements, rights of first offer, rights of first refusal, preferential rights, restrictions on dispositions and the like and those of the type described in the definition of “Permitted Business Investments”) arising in the ordinary course of business of the Company and its Restricted Subsidiaries or that are customary in the Oil and Gas Business;
     (13) Liens reserved in oil and gas mineral leases for bonus or rental payments and for compliance with the terms of such leases;
     (14) Liens upon specific items of inventory, receivables or other goods or proceeds of the Company or any of its Restricted Subsidiaries securing such Person’s obligations in respect of bankers’ acceptances or receivables securitizations issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory, receivables or other goods or proceeds and permitted by Section 4.11;
     (15) Liens securing Obligations of the Company or the Subsidiary Guarantors under the Notes or the Subsidiary Guarantees, as the case may be, and Liens securing other obligations of the Company or the Subsidiary Guarantors under this Indenture;
     (16) Liens to secure payment and performance of Hedging Contracts of the Company or any of its Restricted Subsidiaries;
     (17) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent by more than sixty (60) days or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided that any reserve or other appropriate provision as is required in conformity with GAAP has been made therefor;

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     (18) landlords’, carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or like Liens arising by contract or statute in the ordinary course of business and with respect to amounts which are not yet delinquent by more than sixty (60) days or are being contested in good faith by appropriate proceedings;
     (19) pledges or deposits made in the ordinary course of business (A) in connection with leases, tenders, bids, statutory obligations, surety or appeal bonds, government contracts, performance bonds and similar obligations, or (B) in connection with workers’ compensation, unemployment insurance and other social security or similar legislation;
     (20) any attachment or judgment Lien that does not constitute an Event of Default;
     (21) survey exceptions, easements or reservations of, or rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real property that were not incurred in connection with Indebtedness and that do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of the Company or any of its Restricted Subsidiaries;
     (22) Liens arising solely by virtue of any statutory or common law provisions relating to banker’s Liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained or deposited with a depositary institution; provided that (A) such deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by the Company in excess of those set forth by regulations promulgated by the Federal Reserve Board and (B) such deposit account is not intended by the Company or any of its Restricted Subsidiaries to provide collateral to the depositary institution;
     (23) Liens arising from Uniform Commercial Code financing statement filings regarding operating leases entered into by the Company and its Restricted Subsidiaries in the ordinary course of business;
     (24) leases or subleases granted to others that do not materially interfere with the ordinary course of business of the Company and its Restricted Subsidiaries, taken as a whole;
     (25) Liens arising under this Indenture in favor of the Trustee for its own benefit and similar Liens in favor of other trustees, agents and representatives arising under instruments governing Indebtedness permitted to be incurred under this Indenture, provided, however, that such Liens are solely for the benefit of the trustees, agents or representatives in their capacities as such and not for the benefit of the holders of such Indebtedness;
     (26) Liens arising from the deposit of funds or securities in trust for the purpose of decreasing or defeasing Indebtedness so long as such deposit of funds

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or securities and such decreasing or defeasing of Indebtedness are permitted under Section 4.09 of this Indenture;
     (27) Liens (other than Liens securing Indebtedness) on, or related to, assets to secure all or part of the costs incurred in the ordinary course of the Oil and Gas Business for the exploration, drilling, development, production, processing, transportation, marketing, storage or operation thereof;
     (28) Liens arising from royalties, overriding royalties, revenue interests, net revenue interests, net profit interests, reversionary interests, production payments, preferential rights of purchase, working interests and other similar interests, all as ordinarily exist with respect to properties and assets of the Company and its Restricted Subsidiaries or otherwise as are customary in the Oil and Gas Business;
     (29) Liens incurred in the ordinary course of business of the Company or any Restricted Subsidiary of the Company, provided that, after giving effect to any such incurrence, the aggregate principal amount of all Indebtedness then outstanding and secured by any Liens incurred pursuant to this clause (29) does not exceed the amount set forth in clause (18) of the second paragraph of Section 4.11 of this Indenture; and
     (30) Liens to secure any Permitted Refinancing Indebtedness permitted to be incurred under this Indenture and incurred to refinance Indebtedness that was previously so secured other than Indebtedness referred to in clause (1) above, provided that any such Lien is limited to all or part of the same assets (plus improvements, accessions, proceeds or dividends or distributions in respect thereof) that secured (or, under the written arrangements under which the original Lien arose, could secure) the Indebtedness being refinanced or is in respect of assets that is the security for a Permitted Lien hereunder.
     “Permitted MLP Securities” means equity securities (including incentive distribution rights) of a master limited partnership (or limited liability company or similar business entity with pass-through treatment for U.S. Federal income tax purposes) that has a class of equity securities traded on the New York Stock Exchange, the NYSE Amex, the Nasdaq Stock Market or any successor to any such exchange or market, provided that such master limited partnership (or other entity) is an Affiliate of the Company.
     “Permitted Refinancing Indebtedness” means any Indebtedness of the Company or any of its Restricted Subsidiaries or any Disqualified Stock of the Company incurred or issued in exchange for, or the net proceeds of which shall be used to extend, refinance, renew, replace, defease, discharge, refund or otherwise retire for value, in whole or in part, any other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness) or any Disqualified Stock of the Company (the “Refinanced Indebtedness”), provided that:

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     (1) the principal amount, or in the case of Disqualified Stock, the amount thereof as determined in accordance with the definition of Disqualified Stock, of such Permitted Refinancing Indebtedness does not exceed the principal amount of the Refinanced Indebtedness (plus all accrued (including, for the purposes of defeasance, future accrued) and unpaid interest on, or accrued and unpaid dividends on, the Refinanced Indebtedness, as the case may be, and the amount of all fees, expenses and premiums incurred in connection therewith) and by an amount equal to any existing commitments and incremental facilities unutilized thereunder to the extent incurrence of indebtedness under such unutilized commitment and incremental facilities would then have been permitted;
     (2) such Permitted Refinancing Indebtedness has a final maturity date or redemption date, as applicable, later than or equal to the shorter of (A) 91 days following the Stated Maturity of the Notes or (B) the final maturity date or redemption date, as applicable, of, the Refinanced Indebtedness;
     (3) such Permitted Refinancing Indebtedness has a Weighted Average Life to Maturity at the time such Permitted Refinancing Indebtedness is incurred equal to or greater than the shorter of (A) the Weighted Average Life to Maturity of, the Refinanced Indebtedness and (B) the Weighted Average Life to Maturity that would result if all payments of principal on the Refinanced Indebtedness that were due on or after the date that is 91 days following the last maturity date of any Notes then Outstanding were instead due on such date;
     (4) if the Refinanced Indebtedness is contractually subordinated or otherwise junior in right of payment to the Notes or the Subsidiary Guarantees, such Permitted Refinancing Indebtedness is contractually subordinated or otherwise junior in right of payment to the Notes or the Subsidiary Guarantees on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Refinanced Indebtedness; and
     (5) such Permitted Refinancing Indebtedness is not incurred (other than by way of a guarantee) by a Non-Guarantor Restricted Subsidiary of the Company if the Company or a Subsidiary Guarantor is the issuer or other obligor on the Refinanced Indebtedness; and
     (6) except as otherwise provided in clause (3) of the second paragraph of Section 4.09, the proceeds of the Permitted Refinancing Indebtedness shall be used substantially concurrently with the incurrence thereof to extend, refinance, renew, replace, defease, discharge, refund or otherwise retire the Refinanced Indebtedness, unless the Refinanced Indebtedness is not then due and is not redeemable or prepayable, defeasable or dischargeable, as the case may be, at the option of the obligor thereof or is redeemable or prepayable or may be defeased or discharged only with notice, in which case, such proceeds shall be held in a segregated account of the obligor of the Refinanced Indebtedness until the Refinanced Indebtedness becomes due or redeemable, prepayable or subject to

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defeasance or discharge, as the case may be, or such notice period lapses and then shall be used to extend, refinance, renew, replace, defease, discharge, refund or otherwise retire the Refinanced Indebtedness; provided that in any event the Refinanced Indebtedness shall be extended, refinanced, renewed, replaced, defeased, discharged, refunded or otherwise retired within 60 days of the incurrence of the Refinancing Indebtedness.
     “Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.
     “Production Facility or Pipeline Assets” means (i) assets used primarily for production gathering, transmission, transportation, storage, processing or treatment of natural gas, natural gas liquids or other Hydrocarbons or carbon dioxide and (ii) equity interests of any Person that has no substantial assets other than assets referred to in clause (i).
     “Production Payments” means, collectively, Dollar-Denominated Production Payments and Volumetric Production Payments.
     “Production Payments and Reserve Sales” means the grant or transfer by the Company or a Restricted Subsidiary of the Company to any Person of a royalty, overriding royalty, net profits interest, production payment (whether volumetric or dollar denominated), partnership or other interest in oil and gas properties, reserves or the right to receive all or a portion of the production or the proceeds from the sale of production attributable to such properties, including any such grants or transfers pursuant to incentive compensation programs on terms that are reasonably customary in the oil and gas business for geologists, geophysicists and other providers of technical services to the Company or a Subsidiary of the Company.
     “Rating Agency” means S&P and Moody’s, or if S&P or Moody’s or both shall not make a rating on the Notes publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, selected by the Company (as certified by a resolution of the Board of Directors or a committee thereof) which shall be substituted for S&P or Moody’s or both, as the case may be.
     “Registration Rights Agreement” has the meaning provided in the Appendix.
     “Reporting Default” means a Default described in clause (4) of Section 6.01.
     “Restricted Investment” means an Investment other than a Permitted Investment.
     “Restricted Subsidiary” of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary.
     “S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., or any successor to the rating agency business thereof.

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     “Sale Leaseback Transaction” means, with respect to the Company or any of its Restricted Subsidiaries, any arrangement with any Person providing for the leasing by the Company or any of its Restricted Subsidiaries of any principal property, acquired or placed into service more than 180 days prior to such arrangement, whereby such property has been or is to be sold or transferred by the Company or any of its Restricted Subsidiaries to such Person.
     “Securities Act” means the Securities Act of 1933, as amended.
     “Senior Debt” means
     (1) all Indebtedness of the Company or any of its Restricted Subsidiaries outstanding under Credit Facilities and all obligations under Hedging Contracts with respect thereto;
     (2) any other Indebtedness of the Company or any of its Restricted Subsidiaries permitted to be incurred under the terms of this Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is subordinated in right of payment to the Notes or any Subsidiary Guarantee; and
     (3) all Obligations with respect to the items listed in the preceding clauses (1) and (2).
     Notwithstanding anything to the contrary in the preceding sentence, Senior Debt will not include:
     (a) any intercompany Indebtedness of the Company or any of its Restricted Subsidiaries to the Company or any of its Affiliates; or
     (b) any Indebtedness that is incurred in violation of this Indenture.
     For the avoidance of doubt, “Senior Debt” will not include any trade payables or taxes owed or owing by the Company or any of its Restricted Subsidiaries.
     “Significant Subsidiary” means any Subsidiary that would be a “significant subsidiary” as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the Initial Issuance Date.
     “Stated Maturity” means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which the payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and will not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof.
     “Subsidiary” means, with respect to any specified Person:
     (1) any corporation, association or other business entity (other than a partnership or limited liability company) of which more than 50% of the total

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voting power of Voting Stock 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); and
     (2) any partnership (whether general or limited) or limited liability company (a) the sole general partner or member of which is such Person or a Subsidiary of such Person, or (b) if there is more than a single general partner or member, either (x) the only managing general partners or managing members of which are such Person or one or more Subsidiaries of such Person (or any combination thereof) or (y) such Person owns or controls, directly or indirectly, a majority of the outstanding general partner interests, member interests or other Voting Stock of such partnership or limited liability company, respectively.
     “Subsidiary Guarantee” means the joint and several guarantee pursuant to Article X hereof by a Subsidiary Guarantor of the Obligations of the Company under this Indenture and the Notes.
     “Subsidiary Guarantors” means each of (a) the Restricted Subsidiaries of the Company executing this Indenture as initial Subsidiary Guarantors, (b) any other Restricted Subsidiary of the Company that executes a supplement to this Indenture in accordance with Section 4.15 or 10.02 hereof and (c) the respective successors and assigns of such Restricted Subsidiaries in each case until such time as any such Restricted Subsidiary shall be released and relieved of its obligations pursuant to Section 4.15, 8.01 or 10.03 hereof.
     “Successor Parent” with respect to any Person means any other Person more than 50% of the total outstanding Voting Stock of which (measured by voting power rather than the number of shares, units or the like) is, at the time the first Person becomes a Subsidiary of such other Person, “Beneficially Owned” either by the first Person or by one or more Persons that Beneficially Owned more than 50% of the total outstanding Voting Stock of the first Person (measured by voting power rather than the number of shares, units or the like) immediately prior to the first Person becoming a Subsidiary of such other Person.
     “Transfer Restricted Securities” has the meaning provided in the Appendix.
     “Treasury Rate” means, as of any Redemption Date, the yield to maturity as of such Redemption Date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15(519) which has become publicly available at least two Business Days prior to the Redemption Date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the Redemption Date to October 15, 2014; provided, however, that if such period is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Company shall obtain the Treasury Rate by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the period from the Redemption

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Date to October 15, 2014 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. The Company will (a) calculate the Treasury Rate on the second Business Day preceding the applicable Redemption Date and (b) prior to such Redemption Date file with the Trustee an Officers’ Certificate setting forth the Make Whole Premium and the Treasury Rate and showing the calculation of each in reasonable detail.
     “Uniform Commercial Code” means the New York Uniform Commercial Code as in effect from time to time.
     “Unrestricted Subsidiary” means any Subsidiary of the Company that is designated by the Board of Directors of the Company as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent that such Subsidiary:
     (1) has no Indebtedness other than Non-Recourse Debt owing to any Person other than the Company or any of its Restricted Subsidiaries;
     (2) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless (a) the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company or (b) is otherwise permitted under the provisions of Section 4.13 or (c) to the extent that clause (a) or (b) is not satisfied, the excess value of such agreement, contract, arrangement or understanding shall be deemed a Restricted Payment;
     (3) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or preserve such Person’s financial condition or to cause such Person to achieve any specified levels of operating results; and
     (4) has not, from and after such designation, guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries (other than as otherwise provided in the definition of “Non-Recourse Debt”);
      provided, however , that Items (1) through (4) shall not be deemed to prevent Permitted Investments in Unrestricted Subsidiaries that are otherwise allowed under this Indenture.
     Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary will be evidenced to the Trustee by filing with the Trustee a Board Resolution giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the preceding conditions and was permitted by Section 4.09. In the case of any designation by the Company of a Person as an Unrestricted Subsidiary on the first day that such Person is a Subsidiary of the

40


 

Company in accordance with the provisions of the Indenture, such designation shall be deemed to have occurred for all purposes of the Indenture simultaneously with, and automatically upon, such Person becoming a Subsidiary. If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary will be deemed to be incurred by a Restricted Subsidiary of the Company as of such date and, if such Indebtedness is not permitted to be incurred as of such date under Section 4.11, the Company will be in default of such covenant.
     “Volumetric Production Payments” means production payment obligations recorded as deferred revenue in accordance with GAAP, together with all related undertakings and obligations.
     “Voting Stock” of any Person as of any date means the Capital Stock of such Person that is at the time entitled (without regard to the occurrence of any contingency) to vote in the election of the Board of Directors of such Person.
     “Weighted Average Life to Maturity” means, when applied to any Indebtedness or Disqualified Stock at any date, the number of years obtained by dividing:
     (1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity or redemption, in respect of the Indebtedness or Disqualified Stock, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by
     (2) the then outstanding aggregate principal amount of such Indebtedness or Disqualified Stock.
SECTION 202 Other Definitions .
     Section 1.02 of the Original Indenture shall be amended by inserting the following terms, in their appropriate alphabetical position, and corresponding section references into the table in such Section 1.02 of the Original Indenture:
         
Term   Defined in Section
“Affiliate Transaction”
    4.13  
“Asset Sale Offer”
    3.13  
“Change of Control Offer”
    4.16  
“Change of Control Payment”
    4.16  
“Change of Control Purchase Date”
    4.16  
“Change of Control Settlement Date”
    4.16  
“Excess Proceeds”
    4.12  
“incur”
    4.11  
“Offer Amount”
    3.13  

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Term   Defined in Section
“Offer Period”
    3.13  
“Payment Default”
    6.01  
“Permitted Debt”
    4.11  
“Restricted Payments”
    4.09  
“Settlement Date”
    3.13  
“Termination Date”
    3.13  
SECTION 203 Mutilated, Destroyed, Lost and Stolen Securities.
     The Original Indenture shall be amended by replacing the second sentence of Section 2.09 of the Original Indenture with the following sentence:
     If any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, or is about to be redeemed or purchased by the Company pursuant to an optional redemption described in Section 3.12 or purchased by the Company upon a Change of Control or an Asset Sale pursuant to Article IV, the Company in its discretion may, instead of issuing a new Security, pay, redeem or purchase such Security.
SECTION 204 Amendment of Indenture Without Consent of Holders
     Clause (8) of Section 9.01 of the Original Indenture is hereby amended to replace the words “prospectus supplement” with the words “prospectus, prospectus supplement or offering memorandum.”
SECTION 205 Limitation on Mergers and Consolidations.
     Article V of the Original Indenture shall be amended by replacing Article V of the Original Indenture with the following with respect to the Notes:
     Section 5.01 Merger, Consolidation or Sale of Assets .
     The Company may not (x) consolidate or merge with or into another Person (whether or not the Company is the survivor), or (y) directly or indirectly sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets, in one or more related transactions to another Person, unless:
     (a) either (1) the Company is the survivor or (2) the Person formed by or surviving any such consolidation or merger (if other than such Issuer) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a Person organized or existing under the laws of the United States, any state of the United States or the District of Columbia;
     (b) the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all

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the obligations of the Company under the Notes, this Indenture and the applicable Registration Rights Agreement pursuant to a supplemental indenture or other agreement in a form reasonably satisfactory to the Trustee;
     (c) immediately after such transaction, no Default (other than a Reporting Default) or Event of Default exists;
     (d) and either
     (i) the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made will, on the date of such transaction immediately after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.11 hereof; or
     (ii) immediately after giving effect to such transaction and any related financing transactions on a pro forma basis as if the same had occurred at the beginning of the applicable four-quarter period, the Fixed Charge Coverage Ratio of the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, lease, conveyance or other disposition has been made, will be equal to or greater than the Fixed Charge Coverage Ratio of the Company immediately prior to such transaction; or
     (iii) immediately after giving effect to such transaction and any related financing transactions on a pro forma basis, the Consolidated Net Worth of the Company will be greater than the Consolidated Net Worth of the Company immediately prior to such transaction; and
     (e) the Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger or disposition and such supplemental indenture (if any) comply with this Indenture.
     Notwithstanding the restrictions described in the foregoing clauses (c) and (d), (x) any Restricted Subsidiary of the Company may consolidate with, merge into or dispose of all or part of its assets to the Company or another Restricted Subsidiary, and (y) the Company may merge with or into an Affiliate formed solely for the purpose of reincorporating the Company in another jurisdiction, and the Company will not be required to comply with the preceding clause (e) in connection with any such consolidation, merger or disposition.
     For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the

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assets of one or more Restricted Subsidiaries of the Company, the Capital Stock of which constitutes all or substantially all of the assets of the Company, shall be deemed to be the transfer of all or substantially all of the assets of the Company.
     Section 5.02 Successor Substituted .
     Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, in which the Company is not the surviving entity, the surviving entity formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such surviving entity had been named as the Company herein and shall be substituted for the Company (so that from and after the date of such consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition, the provisions of this Indenture referring to the “Company” shall refer instead to the surviving entity and not to the Company; and thereafter, if the Company is dissolved following a transfer of all or substantially all of its assets in accordance with this Indenture (except in the case of a lease of all or substantially all of the Company’s assets), it shall be discharged and released from all obligations and covenants under this Indenture and the Notes. The Trustee shall enter into a supplemental indenture to evidence the succession and substitution of such successor and such discharge and release of the Company.
SECTION 206 Issuance of Additional Notes .
     Article II of the Original Indenture shall be amended by inserting the following section:
     Section 2.18 Issuance of Additional Notes .
     The Company shall be entitled, subject to its compliance with Section 4.11, at any time and from time to time to create and issue Additional Notes under this Indenture which shall rank equally and ratably with, and have identical terms, as the Initial Notes issued on the Initial Issuance Date, other than with respect to the date of issuance and issue price; provided, however, that any issuance of Additional Notes bearing the same CUSIP number as the Initial Notes (i) is treated as part of the same issue as the Initial Notes within the meaning of Treasury Regulation § 1.1275-1(f), (ii) is a qualified reopening of the Initial Notes within the meaning of Treasury Regulation § 1.1275-2(k), or (iii) is otherwise fungible with the Initial Notes for U.S. federal income tax purposes, in the case of each of clauses (i), (ii) and (iii), so that such Additional Notes will trade as part of a single class with the Initial Notes. The Initial Notes issued on the Initial Issuance Date, and any Additional Notes and all Exchange Notes issued in exchange therefor shall be treated as a single class for all purposes under this Indenture, including, without limitation, waivers, consents, directions, declarations, amendments, redemptions and offers to purchase.

