10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-K

(Mark One)

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2008

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 333-150853-4

Forbes Energy Services Ltd.

(Exact name of registrant as specified in its charter)

Bermuda	98-0581100
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3000 South Business Highway 281 Alice, Texas	78332
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (361) 664-0549

Securities registered pursuant to Section 12(b) or Section 12(g) of the Act: None

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    ¨   Yes     þ   No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    þ   Yes     ¨   No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    þ   Yes     ¨   No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

¨   Large Accelerated Filer	¨   Accelerated Filer
þ   Non-Accelerated Filer	¨   Smaller Reporting Company

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).    ¨   Yes     þ   No

The aggregate market value of the voting stock held by non-affiliates of the registrant as of the last business day of the most recently completed second fiscal quarter, June 30, 2008, was approximately CDN$196,911,153 based on the closing sales price of the registrant’s common stock as reported by the Toronto Stock Exchange on June 30, 2008 of $7.99 per share.

Indicate the number of common shares outstanding of each of the registrant’s classes of common shares, as of the latest

practicable date.

At March 20, 2009, there were 32,611,200 common shares outstanding and 29,500,000 Class B non-voting shares outstanding.

FORBES ENERGY SERVICES LTD. AND SUBSIDIARIES (a/k/a the “Forbes Group”)

TABLE OF CONTENTS

		Page
Cautionary Statement Regarding Forward-Looking Statements
PART I		1
Item 1.	Business	1
Item 1A.	Risk Factors	10
Item 1B.	Unresolved Staff Comments	19
Item 2.	Properties	20
Item 3.	Legal Proceedings	21
Item 4.	Submission of Matters to a Vote of Security Holders	21
PART II		22
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	22
Item 6.	Selected Financial Data	23
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 8.	Consolidated/Combined Financial Statements and Supplementary Data	39
Item 9.	Changes in Disagreements with Accountants on Accounting and Financial Disclosure	67
Item 9A.	Controls and Procedures	67
Item 9B.	Other Information	69
PART III		70
Item 10.	Directors, Executive Officers and Corporate Governance	70
Item 11.	Executive Compensation	70
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	70
Item 13.	Certain Relationships and Related Transaction, and Director Independence	70
Item 14.	Principal Accounting Fees and Services	70
PART IV		71
Item 15.	Exhibits, Financial Statement Schedules	71

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FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K and any oral statements made in connection with it include certain forward-looking statements within the meaning of the federal securities laws. You can generally identify forward-looking statements by the appearance in such a statement of words like “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should” or “will” or other comparable words or the negative of these words. When you consider our forward-looking statements, you should keep in mind the risk factors we describe and other cautionary statements we make in this Annual Report on Form 10-K. Our forward-looking statements are only predictions based on expectations that we believe are reasonable. Our actual results could differ materially from those anticipated in, or implied by, these forward-looking statements as a result of known risks and uncertainties set forth below and elsewhere in this Annual Report on Form 10-K. These factors include or relate to the following:

• supply and demand for oilfield services and industry activity levels in the current depressed market;

• uncertainty in the global financial markets and worldwide economic downturn;

• spending on the oil and natural gas industry given the recent worldwide economic downturn;

• our level of indebtedness in the current depressed market;

• impairment of our long-term assets;

• our ability to maintain stable pricing;

• potential for excess capacity in the current depressed market;

• competition;

• substantial capital requirements;

• significant operating and financial restrictions under our indenture and credit facility;

• technological obsolescence of operating equipment;

• dependence on certain key employees;

• concentration of customers;

• substantial costs of compliance with reporting obligations, including the Sarbanes-Oxley Act;

• material weaknesses in internal controls over financial reporting;

• environmental and other governmental regulation;

• risks inherent in our operations;

• market response to global demands to curtail use of oil and natural gas;

• change of control over us;

• conflicts of interest between the principal equity investors and noteholders;

• results of legal proceedings;

• ability to fully integrate future acquisitions;

• variation from projected operating and financial data;

• variation from budgeted and projected capital expenditures; and

• the other factors discussed under “Risk Factors.”

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We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. To the extent these risks, uncertainties and assumptions give rise to events that vary from our expectations, the forward-looking events discussed in this Annual Report on Form 10-K may not occur. All forward-looking statements attributable to us are qualified in their entirety by this cautionary statement.

Available Information

Information regarding the Company can be found on our internet website at http://www.forbsenergyservices.com. In addition, our annual reports on Form 10-K, quarterly reports on Form 10-Q and amendments to those reports filed or furnished pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934 are made available free of charge on our internet website as soon as reasonably practicable after these reports have been electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”). Information filed with the SEC may be read or copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet website (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically.

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PART I

Item 1.     Business

Overview

We are an independent oilfield services contractor that provides a broad range of onshore drilling-related and production-related services to oil and natural gas companies, primarily onshore in Texas. The services we provide are used to help oil and natural gas companies develop and enhance the production of oil and natural gas, and include fluid hauling, fluid disposal, well maintenance, completion services, workovers and recompletions, plugging and abandonment, and tubing testing. We believe we operate one of the youngest fleets of well servicing rigs, including those commonly referred to as workover rigs, in Texas.

We believe that our broad range of services, which extends from initial drilling, through production, to eventual abandonment, is fundamental to establishing and maintaining the flow of oil and natural gas throughout the life cycle of our customers’ wells. We derive a majority of our revenues from services that support production from existing oil and natural gas operations.

Since our inception in September 2003, we have grown organically from a small South Texas operational base with two well servicing rigs and eight vacuum trucks to a major regional provider of an integrated offering of production and well services. We have successfully executed an aggressive organic growth strategy focused on fleet expansion with the construction of new equipment in a segment of the oilfield services industry characterized by competitors with aging fleets. We believe that our new well servicing rigs and equipment, with an average age of less than 2 years, significantly differentiate us from our competitors.

As of December 31, 2008, we operated from 27 locations across Texas and also operated out of one location in Mississippi and one in Mexico. We currently provide a wide range of services to a diverse group of over 730 companies. Our blue-chip customer base includes ConocoPhillips Company, Apache Corporation, Chesapeake Energy Corporation, Devon Energy Corporation, Dominion Resources, Inc., EOG Resources, Inc., and Penn Virginia Corporation, among others. John E. Crisp and Charles C. Forbes, our senior management team, have cultivated deep and ongoing relationships with these customers during their average of over 30 years of experience in the oilfield services industry. For the year ended December 31, 2008, we generated revenues of approximately $360.9 million.

We currently conduct our operations through the following two business segments:

• Well Servicing. The well servicing segment accounted for 52.6% of our revenues for the year ended December 31, 2008. As of December 31, 2008, the well servicing segment utilized our fleet of 170 well servicing rigs, which included 162 workover rigs and 8 swabbing rigs and related assets and equipment. These assets are used to provide well maintenance, including remedial repairs and removal and replacement of downhole production equipment, well workovers, including significant downhole repairs, re-completions and re-perforations, completion and swabbing activities, and plugging and abandoning services. In addition, as of December 31, 2008, we had a fleet of six tubing testing units that are used to conduct pressure testing of oil and natural gas production tubing.

• Fluid Logistics. The fluid logistics segment accounted for 47.4% of our revenues for the year ended December 31, 2008. The fluid logistics segment utilizes our modern fleet of fluid transport trucks and related assets, including specialized vacuum, high-pressure pump and tank trucks, frac tanks, water wells, proprietary salt water disposal wells and facilities, and related equipment. These assets are used to provide, transport, store, and dispose of a variety of drilling and produced fluids used in, and generated by, oil and natural gas production. These services are required in most workover and completion projects and are routinely used in daily producing well operations.

We believe that our two business segments are complementary and create synergies in terms of selling opportunities. Our multiple lines of service allow us to capitalize on our existing customer base to grow within existing markets, generate more business from existing customers, and increase operating profits. By offering customers the ability to reduce the number of vendors they use, we believe it helps improve the efficiency of our customers. This is demonstrated by the fact that 81.9% of our revenues for the year ended December 31, 2008, were from customers that utilized services of both of our business segments. Further, by having multiple service offerings that span the life cycle of the well, we believe that we have a competitive advantage over smaller competitors offering more limited services.

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The following table summarizes the major components of our equipment fleet at the dates indicated.

	December 31,
	2008	2007	2006	2005	2004
Locations	27	18	12	7	4
Well Servicing Segment
Workover rigs (1)	162	95	41	17	11
Swabbing rigs	8	6	2	—	—
Tubing testing units	6	6	4	4	4
Fluid Logistics Segment
Vacuum trucks(1)	294	205	147	99	26
High-pressure pump trucks	19	14	7	4	2
Other heavy trucks	57	43	25	16	6
Frac tanks(1)	1,370	951	568	241	105
Salt water disposal wells	15	14	9	6	4

(1) At December 31, 2008, 26 of the vacuum trucks, 10 of the workover rigs and 143 of the frac tanks were leased.

Corporate Structure

Forbes Energy Services Ltd. is a Bermuda company created to be the holding company for Forbes Energy Services LLC and its subsidiaries. Forbes Energy Services LLC is a Delaware limited liability company and the U.S. holding company for our operating entities. We operate primarily through the following four subsidiaries which are all Delaware limited liability companies directly owned by Forbes Energy Services LLC: C.C. Forbes, LLC; TX Energy Services, LLC; Superior Tubing Testers, LLC; and Forbes Energy International, LLC. Forbes Energy International, LLC was formed to hold Forbes Energy Services México, S. de R.L. de C.V., a Mexican company that conducts our Mexican operations. Forbes Energy Services LLC also holds Forbes Energy Capital Inc., a Delaware corporation created solely to be a co-issuer of our senior secured notes. The following chart graphically illustrates our current structure:

* Forbes Energy Services México, S. de R.L. de C.V. is 99.99% owned by Forbes Energy International, LLC and 0.01% owned by Forbes Energy Services LLC.

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Reorganizations

Effective January 1, 2008, the members of each of C.C. Forbes, LLC, TX Energy Services, LLC and Superior Tubing Testers, LLC (which included Messrs. John Crisp and Charles Forbes and Ms. Janet Forbes) transferred all of the membership interests they held in such companies to Forbes Energy Services LLC in exchange for all of the outstanding membership interests in Forbes Energy Services LLC (the “Delaware Reorganization”).

In connection with a reorganization completed on May 29, 2008, (the “Bermuda Reorganization”) each of these members transferred 63% of their respective membership interests in Forbes Energy Services LLC to Forbes Energy Services Ltd. in exchange for Class B Shares. Of the proceeds from the Canadian initial public offering and simultaneous U.S. private placement of 24,644,500 common shares by Forbes Energy Services Ltd. in May 2008 (the “Initial Equity Offering”), $120 million was contributed by Forbes Energy Services Ltd. as additional capital to Forbes Energy Services LLC and used to pay the cash consideration for the repurchase by Forbes Energy Services LLC of the remaining membership interests held by the individuals who were members of such company. The purchase price for such transaction was determined on the basis of the price per common share under the initial public offering. Mr. John E. Crisp, the Chairman of the Board, President and Chief Executive Officer of Forbes Energy Services Ltd., Mr. Charles C. Forbes, the Executive Vice President and Chief Operating Officer of Forbes Energy Services Ltd., and Ms. Janet L. Forbes, a director of Forbes Energy Services Ltd., each received approximately $36 million from Forbes Energy Services LLC upon the repurchase of their remaining membership interests, or approximately 20.9% each of the gross proceeds of the Initial Equity Offering.

In connection with the Bermuda Reorganization, John E. Crisp, our President and Chief Executive Officer, Charles C. Forbes, our Executive Vice President and Chief Operating Officer, and Janet L. Forbes, one of our directors, who were the founders of the Forbes Group and were also the three largest owners of each of the entities comprising the original Forbes Group, along with all of the other members of Forbes Energy Services LLC, received Class B shares of Forbes Energy Services Ltd. The Class B shares are convertible at any time at the discretion of each holder into common shares. The Class B shares generally have no voting rights, but are permitted to approve certain actions.

Upon completion of the Bermuda Reorganization, Forbes Energy Services LLC became the wholly owned subsidiary of Forbes Energy Services Ltd. Our headquarters and executive offices are located at 3000 South Business Hwy 281, Alice, Texas 78332. We can be reached by phone at (361) 664-0549.