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     With respect to any Additional Notes, the Company shall set forth in an Officers’ Certificate, which shall be delivered to the Trustee, the following information:
     (1) the aggregate principal amount of such Additional Notes to be authenticated and delivered pursuant to this Indenture;
     (2) the issue price, the issue date (and the corresponding date from which interest shall accrue thereon and the first interest payment date therefor) and the CUSIP number and any corresponding ISIN of such Additional Notes; and
     (3) whether such Additional Notes shall be Transfer Restricted Securities and issued in the form of Initial Notes as set forth in Exhibit 1 to the Appendix or shall be issued in the form of Exchange Notes as set forth in Exhibit 2 to the Appendix.
SECTION 207 Redemption.
     (a) Section 3.03 of the Original Indenture shall be amended by replacing that section of the Original Indenture with the following with respect to the Notes:
     Section 3.03 Selection of Notes to Be Redeemed .
     If less than all of the Notes are to be redeemed at any time, the Trustee shall select the Notes to be redeemed among the Holders of the Notes as follows: (1) if the Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Notes are listed; or (2) if the Notes are not listed on any national securities exchange, on a pro rata basis. In the event of partial redemption other than on a pro rata basis, the particular Notes to be redeemed shall be selected, not less than five (5) Business Days (unless a shorter period shall be agreeable to the Trustee) prior to the giving of notice of the redemption pursuant to Section 3.04, by the Trustee from the Outstanding Notes not previously called for redemption.
     The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of Notes selected shall be in amounts of $2,000 or whole multiples of $1,000 in excess of $2,000; except that if all of the Notes of a Holder are to be redeemed, the entire Outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed. Provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption.
     (b) The first paragraph of Section 3.04 of the Original Indenture shall be amended by replacing that paragraph with the following:
     Subject to the provisions of Section 3.13 hereof, at least 30 days but not more than 60 days before a Redemption Date (except that redemption notices may be mailed

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more than 60 days prior to a Redemption Date if the notice is issued in connection with a legal defeasance, covenant defeasance or discharge), the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address.
     (c) The following provisions shall be added to Article III of the Original Indenture with respect to the Notes:
     Section 3.12 Optional Redemption .
     (a) Except as set forth in clauses (b) and (c) of this Section 3.12, the Company shall not have the option to redeem the Notes prior to October 15, 2014. On and after October 15, 2014, the Company shall have the option to redeem the Notes, in whole or in part at any time, at the Redemption Prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest and Additional Interest, if any, on the Notes to be redeemed to the applicable Redemption Date (subject to the right of Holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the Redemption Date), if redeemed during the twelve-month period beginning on October 15 of the years indicated below:
         
YEAR   PERCENTAGE
2014
    104.313 %
2015
    102.875 %
2016
    101.438 %
2017 and thereafter
    100.000 %
     (b) Notwithstanding the provisions of clause (a) of this Section 3.12, at any time prior to October 15, 2013, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes (including any Additional Notes) issued under this Indenture at a Redemption Price of 108.625% of the principal amount thereof, plus accrued and unpaid interest, if any, and Additional Interest, if any, thereon to the Redemption Date (subject to the right of Holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the Redemption Date), with the net cash proceeds of one or more Equity Offerings, provided that, with respect to each such redemption:
     (1) at least 65% of the aggregate principal amount of Notes (including any Additional Notes) issued under this Indenture remains Outstanding immediately after the occurrence of such redemption (excluding any Notes held by the Company and its Subsidiaries); and
     (2) such redemption occurs within 180 days of the date of the closing of the related Equity Offering.
     (c) Prior to October 15, 2014, the Company may redeem on one or more occasions all or part of the Notes at a Redemption Price equal to the sum of:

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     (1) 100% of the principal amount thereof, plus
     (2) accrued and unpaid interest, if any, to the Redemption Date (subject to the right of Holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the Redemption Date), plus
     (3) the Make Whole Premium at the Redemption Date.
     (d) Any redemption pursuant to this Section 3.12 shall be made pursuant to the provisions of Section 3.01 through Section 3.11 hereof.
     (e) Nothing in this Section 3.12 shall prohibit the Company from acquiring the Notes by means other than a redemption, whether pursuant to a tender offer, open market purchase or otherwise, so long as the acquisition does not violate the terms of the Indenture.
     Section 3.13 Offer to Purchase by Application of Excess Proceeds .
     In the event that, pursuant to Section 4.12 hereof, the Company shall be required to commence an offer to all Holders to purchase Notes (an “Asset Sale Offer”), it shall follow the procedures specified below.
     The Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by Applicable Law (the “Offer Period”). No later than five Business Days after the termination of the Offer Period (the “Settlement Date”), the Company shall purchase and pay for the principal amount of Notes required to be purchased pursuant to Section 4.12 hereof (the “Offer Amount”) or, if less than the Offer Amount has been tendered, all Notes validly tendered in response to the Asset Sale Offer. Payment for any Notes so purchased shall be made in the manner prescribed in the Notes.
     Upon the commencement of an Asset Sale Offer, the Company shall send, by first class mail, a notice to each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall state:
     (a) that the Asset Sale Offer is being made pursuant to this Section 3.13 and Section 4.12 hereof and the length of time the Asset Sale Offer shall remain open, including the time and date the Asset Sale Offer will terminate (the “Termination Date”);
     (b) the Offer Amount and the purchase price;
     (c) that any Note not tendered or accepted for payment shall continue to accrue interest and Additional Interest, if any;

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     (d) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest and Additional Interest, if any, after the Settlement Date;
     (e) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, properly endorsed for transfer, together with the form entitled “Option of Holder to Elect Purchase” on the reverse of the Note completed and such customary documents as the Company may reasonably request, to the Company or a Paying Agent at the address specified in the notice, before the Termination Date;
     (f) that Holders shall be entitled to withdraw their election if the Company or the Paying Agent, as the case may be, receives, prior to the Termination Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased;
     (g) that, if the aggregate principal amount of Notes surrendered by Holders, and Pari Passu Indebtedness surrendered by holders or lenders, collectively, exceeds the amount the Company is required to repurchase, the Trustee shall select the Notes and Pari Passu Indebtedness to be purchased on a pro rata basis on the basis of the aggregate principal amount of tendered Notes and Pari Passu Indebtedness (with such adjustments as may be deemed appropriate by the Trustee so that only Notes in denominations of $2,000, or integral multiples of $1,000 in excess of $2,000, shall be purchased); and
     (h) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $2,000 in principal amount or an integral multiple of $1,000 in excess of $2,000.
     If any of the Notes subject to an Asset Sale Offer is in the form of a Global Note, then the Company shall modify such notice to the extent necessary to accord with the procedures of the Depositary applicable to repurchases.
     Promptly after the Termination Date, the Company shall, to the extent lawful, accept for payment Notes or portions thereof tendered pursuant to the Asset Sale Offer in the aggregate principal amount required by Section 4.12 hereof, and prior to the Settlement Date it shall deliver to the Trustee an Officers’ Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.13 and Section 4.12. Prior to 11:00 a.m., New York City time, on the Settlement Date, the Company or the Paying Agent, as the case may be, shall mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company shall issue a new Note, and the Trustee shall authenticate and mail or deliver such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note

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surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Asset Sale Offer on or before the Settlement Date.
SECTION 208 Covenants.
     (a) Section 4.05 of the Original Indenture is amended and restated in its entirety as follows:
     Section 4.05 Existence .
     Except as otherwise permitted pursuant to the terms hereof (including consolidation and merger permitted by Section 5.01), the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, and the corporate, partnership, limited liability company or other existence of each of its Restricted Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Restricted Subsidiary; provided, however, that the Company shall not be required to preserve the existence of any of its Restricted Subsidiaries if the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Restricted Subsidiaries taken as a whole and that the loss thereof is not adverse in any material respect to the Holders of the Notes.
     (b) Article IV of the Original Indenture is amended by adding the following covenants for the benefit of the Holders of the Notes:
     Section 4.08. Effectiveness of Covenants .
     From and after the first day (the “Suspension Date”) on which (i) the Notes have an Investment Grade Rating from both of the Ratings Agencies and (ii) no Default has occurred and is continuing under the Indenture, the Company and its Restricted Subsidiaries shall cease to be subject to the provisions of the following sections of the Indenture:
    Section 4.09,
 
    Section 4.10,
 
    Section 4.11,
 
    Section 4.12,
 
    Section 4.13, and
 
    clauses (d) of (e) of Section 5.01 (collectively, the “Suspended Covenants”).
     If at any date (each such date, a “Reversion Date”) the credit rating of the Notes is downgraded from an Investment Grade Rating by either Rating Agency, then the

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Suspended Covenants will thereafter be reinstated and again be applicable pursuant to the terms of the Indenture, unless and until the Notes subsequently attain an Investment Grade Rating. The period of time between any Suspension Date and the first subsequent Reversion Date is referred to herein as a “Suspension Period.” Neither the failure of the Company or any of its Subsidiaries to comply with a Suspended Covenant during a Suspension Period nor compliance by the Company or any of its Subsidiaries with any contractual obligation entered into in compliance with the Indenture during a Suspension Period will constitute a Default, Event of Default or breach of any kind under the Indenture, the Notes or the Subsidiary Guarantees.
     During any Suspension Period, the Board of Directors of the Company shall not designate any of the Company’s Subsidiaries as Unrestricted Subsidiaries pursuant to the Indenture.
     Calculations made after the Reversion Date of the amount available to be made as Restricted Payments under Section 4.09 will be made as though the covenant described in Section 4.09 had been in effect at all times since the Initial Issuance Date, including during any Suspension Period.
     Section 4.09 Limitation on Restricted Payments.
     The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly:
     (1) declare or pay any dividend or make any other payment or distribution on account of the Company’s or any of its Restricted Subsidiaries’ Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the holders of the Company’s or any of its Restricted Subsidiaries’ Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or payable to the Company or a Restricted Subsidiary of the Company);
     (2) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company;
     (3) make any principal payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated in right of payment to the Notes or any Subsidiary Guarantee (excluding (a) any intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries, (b) the purchase, redemption, defeasance, repurchase or other acquisition of Indebtedness that is subordinated in right of payment to the Notes or the Subsidiary Guarantees purchased, redeemed, defeased or otherwise acquired in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one

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year of the date of purchase, repurchase, redemption, defeasance or acquisition, and (c) any payment of principal at the Stated Maturity thereof); or
     (4) make any Restricted Investment (all such payments and other actions set forth in these clauses (1) through (4) being collectively referred to as “Restricted Payments”),
     unless, at the time of and after giving effect to such Restricted Payment, no Default (except a Reporting Default) or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment and:
     (I) the Company would, at the time of such Restricted Payment immediately after giving pro forma effect thereto as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.11; and
     (II) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries (excluding Restricted Payments permitted by clauses (2), (3), (4), (5), (8), (9), (11) and (13) of the next succeeding paragraph) since the Initial Issuance Date, is less than the sum, without duplication, of:
     (a) 50% of the aggregate Consolidated Net Income of the Company accrued on a cumulative basis during the period beginning on the Measurement Date and ending on the last day of the Company’s last fiscal quarter ending prior to the date of the Restricted Payment (or, if such aggregate cumulative Consolidated Net Income shall be a loss, minus 100% of such loss); plus
     (b) 100% of the aggregate net cash proceeds, and the Fair Market Value of any Capital Stock of Persons (other than an Unrestricted Subsidiary) engaged primarily in the Oil and Gas Business or any other assets that are used or useful in the Oil and Gas Business, in each case received by the Company after the Measurement Date as a contribution to its common equity capital or from the issue or sale after the Measurement Date of Equity Interests of the Company (other than Disqualified Stock) or from the issue or sale after the Measurement Date of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of the Company that have been converted into or exchanged for such Equity Interests (other than Equity Interests (or Disqualified Stock or debt securities) sold to a Subsidiary of the Company) or received upon the exercise of any options, warrants or rights to purchase Equity Interests (other than Disqualified Stock) of the Company; plus

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     (c) the amount equal to the net reduction in Restricted Investments made by the Company or any of its Restricted Subsidiaries in any Person since the Measurement Date resulting from:
     (i) repurchases or redemptions of such Restricted Investments by such Person, proceeds realized upon the sale of such Restricted Investment to a purchaser other than the Company or a Subsidiary of the Company, repayments of loans or advances or other transfers of assets (including by way of interest payments, dividend or distribution) by such Person to the Company or any Restricted Subsidiary of the Company; plus
     (ii) the redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries or the merger or consolidation of an Unrestricted Subsidiary with and into the Company or any Restricted Subsidiary (valued in each case as provided in the definition of “Investment”) not to exceed, in the case of any Unrestricted Subsidiary, the amount of Investments previously made by the Company or any Restricted Subsidiary of the Company in such Unrestricted Subsidiary; plus
     (iii) an amount equal to any amount included as a Restricted Payment pursuant to clause (II) of the first paragraph of this Section 4.09 on account of any guarantee entered into by the Company or any Restricted Subsidiary; to the extent that such guarantee has not been called upon and the obligation arising under such guarantee no longer exists or has been reduced; plus
     (iv) in the event the Company or any Restricted Subsidiary makes any Investment in a Person that, as a result of or in connection with such Investment, becomes a Restricted Subsidiary or is merged or consolidated with the Company or a Restricted Subsidiary, an amount equal to the amount included as a Restricted Payment pursuant to clause (II) of the first paragraph of this Section 4.09 on account of the Company’s or any Restricted Subsidiary’s Investment in such Person prior to the time it became a Restricted Subsidiary or the time of such merger or consolidation; plus
     (d) the amount by which Indebtedness of the Company or its Restricted Subsidiaries is reduced on the Company’s balance sheet upon the conversion or exchange (other than by a Subsidiary of the Company) subsequent to the Measurement Date of any Indebtedness of the Company or its Restricted Subsidiaries convertible into or exchangeable for Equity Interests of the Company (other than Disqualified Stock) (less the amount of cash, or the Fair Market Value of any other property, distributed by the Company upon such conversion or exchange),

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in each case to the extent such amounts have not been included in Consolidated Net Income for any period commencing on or after the Measurement Date.
The preceding provisions will not prohibit:
     (1) the payment of any dividend or distribution within 60 days after the date of its declaration, if at the date of declaration the payment would have complied with the provisions of this Indenture;
     (2) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness of the Company or any Subsidiary Guarantor or of any Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent (a) contribution (other than from a Restricted Subsidiary of the Company) to the equity capital of the Company or (b) sale (other than to a Restricted Subsidiary of the Company) of, Equity Interests of the Company (other than Disqualified Stock), with a sale being deemed substantially concurrent if such redemption, repurchase, retirement, defeasance or acquisition occurs not more than 120 days after such sale; provided, however, that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition will be excluded or deducted from clause (II) of this Section 4.09;
     (3) the defeasance, redemption, repurchase, retirement or other acquisition of subordinated Indebtedness or Disqualified Stock of the Company or any Subsidiary Guarantor with the net cash proceeds from a substantially concurrent incurrence of, or in exchange for, Permitted Refinancing Indebtedness, with an incurrence of Permitted Refinancing Indebtedness being deemed substantially concurrent if such defeasance, redemption, repurchase, retirement or acquisition occurs not more than 120 days after such incurrence;
     (4) the payment of any dividend or distribution by a Restricted Subsidiary of the Company to the holders of such Restricted Subsidiary’s Equity Interests on a pro rata basis or on a basis more favorable to the Company or a Restricted Subsidiary;
     (5) so long as no Default (other than a Reporting Default) or Event of Default shall have occurred and be continuing or would be caused thereby, the repurchase, redemption or other acquisition or retirement for value (other than for any Equity Interest) of any Equity Interests of the Company or any Restricted Subsidiary of the Company pursuant to any director, employee or consultant equity subscription agreement or equity option agreement or other employee benefit plan or to satisfy obligations under any Equity Interests option plan or similar arrangement other than any rights described under clause 9(b) below; provided, however, that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests may not exceed $3.0 million in any calendar year (with any portion of such $3.0 million amount that is unused in any

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calendar year to be carried forward to successive calendar years and added to such amount) plus, to the extent not previously applied or included,
     (a) the cash proceeds received by the Company or any of its Restricted Subsidiaries from sales of Equity Interests of the Company to employees, consultants or directors of the Company or its Affiliates that occur after the Initial Issuance Date (to the extent the cash proceeds from the sale of such Equity Interests have not otherwise been applied to the payment of Restricted Payments by virtue of clause (II)(b) of the first paragraph of this Section 4.09); and
     (b) the cash proceeds of key man life insurance policies received by the Company or any of its Restricted Subsidiaries after the Initial Issuance Date.
     (6) any purchase, redemption, defeasance, retirement or other acquisition of Indebtedness that is subordinated in right of payment to the Notes or a Subsidiary Guarantee pursuant to the provisions of such Indebtedness in the event of a Change of Control or an Asset Sale, in each case plus accrued and unpaid interest thereon, but only if:
     (a) in the case of a Change of Control, the Company has first complied with and fully satisfied its obligations under Section 4.16; or
     (b) in the case of an Asset Sale, the Company has complied with and fully satisfied its obligations in accordance with Section 4.12;
     (7) the repurchase, redemption or other acquisition for value of Equity Interests of the Company or any Restricted Subsidiary of the Company representing fractional shares of such Equity Interests in connection with a merger or consolidation involving the Company or such Restricted Subsidiary or any other transaction permitted by this Indenture;
     (8) the repurchase, redemption or other acquisition of Equity Interests deemed to occur upon the exercise or conversion of stock options, warrants or other convertible securities if such Equity Interests represent a portion of the exercise or conversion price thereof;
     (9) the defeasance, repurchase, redemption or other acquisition or retirement for value of (a) any Equity Interests of the Company or any Restricted Subsidiary of the Company held by any current or former officers, directors or employees of the Company or any of its Restricted Subsidiaries in connection with the exercise or vesting of any equity compensation (including, without limitation, stock options, restricted stock and phantom stock) in order to satisfy any tax withholding obligation with respect to such exercise or vesting or (b) to the extent otherwise constituting a Restricted Payment, any rights under any cash and/or equity-settled equity stock appreciation agreement or plan of the Company or any Restricted Subsidiary;

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     (10) any payments in connection with a consolidation, merger or transfer of assets in connection with a transaction that is not prohibited by this Indenture not to exceed $25.0 million in the aggregate after the Initial Issuance Date;
     (11) the payment of any dividends or distributions by the Company to the holders of its Disqualified Stock or preferred stock; provided that such Disqualified Stock or preferred stock is issued on or after the Initial Issuance Date in accordance with the first paragraph of Section 4.11;
     (12) the declaration and payment of distributions effecting “poison pill” rights plans provided that any securities or rights so distributed have a nominal Fair Market Value at the time of declaration;
     (13) (i) a capital contribution to Carrizo UK Huntington Ltd. of the North Sea Properties, (ii) cash capital contributions to, and funding of expenses for the benefit of, Carrizo UK Huntington Ltd. in an amount not to exceed $50 million and (iii) a guarantee to fund such capital contributions; or
     (14) so long as no Default (other than a Reporting Default) or Event of Default shall have occurred and be continuing or would be caused thereby, other Restricted Payments in an aggregate amount not to exceed $25.0 million at any time outstanding since the Initial Issuance Date (after giving effect to any dividends, interest payments, return of capital and subsequent reduction in the amount of any Investments made pursuant to this clause as a result of the repayment or other disposition thereof, in an amount not to exceed the amount of such Investments previously made pursuant to this clause); provided, however , that if any Investment pursuant to this clause (14) is made in any Person that is not a Restricted Subsidiary of the Company at the date of the making of such Investment and such Person becomes a Restricted Subsidiary of the Company after such date, such Investment shall thereafter be deemed to have been made pursuant to clause (1) of the definition of “Permitted Investments” and shall cease to have been made pursuant to this clause (14) for so long as such Person continues to be a Restricted Subsidiary.
     The amount of all Restricted Payments (other than cash) will be the Fair Market Value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or any of its Restricted Subsidiaries, as the case may be, pursuant to the Restricted Payment. The Fair Market Value of any assets or securities that are required to be valued by this Section 4.09 will be determined, in the case of amounts under $20.0 million, by an officer of the Company and, in the case of amounts over $20.0 million, by the Board of Directors of the Company, whose determination shall be evidenced by a Board Resolution. For purposes of determining compliance with this Section 4.09, in the event that a Restricted Payment meets the criteria of more than one of the categories of Restricted Payments described in the preceding clauses (1) — (14) or as a Permitted Investment, the Company will be permitted to divide or classify (or later divide, classify or reclassify in whole or in part in

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its sole discretion) such Restricted Payment in any manner that complies with this Section 4.09.
     Section 4.10 Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries .
     The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary of the Company to:
     (1) pay dividends or make any other distributions on its Capital Stock to the Company or any of its Restricted Subsidiaries, or pay any Indebtedness or other obligations owed to the Company or any of its Restricted Subsidiaries;
     (2) make loans or advances to the Company or any of its Restricted Subsidiaries; or
     (3) sell, lease or transfer any of its assets to the Company or any of its Restricted Subsidiaries.
     However, the preceding restrictions of this Section 4.10 will not apply to encumbrances or restrictions existing under or by reason of:
     (1) agreements (including in respect of any Credit Facilities) as in effect on the Initial Issuance Date and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of those agreements (or the agreements referred to in this clause (1)) or the Indebtedness to which those agreements (or the agreements referred to in this clause (1)) relate, provided that the amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are no more restrictive, taken as a whole, with respect to such dividend, distribution and other payment restrictions than those contained in those agreements on the Initial Issuance Date, as determined by the Board of Directors of the Company in its reasonable and good faith judgment;
     (2) this Indenture, the Notes and the Subsidiary Guarantees;
     (3) Applicable Law or similar restriction;
     (4) any agreement or instrument with respect to a Restricted Subsidiary that is not a Restricted Subsidiary of the Company on the Initial Issuance Date, in existence at the time such Person becomes a Restricted Subsidiary of the Company and not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary; provided that such encumbrances and restrictions are not applicable to the Company or any Restricted Subsidiary or the assets of the Company or any Restricted Subsidiary other than such Subsidiary which is becoming a Restricted Subsidiary;

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     (5) any agreement or instrument governing any Permitted Acquisition Indebtedness, so long as such agreement or instrument (A) was not entered into in contemplation of the acquisition, merger or consolidation transaction related thereto, and (B) is not applicable to any Person, or the assets of any Person, other than the Person, or the assets or Subsidiaries of the Person, subject to such acquisition, merger or consolidation, so long as the agreement containing such restriction does not violate any other provision of the Indenture;
     (6) instruments governing Indebtedness of the Company or any of the Subsidiary Guarantors permitted to be incurred pursuant to an agreement entered into subsequent to the Initial Issuance Date in accordance with Section 4.11; provided that the provisions relating to such encumbrance or restriction contained in such instruments are not materially more restrictive, taken as a whole, than the provisions contained in the Credit Agreement and in this Indenture as in effect on the Initial Issuance Date, as determined by the Board of Directors of the Company in its reasonable and good faith judgment;
     (7) (i) customary non-assignment provisions in Hydrocarbon purchase and sale or exchange agreements, joint operating agreements, or similar operational agreements or in licenses or leases, or (ii) other encumbrances or restrictions in agreements or instruments relating to specific assets or property that restrict generally the transfers of such assets or property, provided, however, that such other encumbrances or restrictions do not materially impair the ability of the Company to make scheduled payments on the Notes when due in each case entered into in the ordinary course of business or customary in the Oil and Gas Business;
     (8) Capital Lease Obligations, mortgage financings or purchase money obligations, in each case for property acquired in the ordinary course of business or which is customary in the Oil and Gas Business that impose restrictions on that property purchased or leased of the nature described in clause (3) of the preceding paragraph;
     (9) any agreement for the sale or other disposition of a Restricted Subsidiary of the Company that restricts distributions by that Restricted Subsidiary pending its sale or other disposition;
     (10) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are not materially more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced, as determined by the Board of Directors of the Company in its reasonable and good faith judgment;
     (11) Liens securing Indebtedness otherwise permitted to be incurred under the provisions of Section 4.14 that limit the right of the debtor to dispose of the assets subject to such Liens;

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     (12) provisions limiting the disposition or distribution of assets or property in joint venture agreements, asset sale agreements, stock sale agreements and other similar agreements entered into (a) in the ordinary course of business or which are customary in the Oil and Gas Business, or (b) with the approval of the Company’s Board of Directors, which limitations are applicable only to the assets that are the subject of such agreements;
     (13) any agreement or instrument relating to any assets acquired after the Initial Issuance Date, so long as such encumbrance or restriction relates only to the assets so acquired and is not and was not created in anticipation of such acquisition;
     (14) restrictions on cash, Cash Equivalents or other deposits or net worth imposed by customers or lessors under contracts or leases entered into in the ordinary course of business or which are customary in the Oil and Gas Business;
     (15) customary encumbrances and restrictions contained in agreements of the types described in the definition of “Permitted Business Investments”;
     (16) Hedging Contracts permitted from time to time under this Indenture;
     (17) the issuance of preferred securities by a Restricted Subsidiary of the Company or the payment of dividends thereon in accordance with the terms thereof; provided that issuance of such preferred securities is permitted pursuant to Section 4.11 and the terms of such preferred securities do not expressly restrict the ability of a Restricted Subsidiary of the Company to pay dividends or make any other distributions on its Equity Interests (other than requirements to pay dividends or liquidation preferences on such preferred securities prior to paying any dividends or making any other distributions on such other Equity Interests); and
     (18) any Permitted Investment.
     Section 4.11 Limitation on Incurrence of Indebtedness and Issuance of Preferred Stock .
     The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, “incur”) any Indebtedness, the Company will not issue any Disqualified Stock, and the Company will not permit any of its Restricted Subsidiaries to issue any Disqualified Stock or preferred securities; provided, however, that the Company and any of the Subsidiary Guarantors may incur Indebtedness and the Company may issue Disqualified Stock and any Subsidiary Guarantor may issue Disqualified Stock or preferred securities, if the Fixed Charge Coverage Ratio for the Company’s most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on

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which such additional Indebtedness is incurred or such preferred securities or Disqualified Stock is or are issued, as the case may be, would have been at least 2.50 to 1.0, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred or such preferred securities or Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period.
     The first paragraph of this Section 4.11 will not prohibit the incurrence of any of the following items of Indebtedness or the issuance of any Disqualified Stock or any preferred securities described below (collectively, “Permitted Debt”):
     (1) the incurrence by the Company or any of the Subsidiary Guarantors of additional Indebtedness (including letters of credit) under one or more Credit Facilities, provided that, after giving effect to any such incurrence, the aggregate principal amount of all Indebtedness outstanding under the Company’s and its Restricted Subsidiaries’ Credit Facilities incurred under this clause (1) (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Subsidiaries thereunder) does not exceed the greater of (a) $600 million and (b) an amount equal to the sum of $250 million plus 35.0% of the Company’s Adjusted Consolidated Net Tangible Assets determined as of the date of such incurrence;
     (2) the incurrence by the Company or its Restricted Subsidiaries of the Existing Indebtedness not otherwise referred to in this definition of “Permitted Debt”;
     (3) the incurrence by the Company and the Subsidiary Guarantors of Indebtedness represented by (a) the Notes issued and sold on the Initial Issuance Date (excluding any Additional Notes) and the related Subsidiary Guarantees to be issued on the Initial Issuance Date and (b) the Exchange Notes and the related Subsidiary Guarantees to be issued pursuant to any Registration Rights Agreement;
     (4) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case incurred for the purpose of financing all or any part of the purchase price or cost of design, installation, repair, replacement, construction or improvement of property, plant or equipment used in the business of the Company or such Restricted Subsidiary (whether through the direct purchase of such assets or the Capital Stock of any Person owning such assets (but no other material assets)) and related financing costs, and Attributable Debt in respect of Sale Leaseback Transactions, including all Permitted Refinancing Indebtedness incurred to extend, refinance, renew, replace, defease or refund any Indebtedness incurred pursuant to this clause (4), provided that after giving effect to any such incurrence, the aggregate principal amount of all Indebtedness incurred pursuant to this clause (4) and then outstanding does not

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exceed the greater of (a) $25.0 million and (b) 2.5% of the Company’s Adjusted Consolidated Net Tangible Assets determined as of the date of such incurrence;
     (5) the incurrence or issuance by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which shall be used to extend, refinance, renew, replace, defease, discharge, refund or otherwise retire for value, in whole or in part, Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness) or Disqualified Stock of the Company, in each case that was permitted by this Indenture to be incurred pursuant to the first paragraph of this Section 4.11 or clauses (2), (3), (5) and (12) of this paragraph;
     (6) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among any of the Company and any of its Restricted Subsidiaries; provided, however, that:
     (a) if the Company is the obligor on such Indebtedness and a Subsidiary Guarantor is not the obligee, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes, or if a Subsidiary Guarantor is the obligor on such Indebtedness and neither the Company nor another Subsidiary Guarantor is the obligee, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Subsidiary Guarantee of such Subsidiary Guarantor; and
     (b) (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary of the Company and (ii) any sale or other transfer of any such Indebtedness to a Person that is neither the Company nor a Restricted Subsidiary of the Company will be deemed, in each case, to constitute an incurrence (as of the date of such issuance, sale or transfer) of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (6);
     (7) the incurrence by the Company or any of its Restricted Subsidiaries of obligations under Hedging Contracts;
     (8) the guarantee by the Company or any of its Restricted Subsidiaries of Indebtedness of the Company or any of its Restricted Subsidiaries that was permitted to be incurred by another provision of this Section 4.11;
     (9) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness relating to net gas balancing positions arising in the ordinary course of business and consistent with past practice;
     (10) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness in respect of bid, performance, surety and similar bonds issued for the account of the Company and any of its Restricted

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Subsidiaries in the ordinary course of business or which are customary in the Oil and Gas Business, including guarantees and obligations of the Company or any of its Restricted Subsidiaries with respect to letters of credit supporting such obligations (in each case other than an obligation for money borrowed);
     (11) the issuance by any of the Company’s Restricted Subsidiaries to the Company or to any of its Restricted Subsidiaries of any preferred securities; provided, however, that:
     (a) any subsequent issuance or transfer of Equity Interests that results in any such preferred securities being held by a Person other than the Company or a Restricted Subsidiary of the Company; and
     (b) any sale or other transfer of any such preferred securities to a Person that is not either the Company or a Restricted Subsidiary of the Company shall be deemed, in each case, to constitute an issuance (as of the date of such issuance, sale or transfer) of such preferred securities by such Restricted Subsidiary that was not permitted by this clause (11);
     (12) Permitted Acquisition Indebtedness;
     (13) the incurrence by the Company or its Restricted Subsidiaries of Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds in the ordinary course of business;
     (14) the incurrence by the Company or its Restricted Subsidiaries of Indebtedness consisting of the financing of insurance premiums in customary amounts consistent with the operations and business of the Company and its Restricted Subsidiaries;
     (15) accounts payable or other obligations of the Company or any of its Restricted Subsidiaries to trade creditors created or assumed by the Company or such Restricted Subsidiary in the ordinary course of business or which is customary in the Oil and Gas Business in connection with the obtaining of goods or services;
     (16) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness arising from agreements of the Company or any Restricted Subsidiary of the Company providing for indemnification, adjustment of purchase price, earn outs, or similar obligations, in each case, incurred or assumed in connection with the disposition or acquisition of any business, assets or Capital Stock of a Subsidiary in a transaction permitted by this Indenture, other than guarantees of Indebtedness incurred or assumed by any Person acquiring all or any portion of such business, assets or Subsidiary for the purpose of financing such acquisition;

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     (17) the guarantee by the Company described in clause (13) of Section 4.09; and
     (18) the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness or the issuance by the Company of additional Disqualified Stock or the issuance by any Restricted Subsidiary of preferred securities, provided that, after giving effect to any such incurrence or issuance, the aggregate principal amount of all Indebtedness, Disqualified Stock and preferred securities incurred or issued under this clause (18) and then outstanding does not exceed the greater of (a) $25.0 million and (b) 2.5% of the Company’s Adjusted Consolidated Net Tangible Assets determined as of the date of such incurrence or issuance.
     For purposes of determining compliance with this Section 4.11, in the event that an item of Indebtedness or Disqualified Stock or preferred securities meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (18) above, or is entitled to be incurred or issued pursuant to the first paragraph of this Section 4.11, the Company will be permitted to divide and classify (or later classify, reclassify or re-divide in whole or in part in its sole discretion) such item of Indebtedness or Disqualified Stock or preferred securities in any manner that complies with this Section 4.11, provided that any Indebtedness under a Credit Facility that was incurred on or prior to, and outstanding on the Initial Issuance Date shall be deemed to have been initially incurred on the Initial Issuance Date pursuant to clause (1) of the definition of “Permitted Debt” rather than the first paragraph of this Section 4.11. For purposes of determining any particular amount of Indebtedness under this covenant, (i) guarantees of, or obligations in respect of letters of credit relating to, Indebtedness otherwise included in the determination of such amount shall not also be included except to the extent that such Indebtedness exceeds such guarantee or letter of credit and (ii) if obligations in respect of letters of credit are incurred pursuant to a Credit Facility and are being treated as incurred pursuant to clause (1) of the definition of “Permitted Debt” and the letters of credit relate to other Indebtedness, then such other Indebtedness shall not be included except to the extent that such Indebtedness exceeds such letter of credit.
     The accrual of interest, accrual of dividends, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness, and the payment of dividends on Disqualified Stock or preferred securities in the form of additional shares of Disqualified Stock or preferred securities will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock or preferred securities for purposes of this Section 4.11, provided, in each such case, that the amount thereof is included in Fixed Charges of the Company as accrued.
     For purposes of determining compliance with any U.S. dollar-denominated restriction on the incurrence of Indebtedness, the U.S. dollar-equivalent principal amount of Indebtedness denominated in a foreign currency will be calculated based on the relevant currency exchange rate in effect on the date the Indebtedness was incurred, in the case of term Indebtedness, or first committed, in the case of revolving credit Indebtedness; provided that if such Indebtedness is incurred to refinance other

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Indebtedness denominated in a foreign currency, and the refinancing would cause the applicable U.S. dollar-dominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of the refinancing, such U.S. dollar-dominated restriction shall be deemed not to have been exceeded so long as the principal amount of such refinancing Indebtedness does not exceed the principal amount of such Indebtedness being refinanced (plus all accrued and unpaid interest on such Indebtedness, and the amount of all fees, expenses and premiums incurred in connection therewith). Notwithstanding any other provision of this Section 4.11, the maximum amount of Indebtedness that the Company or any Restricted Subsidiary may incur pursuant to this Section 4.11 shall not be deemed to be exceeded solely as a result of fluctuations in the exchange rate of currencies. The principal amount of any Indebtedness incurred to refinance other Indebtedness, if incurred in a different currency from the Indebtedness being refinanced, will be calculated based on the currency exchange rate applicable to the currencies in which the refinancing Indebtedness is denominated that is in effect on the date of such refinancing.
     Section 4.12 Limitation on Asset Sales .
     The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless:
     (1) the Company (or the Restricted Subsidiary, as the case may be) receives consideration (including by way of relief from, or any Person assuming responsibilities for, any liabilities, contingent or otherwise), as determined (on the date of contractually agreeing to such Asset Sale) in good faith by senior management of the Company or, if the consideration with respect to such Asset Sale exceeds $25 million, the Board of Directors of the Company, at least equal to the Fair Market Value of the assets or Equity Interest issued or sold or otherwise disposed of; and
     (2) at least 75% of the aggregate consideration to be received by the Company and its Restricted Subsidiaries in such Asset Sale (determined on the date of contractually agreeing to such Asset Sale) is in the form of cash or Cash Equivalents. For purposes of this provision, each of the following will be deemed to be cash:
     (a) any liabilities, as shown on the Company’s or such Restricted Subsidiary’s most recent balance sheet, of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated in right of payment to the Notes or any Subsidiary Guarantee) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Restricted Subsidiary from further liability;
     (b) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are, within 180 days after the Asset Sale, converted by the Company or such

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Subsidiary into cash or Cash Equivalents, to the extent of the cash received in that conversion;
     (c) accounts receivable of a business retained by the Company or any of its Restricted Subsidiaries, as the case may be, following the sale of such business, provided that such accounts receivable (i) are not past due more than 90 days and (ii) do not have a payment date greater than 120 days from the date of the invoices creating such accounts receivable; and
     (d) solely in the case of any Asset Sale of Production Facility or Pipeline Assets, the Company or the Restricted Subsidiary receives Permitted MLP Securities;
provided that in the case of any Asset Sale pursuant to a condemnation, appropriation or similar taking, including by deed in lieu of condemnation, such Asset Sale shall not be required to satisfy the requirements of items (1) and (2) above. Notwithstanding the preceding, the 75% limitation referred to above shall be deemed satisfied with respect to any Asset Sale in which the cash or Cash Equivalents portion of the consideration received therefrom, determined in accordance with the preceding provision on an after-tax basis, is equal to or greater than what the after-tax proceeds would have been had such Asset Sale complied with the aforementioned 75% limitation.
     Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Company (or the applicable Restricted Subsidiary, as the case may be) may apply those Net Proceeds at its option to any combination of the following:
     (1) to prepay, repay, redeem, defease or repurchase Senior Debt;
     (2) to invest in or acquire Additional Assets; or
     (3) to make capital expenditures in respect of the Company’s or its Restricted Subsidiaries’ Oil and Gas Business.
     The requirement of clause (2) or (3) of the preceding paragraph shall be deemed to be satisfied if a bona fide binding contract committing to make the investment, acquisition or expenditure referred to therein is entered into by the Company or any of its Restricted Subsidiaries with a Person other than an Affiliate of the Company within the time period specified in the preceding paragraph and such Net Proceeds are subsequently applied in accordance with such contract within six months following the date such agreement is entered into.
     Pending the final application of any Net Proceeds, the Company or any Restricted Subsidiary of the Company may invest the Net Proceeds in any manner that is not prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the preceding paragraph will constitute “Excess Proceeds.”

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     On the 366th day after an Asset Sale (or, at the Company’s option, any earlier date), if the aggregate amount of Excess Proceeds then exceeds $20.0 million, the Company will make an Asset Sale Offer to all Holders of Notes, and to all holders of Pari Passu Indebtedness then outstanding, to purchase the maximum principal amount of Notes and such Pari Passu Indebtedness that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of principal amount plus accrued and unpaid interest and Additional Interest, if any, thereon to the Settlement Date, subject to the right of Holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the Settlement Date, and will be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use those Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate principal amount of Notes and Pari Passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee will select the Notes and such Pari Passu Indebtedness to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Trustee so that only Notes in denominations of $2,000, or integral multiples of $1,000 in excess of $2,000, shall be purchased). Upon surrender of a Note that is repurchased in part, the Company shall issue in the name of the applicable Holder and the Trustee shall authenticate for such Holder at the expense of the Company a new Note equal in principal amount to the non-repurchased portion of the Note surrendered. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero.
     The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.12, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under such provisions by virtue of such compliance.
     Prior to complying with the provisions of this Section 4.12, but in any event no later than the date of the Asset Sale Offer, the Company or any Subsidiary Guarantor must either repay all of its other outstanding Senior Debt or obtain the requisite consents, if any, under all agreements governing such Senior Debt to permit the repurchase of Notes required by the provisions of this Section 4.12.
     Section 4.13 Limitation on Transactions with Affiliates .
     The Company will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its assets to, or purchase any assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of the Company (each, an “Affiliate Transaction”), unless:
     (1) the Affiliate Transaction is on terms that are not materially less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such

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Restricted Subsidiary with an unrelated Person or, if in the good faith judgment of the Company’s Board of Directors, no comparable transaction is available with which to compare such Affiliate Transaction, such Affiliate Transaction is otherwise fair to the Company or the relevant Restricted Subsidiary from a financial point of view; and
     (2) the Company delivers to the Trustee:
     (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration to or from an Affiliate in excess of $15.0 million, an Officers’ Certificate certifying that such Affiliate Transaction complies with this Section 4.13; and
     (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration to or from an Affiliate in excess of $25.0 million, a resolution of the Board of Directors of the Company set forth in an Officers’ Certificate certifying that such Affiliate Transaction complies with this Section 4.13 and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors of the Company.
     The following items will not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of the prior paragraph of this Section 4.13:
     (1) any employment agreement or arrangement, equity award, equity option or cash and/or equity settled equity appreciation agreement or plan, employee benefit plan, officer or director indemnification agreement, severance agreement, consulting agreement or other compensation plan or arrangement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business or which is customary in the Oil and Gas Business, and payments, awards, grants or issuances of securities pursuant thereto;
     (2) transactions between or among any of the Company and its Restricted Subsidiaries (or any entity that becomes a Restricted Subsidiary as a result of such transaction);
     (3) transactions with a Person (other than an Unrestricted Subsidiary of the Company) that is an Affiliate of the Company solely because the Company owns, directly or indirectly, an Equity Interest in, or otherwise controls, such Person and/or has nominated or appointed a person to the Board of Directors of that Person;
     (4) customary compensation, indemnification and other benefits made available to officers, directors, employees or consultants of the Company or a Restricted Subsidiary or Affiliate of the Company, including reimbursement or advancement of out-of-pocket expenses and provisions of officers’ and directors’ liability insurance;

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     (5) sales of Equity Interests (other than Disqualified Stock) to, or receipt of capital contributions from, Affiliates of the Company and any dividend or distribution payable in Equity Interests (other than Disqualified Stock);
     (6) any Permitted Investments or Restricted Payments that are permitted by Section 4.09;
     (7) transactions between the Company or any of its Restricted Subsidiaries and any Person that would not otherwise constitute an Affiliate Transaction except for the fact that one director of such other Person is also a director of the Company or such Restricted Subsidiary, as applicable; provided that such director abstains from voting as a director of the Company or such Restricted Subsidiary, as applicable, on any matter involving such other Person;
     (8) the existence of, and the performance of obligations of the Company or any of its Restricted Subsidiaries under the terms of, any written agreement to which the Company or any of its Restricted Subsidiaries is a party on the Initial Issuance Date, as such agreements may be amended, modified, supplemented or replaced from time to time; provided, however, that any amendment, modification, supplement or replacement entered into after the Initial Issuance Date will be permitted to the extent that its terms are not materially more disadvantageous, taken as a whole, to the Holders of the Notes than the terms of the agreements in effect on the Initial Issuance Date (as conclusively evidenced by a Board Resolution);
     (9) any transaction in which the Company or any of its Restricted Subsidiaries, as the case may be, delivers to the Trustee an opinion from an accounting, appraisal or investment banking firm of national standing stating that such transaction is fair to the Company or such Restricted Subsidiary from a financial point of view or that such transaction meets the requirements of clause (1) of this Section 4.13;
     (10) (a) guarantees by the Company or any of its Restricted Subsidiaries of performance of obligations of the Company’s Unrestricted Subsidiaries in the ordinary course of business or which is customary in the Oil and Gas Business, and (b) pledges by the Company or any Restricted Subsidiary of the Company of Equity Interests in Unrestricted Subsidiaries for the benefit of lenders or other creditors of the Company’s Unrestricted Subsidiaries;
     (11) any Affiliate Transaction with a Person in its capacity as a holder of Indebtedness or Capital Stock of the Company or any Restricted Subsidiary of the Company if such Person is treated no more favorably than the other holders of Indebtedness or Capital Stock of the Company or such Restricted Subsidiary;
     (12) transactions with joint venture partners, customers, clients, suppliers or purchasers or sellers of goods or services, or lessors or lessees of property, in each case in the ordinary course of business or which is customary in

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the Oil and Gas Business and otherwise in compliance with the terms of this Indenture similar to those contained in similar contracts entered into by the Company or any Restricted Subsidiary and third parties, or if neither the Company nor any Restricted Subsidiary has entered into a similar contract with a third party, which are, in the aggregate (taking into account all the costs and benefits associated with such transactions), not materially less favorable to the Company and its Restricted Subsidiaries than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person, in the good faith determination of the Company’s Board of Directors or any executive officer of the Company involved in or otherwise familiar with such transaction;
     (13) transactions entered into by a Person prior to the time such Person becomes a Subsidiary of the Company or is merged or consolidated into the Company or a Subsidiary of the Company (provided such transaction is not entered into in contemplation of such event);
     (14) dividends and distributions to the Company and its Restricted Subsidiaries by any Unrestricted Subsidiary or Joint Venture;
     (15) transactions with Avista or any of its Subsidiaries entered into in connection with the Avista Marcellus Joint Venture; provided such transactions are on terms that are not materially less favorable, taken as a whole, to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person; and
     (16) arrangements relating to sale of the Company’s interests in Pinnacle Gas Resources, Inc. or other management of the Company’s investment in that company; provided that such arrangements are on terms that are not materially less favorable, taken as a whole, to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person.
     Section 4.14 Limitation on Liens .
     The Company will not, and will not permit any of its Restricted Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or become effective any Lien of any kind (other than Permitted Liens) upon any of its assets (whether now owned or hereafter acquired), securing Indebtedness, unless the Notes or the Subsidiary Guarantee of such Restricted Subsidiary, as applicable, is secured on an equal and ratable basis with (or, in the case of obligations subordinated in right of payment to the Notes or such Subsidiary Guarantee, as the case may be, on a basis senior (to at least the same extent as the Notes are senior in right of payment) to) the obligations so secured until such time as such obligations are no longer secured by a Lien.

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     Any Lien on any assets of the Company or any of its Restricted Subsidiaries created for the benefit of the Holders of the Notes pursuant to the preceding paragraph shall provide by its terms that such Lien shall be automatically and unconditionally released and discharged at such time as there are no other Liens of any kind (other than Permitted Liens) on such assets securing Indebtedness.
     Section 4.15 Additional Subsidiary Guarantees .
     If, after the Initial Issuance Date, any Restricted Subsidiary of the Company that is not already a Subsidiary Guarantor guarantees any other Indebtedness of the Company or any Indebtedness of any Restricted Subsidiary in excess of the De Minimis Guaranteed Amount, or any Restricted Subsidiary, if not then a Subsidiary Guarantor, incurs any Indebtedness under any of the Credit Facilities, then in either case that Subsidiary shall become a Subsidiary Guarantor by executing a supplemental indenture substantially in the form of Annex A hereto and delivering it to the Trustee within 90 days of the date on which it guaranteed or incurred such Indebtedness, as the case may be, together with any Officers’ Certificate or Opinion of Counsel required by Section 9.06. Notwithstanding the preceding, any Subsidiary Guarantee of a Restricted Subsidiary that was incurred pursuant to this Section 4.15 shall provide by its terms that it shall be automatically and unconditionally released at such time as such Subsidiary Guarantor ceases both (x) to guarantee any other Indebtedness of the Company and any Indebtedness of any other Restricted Subsidiary and (y) to be an obligor with respect to any Indebtedness under any Credit Facility.
     Each Subsidiary Guarantee shall also be released in accordance with Article X.
     Section 4.16 Offer to Repurchase Upon Change of Control
     Within 30 days following the occurrence of a Change of Control, the Company shall make an offer (a “Change of Control Offer”) to repurchase all or any part (equal to $2,000 or an integral multiple of $1,000 in excess of $2,000) of each Holder’s Notes at a purchase price (the “Change of Control Payment”) in cash equal to 101% of the aggregate principal amount of Notes repurchased, plus accrued and unpaid interest and Additional Interest, if any, thereon to the date of settlement (the “Change of Control Settlement Date”), subject to the right of Holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the Change of Control Settlement Date. Within 30 days following a Change of Control, the Company shall mail a notice of the Change of Control Offer to each Holder and the Trustee describing the transaction or transactions that constitute the Change of Control and stating:
     (a) that the Change of Control Offer is being made pursuant to this Section 4.16 and that all Notes validly tendered and not withdrawn pursuant to the Change of Control Offer will be accepted for payment;

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     (b) the purchase price and the purchase date, which shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the “Change of Control Purchase Date”);
     (c) that the Change of Control Offer will expire as of the time specified in such notice on the Change of Control Purchase Date and that the Company shall pay the Change of Control Purchase Price for all Notes purchased as of the Change of Control Purchase Date promptly thereafter on the Change of Control Settlement Date;
     (d) that any Note not tendered will continue to accrue interest and Additional Interest, if any;
     (e) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest and Additional Interest, if any, after the Change of Control Settlement Date;
     (f) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, properly endorsed for transfer, together with the form entitled “Option of Holder to Elect Purchase” on the reverse of the Notes completed and such customary documents as the Company may reasonably request, to the Paying Agent at the address specified in the notice prior to the termination of the Change of Control Offer on the Change of Control Purchase Date;
     (g) that Holders will be entitled to withdraw their election if the Paying Agent receives, prior to the termination of the Change of Control Offer, a telegram, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing its election to have the Notes purchased; and
     (h) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $2,000 in principal amount or an integral multiple of $1,000 in excess of $2,000.
     If any of the Notes subject to a Change of Control Offer is in the form of a Global Note, then the Company shall modify such notice to the extent necessary to accord with the procedures of the Depositary applicable to repurchases. Further, the Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.16, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under such provisions by virtue of such compliance.

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     On the Change of Control Purchase Date, the Company shall, to the extent lawful, accept for payment all Notes or portions thereof (in integral multiples of $1,000) properly tendered pursuant to the Change of Control Offer. Promptly thereafter on the Change of Control Settlement Date, the Company shall:
     (i) deposit with the Paying Agent by 11:00 a.m., New York City time, an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered; and
     (ii) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers’ Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company.
     On the Change of Control Settlement Date, the Paying Agent shall mail to each Holder of Notes properly tendered the Change of Control Payment for such Notes (or, if all the Notes are then in global form, make such payment through the facilities of the Depositary) and the Trustee shall authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided, however, that each such new Note will be in a principal amount of $2,000 or an integral multiple of $1,000 in excess of $2,000. The Company shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Settlement Date.
     Prior to complying with any of the provisions of this Section 4.16, but in any event no later than the Change of Control Purchase Date, the Company or any Subsidiary Guarantor shall either repay all of its other outstanding Senior Debt or obtain the requisite consents, if any, under all agreements governing such Senior Debt to permit the repurchase of Notes required by this Section 4.16.
     The Company shall not be required to make a Change of Control Offer following a Change of Control if (1) a third party makes the Change of Control Offer in the manner, at the time and otherwise in compliance with the requirements set forth in this Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes properly tendered and not withdrawn under such Change of Control Offer or (2) notice of redemption of all Notes has been given pursuant to Section 3.12 unless there is a default in payment of the applicable Redemption Price.
     A Change of Control Offer may be made in advance of a Change of Control, and conditioned upon the occurrence of such Change of Control, if a definitive agreement is in place for such Change of Control at the time of making the Change of Control Offer.
     In the event that Holders of not less than 90% of the aggregate principal amount of the Outstanding Notes accept a Change of Control Offer and the Company purchases all of the Notes held by such Holders, the Company will have the right, upon not less than 30 nor more than 60 days’ prior notice, given not more than 30 days following the purchase pursuant to such Change of Control Offer, to redeem all of the Notes that remain Outstanding following such purchase at a purchase price equal to the Change of

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Control Payment plus, to the extent not included in the Change of Control Payment, accrued and unpaid interest on the Notes that remain Outstanding, to the date of redemption (subject to the right of Holders on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to such date of redemption).
     Section 4.17 No Partial Inducements .
     The Company shall not, and the Company shall not permit any of its Subsidiaries, either directly or indirectly, to pay (or cause to be paid) any consideration, whether by way of interest, fee or otherwise, to any Beneficial Owner or Holder of the Notes for or as an inducement to any consent to any waiver, supplement or amendment of any terms or provisions of this Indenture or the Notes, unless such consideration is offered to be paid (or agreed to be paid) to all Beneficial Owners and Holders of the Notes which so consent in the time frame set forth in the solicitation documents relating to such consent.
     Section 4.18 Designation of Restricted and Unrestricted Subsidiaries .
     The Board of Directors of the Company may designate any Restricted Subsidiary of the Company to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary of the Company is designated as an Unrestricted Subsidiary, the aggregate Fair Market Value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary properly designated as an Unrestricted Subsidiary will be deemed to be an Investment made as of the time of the designation and will reduce the amount available for Restricted Payments under the first paragraph of Section 4.09 or represent Permitted Investments, as determined by the Company. That designation shall only be permitted if the Investment would be permitted at that time and if the Subsidiary so designated otherwise meets the definition of an Unrestricted Subsidiary.
     The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary of the Company to be a Restricted Subsidiary of the Company; provided that such designation will be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation will only be permitted if (1) such Indebtedness is permitted under Section 4.11, calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period, and (2) no Default (other than a Reporting Default) or Event of Default would be in existence following such designation.
     Section 4.19 Reports
     (a) Whether or not required by the SEC, so long as any Notes are Outstanding, the Company will file with the SEC for public availability within the time periods specified in the SEC’s rules and regulations taking into account any extension of time, deemed filing date or safe harbor contemplated or provided for by Rule 12b-25, Rule 13a-11(c) and Rule 15d-11(c) under the Exchange Act or General Instruction I.A.3(b) of Form S-3 under the Securities Act, and successor provisions (unless the SEC

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will not accept such a filing, in which case the Company will furnish to the Trustee and, upon its prior request, to any of the Holders of the Notes, within the time periods specified in the SEC’s rules and regulations):
     (1) all quarterly and annual financial information with respect to the Company and its Subsidiaries that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were required to file such Forms, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and, with respect to the annual information only, a report on the annual financial statements by the Company’s certified independent accountants; and
     (2) all current reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports.
     The Company will be deemed to have provided such information to the Trustee and the Holders of the Notes if it has filed such reports or reports containing such information with the SEC via the EDGAR filing system and such reports are publicly available.
     The Company shall at all times comply with TIA § 314(a).
     (b) For as long as the Notes remain Outstanding and are “restricted securities” within the meaning of Rule 144(a)(3), if at any time the Company is not required to file the reports required by this Section 4.19 with the SEC, the Company and the Subsidiary Guarantors shall furnish to the Holders of the Notes and to securities analysts and prospective investors in the Notes, upon their request, the information, if any, required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. The Company will be deemed to have provided such information to the Holders of the Notes, securities analysts and prospective investors in the Notes if it has filed reports containing such information with the SEC via the EDGAR filing system and such reports are publicly available.
     (c) In the event that: (1) the rules and regulations of the SEC permit the Company and any direct or indirect parent company of the Company to report at such parent entity’s level on a consolidated basis and such parent entity of the Company is not engaged in any business in any material respect other than incidental to its ownership, directly or indirectly, of the Capital Stock of the Company, or (2) any direct or indirect parent of the Company becomes a Guarantor of the Notes, such consolidated reporting at such parent entity’s level in a manner consistent with that described in this Section 4.19 for the Company will satisfy this Section 4.19; provided that, such financial information is accompanied by consolidating information that explains in reasonable detail the differences between the information relating to such direct or indirect parent and any of its Subsidiaries other than the Company and its Subsidiaries, on the one hand, and the information relating to the Company and its Subsidiaries on a stand alone basis, on the other hand.