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Our Competitive Strengths

We believe that the following competitive strengths position us well within the oilfield services industry:

• Young and Modern Fleet. We believe we operate one of the youngest and most modern fleets of well servicing rigs among the large well-servicing companies, based on an average age of well servicing rigs. We believe over 80% of the active U.S. well servicing rig fleet was built prior to 1982, resulting in an average age in excess of 20 years. By contrast, approximately 89.4% of our 170 well servicing rigs at December 31, 2008 were built in the last three years. Many of our customers tell us that a younger and more modern fleet is more attractive to them because newer well servicing rigs require less down time for maintenance and generally are more reliable than older equipment. In addition, we believe that the level of our business is not subject to the same fluctuations as may be experienced by our competitors who operate primarily older equipment because new equipment is typically the first to be deployed and the last to be idled. As part of our strategy, we have undertaken to enhance our design specifications to improve the operational and safety characteristics of our equipment compared with older equipment.

• Exposure to Revenue Streams Throughout the Life Cycle of the Well. Our maintenance and workover services expose us to demand from our customers throughout the life cycle of a well, from drilling through production and eventual abandonment. Each new well that is drilled provides us a potential multi-year stream of well services revenue, as our customers attempt to maximize and maintain a well’s productivity. Accordingly, demand for our services is generally driven by the total number of producing wells in a region and is generally less volatile than demand for new well drilling services.

• High Level of Customer Retention with a Blue Chip Customer Base. Our top customers include many of the largest integrated and independent oil and natural gas companies operating onshore in the United States. We believe we have been successful in growing in our existing markets as well as expanding to new markets with existing customers due to the quality of our well servicing rigs, our personnel and our safety record. For example, members of our senior management have maintained excellent working relationships for over 20 years with our top customer. We believe the complementary nature of our two business segments also helps retain customers because of the efficiency we offer a customer that has multiple needs at the wellsite. Notably, 81.9% of our revenues from the year ended December 31, 2008 were from customers that utilize services of both of our business segments.

• Industry-Leading Safety Record. For 2008, we had approximately 81.5 % fewer incidents than the industry average. Our customers tell us that our safety record and reputation are critical factors to purchasing and operations managers in their decision-making process. Over several years, we have developed a strong safety culture based on our training programs and safety seminars for our employees and customers. For example, for several years, members of our senior management have played an integral part in monthly joint safety training meetings with customer personnel. In addition, our purchase and deployment of new well servicing rigs with enhanced safety features has contributed to our strong safety record and reputation.

• Experienced Senior Management Team and Operations Staff. Our senior management team of John E. Crisp and Charles C. Forbes has over 64 years of combined experience within the oilfield services industry. In addition, our next level of management, which includes our location managers, has an average of approximately 22 years of experience in the industry.

Our Business Strategy

Our strategy is to continue to do the following:

• Focus on Proven and Established Oil and Natural Gas Basins. We focus our operations on customers that operate in well-established basins which have proven production histories and that have maintained a higher level of activity throughout various oil and natural gas pricing environments. Given the current depressed markets, we believe that this creates a more stable revenue stream for us as the production related services we provide our customers are tied more to ongoing production from proven wells and less to exploratory activity that has been negatively influenced by the recent precipitous decreases in oil and natural gas prices. Our experience shows that production-related services have generally withstood the current depressed economic conditions better than exploratory services. This allows us to improve or maintain utilization and margins for our fleet of assets.

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• Establish and Maintain Leadership Position in Core Operating Areas. Based on our estimates, we believe that we have a majority market share in well servicing and fluid logistics in South Texas. We strive to establish and maintain market leadership positions within all of our core operating areas. To achieve this goal, we maintain close customer relationships and offer high-quality services and the newest equipment for our customers. In addition, our significant presence in our core operating areas facilitates employee retention and hiring and brand recognition.

• Maintain a Disciplined Growth Strategy. Through the third quarter of 2008, we grew our business by following our customers to new locations which have been in reasonably close proximity to our existing locations. In 2007, we expanded from our initial presence in the Cotton Valley with a location in Marshall to Kilgore and Carthage, Texas. We have followed the same strategy in the Permian Basin, where we established an initial presence in Ozona and subsequently expanded to San Angelo, Monahans, Odessa and Big Spring, Texas. We believe that this growth strategy allows us to create synergies in geographic areas and then permits us to expand profitably from those geographic areas in which we have created a critical mass. During 2008, we expanded our field locations with operations to Mississippi and Mexico. During the fourth quarter of 2008, we severely curtailed our expansion due to the economic downturn that negatively impacted the energy industry. We have minimal capital expenditures planned for 2009 which primarily relate to our Mexico operation. These could be curtailed if the market deteriorates further. Timing of future expansion will be dictated by the recovery of exploration activity.

Business Segments

Well Servicing Segment

Through a modern fleet of 170 well servicing rigs, as of December 31, 2008, situated in 16 locations across Texas, one in Mississippi and one in Mexico, we provide a comprehensive offering of well servicing activities to oil and natural gas companies in Texas and our other locations, including completions of newly drilled oil and natural gas wells, wellbore maintenance, workovers and re-completions, tubing testing, and plugging and abandonment services. Our well servicing rig fleet has an average age of approximately 2 years. As part of our operational strategy, we enhanced our design specifications to improve the operational and safety characteristics of our equipment compared with older equipment operated by others in the industry. These include increased derrick height and weight ratings, and increased mud pump horsepower. We believe these enhanced features translate into increased demand for our equipment and services along with better pricing for our equipment and personnel. In addition, we augment our well servicing rig fleet with auxiliary equipment, such as mud pumps, power swivels, mud plants, mud tanks, blow-out preventers, lighting plants, generators, pipe racks, and tongs, which results in incremental rental revenue and increases the profitability of a typical well service job.

We provide the following services in our well servicing segment:

• Completions. Utilizing our well servicing rig fleet, we perform completion services, which involve perforating and/or stimulating a wellbore to allow it to flow oil or natural gas, along with swabbing operations that are utilized to clean a wellbore prior to production. Completion operations are generally shorter term in nature and involve our equipment operating on a site for a period of two to three days.

• Maintenance. Through our fleet of well servicing rigs, we provide for the removal and repair of sucker rods, downhole pumps and other production equipment, the repair of failed production tubing, and the removal of sand, paraffin and other downhole production-related byproducts that impair well productivity. These operations typically involve our well servicing rigs operating on a wellsite for five to seven days.

• Workovers and Re-completions. We provide workover and re-completion services for existing wellbores. These services are designed to significantly enhance productivity by re-perforating to initiate or re-establish productivity from an oil and natural gas wellbore. In addition, we provide major downhole repairs such as casing repair, production tubing replacement, and deepening and sidetracking operations used to extend a wellbore laterally or vertically. These operations are typically longer term in nature and involve our well servicing rigs operating on a wellsite for one to two weeks at a time.

• Tubing Testing. Through a fleet of six downhole testing units, we provide downhole tubing testing services that allow operators to verify tubing integrity. Tubing testing services are performed as production tubing is run into a new wellbore or on older wellbores as production tubing is replaced during a workover operation. Tubing testing services are complementary to our other service offerings and provide a significant opportunity for cross-selling.

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• Plugging and Abandonment. Our well servicing rigs are also used in the process of permanently closing oil and natural gas wells that are no longer capable of producing in economic quantities. Plugging and abandonment work can be performed with a well servicing rig along with wireline and cementing equipment; however, this service is typically provided by companies that specialize in plugging and abandonment work. Many well operators bid this work on a “turnkey” basis, requiring the service company to perform the entire job, including the sale or disposal of equipment salvaged from the well as part of the compensation received, and complying with state regulatory requirements. We perform plugging and abandonment work in conjunction with equipment provided by other service companies.

Fluid Logistics Segment

Our fluid logistics segment provides an integrated array of oilfield fluid sales, transportation, storage, and disposal services that are required on most workover, drilling, and completion projects and are routinely used in daily operation of producing wells by oil and natural gas producers. We have a substantial operational footprint with 19 fluid logistics locations across Texas as of December 31, 2008, and an extensive fleet of transportation trucks, high-pressure pump trucks, frac tanks, and proprietary disposal wells. This combination of services enables us to provide a one-stop source for oil and natural gas companies. We believe that the vast majority of our smaller competitors in this segment can provide some, but not all, of the equipment and services required by customers, thereby requiring them to use several companies to meet their requirements and increasing their administrative burden. In addition, by pursuing an integrated approach to service, we experience increased asset utilization rates, as multiple assets are usually required to provide a given service.

We provide the following services in our fluid logistics segment:

• Fluid Hauling. At December 31, 2008, we owned or leased 370 fluid service vacuum trucks and trailers equipped with a fluid hauling capacity of up to 150 barrels per unit. Each fluid service truck unit is equipped to pump fluids from or into wells, pits, tanks, and other on-site storage facilities. The majority of our fluid service truck units are also used to transport water to fill frac tanks on well locations, including frac tanks provided by us and others, to transport produced salt water to disposal wells, including injection wells owned and operated by us, and to transport drilling and completion fluids to and from well locations. In conjunction with the rental of frac tanks, we use fluid service trucks to transport water for use in fracturing operations. Following completion of fracturing operations, our fluid service trucks are used to transport the flowback produced as a result of the fracturing operations from the wellsite to disposal wells.

• Disposal Services. Most oil and natural gas wells produce varying amounts of salt water throughout their productive lives. Under Texas law, oil and natural gas wastes and salt water produced from oil and natural gas wells are required to be disposed of in authorized facilities, including permitted salt water disposal wells. Injection wells are licensed by state authorities and are completed in permeable formations below the fresh water table. At December 31, 2008, we operated 15 disposal wells in 12 locations across Texas, with injection capacity of over 120,000 barrels per day, that are permitted to dispose of salt water and incidental non-hazardous oil and natural gas wastes throughout our operational bases in Texas. Our transport trucks frequently transport fluids that are disposed of in these salt water disposal wells. The disposal wells have injection capacities ranging up to 15,000 barrels per day. The salt water disposal wells are strategically located in close proximity to the producing wells of our customers. We maintain separators at all 15 disposal wells, which permits us to salvage residual crude oil that is used in operations or later sold.

• Equipment Rental. At December 31, 2008, we owned or leased a fleet of 1370 fluid storage tanks that can store up to 500 barrels of fluid each. This equipment is used by oilfield operators to store various fluids at the wellsite, including fresh water, brine and acid for frac jobs, flowback, temporary production, and mud storage. We transport the tanks on our trucks to well locations that are usually within a 75-mile radius of our nearest location. Frac tanks are used during all phases of the life of a producing well. A typical fracturing operation can be completed within four days using five to 25 or more frac tanks. We believe we maintain one of the youngest storage tank fleets in the industry with an average equipment age of approximately 3 years.

• Fluid Sales. We sell and transport a variety of fluids used in drilling, completion and workover operations for oil and natural gas wells. Although a relatively small percentage of our overall business, the provision of these fluids drives asset utilization rates and revenue from associated equipment. Through these services, we provide fresh water used in fracturing fluid, completion fluids, cement, and drilling mud. In addition, we provide potassium chloride for completion fluids, brine water, and water-based drilling mud.

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Seasonality

Our operations are impacted by seasonal factors. Please see “Item 1A Risk Factors – Activity in the oilfield services industry is seasonal and may affect our revenues during certain periods” in this Form 10-K for additional information.

Sales and Marketing

Sales and marketing functions are performed at two levels: at the field level and through our sales representatives and executives. At the field level, our operations and rig supervisors are in constant contact with their counterparts at our customers. This contact includes working closely in the field, problem resolution efforts, and 24-hour availability. Employees of our customers become accustomed to working closely with and depending on our personnel for assistance, guidance, advice, and in other areas where teams typically interact. Our objective is for our customers to see our employees as an extension of the customers’ employees and resources. These relationships not only secure business long-term, but also generate additional business as new opportunities arise.

Our sales representatives and executives perform more traditional sales activities such as calling on customers, sending proposals, and following up on jobs to ensure customer satisfaction. This includes heavy participation in customer safety programs where our executives and sales staff either participate in or teach safety classes at various customer locations. From a sales standpoint, this close involvement and support is key to establishing and maintaining long-term relationships with the major oil and natural gas companies.

We operate a decentralized sales and marketing organization, where local management teams are largely responsible for developing stronger relationships with customers at the field level. Our customers typically are relationship driven, make decisions at the local level, and are willing to pay higher rates for responsiveness and quality services.