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     (d) Delivery of reports, information and documents to the Trustee under this Section 4.19 is for informational purposes only and the Trustee’s receipt of the foregoing shall not constitute constructive notice of any information contained therein or determinable from information contained therein.
SECTION 209 Amendment to Events of Default.
     (a) Sections 6.01 and 6.02 of the Original Indenture are hereby amended and restated in their entirety as follows with respect to the Notes:
     Section 6.01 Events of Default .
     An “Event of Default” occurs if one of the following shall have occurred and be continuing (whatever the reason for such Event of Default and whether it shall be involuntary or be effected by operation of law):
     (1) the Company defaults in the payment when due of interest or Additional Interest, if any, with respect to the Notes, and such default continues for a period of 30 days;
     (2) the Company defaults in the payment of the principal of or premium, if any, on the Notes when due at their Stated Maturity, upon optional redemption, upon required repurchase, upon acceleration or otherwise;
     (3) the Company fails to comply with the provisions of Section 5.01 hereof or to consummate a purchase of Notes when required pursuant to the provisions of Section 3.13, 4.12 or 4.16 hereof;
     (4) the Company fails to comply with the provisions of Section 4.19 for 120 days after notice to the Company by the Trustee or the Holders of at least 25% in principal amount of the Notes then Outstanding of such failure;
     (5) the Company fails to comply with any other covenant or other agreement in this Indenture or the Notes (including the provisions of Section 3.13, 4.12 or 4.16 to the extent not described in clause (3) of this Section 6.01) for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in principal amount of the Notes then Outstanding of such failure;
     (6) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), whether such Indebtedness or guarantee now exists or is created after the Initial Issuance Date, if such default:
     (A) is caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to the expiration of any grace period provided in such Indebtedness (a “Payment Default”); or

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     (B) results in the acceleration of such Indebtedness prior to its Stated Maturity
and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $30.0 million or more; provided, however, that if any such default is cured or waived or any such acceleration rescinded, or such Indebtedness is repaid and the Notes have not been accelerated, such Event of Default shall be automatically rescinded, so long as such rescission does not conflict with any judgment or decree;
     (7) the Company or any of its Restricted Subsidiaries fails to pay final judgments aggregating in excess of $30.0 million (to the extent not covered by insurance by a reputable and creditworthy insurer as to which the insurer has not disclaimed coverage), which judgments are not paid, discharged or stayed for a period of 60 consecutive days;
     (8) (A) any Subsidiary Guarantee is held in any judicial proceeding to be unenforceable or invalid or ceases for any reason to be in full force and effect or (B) any Subsidiary Guarantor, or any Person acting on behalf of any Subsidiary Guarantor, denies or disaffirms its obligations under its Subsidiary Guarantee, except, in each case, by reason of the release of such Subsidiary Guarantee in accordance with the provisions of this Indenture; and
     (9) the Company, any of the Company’s Restricted Subsidiaries that is a Significant Subsidiary of the Company or any group of Restricted Subsidiaries of the Company that, taken as a whole, would constitute a Significant Subsidiary of the Company, pursuant to or within the meaning of Bankruptcy Law:
     (A) commences a voluntary case,
     (B) consents in writing to the entry of an order for relief against it in an involuntary case,
     (C) consents in writing to the appointment of a Custodian of it or for all or substantially all of its property,
     (D) makes a general assignment for the benefit of its creditors, or
     (E) admits in writing it generally is not paying its debts as they become due; or
     (10) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

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     (A) is for relief against the Company, any of the Company’s Restricted Subsidiaries that is a Significant Subsidiary of the Company or any group of Restricted Subsidiaries of the Company that, taken as a whole, would constitute a Significant Subsidiary of the Company, in an involuntary case;
     (B) appoints a Custodian (x) of the Company, any of the Company’s Restricted Subsidiaries that is a Significant Subsidiary of the Company or any group of Restricted Subsidiaries of the Company that, taken as a whole, would constitute a Significant Subsidiary of the Company, or (y) for all or substantially all of the property of the Company, any of the Company’s Restricted Subsidiaries that is a Significant Subsidiary of the Company or any group of Restricted Subsidiaries of the Company, that, taken together, would constitute a Significant Subsidiary of the Company; or
     (C) orders the liquidation of the Company, any of the Company’s Restricted Subsidiaries that is a Significant Subsidiary of the Company or any group of Restricted Subsidiaries of the Company that, taken as a whole, would constitute a Significant Subsidiary of the Company;
     and the order or decree remains unstayed and in effect for 60 consecutive days.
     Section 6.02 Acceleration .
     If any Event of Default occurs and is continuing, the Trustee, by notice to the Company, or the Holders of at least 25% in principal amount of the then Outstanding Notes, by notice to the Company and the Trustee, may declare all the Notes to be due and payable immediately. Upon any such declaration, the Notes shall become due and payable immediately, together with all accrued and unpaid interest, Additional Interest, if any, and premium, if any, thereon. Notwithstanding the preceding, if an Event of Default specified in clause (9) or (10) of Section 6.01 hereof occurs with respect to the Company, any of the Company’s Restricted Subsidiaries that is a Significant Subsidiary of the Company or any group of Restricted Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary of the Company, all Outstanding Notes shall become due and payable immediately without further action or notice, together with all accrued and unpaid interest, Additional Interest, if any, and premium, if any, thereon. The Holders of a majority in principal amount of the then Outstanding Notes by notice to the Trustee may on behalf of all of the Holders rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except with respect to nonpayment of principal, interest, premium or Additional Interest, if any, that have become due solely because of the acceleration) have been cured or waived.
     (b) Section 6.03 of the Original Indenture is hereby amended by inserting the phrase “(including Additional Interest)” after the word “interest” in the first sentence thereof.

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     (c) Section 6.04 of the Original Indenture is hereby amended and restated in its entirety as follows:
     Section 6.04 Waiver of Past Defaults .
     Holders of a majority in principal amount of the then Outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive (including, without limitation, in connection with a purchase of, or tender offer or exchange offer for, Notes) any existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, or interest, premium, or Additional Interest, if any, on, the Notes. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon.
     (d) Section 6.05 of the Original Indenture is hereby amended by replacing the words “clause (1), (2), (3) or (7) of Section 6.01” with the words “clause (1), (2), (3), (4), (5), (6), (7) or (8) of Section 6.01” in the first sentence thereof.
SECTION 210 Guarantees .
     (a) Section 10.01(d) of the Original Indenture is amended to replace “The obligations of” at the beginning of such section with “To the fullest extent allowed under Applicable Law, the obligations of”.
     (b) Section 10.01(e) of the Original Indenture is amended to replace “Each of the Subsidiary Guarantors hereby” with “To the fullest extent allowed under Applicable Law, each of the Subsidiary Guarantors hereby”.
     (c) Section 10.04 of the Original Indenture is hereby amended and restated in its entirety as follows with respect to the Notes:
     Section 10.04 Releases of Subsidiary Guarantees .
     Notwithstanding any other provisions of this Indenture, the Subsidiary Guarantee of a Subsidiary Guarantor shall be released: (1) in connection with any sale or other disposition of all or substantially all of the assets of such Subsidiary Guarantor (including by way of merger or consolidation) to a Person that is not (either before or after giving effect to such transaction) the Company or a Restricted Subsidiary of the Company, if the sale or other disposition complies with Section 4.12; (2) in connection with any sale or other disposition of all of the Capital Stock of such Subsidiary Guarantor to a Person that is not (either before or after giving effect to such transaction) the Company or a Restricted Subsidiary of the Company, if the sale or other disposition complies with Section 4.12; (3) if such Subsidiary Guarantor is a Restricted Subsidiary and the Company designates such Subsidiary Guarantor as an Unrestricted Subsidiary in accordance with Section 4.18 of this Indenture; (4) upon legal defeasance or discharge in accordance with Article VIII; (5) upon the liquidation or dissolution of such Subsidiary Guarantor provided no Default or Event of Default has occurred or is continuing; (6) at

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such time as such Subsidiary Guarantor ceases both (x) to guarantee any other Indebtedness of the Company and any Indebtedness of any other Restricted Subsidiary (except as a result of payment under any such other guarantee) and (y) to be an obligor with respect to any Indebtedness under any Credit Facility; or (7) upon such Subsidiary Guarantor consolidating with, merging into or transferring all of its assets to the Company or another Subsidiary Guarantor, and as a result of, or in connection with, such transaction such Subsidiary Guarantor dissolving or otherwise ceasing to exist.
     Upon delivery by the Company to the Trustee of an Officers’ Certificate to the effect that any of the conditions described in the foregoing clauses (1) - (7) has occurred, the Trustee shall execute any documents reasonably requested by the Company in order to evidence the release of any Subsidiary Guarantor from its obligations under its Subsidiary Guarantee. Any Subsidiary Guarantor not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and interest, premium, and Additional Interest, if any, on, the Notes and for the other obligations of such Subsidiary Guarantor under this Indenture as provided in this Article X.
     (d) Article X of the Original Indenture is hereby amended by adding the following Section 10.05 with respect to the Notes:
     Section 10.05 Subsidiary Guarantors May Consolidate, etc., on Certain Terms .
     (a) No Subsidiary Guarantor shall sell or otherwise dispose of, in one or more related transactions, all or substantially all of its assets to, or consolidate with or merge with or into (whether or not such Subsidiary Guarantor is the surviving Person), another Person (other than the Company or another Subsidiary Guarantor), unless, (i) either (1) the Person acquiring the assets in any such sale or other disposition or the Person formed by or surviving any such consolidation or merger (if other than such Subsidiary Guarantor) unconditionally assumes, pursuant to a supplemental indenture substantially in the form of Annex A hereto, all the obligations of such Subsidiary Guarantor under the Notes, this Indenture and its Subsidiary Guarantee on terms set forth herein and therein, or (2) such transaction or series of related transactions complies with the provisions of Section 4.12, and (ii) immediately after giving effect to such transaction or series of related transactions, no Default or Event of Default exists.
     (b) In the case of any such consolidation or merger and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and substantially in the form of Annex A hereto, of the Subsidiary Guarantee of, and compliance with Section 10.5(a) of the Indenture by, the applicable Subsidiary Guarantor, such successor Person shall succeed to and be substituted for such Subsidiary Guarantor with the same effect as if it had been named herein as a Subsidiary Guarantor.

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SECTION 211 Other Amendments.
     (a) The third paragraph of Section 2.08 of the Original Indenture shall be amended to delete “(except as otherwise expressly permitted herein)” and to replace “Business Days” with “days”.
     (b) The second paragraph of Section 4.01 of the Original Indenture shall be amended and restated as follows:
     The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium (if any), from time to time on demand at a rate that is 1.0% higher than the then applicable interest rate on the Notes to the extent lawful; and it shall pay interest (including post petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and any Additional Interest (without regard to any applicable grace period) from time to time on demand at a rate that is 1.0% higher than the then applicable interest rate on the Notes to the extent lawful.
     (c) Clause (3) of Section 6.06 of the Original Indenture shall be amended to add “to be incurred in compliance with such request” at the end of such clause.
     (d) Section 8.01(b) of the Original Indenture shall be amended to add the following paragraph after the first paragraph of such Section:
     In addition, the Company shall have delivered to the Trustee an Officers’ Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over the other creditors of the Company or the Subsidiary Guarantors or with the intent of defeating, hindering, delaying or defrauding creditors of the Company, the Subsidiary Guarantors or others.
     (e) Clause (10) of Section 9.02 of the Original Indenture shall be amended to delete “materially”.
     (f) The third paragraph of Section 9.04 of the Original Indenture shall be amended to replace “clauses (1) through (9)” with “clauses (1) through (10)”.
     (g) The last sentence of Section 10.03 of the Original Indenture shall be amended to replace “federal or state law” with “applicable law.”
ARTICLE THREE
MISCELLANEOUS PROVISIONS
SECTION 301 Integral Part.
     This Fourth Supplemental Indenture constitutes an integral part of the Indenture.

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SECTION 302 General Definitions.
     For all purposes of this Fourth Supplemental Indenture:
          (a) capitalized terms used herein without definition shall have the meanings specified in the Indenture; and
          (b) the terms “herein,” “hereof,” “hereunder,” and other words of similar import refer to this Fourth Supplemental Indenture.
SECTION 303 Adoption, Ratification and Confirmation.
     The Indenture, as supplemented and amended by this Fourth Supplemental Indenture, is in all respects hereby adopted, ratified and confirmed.
SECTION 304 Counterparts.
     This Fourth Supplemental Indenture may be executed in any number of counterparts, each of which when so executed shall be deemed an original; and all such counterparts shall together constitute but one and the same instrument.
SECTION 305 Governing Law.
     THIS FOURTH SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

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     IN WITNESS WHEREOF, the parties hereto have caused this Fourth Supplemental Indenture to be duly executed as of the day and year first written above.
         
  CARRIZO OIL & GAS, INC.
 
 
  By:   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President and Chief Financial Officer   
 
  BANDELIER PIPELINE HOLDING, LLC
 
 
  By:   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President   
 
  CARRIZO (MARCELLUS) LLC
 
 
  By:   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President   
 
  CARRIZO (MARCELLUS) WV LLC
 
 
  By:   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President   
 
  CARRIZO MARCELLUS HOLDING INC.
 
 
  By:   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President   

B-1


 

         
         
  CCBM, INC.
 
 
  By:   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President   
 
  CHAMA PIPELINE HOLDING LLC
 
 
  By:   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President   
 
  CLLR, INC.
 
 
  By:   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President   
 
  HONDO PIPELINE, INC.
 
 
  By:   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President   
 
  MESCALERO PIPELINE, LLC
 
 
  By:   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President   

B-2


 

         
         
  WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee
 
 
  By:   /s/ Patrick T. Giordano    
    Name:   Patrick T. Giordano   
    Title:   Vice President   

B-3


 

         
RULE 144A/REGULATION S APPENDIX
PROVISIONS RELATING TO INITIAL NOTES
AND EXCHANGE NOTES
1. Definitions
     1.1 Definitions .
     For the purposes of this Appendix the following terms shall have the meanings indicated below:
     “Depositary” means The Depository Trust Company, its nominees and their respective successors and assigns, or such other depository institution hereinafter appointed by the Company.
     “Clearstream” means Clearstream Banking, S.A., or any successor securities clearing agency.
     “Euroclear” means Euroclear Bank S.A./N.V. or any successor securities clearing agency.
     “Exchange Notes” means (1) the 8.625% Senior Notes due 2018 issued pursuant to this Indenture in connection with a Registered Exchange Offer pursuant to a Registration Rights Agreement and (2) Additional Notes, if any, issued pursuant to a registration statement filed with the SEC under the Securities Act.
     “Initial Notes” means (1) $400,000,000 aggregate principal amount of 8.625% Senior Notes due 2018 issued pursuant to this Indenture on the Initial Issuance Date, (2) Additional Notes, if any, issued in a transaction exempt from the registration requirements of the Securities Act and (3) any 8.625% Senior Notes due 2018 issued pursuant to Section 2.3(b)(ii) hereof in exchange for any Initial Notes.
     “Initial Purchasers” means (1) with respect to the Initial Notes issued on the Initial Issuance Date, Credit Suisse (USA) LLC, Wells Fargo Securities, LLC and RBC Capital Markets Corporation and (2) with respect to each issuance of Additional Notes, the Persons purchasing such Additional Notes under the related Purchase Agreement.
     “Notes” means the Initial Notes (including any Additional Notes, if any, issued in a transaction exempt from the registration requirements of the Securities Act) and the Exchange Notes (including any Additional Notes, if any, issued pursuant to a registration statement filed with the SEC under the Securities Act), treated as a single class.
     “Notes Custodian” means the custodian with respect to a Global Note (as appointed by the Depositary), or any successor Person thereto and shall initially be the Trustee.
     “Purchase Agreement” means (1) with respect to the Initial Notes issued on the Initial Issuance Date, the Purchase Agreement dated October 28, 2010 among the Company, the

Appendix - 1


 

Subsidiary Guarantors and the Initial Purchasers, and (2) with respect to each issuance of Additional Notes, the purchase agreement or underwriting agreement among the Company and the Persons purchasing or underwriting such Additional Notes.
     “QIB” means “qualified institutional buyer” as that term is defined in Rule 144A(a)(1) under the Securities Act.
     “Registered Exchange Offer” means the offer by the Company, pursuant to a Registration Rights Agreement, to certain Holders of Initial Notes, to issue and deliver to such Holders, in exchange for the Initial Notes, a like aggregate principal amount of Exchange Notes registered under the Securities Act.
     “Registration Rights Agreement” means (1) with respect to the Initial Notes issued on the Initial Issuance Date, the Registration Rights Agreement dated as of November 2, 2010 among the Company, the Subsidiary Guarantors and Credit Suisse (USA) LLC, Wells Fargo Securities, LLC and RBC Capital Markets, LLC and (2) with respect to each issuance of Additional Notes issued in a transaction exempt from the registration requirements of the Securities Act, the registration rights agreement, if any, among the Company and one or more Persons purchasing such Additional Notes under the related Purchase Agreement, in each case, as amended from time to time.
     “Shelf Registration Statement” means any registration statement issued by the Company in connection with the offer and sale of Initial Notes pursuant to a Registration Rights Agreement.
     “Transfer Restricted Securities” means Notes that bear or are required to bear the legend set forth in Section 2.3(b)(i) hereof.
     “Unrestricted Initial Notes” means any Initial Notes that are not Transfer Restricted Securities.
     1.2 Other Definitions .
         
Term   Defined in Section:
“Agent Members”
    2.1 (b)
“Distribution Compliance Period”
    2.1 (b)
“Global Note”
    2.1 (a)
“Regulation S”
    2.1 (a)
“Regulation S Notes”
    2.1 (a)
“Resale Restriction Termination Date”
    2.3 (b)
“Restricted Global Note”
    2.1 (a)
“Restricted Period”
    2.1 (b)
“Rule 144A”
    2.1 (a)
“Rule 144A Notes”
    2.1 (a)

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     2.1 The Notes .
     (a)  Form and Dating . Initial Notes offered and sold to QIBs in reliance on Rule 144A (“Rule 144A Notes”) under the Securities Act (“Rule 144A”) or in reliance on Regulation S (“Regulation S Notes”) under the Securities Act (“Regulation S”), in each case as provided in a Purchase Agreement, shall be issued initially in the form of one or more permanent global Notes in definitive, fully registered form without interest coupons with the global Notes legend and Restricted Notes legend set forth in Exhibit 1 hereto (each, unless and until becoming an Unrestricted Initial Note in accordance with Section 2.3(b)(ii) below, a “Restricted Global Note”), which shall be deposited on behalf of the purchasers of the Initial Notes represented thereby with the Trustee, as custodian for the Depositary (or with such other custodian as the Depositary may direct), and registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. Beneficial interests in a Restricted Global Note representing Initial Notes sold in reliance on either Rule 144A or Regulation S may be held through Euroclear or Clearstream, as indirect participants in the Depositary. The aggregate principal amount of the Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee as hereinafter provided. Exchange Notes shall be issued in global form (with the global Notes legend set forth in Exhibit 1 hereto) or in certificated form as provided in Section 2.4 of this Appendix. Exchange Notes issued in global form, Unrestricted Initial Notes issued in global form and Restricted Global Notes are sometimes referred to in this Appendix as “Global Notes.”
     (b)  Book-Entry Provisions . This Section 2.1(b) shall apply only to a Global Note deposited with or on behalf of the Depositary.
     The Company shall execute and the Trustee shall, in accordance with this Section 2.1(b), authenticate and deliver initially one or more Global Notes that (a) shall be registered in the name of the Depositary for such Global Note or Global Notes or the nominee of such Depositary and (b) shall be delivered by the Trustee to such Depositary or pursuant to such Depositary’s instructions or held by the Trustee as custodian for the Depositary. If such Global Notes are Restricted Global Notes, then separate Global Notes shall be issued to represent Rule 144A Notes and Regulation S Notes so long as required by law or the Depositary.
     Members of, or participants in, the Depositary (“Agent Members”) shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depositary or by the Trustee as the custodian of the Depositary or under such Global Note, and the Company, the Trustee and any agent of the Company or the Trustee shall be entitled to treat the Depositary as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices of such Depositary governing the exercise of the rights of a holder of a beneficial interest in any Global Note.
     Prior to the expiration of the period through and including the 40th day after the later of the commencement of the offering of any Initial Notes and the closing of such offering (such