We cross-market our well servicing rigs along with our fluid logistics services, thereby offering our customers the ability to minimize vendors, which we believe improves the efficiency of our customers. This is demonstrated by the fact that 81.9% of our revenues for the year ended December 31, 2008 were from customers that utilized services of both of our business segments.

Employees

At December 31, 2008, we had 1,876 employees. We have made significant investments to recruit employees, provide comprehensive employee training, and implement recognized standards for health and safety. None of our employees are represented by a union or employed pursuant to a collective bargaining agreement or similar arrangement. We have not experienced any strikes or work stoppages, and we believe we have good relations with our employees. Since December 31, 2008, as a result of the current depressed market conditions, we have reduced our workforce by approximately 34%, and reduced pay rates by approximately 17%.

Continued retention of existing qualified management and field employees and availability of additional qualified management and field employees will be a critical factor in our continued success as we work to gain operating efficiencies in the current depressed market.

Competition

Our competition includes small regional service providers as well as larger companies with operations throughout the continental United States and internationally. Our four largest competitors are Basic Energy Services, Inc., Complete Production Services, Inc., Key Energy Services, Inc., and Nabors Industries Ltd. We believe that these larger competitors primarily have centralized management teams that direct their operations and decision-making primarily from corporate and regional headquarters. In addition, because of their size, these companies market a large portion of their work to the major oil and natural gas companies. We compete primarily on the basis of the young age and quality of our equipment, our safety record, the quality and expertise of our employees, and our responsiveness to customer needs.

Customers

We served in excess of 730 customers during the year ended December 31, 2008. For this same time period, our largest customer comprised approximately 8.5% of our combined revenues, our five largest customers comprised approximately 30.3% of our combined revenues, and our ten largest customers comprised approximately 42.9% of our combined revenues. Through the third

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quarter of 2008, we had been expanding our market base and adding new customers, however, our expansion was scaled back in the fourth quarter due to the general decrease in activity in the oil and natural gas industry. The loss of our top customer or of several of the customers in the top ten would materially adversely affect our revenues and results of operations. We believe that customers lost could be replaced with other customers, but there can be no assurance that lost revenues could be replaced in a timely manner or at all, especially given the current market conditions.

Our business segments charge customers by the hour, day or project for services, equipment and personnel.

We have master service agreements in place with most of our customers, under which projects are awarded on the basis of price, type of service, location of equipment, and the experience level of work crews.

Suppliers

We purchase or lease our well servicing rigs from several third-party suppliers. The following table provides information regarding our largest rig providers during the year ended December 31, 2008:

Rig Suppliers	Percentage of Purchases For the Year Ended December 31, 2008
Dragon Rig Sales and Service	63.2	%
Lanco Well Services Corp.*	35.3	%
Other	1.5	%

* During 2008, Dragon Rig Sales and Service’s parent company acquired Lanco Well Services Corp.

We have a strong and flexible working relationship with our principal well servicing rig suppliers who have verbally provided us with a right of first refusal on well servicing rigs under construction. We believe these verbal assurances permit us to delay any commitment to purchase a rig until such time as we are in need of the rig while effectively preventing our competitors from having access to such well servicing rigs unless we decline to accept them upon completion of construction.

We purchase well servicing chemicals, drilling fluids, and related supplies from various third-party suppliers. We purchase potassium chloride from two suppliers. For all other well servicing products, such as barite, surfactants, and drilling fluids, we purchase from various suppliers of well servicing products when needed.

Although we do not have written agreements with any of our suppliers (other than leases with respect to certain of our rigs and equipment), we have not historically suffered from an inability to purchase or lease equipment or purchase raw materials.

Insurance

Our operations are subject to risks inherent in the oilfield services industry, such as equipment defects, malfunctions, failures and natural disasters. In addition, hazards such as unusual or unexpected geological formations, pressures, blow-outs, fires or other conditions may be encountered in drilling and servicing wells, as well as the transportation of fluids and our assets between locations. We have obtained insurance coverage against certain of these risks which we believe is customary in the industry, including $1 million in general liability per occurrence, $25 million in umbrella coverage, and $25 million of excess liability coverage. Such insurance is subject to coverage limits and exclusions and may not be available for all of the risks and hazards to which we are exposed. In addition, no assurance can be given that such insurance will be adequate to cover our liabilities or will be generally available in the future or, if available, that premiums will be commercially justifiable. If we incur substantial liability and such damages are not covered by insurance or are in excess of policy limits, or if we incur such liability at a time when we are not able to obtain liability insurance, our business, results of operations and financial condition could be materially and adversely affected.

Environmental Regulations

Our operations are subject to various federal, state, and local laws and regulations pertaining to health, safety and the environment. Laws and regulations protecting the environment have become more stringent over the years, and in certain circumstances may impose strict liability, rendering us liable for environmental damage without regard to negligence or fault on our part. Moreover, cleanup costs, penalties, and other damages arising as a result of new, or changes to existing, environmental laws and regulations could be substantial and could have a material adverse effect on our financial condition, results of operations and cash flows. We believe that we conduct our operations in substantial compliance with current federal, state and local requirements related to health, safety and the environment.

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The following is a summary of the more significant existing environmental, health and safety laws and regulations to which our operations are subject and for which compliance may have a material adverse effect on our results of operation or financial position. See “Item 1A Risk Factors - Due to the nature of our business, we may be subject to environmental liability” in this Form 10-K for further details.

Hazardous Substances and Waste

The Comprehensive Environmental Response, Compensation, and Liability Act, as amended, or CERCLA, and comparable state laws impose liability without regard to fault or the legality of the original conduct on certain defined persons, including current and prior owners or operators of the site where a release of hazardous substances occurred and entities that disposed or arranged for the disposal of the hazardous substances found at the site. Under CERCLA, these responsible persons may be liable for the costs of cleaning up the hazardous substances, for damages to natural resources, and for the costs of certain health studies. In the course of our operations, we generate materials that are regulated as hazardous substances and, as a result, may incur CERCLA liability for cleanup costs. Also, claims may be filed for personal injury and property damage allegedly caused by the release of hazardous substances or other pollutants.

We also generate solid wastes that are subject to the requirements of the Resource Conservation and Recovery Act, as amended, or RCRA, and comparable state statutes. Certain materials generated in the exploration, development, or production of crude oil and natural gas are excluded from RCRA’s hazardous waste regulation, but these wastes, which include wastes currently generated during our operations, could be designated as “hazardous wastes” in the future and become subject to more rigorous and costly disposal requirements. Any such changes in the laws and regulations could have a material adverse effect on our operating expenses.