Appendix - 3


 

period, the “Restricted Period”), beneficial interests in the Restricted Global Note representing Regulation S Notes may be exchanged for beneficial interests in the Rule 144A Restricted Global Note representing Rule 144A Notes only if (i) such exchange occurs in connection with a transfer of the Notes pursuant to Rule 144A, (ii) the transferor first delivers to the Trustee a written certificate (in the form of transfer provided in Exhibit 1 hereto) to the effect that the Notes are being transferred to a Person who the transferor reasonably believes to be a QIB within the meaning of Rule 144A and is purchasing for its own account or the account of a QIB, in each case in a transaction meeting the requirements of Rule 144A, and (iii) the transfer is in accordance with all applicable securities laws of the states of the United States and other jurisdictions. After the expiration of the Restricted Period, such certification requirements shall not apply to such transfers of beneficial interests in a Restricted Global Note representing Regulation S Notes.
     Beneficial interests in a Restricted Global Note representing Rule 144A Notes may be transferred to a Person who takes delivery in the form of an interest in the Restricted Global Note representing Regulation S Notes, whether before or after the expiration of the Restricted Period, only if the transferor first delivers to the Trustee a written certificate (in the form provided in Exhibit 1 hereto) to the effect that such transfer is being made in accordance with Rule 903 or 904 of Regulation S or Rule 144 (if available) and that, if such transfer occurs prior to the expiration of the Restricted Period, the interest transferred will be held immediately thereafter through Euroclear or Clearstream.
     (c)  Certificated Notes . Except as provided in Section 2.3 or 2.4, owners of beneficial interests in Restricted Global Notes shall not be entitled to receive physical delivery of certificated Notes. Certificated Notes shall not be exchangeable for beneficial interests in Global Notes unless the transferor first delivers to the Trustee a written certificate (in the form provided in Exhibit 1 hereto) to the effect that such transfer will comply with the appropriate transfer restrictions applicable to such Notes.
     2.2 Authentication .
     The Trustee shall authenticate and deliver: (1) on the Initial Issuance Date, an aggregate principal amount of $400,000,000 8.625% Senior Notes due 2018, (2) at any time or from time to time, any Additional Notes for an original issue in an aggregate principal amount specified in the written order of the Company pursuant to Section 2.04 of the Indenture and (3) at any time or from time to time, Exchange Notes for issue only in a Registered Exchange Offer pursuant to a Registration Rights Agreement, for a like principal amount of Initial Notes, in each case upon a written order of the Company. Such order (x) shall specify (i) the aggregate principal amount of the Notes to be authenticated, the date on which such Notes are to be authenticated, to whom such Notes shall be registered and whether such Notes shall be held by the Notes Custodian or, if not, to whom the Notes shall be delivered; (ii) whether such Notes constitute Initial Notes or Exchange Notes; (iii) whether or not such Notes constitute Additional Notes; and (iv) if such Notes constitute Additional Notes, the issue price, the issue date (and the corresponding date from which interest shall accrue thereon and the first interest payment date therefor) and the CUSIP number and any corresponding ISIN of such Additional Notes and whether such Additional Notes shall be Transfer Restricted Securities and issued in the form of Initial Notes as set forth in Exhibit 1 hereto or shall be issued in the form of Exchange Notes as set forth in

Appendix - 4


 

Exhibit 2 hereto and (y) in the case of any issuance of Additional Notes, shall certify that such issuance is in compliance with Section 4.11 of the Indenture. The Trustee shall also authenticate and deliver Notes at the times and in the manner specified in Sections 2.3 and 2.4 hereof and in Sections 2.08, 2.09, 2.12, 3.07, 4.12, 4.16 or 9.05 of the Indenture.
     2.3 Transfer and Exchange .
     (a)  Transfer and Exchange of Global Notes .
     (i) The transfer and exchange of Global Notes or beneficial interests therein shall be effected through the Depositary, in accordance with the Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depositary therefor. A transferor of a beneficial interest in a Global Note shall deliver to the Registrar a written order given in accordance with the Depositary’s procedures containing information regarding the participant account of the Depositary to be credited with a beneficial interest in the Global Note. The Registrar shall, in accordance with such instructions instruct the Depositary to credit to the account of the Person specified in such instructions a beneficial interest in the Global Note and to debit the account of the Person making the transfer the beneficial interest in the Global Note being transferred.
     (ii) Notwithstanding any other provisions of this Appendix, a Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary.
     (iii) In the event that a Restricted Global Note is exchanged for Notes in certificated form pursuant to Section 2.4 of this Appendix, prior to the consummation of a Registered Exchange Offer or the effectiveness of a Shelf Registration Statement with respect to such Notes, such Notes may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this Section 2.3 (including the certification requirements set forth on the reverse of the Initial Notes intended to ensure that such transfers comply with Rule 144A or Regulation S, as the case may be) and such other procedures as may from time to time be adopted by the Company.
     (b)  Legend .
     (i) Except as permitted by the following paragraphs (ii), (iii), (iv) and (v), each Note certificate evidencing the Restricted Global Notes (and all Notes issued in exchange therefor or in substitution thereof) shall bear a legend in substantially the following form:
THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. NEITHER SUCH NOTES NOR ANY INTEREST OR PARTICIPATION HEREIN MAY

Appendix - 5


 

BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF ANY NOTE EVIDENCED HEREBY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING SUCH NOTE IN AN “OFFSHORE TRANSACTION” PURSUANT TO RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, PRIOR TO THE DATE WHICH IS ONE YEAR AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF SUCH NOTE) OR THE LAST DAY ON WHICH WE OR ANY OF OUR AFFILIATES WERE THE OWNERS OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH NOTE) (THE “RESALE RESTRICTION TERMINATION DATE”), OFFER, SELL OR OTHERWISE TRANSFER SUCH NOTE EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”), TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO RULE 144 UNDER THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM SUCH NOTE IS TRANSFERRED PRIOR TO THE RESALE RESTRICTION TERMINATION DATE A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND, SUBJECT TO THE ISSUER’S AND THE TRUSTEE’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) THAT IS (A) PURSUANT TO CLAUSE (2)(D) PRIOR TO THE END OF THE 40 DAY DISTRIBUTION COMPLIANCE PERIOD WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (B) PURSUANT TO CLAUSE (2)(F) PRIOR TO THE RESALE RESTRICTION TERMINATION DATE TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES IN CLAUSES (i)(A) OR (B), TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS NOTE IS COMPLETED AND DELIVERED BY THE

Appendix - 6


 

TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED AS TO ANY NOTE EVIDENCED HEREBY UPON DELIVERY TO THE TRUSTEE BY THE COMPANY OR THE HOLDER THEREOF OF A WRITTEN REQUEST FOR THE REMOVAL HEREOF, IN ANY CASE AT ANY TIME AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION,” “UNITED STATES” AND “U.S. PERSON” HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
     (ii) Subject to applicable procedures of the Depositary, and without limiting Section 2.3(b)(i), the Company, acting in its discretion, may remove the legend set forth in paragraph (i) above from any Transfer Restricted Security at any time on or after the Resale Restriction Termination Date applicable to such Transfer Restricted Security. Without limiting the generality of the preceding sentence, the Company may effect such removal by issuing and delivering, in exchange for such Transfer Restricted Security, an Unrestricted Initial Note without such legend, registered to the same Holder and in an equal principal amount, and upon receipt by the Trustee of a written order of the Company stating that the Resale Restriction Termination Date applicable to such Transfer Restricted Security has occurred and requesting the authentication and delivery of an Unrestricted Initial Note in exchange therefor (which order shall not be required to be accompanied by any Opinion of Counsel or any other document) given at least three Business Days in advance of the proposed date of exchange specified therein (which shall be no earlier than such Resale Restriction Termination Date), the Trustee shall authenticate and deliver such Unrestricted Initial Note to the Depositary or pursuant to such Depositary’s instructions or hold such Note as Note Custodian for the Depositary and shall request the Depositary to, or, if the Trustee is Note Custodian of such Transfer Restricted Security, shall itself, surrender such Transfer Restricted Security in exchange for such Unrestricted Initial Note without such legend and thereupon cancel such Transfer Restricted Security so surrendered, all as directed in such order. For purposes of determining whether the Resale Restriction Termination Date has occurred with respect to any Notes evidenced by a Transfer Restricted Security or delivering any order pursuant to this Section 2.3(b)(ii) with respect to such Notes, (i) only those Notes which a Principal Officer of the Company actually knows (after reasonable inquiry) to be or to have been owned by an Affiliate of the Company shall be deemed to be or to have been, respectively, owned by an Affiliate of the Company; and (ii) “Principal Officer” means the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company.
For purposes of this Section 2.3(b)(ii), all provisions relating to the removal of the legend set forth in paragraph (i) above shall relate, if the Resale Restriction Termination Date has occurred only with respect to a portion of the Notes evidenced by a Transfer Restricted Security, to such portion of the Notes so evidenced as to which the Resale Restriction Termination Date has occurred.

Appendix - 7


 

Each holder of any Note evidenced by any Restricted Global Note, by its acceptance thereof, (A) authorizes and consents to, (B) appoints the Company as its agent for the sole purpose of delivering such electronic messages, executing and delivering such instruments and taking such other actions, on such holder’s behalf, as the Depositary or the Trustee may require to effect, and (C) upon the request of the Company, agrees to deliver such electronic messages, execute and deliver such instruments and take such other actions as the Depositary or the Trustee may require, or as shall otherwise be necessary to effect, the removal of the legend set forth in Section 2.3(b)(i) (including by means of the exchange of all or the portion of such Restricted Global Note evidencing such Note for a certificate evidencing such Note that does not bear such legend) at any time after the Resale Restriction Termination Date.
     (iii) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by a Restricted Global Note) pursuant to Rule 144 under the Securities Act, the Registrar shall permit the transferee thereof to exchange such Transfer Restricted Security for a certificated Note that does not bear the legend set forth above and rescind any restriction on the transfer of such Transfer Restricted Security, if the transferor thereof certifies in writing to the Registrar that such sale or transfer was made in reliance on Rule 144 (such certification to be in the form set forth on the reverse of the Note).
     (iv) After a transfer of any Initial Notes pursuant to and during the period of the effectiveness of a Shelf Registration Statement with respect to such Initial Notes, all requirements pertaining to legends on such Initial Note will cease to apply, and an Initial Note in global form, without restrictive transfer legends, will be available to the transferee of the Holder of such Initial Notes upon directions to transfer such Holder’s interest in the Global Note.
     (v) Upon the consummation of a Registered Exchange Offer with respect to the Initial Notes, Exchange Notes in global form will be available to Holders that exchange such Initial Notes in such Registered Exchange Offer.
     (c)  Cancellation or Adjustment of Global Note .
     At such time as all beneficial interests in a Global Note have either been exchanged for certificated Notes, redeemed, purchased or canceled, such Global Note shall be returned to the Trustee for cancellation or retained and canceled by the Trustee. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for certificated Notes, redeemed, purchased or canceled, the principal amount of Notes represented by such Global Note shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the Notes Custodian for such Global Note) with respect to such Global Note, by the Trustee or the Notes Custodian, to reflect such reduction.

Appendix - 8


 

     (d)  Obligations with Respect to Transfers and Exchanges of Notes .
     (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate certificated Notes and Global Notes at the Registrar’s request.
     (ii) No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charge payable upon any exchange or transfer pursuant to Sections 3.07, 4.12, 4.16 and 9.05 of the Indenture).
     (iii) The Registrar shall not be required to register the transfer of or exchange of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, it need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed.
     (iv) Prior to the due presentation for registration of transfer of any Note, the Company, the Subsidiary Guarantors, the Trustee, the Paying Agent or the Registrar may deem and treat the Person in whose name a Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of, interest, premium and Additional Interest, if any, on, such Note and for all other purposes whatsoever, whether or not such Note is overdue, and none of the Company, the Subsidiary Guarantors, the Trustee, the Paying Agent or the Registrar shall be affected by notice to the contrary.
     (v) All Notes issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Notes surrendered upon such transfer or exchange. Accordingly, for purposes of clause (3) of the second paragraph of Section 4.11 of this Indenture, “the Notes issued and sold on the Initial Issuance Date” shall be deemed to refer to and include any Notes issued in exchange for, or upon registration of transfer of, or in lieu of, any such Notes (or any predecessor Notes thereof) pursuant to Sections 2.3 or 2.4 hereof or Sections 2.08, 2.09, 2.12, 3.07, 4.12, 4.16 or 9.05 of this Indenture.
     (e)  No Obligation of the Trustee .
     (i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Note, a member of, or a participant in the Depositary or other Person with respect to the accuracy of the records of the Depositary or its nominee or of any participant or member thereof, with respect to any ownership interest in the Notes or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depositary) of any notice (including any notice of optional redemption) or the payment of any amount,

Appendix - 9


 

under or with respect to such Notes. All notices and communications to be given to the Holders and all payments to be made to Holders under the Notes shall be given or made only to or upon the order of the registered Holders (which shall be the Depositary or its nominee in the case of a Global Note). The rights of beneficial owners in any Global Note shall be exercised only through the Depositary subject to the applicable rules and procedures of the Depositary. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depositary with respect to its members, participants and any beneficial owners.
     (ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under the Indenture or under Applicable Law with respect to any transfer of any interest in any Note (including any transfers between or among Depositary participants, members or beneficial owners in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of the Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.
     2.4 Certificated Notes .
     (a) A Global Note deposited with the Depositary or with the Trustee as custodian for the Depositary pursuant to Section 2.1 shall be transferred to the beneficial owners thereof in the form of certificated Notes in an aggregate principal amount equal to the principal amount of such Global Note, in exchange for such Global Note, only if such transfer complies with Section 2.3 and (i) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such Global Note or if at any time such Depositary ceases to be a “clearing agency” registered under the Exchange Act and in either case a successor depositary is not appointed by the Company within 90 days, (ii) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of the Certificated Notes, or (iii) a Default or an Event of Default has occurred and is continuing and DTC notifies the Trustee of its decision to exchange the Global Notes.
     (b) Any Global Note that is transferable to the beneficial owners thereof pursuant to this Section shall be surrendered by the Depositary or the Notes Custodian to the Trustee located at its Corporate Trust Office to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Note, an equal aggregate principal amount of certificated Notes of authorized denominations. Any portion of a Global Note transferred pursuant to this Section shall be executed, authenticated and delivered only in denominations equal to $2,000 or an integral multiple of $1,000 in excess of $2,000, and registered in such names as the Depositary shall direct. Any certificated Note delivered in exchange for an interest in a Global Note shall, except as otherwise provided by Section 2.3(b), bear the Restricted Notes legend set forth in Exhibit 1 hereto.

Appendix - 10


 

     (c) The Holder of a Global Note shall be entitled to grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under the Indenture or the Notes.
     (d) In the event of the occurrence of any of the events specified in Section 2.4(a), the Company shall promptly make available to the Trustee a reasonable supply of certificated Notes in definitive, fully registered form without interest coupons.

Appendix - 11


 

[EXHIBIT 1 TO RULE 144A/REGULATION S APPENDIX]
[FORM OF FACE OF INITIAL NOTE]
     [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
      UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR THE INDIVIDUAL NOTES REPRESENTED HEREBY, THIS GLOBAL NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.]
[RESTRICTED NOTE LEGEND]
     THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. NEITHER SUCH NOTES NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF ANY NOTE EVIDENCED HEREBY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN “OFFSHORE TRANSACTION” PURSUANT TO RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, PRIOR TO THE DATE WHICH IS ONE YEAR AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS NOTE) OR THE LAST DAY ON WHICH THE COMPANY OR ANY OF AFFILIATE OF THE COMPANY WERE THE OWNERS OF THIS NOTE (OR ANY PREDECESSOR OF THIS NOTE) (THE “RESALE RESTRICTION TERMINATION DATE”), OFFER, SELL OR OTHERWISE TRANSFER SUCH NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”), TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS

Exhibit 1 to App.-1


 

OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO RULE 144 UNDER THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM SUCH NOTE IS TRANSFERRED PRIOR TO THE RESALE RESTRICTION TERMINATION DATE A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND, SUBJECT TO THE COMPANY’S AND THE TRUSTEE’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) THAT IS (A) PURSUANT TO CLAUSE (2)(D) PRIOR TO THE END OF THE 40 DAY DISTRIBUTION COMPLIANCE PERIOD WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (B) PURSUANT TO CLAUSE (2)(F) PRIOR TO THE RESALE RESTRICTION TERMINATION DATE TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES IN CLAUSES (i)(A) OR (B), TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS NOTE IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON DELIVERY TO THE TRUSTEE BY THE COMPANY OR THE HOLDER THEREOF OF A WRITTEN REQUEST FOR THE REMOVAL HEREOF, IN ANY CASE AT ANY TIME AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION,” “UNITED STATES” AND “U.S. PERSON” HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
8.625% SENIOR NOTE DUE 2018
CARRIZO OIL & GAS, INC.
Maturity: October 15, 2018
     
Principal Amount: $   CUSIP: [______]
     
No. [R] [S]-   ISIN: [______]
     Carrizo Oil & Gas, Inc., a Texas corporation (herein called the “Company,” which term includes any successor entity under the indenture hereinafter referred to), for value received, hereby promises to pay to [__], or registered assigns, the principal sum of [__] Dollars ($) on October 15, 2018 and to pay interest thereon in immediately available funds as specified on the other side of this Note.
     If a Holder of this Note has given wire transfer instructions to the Company, the Company will pay all principal, interest and premium, if any on this Note in accordance with such instructions. Otherwise, payment of the principal, interest and premium, if any, on this Note will be made at the office or agency of the Company maintained for that purpose in Dallas,

Exhibit 1 to App.-2


 

Texas in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company, payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the register of Notes unless the Holder has given wire transfer instructions to the Company.
     Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.
     Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
     IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
Dated:
         
  CARRIZO OIL & GAS, INC.
 
 
  By:      
    Name:      
    Title:      
 
     
  By:      
    Name:      
    Title:      

Exhibit 1 to App.-3


 

         
TRUSTEE’S CERTIFICATE OF AUTHENTICATION
     This is one of the Notes of the series designated therein referred to in the within-mentioned Indenture.
         
  WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee
 
 
     
  Authorized Signatory   
     
 
Date of Authentication:

Exhibit 1 to App.-4


 

[FORM OF REVERSE OF INITIAL NOTE]
CARRIZO OIL & GAS, INC.
8.625% SENIOR NOTE DUE 2018
     This Note is one of a duly authorized issue of Notes of the Company issued and to be issued in one or more series under an Indenture, dated as of May 28, 2008, as amended by the Fourth Supplemental Indenture thereto dated as of November 2, 2010 (as so amended, herein called the “Indenture”), among the Company, the Subsidiary Guarantors named therein and Wells Fargo Bank, National Association, as trustee (herein called the “Trustee”, which term includes any successor trustee under the Indenture), or their respective predecessors, as applicable, to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Subsidiary Guarantors, the Trustee and the Holders of the Notes and of the terms upon which the Notes are, and are to be, authenticated and delivered. This Note is one of the series designated on the face hereof, which is initially in the aggregate principal amount of $400,000,000. As used herein, the term “Notes” means the Company’s 8.625% Senior Notes due 2018.
     Subject to Section 2.18 of the Indenture, the Company may, at any time and from time to time, without notice or the consent of the holders of the Notes, create and issue Additional Notes ranking equally and ratably with the Initial Notes and the Exchange Notes in all respects (except for the payment of interest accruing prior to the date such Additional Notes are initially issued under the Indenture and the offering price and issue date), so that such Additional Notes form a single series with such Initial Notes and Exchange Notes and have the same terms as to status, redemption, covenants or otherwise as such Initial Notes and Exchange Notes.
Interest
     The rate at which this Note shall bear interest shall be 8.625% per annum. Interest on this Note shall accrue from the date of original issuance, or from the most recent date to which interest has been paid or provided for on the Notes. The Company will also pay Additional Interest payable pursuant to Section 6 of the Registration Rights Agreement referred to below. The Interest Payment Dates on which interest on this Note shall be payable are October 15 and April 15 of each year (each, an “Interest Payment Date”), commencing on April 15, 2011. If an Interest Payment Date falls on a day that is not a Business Day, the interest payment to be made on such Interest Payment Date will be made on the next succeeding Business Day with the same force and effect as if made on such Interest Payment Date, and no additional interest will accrue solely as a result of such delayed payment. The Regular Record Date for the interest payable on this Note on any Interest Payment Date shall be the October 1 or April 1, as the case may be, immediately preceding such Interest Payment Date. Interest will cease to accrue on this Note upon its maturity, purchase by the Company at the option of a holder or redemption. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day

Exhibit 1 to App.-5


 

months. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium (if any), from time to time on demand at a rate that is 1.0% higher than the then applicable interest rate on the Notes to the extent lawful; and it shall pay interest (including post petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and any Additional Interest (without regard to any applicable grace period) from time to time on demand at a rate that is 1.0% higher than the then applicable interest rate on the Notes to the extent lawful.
Method of Payment
     Payments in respect of principal of and interest, if any, on the Notes shall be made by the Company in immediately available funds.
Optional Redemption
     (a) Except as set forth in subparagraphs (b) and (c) of this section, the Company shall not have the option to redeem this Note prior to October 15, 2014. On and after October 15, 2014, the Company shall have the option to redeem this Note, in whole or in part at any time, upon prior notice as set forth below under the caption “Notice,” at the Redemption Prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest and Additional Interest, if any, on this Note to the applicable Redemption Date (subject to the right of Holders of record on the relevant record date to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date), if redeemed during the twelve-month period beginning on October 15 of the years indicated below:
         
YEAR   PERCENTAGE
2014
    104.313 %
2015
    102.875 %
2016
    101.438 %
2017 and thereafter
    100.000 %
     (b) Notwithstanding the provisions of subparagraph (a) of this section, at any time prior to October 15, 2013, the Company may on one or more occasions redeem up to 35% of the aggregate principal amount of this Note at a Redemption Price of 108.625% of the principal amount thereof, plus accrued and unpaid interest, if any, and Additional Interest, if any, thereon to the Redemption Date (subject to the right of Holders of record on the relevant record date to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date), with the net cash proceeds of one or more Equity Offerings; provided that, with respect to each such redemption, (i) at least 65% of the aggregate principal amount of Notes issued under the Indenture remains outstanding immediately after the occurrence of such redemption (excluding any Notes held by the Company and its Subsidiaries) and (ii) such redemption occurs within 180 days of the date of the closing of the related Equity Offering.
     (c) Prior to October 15, 2014, the Company may redeem on one or more occasions all or part of this Note at a Redemption Price equal to the sum of (1) 100% of the principal amount

Exhibit 1 to App.-6


 

thereof, plus (2) accrued and unpaid interest, if any, to the Redemption Date (subject to the right of Holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the Redemption Date), plus (3) the Make Whole Premium at the Redemption Date.
Selection
     If less than all of the Notes are to be redeemed at any time, the Trustee will select Notes for redemption as follows:
     (1) if the Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Notes are listed; or
     (2) if the Notes are not listed on any national securities exchange, on a pro rata basis.
Notice
     No Note of $2,000 or less can be redeemed in part. Notices of optional redemption will be mailed by first class mail at least 30 but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at its registered address, except that optional redemption notices may be mailed more than 60 days prior to a Redemption Date if the notice is issued in connection with a defeasance of the Notes or a discharge of the indenture. Notice of any redemption, including, without limitation, upon an Equity Offering, may, at the Company’s discretion, be subject to one or more conditions precedent, including, but not limited to, completion of a related Equity Offering.
     If this Note is to be redeemed in part only, the notice of redemption that relates to this Note will state the portion of the principal amount that is to be redeemed. A new Note in principal amount equal to the unredeemed portion of this Note will be issued in the name of the applicable Holder upon cancellation of this Note. Notes called for redemption become due on the date fixed for redemption. On and after the Redemption Date, interest ceases to accrue on Notes or portions of them called for redemption.
     The notice of redemption with respect to a redemption described in Paragraph (c) under the caption “Optional Redemption” need not set forth the Make Whole Premium but only the manner of calculation thereof.
Repurchase by the Company at the Option of Holder
Change of Control
     If a Change of Control occurs, the Holder of this Note will have the right to require the Company to repurchase all or any part (equal to $2,000 or an integral multiple of $1,000 in excess of $2,000) of this Note pursuant to an offer (“Change of Control Offer”) on the terms set forth in the Indenture. In the Change of Control Offer, the Company will offer a payment in cash (the “Change of Control Payment”) equal to 101% of the aggregate principal amount of the part

Exhibit 1 to App.-7


 

of this Note repurchased plus accrued and unpaid interest, if any, to the date of purchase (the “Change of Control Purchase Date”), subject to the right of the Holders of record of this Note on the relevant record date to receive interest due on an interest payment date that is on or prior to the Change of Control Purchase Date. Within 30 days following any Change of Control, the Company will mail a notice to each Holder and the Trustee describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes as of the Change of Control Purchase Date specified in the notice, which date will be no earlier than 30 days and no later than 60 days from the date such notice is mailed, pursuant to the procedures required by the Indenture and described in such notice.
     The Company will not be required to make a Change of Control Offer upon a Change of Control if (1) a third party makes the Change of Control Offer in the manner, at the time and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes properly tendered and not withdrawn under the Change of Control Offer or (2) notice of redemption of all Notes has been given pursuant to the Indenture as described above under the caption “Optional Redemption” unless there is a default in payment of the applicable Redemption Price.
     In the event that Holders of not less than 90% of the aggregate principal amount of the outstanding Notes accept a Change of Control Offer and the Company purchases all of the Notes held by such Holders, the Company will have the right, upon not less than 30 nor more than 60 days’ prior notice, given not more than 30 days following the purchase pursuant to the Change of Control Offer described above, to redeem all of the Notes that remain outstanding following such purchase at a purchase price equal to the Change of Control Payment plus, to the extent not included in the Change of Control Payment, accrued and unpaid interest on the Notes that remain outstanding, to the date of redemption (subject to the right of Holders on the relevant record date to receive interest due on the relevant interest payment date).
Asset Sale
     Subject to the terms of the Indenture, on the 366th day after an Asset Sale (or, at the Company’s option, any earlier date), if the aggregate amount of Excess Proceeds then exceeds $20.0 million, the Company will make an offer (the “Asset Sale Offer”) to all Holders of Notes, and to all holders of Pari Passu Indebtedness then outstanding, to purchase the maximum principal amount of Notes and such Pari Passu Indebtedness that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of principal amount plus accrued and unpaid interest, if any, to the date of settlement, subject to the right of Holders of record on the relevant record date to receive interest due on an Interest Payment Date that is on or prior to the date of settlement, and will be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use those Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and other Pari Passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee will select the Notes and such other Pari Passu Indebtedness to be purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero.