Although we have used operating and disposal practices that were standard in the industry at the time, hydrocarbons or other wastes may have been released at properties owned or leased by us now or in the past, or at other locations where these hydrocarbons and wastes were taken for treatment or disposal. Under CERCLA, RCRA and analogous state laws, we could be required to clean up contaminated property (including contaminated groundwater), perform remedial activities to prevent future contamination, or pay for associated natural resource damages.

Water Discharges

We operate facilities that are subject to requirements of the Clean Water Act, as amended, or CWA, and analogous state laws that impose restrictions and controls on the discharge of pollutants into navigable waters. Pursuant to these laws, permits must be obtained to discharge pollutants into state waters or waters of the United States, including to discharge storm water runoff from certain types of facilities. Spill prevention, control, and countermeasure requirements under the CWA require implementation of measures to help prevent the contamination of navigable waters in the event of a hydrocarbon spill. The CWA can impose substantial civil and criminal penalties for non-compliance.

Employee Health and Safety

We are subject to the requirements of the federal Occupational Safety and Health Act, as amended, or OSHA, and comparable state laws that regulate the protection of employee health and safety. OSHA’s hazard communication standard requires that information about hazardous materials used or produced in our operations be maintained and provided to employees, state and local government authorities, and citizens. We believe that our operations are in substantial compliance with OSHA requirements.

Other Laws and Regulations

We operate salt water disposal wells that are subject to the CWA, Safe Drinking Water Act, and state and local laws and regulations, including those established by the Environmental Protection Agency’s Underground Injection Control Program which establishes the minimum program requirements. Our salt water disposal wells are located in Texas, which requires us to obtain a permit to operate each of these wells. We have such permits for each of our salt water disposal wells. The Texas regulatory agency may suspend or modify any of these permits if such well operation is likely to result in pollution of fresh water, substantial violation of permit conditions or applicable rules, or leaks to the environment. We maintain insurance against some risks associated with our well service activities, but there can be no assurance that this insurance will continue to be commercially available or available at premium levels that justify its purchase by us. The occurrence of a significant event that is not fully insured or indemnified could have a materially adverse effect on our financial condition and operations.

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Item 1A.     Risk Factors

The following information describes certain significant risks and uncertainties inherent in our business. You should take these risks into account in evaluating us. This section does not describe all risks applicable to us, our industry or our business, and it is intended only as a summary of certain material risks. You should carefully consider such risks and uncertainties together with the other information contained in this Form 10-K. If any of such risks or uncertainties actually occurs, our business, financial condition or operating results could be harmed substantially and could differ materially from the plans and other forward-looking statements included in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Form 10-K.

The industry in which we operate is highly volatile, and there can be no assurance that demand for our services will improve from recent depressed levels.

The demand, pricing and terms for oilfield services in our existing or future service areas largely depend upon the level of exploration and development activity for both crude oil and natural gas in the United States. Oil and natural gas industry conditions are influenced by numerous factors over which we have no control, including oil and natural gas prices, expectations about future oil and natural gas prices, levels of consumer demand, the cost of exploring for, producing and delivering oil and natural gas, the expected rates of declining current production, the discovery rates of new oil and natural gas reserves, available pipeline and other oil and natural gas transportation capacity, weather conditions, political, regulatory and economic conditions, and the ability of oil and natural gas companies to raise equity capital or debt financing.

The level of activity in the oil and natural gas industry in the United States is volatile and has recently experienced a significant downturn. No assurance can be given that trends in oil and natural gas exploration and production activities will improve or, if so, when such improvement will occur. Continuation of the recent substantial reduction in oil and natural gas prices will likely continue to have a negative effect on oil and natural gas production levels and therefore affect the demand for drilling and well services by oil and natural gas companies. Any addition to, or elimination or curtailment of, government incentives for companies involved in the exploration for and production of oil and natural gas could have a significant effect on the oilfield services industry in the United States. Lower oil and natural gas prices could also cause our customers to seek to terminate, renegotiate or fail to honor our services contracts, affect the fair market value of our equipment fleet which in turn could trigger a write down of our assets for accounting purposes, affect our ability to retain skilled oilfield services personnel, and affect our ability to obtain access to capital to fund and grow our business. In connection with the preparation of our 2008 year-end financial statements, it was determined that our goodwill was fully impaired and it was fully written off effective in the fourth quarter of 2008. A further material decline in crude oil or natural gas prices or industry activity could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We may be adversely affected by uncertainty in the global financial markets and worldwide economic downturn.

Our future results may be impacted by the worldwide economic downturn, continued volatility or further deterioration in the debt and equity capital markets, inflation, deflation, or other adverse economic conditions that may negatively affect us or parties with whom we do business resulting in their non-payment or inability to perform obligations owed to us such as the failure of customers to honor their commitments, the failure of major suppliers to complete orders or the failure by Citibank, N.A. to provide expected funding under our revolving credit agreement. Additionally, credit market conditions may slow our collection efforts as customers experience increased difficulty in obtaining requisite financing, potentially leading to lost revenue and higher than normal accounts receivable. This could result in greater expense associated with collection efforts and increased bad debt expense.

The cost of raising money in the debt and equity capital markets has increased substantially during the current financial crisis while the availability of funds from those markets has diminished significantly. The current global economic downturn may adversely impact our ability to issue additional debt and institutional investors have responded to their customers by increasing interest rates, enacting tighter lending standards and refusing to refinance existing debt upon maturity or on terms similar to expiring debt. Even though we completed a private placement of 7,966,500 shares of our common stock for aggregate net proceeds of $30.0 million in the fourth quarter of 2008, we may require additional capital in the future. However, due to the above listed factors, we cannot be certain that additional funding will be available if needed and, to the extent required, on acceptable terms.

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Our business depends on domestic spending by the oil and natural gas industry, and this spending and our business may be adversely affected by industry and financial market conditions that are beyond our control.

We depend on our customers’ willingness to make operating and capital expenditures to explore, develop and produce oil and natural gas in the United States. Customers’ expectations for lower market prices for oil and natural gas, as well as the availability of capital for operating and capital expenditures, may curtail spending thereby reducing demand for our services and equipment.

Industry conditions are influenced by numerous factors over which we have no control, such as the supply of and demand for oil and natural gas, domestic and worldwide economic conditions, political instability in oil and natural gas producing countries and merger and divestiture activity among oil and natural gas producers. The volatility of the oil and natural gas industry and the consequent impact on exploration and production activity could adversely impact the level of drilling and workover activity by some of our customers. This reduction may cause a decline in the demand for our services or adversely affect the price of our services. In addition, reduced discovery rates of new oil and natural gas reserves in our market areas also may have a negative long-term impact on our business, even in an environment of stronger oil and natural gas prices, to the extent existing production is not replaced and the number of producing wells for us to service declines.

Recent adverse changes in capital markets have also caused a number of oil and natural gas producers to announce reductions in capital budgets for future periods. Limitations on the availability of capital, or higher costs of capital, for financing expenditures may cause these and other oil and natural gas producers to make additional reductions to capital budgets in the future even if commodity prices remain at historically high levels.

These same economic factors impact our customers’ ability to pay amounts due to us on a timely basis. This may impact some customers more severely causing them to be unable to pay their vendors for extended periods, if at all. This could have a negative impact on our cash flow.

Our indebtedness could restrict our operations and make us more vulnerable to adverse economic conditions.

As of December 31, 2008, our long-term debt, including current maturities, was $212.2 million. In the event the downturn continues or worsens, our level of indebtedness may adversely affect operations and limit our growth. Our level of indebtedness may affect our operations in several ways, including the following:

• by increasing our vulnerability to general adverse economic and industry conditions;

• due to the fact that the covenants that are contained in the agreements governing our indebtedness limit our ability to borrow funds, dispose of assets, pay dividends and make certain investments;

• due to the fact that any failure to comply with the financial or other covenants of our debt could result in an event of default, which could result in some or all of our indebtedness becoming immediately due and payable; and

• due to the fact that our level of debt may impair our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or other general corporate purposes.

Under our Credit Facility, an event of default will be deemed to have occurred if there is a change in control over us or if a material adverse change occurs with regards to our financial position, our consolidated business, assets, operations, properties or prospects, our ability to timely pay the obligations under the Credit Facility or the enforceability of the material terms of any material loan document against us. The lender under the Credit Facility could at some future date make a determination that such a material adverse change had occurred, which is outside our control. Due to cross-default provisions in our Credit Facility and the indenture governing our Senior Secured Notes, a default and acceleration of outstanding debt under one debt agreement would result in the default and possible acceleration of outstanding debt under our other agreement. Accordingly, a default under a material adverse change clause or otherwise could result in all or a portion of our outstanding debt becoming immediately due and payable. If this occurred, we might not be able to obtain waivers or secure alternative financing to satisfy all of our obligations simultaneously. These events could have a material adverse effect on our business, financial position, results of operations and cash flows and the ability to satisfy the obligations under our debt agreements.

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Impairment of our long-term assets may adversely impact our financial position and results of operations.

We evaluate our long-term assets including property, equipment, identifiable intangible assets and goodwill in accordance with generally accepted accounting principles in the U.S. We used estimated future cash flows in assessing recoverability of our long-lived assets and an impairment of goodwill. The cash flow projections are based on our current operating plan, estimates and judgmental assessments. We perform this assessment of potential impairment at least annually, but also whenever facts and circumstances indicate that the carrying value of the net assets may not be recoverable due to various external or internal factors, termed a “triggering event.” We have recorded goodwill impairment charges of $4.4 million for the year ended December 31, 2008. If we determine that our estimates of future cash flows were inaccurate or our actual results for 2009 are materially different than expected, we could record additional impairment charges at interim periods during 2009 or in future years, which could have a material adverse effect on our financial position and results of operations.

We may be unable to maintain pricing on our core services.

Through the first three quarters of 2008, we were able to maintain consistent pricing for our services given the high level of demand through such period. However, as a result of pressures stemming from deteriorating market conditions and falling commodity prices, it has become increasingly difficult to maintain our prices. We have and will likely continue to face pricing pressure from our customers and our competitors. We have made price concessions, and may be compelled to make further price concessions, in order to maintain market share. The inability to maintain our pricing or further reductions in our pricing may have a material negative impact on our financial position, operating results, and cash flows.

Industry capacity may adversely affect our business.

Through the first three quarters of 2008, we had excellent utilization rates. As a result of the current worldwide economic downturn and decline in U.S. onshore exploration and production activities, demand in the industry generally is much lower than in the past which also means that neither we nor our competitors are utilizing significant portions of our respective rig fleets and related equipment. Lower utilization of our fleet has led to reduced pricing for our services. Capacity that exceeds current demand in the industry has further exacerbated the pricing pressure for our services. Although oilfield service companies are not likely to add significant new capacity under current market conditions, in light of current market conditions and the deteriorating demand for our services, the excess capacity could cause us to experience continued pressure on the pricing of our services and our utilization. This could have a material negative impact on our financial position, operating results, and cash flows.

The industry in which we operate is highly competitive.

The oilfield services industry is highly competitive and we compete with a substantial number of companies, some of which have greater technical and financial resources than we have. Our four largest competitors are Basic Energy Services, Inc., Complete Production Services, Inc., Key Energy Services Inc. and Nabors Industries Ltd. Our ability to generate revenues and earnings depends primarily upon our ability to win bids in competitive bidding processes and to perform awarded projects within estimated times and costs. There can be no assurance that competitors will not substantially increase the resources devoted to the development and marketing of products and services that compete with ours, or that new or existing competitors will not enter the various markets in which we are active. In certain aspects of our business, we also compete with a number of small and medium-sized companies that, like us, have certain competitive advantages such as low overhead costs and specialized regional strengths. In addition, reduced levels of activity in the oil and natural gas industry could intensify competition and the pressure on competitive pricing and may result in lower revenues or margins to us.

We anticipate having substantial capital requirements that, if not met, may slow our operations.