Exhibit 1 to App.-8


 

Transfer
     As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Note is registrable in the register of the Notes, upon surrender of this Note for registration or transfer at the office or agency of the Registrar for the Notes, duly endorsed by, or accompanied by a written instrument of transfer in form reasonably satisfactory to the Registrar duly executed by the Holder thereof or his attorney duly authorized in writing, and thereupon one or more new Notes, of like tenor and of other authorized denominations and for the same aggregate principal amount, executed by the Company and authenticated and delivered by the Trustee, will be issued to the designated transferee or transferees.
     The Notes are issuable only in registered form without coupons in denominations of $2,000 and integral multiples of $1,000, in excess of $2,000. As provided in the Indenture and subject to certain limitations set forth therein and on the face of this Note, Notes are exchangeable for a like aggregate principal amount of Notes of a different authorized denomination as requested by the Holder surrendering the same.
     No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.
     Prior to due presentment of this Note for registration of transfer, the Company, the Trustee or any agent of the Company or the Trustee may treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.
Guarantees
     The payment by the Company of the principal of and interest, premium and Additional Interest, if any, on, the Notes is fully and unconditionally guaranteed on a joint and several senior unsecured basis by each of the Subsidiary Guarantors to the extent set forth in the Indenture.
Amendment, Supplement and Waiver; Limitation on Suits
     The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Notes at any time by the Company and the Trustee with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes. The Indenture also contains provisions permitting the Holders of at least a majority in principal amount of the then outstanding Notes, to waive compliance by the Company with certain existing or past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note.
     Subject to the right of the Holder of any Notes to institute proceedings to enforce the Holder’s right to receive payment of the principal thereof and interest thereon (or repurchase

Exhibit 1 to App.-9


 

price thereof), no Holder of the Notes shall have any right to institute any proceeding, judicial or otherwise, with respect to the Indenture, or for the appointment of a receiver or Trustee, or for any other remedy thereunder, unless
     (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default;
     (2) the Holders of at least 25% in principal amount of the then Outstanding Notes shall have made written request to the Trustee to pursue the remedy;
     (3) such Holder or Holders offer to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense to be incurred in compliance with such request;
     (4) the Trustee for 60 days after its receipt of such request and offer of indemnity has failed to comply with such request; and
     (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the then outstanding Notes;
it being understood and intended that no one or more of such Holders shall have the right in any manner whatever by virtue of, or by availing of, any provision of the Indenture to prejudice the rights of any other of such Holders, or to obtain preference or priority over any other of such Holders.
Successor Entity
     When a successor Person assumes all the obligations of its predecessor under the Notes and the Indenture in accordance with the terms and conditions of the Indenture, the predecessor Person will (except in certain circumstances specified in the Indenture) be released from those obligations.
Defaults and Remedies
     If an Event of Default with respect to Notes shall occur and be continuing, all unpaid Principal Amount plus accrued and unpaid interest through the acceleration date of the Notes may be declared due and payable in the manner and with the effect provided in the Indenture.
No Personal Liability of Directors, Officers, Employees and Shareholders
     No director, officer, partner, employee, incorporator, manager or shareholder or other owner of Capital Stock of the Company or any Subsidiary Guarantor, as such, will have any liability for any obligations of the Company or any Subsidiary Guarantor under the Notes, the Indenture or the Subsidiary Guarantees, or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws.

Exhibit 1 to App.-10


 

Removal of Restricted Note Legend
     Each holder of any Note evidenced by any Restricted Global Note, by its acceptance thereof, (A) authorizes and consents to, (B) appoints the Company as its agent for the sole purpose of delivering such electronic messages, executing and delivering such instruments and taking such other actions, on such holder’s behalf, as the Depositary or the Trustee may require to effect, and (C) upon the request of the Company, agrees to deliver such electronic messages, execute and deliver such instruments and take such other actions as the Depositary or the Trustee may require, or as shall otherwise be necessary to effect, the removal of the Restricted Note Legend set forth on the face of such Note (including by means of the exchange of all or the portion of such Restricted Global Note evidencing such Note for a certificate evidencing such Note that does not bear such Restricted Note Legend) at any time after the Resale Restriction Termination Date.
Additional Rights of Holders of Transfer Restricted Notes
     In addition to the rights provided to Holders of the Notes under the Indenture, Holders of Transfer Restricted Notes shall have all the rights set forth in the Registration Rights Agreement dated as of November 2, 2010, among the Company, the Subsidiary Guarantors and Credit Suisse (USA) LLC, Wells Fargo Securities, LLC and RBC Capital Markets, LLC (the “Registration Rights Agreement”).
Indenture to Control; Governing Law
     In the case of any conflict between the provisions of this Note and the Indenture, the provisions of the Indenture shall control.
     THE INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Definitions
     All terms defined in the Indenture and used in this Note but not specifically defined herein are used herein as so defined.

Exhibit 1 to App.-11


 

ASSIGNMENT FORM
     To assign this Note, fill in the form below and have your signature guaranteed: (I) or (we) assign and transfer this Note to:
 
(Insert assignee’s soc. sec. or tax ID. no.)
 
(Print or type assignee’s name, address and zip code)
and irrevocably appoint ___________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him.
Dated:
Your Name:
 
(Print your name exactly as it appears on the face of this Note)
Your Signature:
 
(Sign exactly as your name appears on the face of this Note)
SIGNATURE GUARANTEE*:
 
*   The signature must be guaranteed by an institution which is a member of one of the following recognized signature guaranty programs: (i) the Securities Transfer Agent Medallion Program (STAMP); (ii) the New York Stock Exchange Medallion Program (MSP); (iii) the Stock Exchange Medallion Program (SEMP); or (iv) such other guarantee program acceptable to the Trustee.
[Include the following only if the Restricted Note Legend is included hereon]
[In connection with any transfer of any of the Notes evidenced by this certificate occurring prior to one year after the later of the date of original issuance of such Notes and the last date, if any, on which such Notes were owned by the Company or any Affiliate of the Company (or, in the case of Regulation S Notes, prior to the expiration of the Distribution Compliance Period), the undersigned confirms that such Notes are being transferred in accordance with their terms:
Exhibit 1 to App.-12

 


 

CHECK ONE BOX BELOW
  (1) o   to the Company or any Subsidiary thereof; or
 
  (2) o   pursuant to an effective registration statement under the Securities Act of 1933; or
 
  (3) o   to a person who the undersigned reasonably believes is a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act of 1933) that is purchasing for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or
 
  (4) o   pursuant to offers and sales to non-U.S. persons that occur outside the United States within the meaning of Regulation S under the Securities Act of 1933 in compliance with Rule 904 under the Securities Act of 1933; or
 
  (5) o   pursuant to Rule 144 under the Securities Act of 1933; or
 
  (6) o   pursuant to another exemption from registration under the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any of the Notes evidenced by this certificate in the name of any person other than the registered holder thereof; provided , however , that if box (4) or (6) is checked, the Trustee shall be entitled to require, prior to registering any such transfer of the Notes, such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933.
         
     
     
  Signature   
     
Exhibit 1 to App.-13

 


 

TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company and any Subsidiary Guarantors as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A.
                 
Dated:
               
 
 
 
     
 
Notice: To be executed by an executive officer
   
Exhibit 1 to App.-14

 


 

OPTION OF HOLDER TO ELECT PURCHASE
     If you want to elect to have this Note purchased, in whole or in part, by the Company pursuant to Section 4.12 or 4.16 of the Indenture, check the following box:
     
o Section 4.12   o Section 4.16
     If you want to have only part of this Note purchased by the Company pursuant to Section 4.12 or 4.16 of the Indenture, state the Principal Amount you want to be purchased (in minimum denomination of $2,000 or integral multiples of $1,000 in excess of $2,000): $________________
Your Signature: __________________________________________  Date: ________________
(Sign exactly as your name appears on the other side of this Note)
*Signature guaranteed by: __________________________________________
By: ________________
 
*   The signature must be guaranteed by an institution which is a member of one of the following recognized signature guaranty programs: (i) the Securities Transfer Agent Medallion Program (STAMP); (ii) the New York Stock Exchange Medallion Program (MSP); (iii) the Stock Exchange Medallion Program (SEMP); or (iv) such other guaranty program acceptable to the Trustee.
Exhibit 1 to App.-15

 


 

[FORM OF NOTATION OF GUARANTEE]
     Each of the Subsidiary Guarantors (which term includes any successor Person under the Indenture) has fully, unconditionally and absolutely guaranteed, to the extent set forth in the Indenture and subject to the provisions in the Indenture, the due and punctual payment of the principal of, and premium, if any, and interest on the Notes and all other amounts due and payable under the Indenture and the Notes by the Company.
     The obligations of the Subsidiary Guarantors to the Holders of Notes and to the Trustee pursuant to the Guarantee and the Indenture are expressly set forth in Article X of the Indenture and reference is hereby made to the Indenture for the precise terms of the Guarantee.
         
  [NAME OF SUBSIDIARY GUARANTOR]
 
 
  By:      
    Name:      
    Title:      
Exhibit 1 to App.-16

 


 

EXHIBIT 2 TO RULE 144A/REGULATION S APPENDIX
[FORM OF FACE OF EXCHANGE NOTE]*
     [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR THE INDIVIDUAL NOTES REPRESENTED HEREBY, THIS GLOBAL NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.]
All references to “Additional Interest” in this Note shall be deleted unless if, at the date of issuance of the Exchange Note, any Registration Default (as defined in the Registration Rights Agreement) has occurred with respect to the related Initial Notes during the interest period in which such date of issuance occurs.
8.625% SENIOR NOTE DUE 2018
CARRIZO OIL & GAS, INC.
     
 
  Maturity: October 15, 2018
 
   
Principal Amount: $
  CUSIP: [_____]
 
   
Registered: No. [R] [S]-
  ISIN: [______]
     Carrizo Oil & Gas, Inc., a Texas corporation (herein called the “Company,” which term includes any successor entity under the indenture hereinafter referred to), for value received, hereby promises to pay to [__], or registered assigns, the principal sum of [__] Dollars ($) on October 15, 2018 and to pay interest thereon in immediately available funds as specified on the other side of this Note.
     If a Holder of this Note has given wire transfer instructions to the Company, the Company will pay all principal, interest and premium, if any on this Note in accordance with such instructions. Otherwise, payment of the principal, interest and premium, if any, on this Note will be made at the office or agency of the Company maintained for that purpose in Dallas, Texas in such coin or currency of the United States of America as at the time of payment is legal

Exhibit 2 to App-1


 

tender for payment of public and private debts; provided, however, that at the option of the Company, payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the register of Notes unless the Holder has given wire transfer instructions to the Company.
     Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.
     Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
     IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
Dated:
         
  CARRIZO OIL & GAS, INC.
 
 
  By:      
    Name:      
    Title:      
 
  By:      
    Name:      
    Title:      

Exhibit 2 to App.-2


 

TRUSTEE’S CERTIFICATE OF AUTHENTICATION
     This is one of the Notes of the series designated therein referred to in the within-mentioned Indenture.
         
  WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Trustee
 
 
     
  Authorized Signatory   
     
 
Date of Authentication:
Exhibit 2 to App.-3

 


 

[FORM OF REVERSE OF EXCHANGE NOTE]
CARRIZO OIL & GAS, INC.
8.625% SENIOR NOTE DUE 2018
     This Note is one of a duly authorized issue of Notes of the Company issued and to be issued in one or more series under an Indenture, dated as of May 28, 2008, as amended by the Fourth Supplemental Indenture thereto dated as of November 2, 2010 (as so amended, herein called the “Indenture”), among the Company, the Subsidiary Guarantors named therein and Wells Fargo Bank, National Association, as trustee (herein called the “Trustee”, which term includes any successor trustee under the Indenture), or their respective predecessors, as applicable, to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Subsidiary Guarantors, the Trustee and the Holders of the Notes and of the terms upon which the Notes are, and are to be, authenticated and delivered. This Note is one of the series designated on the face hereof, which is initially in the aggregate principal amount of $400,000,000. As used herein, the term “Notes” means the Company’s 8.625% Senior Notes due 2018.
     Subject to Section 2.18 of the Indenture, the Company may, at any time and from time to time, without notice or the consent of the holders of the Notes, create and issue Additional Notes ranking equally and ratably with the Initial Notes and the Exchange Notes in all respects (except for the payment of interest accruing prior to the date such Additional Notes are initially issued under the Indenture and the offering price and issue date), so that such Additional Notes form a single series with such Initial Notes and Exchange Notes and have the same terms as to status, redemption, covenants or otherwise as such Initial Notes and Exchange Notes.
Interest
     The rate at which this Note shall bear interest shall be 8.625% per annum. Interest on this Note shall accrue from the date of original issuance, or from the most recent date to which interest has been paid or provided for on the Notes. The Company will also pay Additional Interest payable pursuant to Section 6 of the Registration Rights Agreement referred to below. The Interest Payment Dates on which interest on this Note shall be payable are October 15 and April 15 of each year (each, an “Interest Payment Date”), commencing on April 15, 2011. If an Interest Payment Date falls on a day that is not a Business Day, the interest payment to be made on such Interest Payment Date will be made on the next succeeding Business Day with the same force and effect as if made on such Interest Payment Date, and no additional interest will accrue solely as a result of such delayed payment. The Regular Record Date for the interest payable on this Note on any Interest Payment Date shall be the October 1 or April 1, as the case may be, immediately preceding such Interest Payment Date. Interest will cease to accrue on this Note upon its maturity, purchase by the Company at the option of a holder or redemption. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium (if any), from time to time on demand at a rate that is 1.0% higher than the then applicable interest rate on the Notes to

Exhibit 2 to App.-4


 

the extent lawful; and it shall pay interest (including post petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and any Additional Interest (without regard to any applicable grace period) from time to time on demand at a rate that is 1.0% higher than the then applicable interest rate on the Notes to the extent lawful. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months.
Method of Payment
     Payments in respect of principal of and interest, if any, on the Notes shall be made by the Company in immediately available funds.
Optional Redemption
     (a) Except as set forth in subparagraphs (b) and (c) of this section, the Company shall not have the option to redeem this Note prior to October 15, 2014. On and after October 15, 2014, the Company shall have the option to redeem this Note, in whole or in part at any time, upon prior notice as set forth below under the caption “Notice,” at the Redemption Prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest and Additional Interest, if any, on this Note to the applicable Redemption Date (subject to the right of Holders of record on the relevant record date to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date), if redeemed during the twelve-month period beginning on October 15 of the years indicated below:
         
YEAR   PERCENTAGE
2014
    104.313 %
2015
    102.875 %
2016
    101.438 %
2017 and thereafter
    100.000 %
     (b) Notwithstanding the provisions of subparagraph (a) of this section, at any time prior to October 15, 2013, the Company may on one or more occasions redeem up to 35% of the aggregate principal amount of this Note at a Redemption Price of 108.625% of the principal amount thereof, plus accrued and unpaid interest, if any, and Additional Interest, if any, thereon to the Redemption Date (subject to the right of Holders of record on the relevant record date to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date), with the net cash proceeds of one or more Equity Offerings; provided that, with respect to each such redemption, (i) at least 65% of the aggregate principal amount of Notes issued under the Indenture remains outstanding immediately after the occurrence of such redemption (excluding any Notes held by the Company and its Subsidiaries) and (ii) such redemption occurs within 180 days of the date of the closing of the related Equity Offering.
     (c) Prior to October 15, 2014, the Company may redeem on one or more occasions all or part of this Note at a Redemption Price equal to the sum of (1) 100% of the principal amount thereof, plus (2) accrued and unpaid interest, if any, to the Redemption Date (subject to the right of Holders of record on the relevant record date to receive interest due on an interest payment

Exhibit 2 to App.-5


 

date that is on or prior to the Redemption Date), plus (3) the Make Whole Premium at the Redemption Date.
Selection
     If less than all of the Notes are to be redeemed at any time, the Trustee will select Notes for redemption as follows:
(1) if the Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Notes are listed; or
(2) if the Notes are not listed on any national securities exchange, on a pro rata basis.
Notice
     No Note of $2,000 or less can be redeemed in part. Notices of optional redemption will be mailed by first class mail at least 30 but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at its registered address, except that optional redemption notices may be mailed more than 60 days prior to a Redemption Date if the notice is issued in connection with a defeasance of the Notes or a discharge of the indenture. Notice of any redemption, including, without limitation, upon an Equity Offering, may, at the Company’s discretion, be subject to one or more conditions precedent, including, but not limited to, completion of a related Equity Offering.
     If this Note is to be redeemed in part only, the notice of redemption that relates to this Note will state the portion of the principal amount that is to be redeemed. A new Note in principal amount equal to the unredeemed portion of this Note will be issued in the name of the applicable Holder upon cancellation of this Note. Notes called for redemption become due on the date fixed for redemption. On and after the Redemption Date, interest ceases to accrue on Notes or portions of them called for redemption.
     The notice of redemption with respect to a redemption described in Paragraph (c) under the caption “Optional Redemption” need not set forth the Make Whole Premium but only the manner of calculation thereof.
Repurchase by the Company at the Option of Holder
Change of Control
     If a Change of Control occurs, the Holder of this Note will have the right to require the Company to repurchase all or any part (equal to $2,000 or an integral multiple of $1,000 in excess of $2,000) of this Note pursuant to an offer (“Change of Control Offer”) on the terms set forth in the Indenture. In the Change of Control Offer, the Company will offer a payment in cash (the “Change of Control Payment”) equal to 101% of the aggregate principal amount of the part of this Note repurchased plus accrued and unpaid interest, if any, to the date of purchase (the “Change of Control Purchase Date”), subject to the right of the Holders of record of this Note on

Exhibit 2 to App.-6


 

the relevant record date to receive interest due on an interest payment date that is on or prior to the Change of Control Purchase Date. Within 30 days following any Change of Control, the Company will mail a notice to each Holder and the Trustee describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes as of the Change of Control Purchase Date specified in the notice, which date will be no earlier than 30 days and no later than 60 days from the date such notice is mailed, pursuant to the procedures required by the Indenture and described in such notice.
     The Company will not be required to make a Change of Control Offer upon a Change of Control if (1) a third party makes the Change of Control Offer in the manner, at the time and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes properly tendered and not withdrawn under the Change of Control Offer or (2) notice of redemption of all Notes has been given pursuant to the Indenture as described above under the caption “Optional Redemption” unless there is a default in payment of the applicable Redemption Price.
     In the event that Holders of not less than 90% of the aggregate principal amount of the outstanding Notes accept a Change of Control Offer and the Company purchases all of the Notes held by such Holders, the Company will have the right, upon not less than 30 nor more than 60 days’ prior notice, given not more than 30 days following the purchase pursuant to the Change of Control Offer described above, to redeem all of the Notes that remain outstanding following such purchase at a purchase price equal to the Change of Control Payment plus, to the extent not included in the Change of Control Payment, accrued and unpaid interest on the Notes that remain outstanding, to the date of redemption (subject to the right of Holders on the relevant record date to receive interest due on the relevant interest payment date).
Asset Sale
     Subject to the terms of the Indenture, on the 366th day after an Asset Sale (or, at the Company’s option, any earlier date), if the aggregate amount of Excess Proceeds then exceeds $20.0 million, the Company will make an offer (the “Asset Sale Offer”) to all Holders of Notes, and to all holders of Pari Passu Indebtedness then outstanding, to purchase the maximum principal amount of Notes and such Pari Passu Indebtedness that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of principal amount plus accrued and unpaid interest, if any, to the date of settlement, subject to the right of Holders of record on the relevant record date to receive interest due on an Interest Payment Date that is on or prior to the date of settlement, and will be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use those Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and other Pari Passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee will select the Notes and such other Pari Passu Indebtedness to be purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero.

Exhibit 2 to App.-7


 

Transfer
     As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Note is registrable in the register of the Notes, upon surrender of this Note for registration or transfer at the office or agency of the Registrar for the Notes, duly endorsed by, or accompanied by a written instrument of transfer in form reasonably satisfactory to the Registrar duly executed by the Holder thereof or his attorney duly authorized in writing, and thereupon one or more new Notes, of like tenor and of other authorized denominations and for the same aggregate principal amount, executed by the Company and authenticated and delivered by the Trustee, will be issued to the designated transferee or transferees.
     The Notes are issuable only in registered form without coupons in denominations of $2,000 and integral multiples of $1,000, in excess of $2,000. As provided in the Indenture and subject to certain limitations set forth therein and on the face of this Note, Notes are exchangeable for a like aggregate principal amount of Notes of a different authorized denomination as requested by the Holder surrendering the same.
     No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.
     Prior to due presentment of this Note for registration of transfer, the Company, the Trustee or any agent of the Company or the Trustee may treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.
Guarantees
     The payment by the Company of the principal of and interest, premium and Additional Interest, if any, on, the Notes is fully and unconditionally guaranteed on a joint and several senior unsecured basis by each of the Subsidiary Guarantors to the extent set forth in the Indenture.
Amendment, Supplement and Waiver; Limitation on Suits
     The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Notes at any time by the Company and the Trustee with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes. The Indenture also contains provisions permitting the Holders of at least a majority in principal amount of the then outstanding Notes, to waive compliance by the Company with certain existing or past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note.
     Subject to the right of the Holder of any Notes to institute proceedings to enforce the Holder’s right to receive payment of the principal thereof and interest thereon (or repurchase

Exhibit 2 to App.-8


 

price thereof), no Holder of the Notes shall have any right to institute any proceeding, judicial or otherwise, with respect to the Indenture, or for the appointment of a receiver or Trustee, or for any other remedy thereunder, unless
     (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default;
     (2) the Holders of at least 25% in principal amount of the then Outstanding Notes shall have made written request to the Trustee to pursue the remedy;
     (3) such Holder or Holders offer to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense to be incurred in compliance with such request;
     (4) the Trustee for 60 days after its receipt of such request and offer of indemnity has failed to comply with such request; and
     (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the then outstanding Notes;
it being understood and intended that no one or more of such Holders shall have the right in any manner whatever by virtue of, or by availing of, any provision of the Indenture to prejudice the rights of any other of such Holders, or to obtain preference or priority over any other of such Holders.
Successor Entity
     When a successor Person assumes all the obligations of its predecessor under the Notes and the Indenture in accordance with the terms and conditions of the Indenture, the predecessor Person will (except in certain circumstances specified in the Indenture) be released from those obligations.
Defaults and Remedies
     If an Event of Default with respect to Notes shall occur and be continuing, all unpaid Principal Amount plus accrued and unpaid interest through the acceleration date of the Notes may be declared due and payable in the manner and with the effect provided in the Indenture.
No Personal Liability of Directors, Officers, Employees and Shareholders
     No director, officer, partner, employee, incorporator, manager or shareholder or other owner of Capital Stock of the Company or any Subsidiary Guarantor, as such, will have any liability for any obligations of the Company or any Subsidiary Guarantor under the Notes, the Indenture or the Subsidiary Guarantees, or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws.

Exhibit 2 to App.-9


 

[Additional Rights of Holders of Transfer Restricted Notes
     In addition to the rights provided to Holders of the Notes under the Indenture, Holders of Transfer Restricted Notes shall have all the rights set forth in the Registration Rights Agreement dated as of November 2, 2010, among the Company, the Subsidiary Guarantors and Credit Suisse (USA) LLC, Wells Fargo Securities, LLC and RBC Capital Markets, LLC (the “Registration Rights Agreement”).] 1
Indenture to Control; Governing Law
     In the case of any conflict between the provisions of this Note and the Indenture, the provisions of the Indenture shall control.
     THE INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Definitions
     All terms defined in the Indenture and used in this Note but not specifically defined herein are used herein as so defined.
 
1   Delete if this Security is not being issued in exchange for an Initial Note.

Exhibit 2 to App.-10


 

ASSIGNMENT FORM
     To assign this Note, fill in the form below and have your signature guaranteed: (I) or (we) assign and transfer this Note to:
 
(Insert assignee’s soc. sec. or tax ID. no.)
 
(Print or type assignee’s name, address and zip code)
and irrevocably appoint ___________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him.
Dated:
Your Name:
 
(Print your name exactly as it appears on the face of this Note)
Your Signature:
__________________________
(Sign exactly as your name appears on the face of this Note)
SIGNATURE GUARANTEE*:
 
*   The signature must be guaranteed by an institution which is a member of one of the following recognized signature guaranty programs: (i) the Securities Transfer Agent Medallion Program (STAMP); (ii) the New York Stock Exchange Medallion Program (MSP); (iii) the Stock Exchange Medallion Program (SEMP); or (iv) such other guarantee program acceptable to the Trustee.

Exhibit 2 to App.-11


 

OPTION OF HOLDER TO ELECT PURCHASE
     If you want to elect to have this Note purchased, in whole or in part, by the Company pursuant to Section 4.12 or 4.16 of the Indenture, check the following box:
o      Section 4.12           o      Section 4.16
     If you want to have only part of this Note purchased by the Company pursuant to Section 4.12 or 4.16 of the Indenture, state the Principal Amount you want to be purchased (in minimum denomination of $2,000 or integral multiples of $1,000 in excess of $2,000): $________________
Your Signature:________________________________________________________________________________  Date:____________
(Sign exactly as your name appears on the other side of this Note)
* Signature guaranteed by:
 
By: ________________________
 
*   The signature must be guaranteed by an institution which is a member of one of the following recognized signature guaranty programs: (i) the Securities Transfer Agent Medallion Program (STAMP); (ii) the New York Stock Exchange Medallion Program (MSP); (iii) the Stock Exchange Medallion Program (SEMP); or (iv) such other guaranty program acceptable to the Trustee.

Exhibit 2 to App.-12


 

[FORM OF NOTATION OF GUARANTEE]
     Each of the Subsidiary Guarantors (which term includes any successor Person under the Indenture) has fully, unconditionally and absolutely guaranteed, to the extent set forth in the Indenture and subject to the provisions in the Indenture, the due and punctual payment of the principal of, and premium, if any, and interest on the Notes and all other amounts due and payable under the Indenture and the Notes by the Company.
     The obligations of the Subsidiary Guarantors to the Holders of Notes and to the Trustee pursuant to the Guarantee and the Indenture are expressly set forth in Article X of the Indenture and reference is hereby made to the Indenture for the precise terms of the Guarantee.
         
  [NAME OF SUBSIDIARY GUARANTOR]
 
 
  By:      
    Name:      
    Title:      

Exhibit 2 to App.-13


 

ANNEX A
 
 
FORM OF SUPPLEMENTAL INDENTURE
CARRIZO OIL & GAS, INC.,
the Subsidiary Guarantors named herein
and
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Trustee
 
8.625% Senior Notes due 2018
 
 

Annex-1


 

TABLE OF CONTENTS
             
ARTICLE ONE AGREEMENT TO BE BOUND     3  
 
           
SECTION 101
  Agreement to be Bound     3  
 
           
ARTICLE TWO MISCELLANEOUS PROVISIONS     4  
 
           
SECTION 201
  Integral Part     4  
SECTION 202
  General Definitions     4  
SECTION 203
  Adoption, Ratification and Confirmation     4  
SECTION 204
  Counterparts     4  
SECTION 205
  Governing Law     4  

Annex-2


 

CARRIZO OIL & GAS, INC.
SUPPLEMENTAL INDENTURE
     THIS SUPPLEMENTAL INDENTURE, dated as of ________________, _______, among Carrizo Oil and Gas, Inc., a Texas corporation (the “Company”), [__________] (the “Guaranteeing Subsidiary”), which is a subsidiary of the Company, each of the existing Subsidiary Guarantors (as defined in the Indenture referred to below) and Wells Fargo Bank, National Association (the “Trustee”).
WITNESSETH :
     WHEREAS, the Company, certain of its Subsidiaries and the Trustee heretofore executed and delivered an Indenture, dated as of May 28, 2008 (as amended and supplemented by a Fourth Supplemental Indenture among the Company, certain of its Subsidiaries, and the Trustee, dated as of November 2, 2010, the “Indenture”), providing for the issuance of the Company’s 8.625% Senior Notes due 2018 (the “Senior Notes”);
     WHEREAS, Section 4.15 of the Indenture provides that under certain circumstances a Restricted Subsidiary of the Company that is not already a Subsidiary Guarantor shall execute and deliver to the Trustee a supplemental indenture pursuant to which such Restricted Subsidiary shall become a Subsidiary Guarantor; and
     WHEREAS, the Company, pursuant to the terms and provisions of the Indenture, proposes in and by this Supplemental Indenture to supplement and amend the Indenture insofar as it will apply only to the Senior Notes in certain respects;
     NOW, THEREFORE:
     To comply with the provisions of the Indenture and in consideration of the premises provided for herein, the Guaranteeing Subsidiary, the Company, the existing Subsidiary Guarantors and the Trustee mutually covenant and agree for the equal and proportionate benefit of all Holders of the Notes as follows:
ARTICLE ONE
GUARANTEE
SECTION 101 Guarantee.
     The Guaranteeing Subsidiary hereby agrees by execution of this Supplemental Indenture, with respect to the Senior Notes, to be bound by all of the provisions of the Indenture applicable to a Subsidiary Guarantor to the extent provided for in Article X of the Indenture.

Annex-3


 

ARTICLE TWO
MISCELLANEOUS PROVISIONS
SECTION 201 Integral Part.
     This Supplemental Indenture constitutes an integral part of the Indenture.
SECTION 202 General Definitions .
     For all purposes of this Supplemental Indenture:
          (a) capitalized terms used herein without definition shall have the meanings specified in the Indenture; and
          (b) the terms “herein,” “hereof,” “hereunder” and other words of similar import refer to this Supplemental Indenture.
SECTION 203 Adoption, Ratification and Confirmation .
     The Indenture, as supplemented and amended by this Supplemental Indenture, is in all respects hereby adopted, ratified and confirmed.
SECTION 204 Counterparts .
     This Supplemental Indenture may be executed in any number of counterparts, each of which when so executed shall be deemed an original; and all such counterparts shall together constitute but one and the same instrument.
SECTION 205 Governing Law .
     THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

Annex-4


 

     IN WITNESS WHEREOF, the parties hereto have caused this [          ] Supplemental Indenture to be duly executed as of the day and year first written above.
         
  CARRIZO OIL & GAS, INC.
 
 
  By:      
    Name:   Paul F. Boling   
    Title:   Vice President and Chief Financial
Officer 
 
 
  GUARANTEEING SUBSIDIARY

[_____________________________]
 
 
  By:      
    Name:      
    Title:      
 
  EXISTING SUBSIDIARY
GUARANTORS 1

WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Trustee
 
 
  By:      
    Name:      
    Title:      
 
 
1   Insert signature blocks for each Subsidiary Guarantor existing at the time of execution of this Supplemental Indenture.

Annex-5

Exhibit 4.3
EXECUTION VERSION
 
FIFTH SUPPLEMENTAL INDENTURE
among
CARRIZO OIL & GAS, INC.
as Issuer
and
THE SUBSIDIARY GUARANTORS NAMED ON THE SIGNATURE PAGE HEREOF
as Subsidiary Guarantors
and
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Trustee
 
4.375% Convertible Senior Notes due 2028
 
November 2, 2010
 

 


 

TABLE OF CONTENTS
         
ARTICLE ONE
    3  
 
       
SECTION 101 Guarantee
    3  
 
       
ARTICLE TWO
    3  
 
       
SECTION 201 Amendment to Indenture
    3  
 
       
ARTICLE THREE
    3  
 
       
SECTION 301 Integral Part
    3  
SECTION 302 General Definitions
    3  
SECTION 303 Adoption, Ratification and Confirmation
    4  
SECTION 304 Counterparts
    4  
SECTION 305 Trustee Disclaimer
    4  
SECTION 306 Governing Law
    4  

 


 

CARRIZO OIL & GAS, INC.
FIFTH SUPPLEMENTAL INDENTURE
     THIS FIFTH SUPPLEMENTAL INDENTURE, dated as of November 2, 2010 (the “Fifth Supplemental Indenture”), among Carrizo Oil & Gas, Inc., a Texas corporation (the “Company”), the subsidiary guarantors listed on the signature page hereof (each, a “Subsidiary Guarantor” and collectively, the “Subsidiary Guarantors”) and Wells Fargo Bank, National Association (the “Trustee”).
W I T N E S S E T H :
     WHEREAS, the Company, certain of its Subsidiaries and the Trustee heretofore executed and delivered an Indenture, dated as of May 28, 2008 (the “Original Indenture”), providing for the issuance from time to time of one or more series of the Company’s Securities;
     WHEREAS, the Company issued $373,750,000 aggregate principal amount of 4.375% Convertible Senior Notes due 2028 (the “Convertible Notes”) pursuant to the Original Indenture, as supplemented by the First Supplemental Indenture thereto between the Company and the Trustee dated May 28, 2008 (the “First Supplemental Indenture” and the Original Indenture as so supplemented, the “Indenture”);
     WHEREAS, Section 4.08 of the Indenture provides that if at any time the Company issues any Publicly Traded Debt Securities, and any Subsidiary Guarantor provides a Guarantee with respect to such Publicly Traded Debt Securities, then the Company will cause such Subsidiary Guarantor to guarantee the Convertible Notes as provided in Article Ten of the Indenture;
     WHEREAS, on the date hereof, the Company issued $400,000,000 aggregate principal amount of 8.625% Senior Notes due 2018 (the “Senior Notes”), which are guaranteed by the Subsidiary Guarantors on a senior, unsecured basis;
     WHEREAS, the Company, pursuant to the foregoing authority, proposes in and by this Fifth Supplemental Indenture to supplement and amend the Indenture insofar as it will apply only to the Convertible Notes in certain respects;
     NOW, THEREFORE:
     To comply with the provisions of the Indenture and in consideration of the premises provided for herein, the Company, the Subsidiary Guarantors and the Trustee mutually covenant and agree for the equal and proportionate benefit of all Holders of the Convertible Notes as follows:

2


 

ARTICLE ONE
GUARANTEE
SECTION 101 Guarantee
     Each Subsidiary Guarantor agrees to be bound by all of the provisions of the Indenture applicable to a Subsidiary Guarantor with respect to the Convertible Notes and perform all of the obligations and agreements of a Subsidiary Guarantor under the Indenture with respect to the Convertible Notes.
ARTICLE TWO
AMENDMENT TO INDENTURE
SECTION 201 Amendment to Indenture
     The Indenture shall be amended by adding the following clause (iii) to Section 10.04:
     or (iii) automatically when such Subsidiary Guarantor no longer guarantees the Company’s 8.625% Senior Notes due 2018 (and, notwithstanding the provisions of Section 10.04(a) of the Indenture, such Guarantee may not be released until no other Securities issued under the Indenture are guaranteed by such Subsidiary Guarantor; provided, that the foregoing shall not restrict the release of a Guarantee of one or more series of Securities if the release of each such Guarantee occurs on a substantially simultaneous basis).
ARTICLE THREE
MISCELLANEOUS PROVISIONS
SECTION 301 Integral Part.
     This Fifth Supplemental Indenture constitutes an integral part of the Indenture.
SECTION 302 General Definitions.
     For all purposes of this Fifth Supplemental Indenture:
     (a) capitalized terms used herein without definition shall have the meanings specified in the Indenture; and
     (b) the terms “herein,” “hereof,” “hereunder” and other words of similar import refer to this Fifth Supplemental Indenture.

3


 

SECTION 303 Adoption, Ratification and Confirmation.
     The Indenture, as supplemented and amended by this Fifth Supplemental Indenture, is in all respects hereby adopted, ratified and confirmed.
SECTION 304 Counterparts.
     This Fifth Supplemental Indenture may be executed in any number of counterparts, each of which when so executed shall be deemed an original; and all such counterparts shall together constitute but one and the same instrument.
SECTION 305 Trustee Disclaimer.
     The Trustee shall not be responsible in any manner whatsoever for or with respect to any of the recitals or statements contained herein, all of which recitals or statements are made solely by the Company and the Subsidiary Guarantors, and the Trustee makes no representation with respect to any such matters. Additionally, the Trustee makes no representations as to the validity or sufficiency of this Fifth Supplemental Indenture.
SECTION 306 Governing Law.
     THIS FIFTH SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

4


 

     IN WITNESS WHEREOF, the parties hereto have caused this Fifth Supplemental Indenture to be duly executed as of the day and year first written above.
         
  WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Trustee

 
 
  By:   /s/ Patrick T. Giordano    
    Name:   Patrick T. Giordano   
    Title:   Vice President   
 
  CARRIZO OIL & GAS, INC.
 
 
  By:   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President and
Chief Financial Officer 
 
 
  The Subsidiary Guarantors

BANDELIER PIPELINE HOLDING,
LLC

 
 
  By:   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President   
 
  CARRIZO (MARCELLUS) LLC
 
 
  By:   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President   

 


 

         
         
  CARRIZO (MARCELLUS) WV LLC
 
 
  By:   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President   
 
  CARRIZO MARCELLUS HOLDING INC.
 
 
  By:   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President   
 
  CCBM, INC.
 
 
  By:   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President   
 
  CHAMA PIPELINE HOLDING LLC
 
 
  By:   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President   
 
  CLLR, INC.
 
 
  By:   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President   

 


 

         
         
  HONDO PIPELINE INC.
 
 
  By:   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President   
 
  MESCALERO PIPELINE, LLC
 
 
  By:   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President   
 

 

Exhibit 10.1
$400,000,000
CARRIZO OIL & GAS, INC.
8.625% Senior Notes due 2018
REGISTRATION RIGHTS AGREEMENT
November 2, 2010
Credit Suisse Securities (USA) LLC
Wells Fargo Securities, LLC
RBC Capital Markets, LLC
c/o Credit Suisse Securities (USA) LLC
          Eleven Madison Avenue
          New York, New York 10010-3629
Dear Sirs:
     Carrizo Oil & Gas, Inc., a Texas corporation (the “Issuer”), proposes to issue and sell to Credit Suisse Securities (USA) LLC, Wells Fargo Securities, LLC and RBC Capital Markets, LLC (collectively, the “Initial Purchasers”), upon the terms set forth in a purchase agreement of even date herewith (the “Purchase Agreement”), $400,000,000 aggregate principal amount of its 8.625% Senior Notes due 2018 (the “Initial Notes”) to be unconditionally guaranteed (the “Guarantees”) by Bandelier Pipeline Holding, LLC, Carrizo (Marcellus) LLC, Carrizo (Marcellus) WV LLC, Carrizo Marcellus Holding Inc., CCBM, Inc., Chama Pipeline Holding LLC, CLLR, Inc., Hondo Pipeline, Inc. and Mescalero Pipeline, LLC, each a Delaware limited liability company or corporation (the “Guarantors” and together with the Issuer, the “Company”). The Initial Notes will be issued pursuant to an Indenture, dated as of May 28, 2008 (the “Base Indenture”), as supplemented by the Fourth Supplemental Indenture thereto dated as of November 2, 2010 (the “Fourth Supplemental Indenture” and, together with the Base Indenture, the “Indenture”), among the Company, the Subsidiary Guarantors named therein and Wells Fargo Bank, National Association, as Trustee (the “Trustee”). As an inducement to the Initial Purchasers, the Company agrees with the Initial Purchasers, for the benefit of the holders of the Initial Notes (including, without limitation, the Initial Purchasers), the Exchange Notes (as defined below) and the Private Exchange Notes (as defined below) (collectively the “Holders”), as follows:
     1.  Registered Exchange Offer . The Company shall, at its own cost, and on or before the date that is 180 days after the date of original issue of the Initial Notes (the “Issue Date”) use commercially reasonable efforts to file a registration statement (the “Exchange Offer Registration Statement”) with the Securities and Exchange Commission (the “Commission”) on an appropriate form under the Securities Act of 1933, as amended (the “Securities Act”), with respect to a registered offer (the “Registered Exchange Offer”) to exchange each outstanding Initial Note for a new note (the “Exchange Notes”) having terms substantially identical in all material respects to such outstanding Initial Note (except that the Exchange Note will not contain terms with respect to transfer restrictions or the payment of liquidated damages (as described in Section 6 hereof)). The Company shall use its commercially reasonable efforts (which shall include filing of all necessary amendments to such Exchange Offer Registration Statement) to cause the Exchange Offer Registration Statement to be declared (or become automatically) effective under the Securities Act within 360 days after the Issue Date of the Initial Notes and shall keep the Registered Exchange Offer open for not less than 20 business days (or longer, if required by applicable law) after the

 


 

date notice of the Registered Exchange Offer is mailed to the Holders (such period being called the “Exchange Offer Registration Period”).
     If the Company effects the Registered Exchange Offer, the Company will be entitled to close the Registered Exchange Offer 20 business days after the commencement thereof (or longer, if required by applicable law or any broker-dealer as described in this Section 1 below) provided that the Company has accepted all the Initial Notes theretofore validly tendered in accordance with the terms of the Registered Exchange Offer.
     Promptly following the effectiveness of the Exchange Offer Registration Statement, the Company shall offer the Exchange Notes in exchange for surrender of the Initial Notes, it being the objective of such Registered Exchange Offer to enable each Holder electing to exchange the Initial Notes for Exchange Notes (assuming that such Holder is not an affiliate of the Company within the meaning of the Securities Act, acquires the Exchange Notes in the ordinary course of such Holder’s business and has no arrangements with any person to participate in the distribution of the Exchange Notes and is not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer) to trade such Exchange Notes from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of the several states of the United States; provided, however, that Participating Broker-Dealers (as defined below) receiving Exchange Notes in the Registered Exchange Offer will have a prospectus delivery requirement with respect to resales of such Exchange Notes.
     The Company acknowledges that, pursuant to current interpretations by the Commission’s staff of Section 5 of the Securities Act, in the absence of an applicable exemption therefrom, (i) each Holder which is a broker-dealer electing to exchange Securities, acquired for its own account as a result of market making activities or other trading activities, for Exchange Notes (a “Participating Broker-Dealer”), is required to deliver a prospectus containing information substantially set forth in (a) Annex A hereto on the cover, (b) Annex B hereto in the “Exchange Offer Procedures” section and the “Purpose of the Exchange Offer” section, and (c) Annex C hereto in the “Plan of Distribution” section of such prospectus in connection with a sale of any such Exchange Notes received by such Participating Broker-Dealer pursuant to the Registered Exchange Offer and (ii) an Initial Purchaser that elects to sell Exchange Notes acquired in exchange for Initial Notes constituting any portion of an unsold allotment is required to deliver a prospectus containing the information required by Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in connection with such sale.
     The Company shall use its commercially reasonable efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the prospectus contained therein, in order to permit such prospectus to be lawfully delivered by all persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such persons must comply with such requirements in order to resell the Exchange Notes; provided, however, that (i) in the case where such prospectus and any amendment or supplement thereto must be delivered by a Participating Broker-Dealer or an Initial Purchaser, such period shall be the lesser of 180 days and the date on which all Participating Broker-Dealers and the Initial Purchasers have sold all Exchange Notes held by them (unless such period is extended pursuant to Section 3(j) below) and (ii) the Company shall make such prospectus and any amendment or supplement thereto, available to any broker-dealer for use in connection with any resale of any Exchange Notes for a period of not less than 90 days after the consummation of the Registered Exchange Offer (or such shorter period which such persons are required by applicable law to deliver such prospectus).
     If, upon consummation of the Registered Exchange Offer, any Initial Purchaser holds Initial Notes acquired by it as part of its initial distribution, the Company, simultaneously with the delivery of the

 


 

Exchange Notes pursuant to the Registered Exchange Offer, shall issue and deliver to such Initial Purchaser upon the written request of such Initial Purchaser, in exchange (the “Private Exchange”) for the Initial Notes held by such Initial Purchaser, debt securities of the Company having a principal amount equal to the surrendered Initial Notes issued under the Indenture and having terms identical in all material respects (including the existence of restrictions on transfer under the Securities Act and the securities laws of the several states of the United States, but excluding the payment of liquidated damages as described in Section 6 hereof) to the Initial Notes (the “Private Exchange Notes”). The Initial Notes, the Exchange Notes and the Private Exchange Notes are herein collectively called the “Securities”.
     In connection with the Registered Exchange Offer, the Company shall:
     (a) mail to each Holder a copy of the prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents;
     (b) keep the Registered Exchange Offer open for not less than 20 business days (or longer, if required by applicable law or any broker-dealer, as described above) after the date notice thereof is mailed to the Holders;
     (c) utilize the services of a depositary for the Registered Exchange Offer with an address in the United States of America, which may be the Trustee or an affiliate of the Trustee;
     (d) permit Holders to withdraw tendered Securities at any time prior to the close of business, New York time, on the last business day on which the Registered Exchange Offer shall remain open; and
     (e) otherwise comply in all material respects with all applicable laws.
     As soon as practicable after the close of the Registered Exchange Offer or the Private Exchange, as the case may be, the Company shall:
     (x) accept for exchange all the Securities validly tendered and not withdrawn pursuant to the Registered Exchange Offer and the Private Exchange;
     (y) deliver to the Trustee for cancellation all the Initial Notes so accepted for exchange; and
     (z) cause the Trustee to authenticate and deliver promptly to each Holder of the Initial Notes, Exchange Notes or Private Exchange Notes, as the case may be, equal in principal amount to the Initial Notes of such Holder so accepted for exchange.
     The Indenture will provide that the Exchange Notes will not be subject to the transfer restrictions set forth in the Indenture and that all the Securities will vote and consent together on all matters as one class and that none of the Securities will have the right to vote or consent as a class separate from one another on any matter.
     Interest on each Exchange Note and Private Exchange Note issued pursuant to the Registered Exchange Offer and in the Private Exchange will accrue from the last interest payment date on which interest was paid on the Initial Note surrendered in exchange therefor or, if no interest has been paid on the such Initial Note, from the Issue Date.

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     A Holder of Initial Notes who wishes to exchange such notes for Exchange Notes in the Registered Exchange Offer will be required to represent to the Company that at the time of the consummation of the Registered Exchange Offer (i) any Exchange Notes to be received by it will be acquired in the ordinary course of business, (ii) if it is not a broker-dealer, it has no arrangement or understanding to participate in the distribution (within the meaning of the Securities Act) of the Exchange Notes, (iii) it is not an “affiliate” of the Issuer as defined in Rule 405 of the Securities Act, or if it is an affiliate of the Issuer, that it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, and (iv) if it is a broker-dealer, that it will receive Exchange Notes for its own account in exchange for Initial Notes that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. Any Holder who fails to make such representations will not be entitled to the benefits of Section 6(a) (with respect to a Registration Default related to the Registered Exchange Offer).
     Notwithstanding any other provisions hereof, the Company will ensure that (i) any Exchange Offer Registration Statement, and any amendment thereto and any prospectus forming part thereof and any supplement thereto, complies in all material respects with the Securities Act and the rules and regulations thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, does not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
     2.  Shelf Registration . If, (i) in the event that applicable interpretations of the staff of the Commission do not permit the Company to effect a Registered Exchange Offer, as contemplated by Section 1 hereof or (ii) any Initial Purchaser so requests with respect to the Initial Notes (or the Private Exchange Notes) not eligible to be exchanged for Exchange Notes in the Registered Exchange Offer and held by it following consummation of the Registered Exchange Offer, the Company shall take the following actions:
     (a) The Company shall use its commercially reasonable efforts to file a shelf registration statement (the “Shelf Registration Statement” and, together with the Exchange Offer Registration Statement, a “Registration Statement”) on an appropriate form under the Securities Act, and to cause the Shelf Registration Statement to be declared (or to become automatically) effective under the Securities Act, covering resales of the notes, from time to time in accordance with the methods of distribution set forth in the Shelf Registration Statement and Rule 415 under the Securities Act (hereinafter, the “Shelf Registration”); provided, however, that no Holder (other than an Initial Purchaser) shall be entitled to either have the Securities held by it covered by such Shelf Registration Statement or otherwise obtain the benefits relating to the registration of the Securities unless such Holder agrees in writing to be bound by all the provisions of this Agreement applicable to such Holder.
     (b) The Company shall keep the Shelf Registration Statement effective until the earliest of (the “Shelf Registration Period”) (i) the time when the Securities covered by the Shelf Registration Statement can be sold pursuant to Rule 144 without any restrictive legend or volume

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limitations, (ii) one year from the effective date of the Shelf Registration Statement and (iii) the date on which all Securities registered thereunder are disposed of in accordance therewith.
     (c) Notwithstanding any other provisions of this Agreement to the contrary, the Company shall cause the Shelf Registration Statement and the related prospectus and any amendment or supplement thereto, as of the effective date of the Shelf Registration Statement, amendment or supplement, as the case may be, (i) to comply as to form in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the Commission and (ii) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein (in the case of the prospectus, in the light of the circumstances under which they were made), not misleading.
     3.  Registration Procedures . In connection with any Shelf Registration contemplated by Section 2 hereof and, to the extent applicable, any Registered Exchange Offer contemplated by Section 1 hereof, the following provisions shall apply:
     (a) The Company shall (i) furnish to each Initial Purchaser, prior to the filing thereof with the Commission, a copy of the Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein, including financial statements and schedules, and, if so requested, all exhibits thereto (including those incorporated by reference) and, in the event that an Initial Purchaser (with respect to any portion of an unsold allotment from the original offering) is participating in the Registered Exchange Offer or the Shelf Registration Statement, the Company shall use its commercially reasonable efforts to reflect in each such document, when so filed with the Commission, such comments as such Initial Purchaser reasonably may propose in writing within two business days of the delivery of a draft thereof; (ii) include the information substantially set forth in Annex A hereto on the cover, in Annex B hereto in the “Exchange Offer Procedures” section and the “Purpose of the Exchange Offer” section and in Annex C hereto in the “Plan of Distribution” section of the prospectus forming a part of the Exchange Offer Registration Statement and include the information substantially set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer; (iii) if requested by an Initial Purchaser, include the information required by Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in the prospectus forming a part of the Exchange Offer Registration Statement; (iv) include within the prospectus contained in the Exchange Offer Registration Statement a section entitled “Plan of Distribution,” reasonably acceptable to the Initial Purchasers, which shall contain a summary statement of the positions taken or policies made by the staff of the Commission with respect to the potential “underwriter” status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of Exchange Notes received in the Registered Exchange Offer, whether such positions or policies have been publicly disseminated by the staff of the Commission or such positions or policies, in the reasonable judgment of the Initial Purchasers based upon advice of counsel (which may be in-house counsel), represent the prevailing views of the staff of the Commission; and (v) in the case of the Shelf Registration Statement, include in the prospectus included in the Shelf Registration Statement (or, if permitted by Commission Rule 430B(b), in a prospectus supplement that becomes a part thereof pursuant to Commission Rule 430B(f)) that is delivered to any Holder pursuant to Section 3(d) and (f), the names of the Holders, who propose to sell Securities pursuant to the Shelf Registration Statement, as selling securityholders.

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     (b) The Company shall give written notice to the Initial Purchasers, the Holders of the Securities (proposed to be sold under the Shelf Registration Statement, if applicable) and any Participating Broker-Dealer from whom the Company has received prior written notice that it will be a Participating Broker-Dealer in the Registered Exchange Offer (which notice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made):
     (i) when the Registration Statement or any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective;
     (ii) of any request by the Commission after the Registration Statement has become effective for amendments or supplements to the Registration Statement or the prospectus included therein or for additional information;
     (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose, of the issuance by the Commission of a notification of objection to the use of the form on which the Registration Statement has been filed, and of the occurrence of any event that causes the Company to become an “ineligible issuer,” as defined in Commission Rule 405;
     (iv) of the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and
     (v) of the occurrence of any event during the period that the Registration Statement is effective that requires the Company to make changes in the Registration Statement or the prospectus in order that the Registration Statement or the prospectus do not contain an untrue statement of a material fact nor omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the prospectus, in the light of the circumstances under which they were made) not misleading.
     (c) The Company shall use its commercially reasonable efforts to obtain the withdrawal, at the earliest possible time, of any order suspending the effectiveness of the Registration Statement.
     (d) The Company shall furnish, prior to filing with the Commission, to each Holder of Securities included within the coverage of the Shelf Registration, without charge, at least one copy of the Shelf Registration Statement and any post-effective amendment or supplement thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference), which documents will be subject to the review and reasonable comment of the Holders and their counsel, for at least three Business Days. The Company shall not, without the prior consent of the Initial Purchasers, make any offer relating to the Securities that would constitute a “free writing prospectus,” as defined in Commission Rule 405.

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     (e) If requested by a Participating Broker-Dealer or Holder, the Company shall deliver to each such person who so requests, without charge, at least one copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if so requested, all exhibits thereto (including those incorporated by reference).
     (f) The Company shall, during the Shelf Registration Period, deliver to each Holder of Securities included within the coverage of the Shelf Registration, without charge, as many copies of the prospectus (including each preliminary prospectus) included in the Shelf Registration Statement and any amendment or supplement thereto as such person may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by each of the selling Holders of the Securities in connection with the offering and sale of the Securities covered by the prospectus, or any amendment or supplement thereto, included in the Shelf Registration Statement.
     (g) The Company shall deliver to each Initial Purchaser, any Participating Broker-Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer, without charge, as many copies of the final prospectus included in the Exchange Offer Registration Statement and any amendment or supplement thereto as such persons may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by any Initial Purchaser, if necessary, any Participating Broker-Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer in connection with the offering and sale of the Exchange Notes covered by the prospectus, or any amendment or supplement thereto, included in such Exchange Offer Registration Statement.
     (h) Prior to any public offering of the Securities, pursuant to any Registration Statement, the Company shall use commercially reasonable efforts to register or qualify or cooperate with the Holders of the Securities included therein and their respective counsel in connection with the registration or qualification of the Securities for offer and sale under the securities or “blue sky” laws of such states of the United States as any Holder of the Securities reasonably requests in writing and do any and all other acts or things reasonably necessary or advisable to enable the offer and sale in such jurisdictions of the Securities covered by such Registration Statement; provided, however, that the Company shall not be required to (i) qualify generally to do business or as a dealer in securities in any jurisdiction where it is not then so qualified or (ii) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject.
     (i) The Company shall cooperate with the Holders of the Securities to facilitate the timely preparation and delivery of certificates or global notes representing the Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Holders may request a reasonable period of time prior to sales of the Securities pursuant to such Registration Statement.
     (j) Upon the occurrence of any event contemplated by clauses (ii) through (v) of Section 3(b) above during the period for which the Company is required to maintain an effective Registration Statement, the Company shall promptly prepare and file a post-effective amendment to the Registration Statement or a supplement to the related prospectus and any other required document so that, as thereafter delivered to Holders of the Securities or purchasers of Securities,

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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 the light of the circumstances under which they were made, not misleading; notwithstanding the foregoing, the Company shall not be required to amend or supplement the Shelf Registration Statement or any related prospectus if (i) an event occurs and is continuing as a result of which the Shelf Registration Statement or any related prospectus would, in the Company’s good faith judgment, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading (with respect to such prospectus only, in the light of the circumstances under which they were made) and (ii) (a) the Company determines in its good faith judgment that the disclosure of such event at such time would have a material adverse effect on its business, operations or prospects or (b) the disclosure otherwise relates to a pending material business transaction that has not yet been publicly disclosed; provided, however, such requirement to amend or supplement the Shelf Registration Statement or any related prospectus shall not be suspended for more than 45 aggregate days in any 90-day period or more than 90 aggregate days in any 360-day period). If the Company notifies the Initial Purchasers, the Holders of the Securities and any known Participating Broker-Dealer in accordance with clauses (ii) through (v) of Section 3(b) above to suspend the use of the prospectus until the requisite changes to the prospectus have been made, then the Initial Purchasers, the Holders of the Securities and any such Participating Broker-Dealers shall suspend use of such prospectus and expressly agree to maintain the information contained in such notice, as well as the fact that it has received such notice, confidential (except that such information may be disclosed to its counsel) until it has been publicly disclosed by the Company, and the period of effectiveness of the Shelf Registration Statement provided for in Section 2(b) above and the Exchange Offer Registration Statement provided for in Section 1 above shall each be extended by the number of days from and including the date of the giving of such notice to and including the date when the Initial Purchasers, the Holders of the Securities and any known Participating Broker-Dealer shall have received such amended or supplemented prospectus pursuant to this Section 3(j). If the Company is required to file any post-effective amendment to the Shelf Registration Statement or a new Shelf Registration Statement for the sole purpose of adding Holders to the Shelf Registration Statement, the Company shall not be required to file such post-effective amendment or new Shelf Registration Statement more frequently than once every calendar quarter.
     (k) Not later than the effective date of the applicable Registration Statement, the Company will provide a CUSIP number for the Initial Notes, the Exchange Notes or the Private Exchange Notes, as the case may be, and provide the applicable trustee with printed certificates or global notes for the Initial Notes, the Exchange Notes or the Private Exchange Notes, as the case may be, in a form eligible for deposit with The Depository Trust Company.
     (l) The Company will use commercially reasonable efforts to comply with all rules and regulations of the Commission to the extent and so long as they are applicable to the Registered Exchange Offer or the Shelf Registration and will make generally available to its security holders (or otherwise provide in accordance with Section 11(a) of the Securities Act) an earnings statement satisfying the provisions of Section 11(a) of the Securities Act, no later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company’s first fiscal quarter commencing after the effective date of the Registration Statement, which statement shall cover such 12-month period.
     (m) The Company shall cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended, in a timely manner and containing such changes, if any, as shall be

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necessary for such qualification. In the event that such qualification would require the appointment of a new trustee under the Indenture, the Company shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture.
     (n) The Company may require each Holder of Securities to be sold pursuant to the Shelf Registration Statement to furnish to the Company such information regarding the Holder and the distribution of the Securities as the Company may from time to time reasonably require for inclusion in the Shelf Registration Statement. The Company may exclude from such registration the Securities of any Holder that fails to furnish such information within a reasonable time after receiving such request, and the Holder of any such Excluded Securities shall not be entitled to the benefits of Section 6(a) (with respect to a Registration Default related to the Shelf Registration).
     (o) [INTENTIONALLY OMITTED]
     (p) In the case of any Shelf Registration, the Company shall (i) make reasonably available for inspection during normal business hours by the Holders of the Securities and any attorney or accountant retained by the Holders of the Securities all relevant financial and other records, pertinent corporate documents and properties of the Company reasonably requested by the Holders of the Securities or any such underwriter and (ii) cause the Company’s officers, directors, employees, accountants and auditors to make available during normal business hours all relevant information reasonably requested by the Holders of the Securities or any such attorney or accountant in connection with the Shelf Registration Statement, in each case, as shall be reasonably necessary to enable such persons, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that the foregoing inspection and information gathering shall be coordinated on behalf of the Initial Purchasers by you and on behalf of the other parties, by one counsel designated by and on behalf of such other parties as described in Section 4 hereof; provided, further, however, that any information that is designated in writing by the Company, in good faith, as confidential at the time of delivery of such information shall be kept confidential by the Holders or any such attorney or accountant, unless such disclosure is made in connection with a court proceeding or required by law, or such information is or becomes available to the public generally or through a third party without, to the knowledge of any recipient of confidential information, an accompanying obligation of confidentiality or is independently developed.
     (q) [INTENTIONALLY OMITTED]
     (r) [INTENTIONALLY OMITTED]
     (s) If a Registered Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Initial Notes by Holders to the Company (or to such other Person as directed by the Company) in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be, the Company shall mark, or caused to be marked, on the Initial Notes so exchanged that such Initial Notes are being canceled in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be; in no event shall the Initial Notes be marked as paid or otherwise satisfied.
     (t) The Company will use its commercially reasonable efforts to, if the Initial Notes have been rated prior to the initial sale of such Initial Notes, confirm such ratings will apply to the Securities covered by a Registration Statement.

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     (u) [INTENTIONALLY OMITTED]
     (v) The Company shall use its commercially reasonable efforts to take all other steps necessary to effect the registration of the Securities covered by a Registration Statement contemplated hereby.
     4.  Registration Expenses . The Company shall bear all fees and expenses incurred in connection with the performance of its obligations under Sections 1 through 3 hereof, whether or not the Registered Exchange Offer or a Shelf Registration is filed or becomes effective. Each Holder shall pay all brokerage fees and commissions, all transfer taxes, the fees and expenses of any legal counsel and any other advisors such Holder engages, and all similar fees and commissions relating to such Holder’s disposition of Securities.
     5.  Indemnification . (a) The Company agrees to indemnify and hold harmless each Holder of the Securities, any Participating Broker-Dealer and each person, if any, who controls such Holder or such Participating Broker-Dealer within the meaning of the Securities Act or the Exchange Act (each Holder, any Participating Broker-Dealer and such controlling persons are referred to collectively as the “Indemnified Parties”) from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof (including, but not limited to, any losses, claims, damages, liabilities or actions relating to purchases and sales of the Securities) to which each Indemnified Party may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus or “issuer free writing prospectus,” as defined in Commission Rule 433 (“Issuer FWP”), relating to the Shelf Registration, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus, preliminary prospectus or Issuer FWP, or any supplement thereto, in the light of the circumstances under which they were made) not misleading, and shall reimburse, as incurred, the Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect thereof; provided, however, that (i) the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus or Issuer FWP relating to a Shelf Registration in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein and (ii) with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus relating to a Shelf Registration Statement, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any Holder or Participating Broker-Dealer from whom the person asserting any such losses, claims, damages or liabilities purchased the Securities concerned, to the extent that a prospectus relating to such Securities was required to be delivered (including through satisfaction of the conditions of Commission Rule 172) by such Holder or Participating Broker-Dealer under the Securities Act in connection with such purchase and any such loss, claim, damage or liability of such Holder or Participating Broker-Dealer results from the fact that there was not conveyed to such person, at or prior to the time of the sale of such Securities to such person, an amended or supplemented prospectus or, if permitted by Section 3(d), an Issuer FWP correcting such untrue statement or omission or alleged untrue statement or omission if the Company had previously furnished copies thereof to such Holder or Participating Broker-Dealer; provided further, however, that this indemnity agreement (i) will be in

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addition to any liability which the Company may otherwise have to such Indemnified Party and (ii) this indemnity will not apply to any loss, claim, damage or liability arising from an offer or sale, occurring during a period during which the availability of the Shelf Registration Statement or any related prospectus may be suspended, of Securities by a Holder to whom the Company theretofore provided a notice pursuant to clauses (ii) through (v) of Section 3(b) provided that such loss, claim, damage or liability relates to the contents of such notice.
     (b) Each Holder of the Securities, severally and not jointly, will indemnify and hold harmless the Company and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act from and against any losses, claims, damages or liabilities or any actions in respect thereof, to which the Company or any such controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions (i) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus or Issuer FWP relating to a Shelf Registration, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus, preliminary prospectus or Issuer FWP or any supplement thereto, in the light of the circumstances under which they were made) not misleading, but in each case only to the extent that the untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein; and, subject to the limitation set forth immediately preceding this clause, shall reimburse, as incurred, the Company for any legal or other expenses reasonably incurred by the Company or any such controlling person in connection with investigating or defending any loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition to any liability which such Holder may otherwise have to the Company or any of its controlling persons.
     (c) Promptly after receipt by an indemnified party under this Section 5 of notice of the commencement of any action or proceeding (including a governmental investigation), such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 5, notify the indemnifying party of the commencement thereof; but the failure to notify the indemnifying party shall not relieve the indemnifying party from any liability that it may have under subsection (a) or (b) above except to the extent that it has been materially prejudiced by such failure; and provided further that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party otherwise than under subsection (a) or (b) above. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof the indemnifying party will not be liable to such indemnified party under this Section 5 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof. Notwithstanding the foregoing, in any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the contrary; (ii) the indemnifying party has failed within a reasonable time to retain counsel reasonably satisfactory to the indemnified party; (iii) the indemnified party shall have reasonably concluded that there may be legal defenses available to it that are different from or in addition to those available to the indemnifying party; or (iv) the named parties in any such proceeding (including any impleaded parties)

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include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood and agreed that the indemnifying party shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for the fees and expenses or more than one separate firm (in addition to any local counsel) for all indemnified parties, and that all such fees and expenses shall be reimbursed as they are incurred. No indemnifying party shall, without the prior written consent of the indemnified party, which consent shall not be unreasonably withheld or delayed, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement (i) includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action, and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.
     (d) If the indemnification provided for in this Section 5 is unavailable or insufficient to hold harmless an indemnified party under subsections (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the exchange of the Securities, pursuant to the Registered Exchange Offer, or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or such Holder or such other indemnified party, as the case may be, on the other, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding any other provision of this Section 5(d), the Holders of the Securities shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such Holders from the sale of the Securities pursuant to a Registration Statement exceeds the amount of damages which such Holders have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph (d), each person, if any, who controls such indemnified party within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as such indemnified party and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as the Company.
     (e) The agreements contained in this Section 5 shall survive the sale of the Securities pursuant to a Registration Statement and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party.

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     6.  Additional Interest Under Certain Circumstances . (a) If: (i) the Exchange Offer Registration Statement (or, if required, the Shelf Registration Statement) is not filed on or before the date that is 180 days after the Issue Date; or (ii) the Registered Exchange Offer is not completed (or, if required, the Shelf Registration Statement is not declared (or does not become automatically) effective) on or before the date that is 360 days after the Issue Date (each such event referred to in clause (i) and (ii), a “Registration Default”), then the Company will pay each Holder of Initial Notes liquidated damages in the form of additional interest in an amount equal to 0.25% per annum of the principal amount of Initial Notes held by such Holder, with respect to the first 90 days after the date of the Registration Default (which rate shall be increased by an additional 0.25% per annum for each subsequent 90-day period that such liquidated damages continue to accrue) in each case until the Registration Default no longer exists; provided, however, that at no time shall the amount of liquidated damages accruing exceed in the aggregate 1.0% per annum. Upon filing of the Exchange Offer Registration Statement (or, if required, the Shelf Registration Statement) in the case of a Registration Default referred to in clause (i), or the completion of the Registered Exchange Offer (or, if required, the effectiveness of the Shelf Registration Statement or termination thereof in accordance with the registration rights agreement), in the case of a Registration Default referred to in clause (ii), liquidated damages described in this Section 6 will cease to accrue.
     (b) Any amounts of Additional Interest due pursuant to clause (i) or (ii) of Section 6(a) above will be payable in cash on the regular interest payment dates with respect to the Initial Notes. The amount of Additional Interest will be determined by multiplying the applicable Additional Interest rate by the principal amount of the Initial Notes, multiplied by a fraction, the numerator of which is the number of days such Additional Interest rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months), and the denominator of which is 360. The obligation of the Company to pay Additional Interest in the case of any Registration Default shall be the sole and exclusive remedy of the Holders for any such Registration Default and the failure of the Company to comply with its obligtions under Section 1 and Section 2. Notwithstanding anything to the contrary herein, (i) the amount of Additional Interest payable shall not increase because more than one Registration Default has occurred and is continuing and (ii) a Holder that is not entitled to the benefits of the Shelf Registration Statement shall not be entitled to Additional Interest with respect to any Registration Default that pertains to the Shelf Registration.
     7.  Rules 144 and 144A . The Company shall use its commercially reasonable efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the request of any Holder of Transfer Restricted Securities (as hereafter defined), make publicly available other information so long as necessary to permit sales of their securities pursuant to Rules 144 and 144A. The Company will provide a copy of this Agreement to prospective purchasers of Initial Notes identified to the Company by the Initial Purchasers upon request. Upon the request of any Holder of Initial Notes, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act.
     “Transfer Restricted Securities” means each Note until (i) the date on which such Transfer Restricted Security has been exchanged by a person other than a broker-dealer for a freely transferable Exchange Note in the Registered Exchange Offer, (ii) following the exchange by a broker-dealer in the Registered Exchange Offer of a Initial Note for an Exchange Note, the date on which such Exchange Note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, or (iii) the date on which such

13


 

Initial Note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement.
     8.  Underwritten Registrations . Notwithstanding anything herein to the contrary, no Securities covered by the Shelf Registration Statement may be sold in an underwritten offering under the Shelf Registration Statement without the prior written consent of the Company.
     9.  Miscellaneous .
     (a)  Amendments and Waivers . The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, except by the Company and the written consent of the Holders of a majority in principal amount of the Securities affected by such amendment, modification, supplement, waiver or consents.
     (b)  Notices . All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first-class mail, facsimile transmission, or air courier which guarantees overnight delivery:
          (1) if to a Holder of the Securities, at the most current address given by such Holder to the Company.
          (2) if to the Initial Purchasers;
Credit Suisse Securities (USA) LLC
Eleven Madison Avenue
New York, NY 10010-3629
Fax No.: (212) 325-4296
Attention: Transactions Advisory Group
     with a copy to:
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, NY 10017
Fax No.: (212) 701-5674
Attention: Richard D. Truesdell
          (3) if to the Company, at its address as follows:
Carrizo Oil & Gas, Inc.
1000 Louisiana Street, Suite 1500
Houston, TX 77002
Fax No.: (713) 328-1035
Attention: General Counsel

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     with a copy to:
Baker Botts L.L.P.
One Shell Plaza
910 Louisiana Street
Houston, TX 77002
Fax No.: (713) 229-1522
Attention: Gene J. Oshman
     All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; three business days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged by recipient’s facsimile machine operator, if sent by facsimile transmission; and on the day delivered, if sent by overnight air courier guaranteeing next day delivery.
     (c)  No Prohibitive Agreements . The Company has not, as of the date hereof, entered into any agreement with respect to its securities that would prohibit the performance of the Company’s duties and obligations pursuant to this Agreement.
     (d)  Successors and Assigns . This Agreement shall be binding upon the respective successors and assigns of each of the parties hereto.
     (e)  Counterparts . This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.
     (f)  Headings . The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
     (g)  Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
     (h)  Severability . If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.
     (i)  Securities Held by the Company . Whenever the consent or approval of Holders of a specified percentage of principal amount of Securities is required hereunder, Securities held by the Company or its affiliates (other than subsequent Holders of Securities if such subsequent Holders are deemed to be affiliates solely by reason of their holdings of such Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage.
     If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the several Initial Purchasers and the Company in accordance with its terms.

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  Carrizo Oil & Gas, Inc.
 
 
  By   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President and
Chief Financial Officer 
 
         
  Bandelier Pipeline Holding, LLC
 
 
  By   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President and
Chief Financial Officer 
 
         
  Carrizo (Marcellus) LLC
 
 
  By   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President and
Chief Financial Officer 
 
         
  Carrizo (Marcellus) WV LLC
 
 
  By   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President and
Chief Financial Officer 
 
         
  Carrizo Marcellus Holding Inc.
 
 
  By   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President and
Chief Financial Officer 
 
         
  CCBM, Inc.
 
 
  By   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President and  
Chief Financial Officer 
 

 


 

  Chama Pipeline Holding LLC
 
  By   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President and
Chief Financial Officer 
 
 
  CLLR, Inc.    
 
  By   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President and
Chief Financial Officer 
 
 
  Hondo Pipeline Inc.    
 
  By   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President and
Chief Financial Officer 
 
 
  Mescalero Pipeline, LLC    
 
  By   /s/ Paul F. Boling    
    Name:   Paul F. Boling   
    Title:   Vice President and
Chief Financial Officer 
 

 


 

         
The foregoing Registration Rights Agreement is hereby
confirmed and accepted as of the date first above written.
       
Credit Suisse Securities (USA) LLC
WELLS FARGO SECURITIES, LLC
RBC CAPITAL MARKETS, LLC
 
    by: Credit Suisse Securities (USA) LLC  
       
  By:   /s/ David S. Alterman    
    Name:   David S. Alterman   
    Title:   Managing Director   
       
    by: Wells Fargo Securities , LLC
 
 
  By:   /s/ David Humphreys    
    Name:   David Humphreys   
    Title:   Managing Director   
       
    by: RBC CAPITAL MARKETS, LLC
 
 
  By:   /s/ David Capaldi    
    Name:   David Capaldi   
    Title:   Managing Director   

 


 

ANNEX A
     Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Initial Notes where such Initial Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date (as defined herein), it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See “Plan of Distribution.”

 


 

ANNEX B
     Each broker-dealer that receives Exchange Notes for its own account in exchange for Securities, where such Initial Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See “Plan of Distribution.”

 


 

ANNEX C
PLAN OF DISTRIBUTION
     Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Initial Notes where such Initial Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until                     , 20[  ] , all dealers effecting transactions in the Exchange Notes may be required to deliver a prospectus. (1)
     The Company will not receive any proceeds from any sale of Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an “underwriter” within the meaning of the Securities Act and any profit on any such resale of Exchange Notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.
     For a period of 180 days after the Expiration Date the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the Holders of the Securities) other than commissions or concessions of any brokers or dealers and will indemnify the Holders of the Securities (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act.
 
(1)   In addition, the legend required by Item 502(b) of Regulation S-K will appear on the back cover page of the Exchange Offer prospectus.

 


 

ANNEX D
o CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
         
  Name:    
  Address:      
       
If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Initial Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.