Our business strategy is based in part upon the continued expansion of our fleet through the purchase of new well servicing rigs, vacuum trucks, and related equipment. In order to continue to implement our business strategy, we will be required to expend substantial sums for any such purchases. We expect to pay for these capital expenditures through cash flow from operations, borrowings under the Credit Facility, short-term equipment vendor financings, and other permitted financings. To continue to fund future growth, including making additional capital expenditures to purchase additional equipment and, over the longer term, to remain competitive, we may need to obtain additional financings, some of which may be secured, and/or to raise capital through the sale of additional debt or equity securities. Our ability to obtain financing or to access the capital markets for future offerings may be limited by the restrictive covenants in our current and future debt agreements, by our future financial condition, and by adverse market conditions resulting from, among other things, general economic conditions and contingencies and uncertainties beyond our control.

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In light of the current market conditions and the deteriorating demand for our services, capital requirements for new equipment purchases are not currently an issue. However, an upturn in the market would renew the risks discussed in this risk factor.

The indenture governing the Senior Secured Notes and the credit agreement governing the Credit Facility impose significant operating and financial restrictions on us that may prevent us from pursuing certain business opportunities and restrict our ability to operate our business.

The indenture governing the Senior Secured Notes and the credit agreement governing the Credit Facility contain covenants that restrict our ability to take various actions, such as

• incurring or guaranteeing additional indebtedness or issuing disqualified capital stock;

• creating or incurring liens;

• engaging in business other than our current business and reasonably related extensions thereof;

• making loans and investments;

• paying certain dividends, distributions, redeeming subordinated indebtedness or making other restricted payments;

• incurring dividend or other payment restrictions affecting certain subsidiaries;

• transferring or selling assets;

• entering into transactions with affiliates;

• making capital expenditures;

• entering into sale/leaseback transactions; and

• consummating a merger, consolidation or sale of all or substantially all of our assets.

In addition, the credit agreement requires us to comply with specified financial ratios, including regarding minimum net worth, fixed charge coverage and similar such ratios.

Our ability to comply with these covenants will likely be affected by events beyond our control, and we cannot assure that we will satisfy those requirements.

The restrictions contained in the indenture and the credit agreement could also limit our ability to plan for or react to market conditions, meet capital needs or otherwise restrict our activities or business plans and adversely affect our ability to fund our operations, enter into acquisitions or to engage in other business activities that would be in our interest.

We are subject to the risk of technological obsolescence.

Our ability to maintain our current business and win new business will depend upon continuous improvements in operating equipment, among other things. There can be no assurance that we will be successful in our efforts in this regard or that we will have the resources available to continue to support this need to have our equipment remain technologically up to date and competitive. Our failure to do so could have a material adverse effect on us. No assurances can be given that competitors will not achieve technological advantages over us.

We are highly dependent on certain of our officers and key employees.

Our success is dependent upon our key management, technical and field personnel, especially John E. Crisp, our President and Chief Executive Officer, Charles C. Forbes, our Executive Vice President and Chief Operating Officer, and other key executive officers. Any loss of the services of any one of such officers or a sufficient number of other employees could have a material adverse effect on our business and operations. Our ability to expand our services is dependent upon our ability to attract and retain additional qualified employees. The ability to secure the services of additional personnel may be constrained in times of strong industry activity.

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Our customer base is concentrated within the oil and natural gas production industry and loss of a significant customer could cause our revenue to decline substantially.

We served in excess of 730 customers for the year ended December 31, 2008. For this same time period, our largest customer comprised approximately 8.5% of our combined revenues, our five largest customers comprised approximately 30.3% of our combined revenues, and our top ten customers comprised approximately 42.9% of our combined revenues. Although we have been continually expanding our market base and adding new customers since inception, these customers currently represent a large portion of our combined revenues. The loss of our top customer or of several of our top customers would adversely affect our revenues and results of operations. We may be able to replace customers lost with other customers, but there can be no assurance that lost revenues could be replaced in a timely manner, with the same margins or at all.

We will continue to incur significant costs as a result of being obligated to comply with Securities Exchange Act reporting requirements, the Sarbanes-Oxley Act and Canadian reporting requirements, and our management will be required to devote substantial time to compliance matters.

Under our indenture, we are required to file reports under the Securities Exchange Act of 1934, as amended, with the Securities and Exchange Commission, or the Commission. In addition, the Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the Commission have imposed various requirements on public companies, including the establishment and maintenance of effective disclosure controls and procedures, internal controls and corporate governance practices. We are also required to comply with the rules and regulations applicable to public companies in Canada and to file reports with the Canadian securities administrators. Accordingly, we will continue to incur significant legal, accounting and other expenses. Our management and other personnel will continue to devote a substantial amount of time and resources to comply with these requirements. These rules and regulations will increase our legal and financial compliance costs.

The Sarbanes-Oxley Act of 2002 requires, among other things, that we maintain effective internal controls for financial reporting and disclosure. In particular, commencing in fiscal 2009, we will be required to perform system and process evaluation and testing of our internal controls over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002. Our testing, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or significant deficiencies in addition to the ones discussed below. We expect to continue to incur significant expense and devote substantial management effort toward ensuring compliance in particular with Section 404. Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, if we identify possible future deficiencies in our internal controls in addition to the ones discussed below that are deemed to be material weaknesses or if we fail to adequately address existing and future deficiencies, we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would entail expenditure of additional financial and management resources.

We face several risks relating to material weaknesses in our internal control over financial reporting.

In connection with the preparation of the Forbes Group’s combined financial statements for the years ended December 31, 2006 and 2007 and our consolidated financial statements for the year ended December 31, 2008, we identified control deficiencies that constitute material weaknesses in the design and operation of our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses were present at December 31, 2008.

• We did not maintain an appropriate accounting and financial reporting organizational structure to support the activities of the Forbes Group. Specifically, we did not maintain a sufficient complement of personnel with an appropriate level of accounting knowledge, experience and training to ensure the proper selection, application and implementation of GAAP.

• We did not maintain effective controls over the preparation and review of the consolidated/combined financial statements and disclosures.

• We did not design or maintain effective controls over purchase accounting. Specifically, we did not design and maintain effective controls over the accuracy and completeness of the purchase price allocation associated with the January 1, 2008 Delaware Reorganization. This material weakness resulted in the requirement to restate the Company’s unaudited condensed consolidated financial statements issued and filed for the quarters ended June 30, 2008 and September 30, 2008 (as well as the issued but unfiled financial statements for the quarter ended March 31, 2008).

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• We did not design and maintain effective controls over the review of the accuracy and completeness of the income tax provision. This material weakness resulted in the requirement to restate the Company’s unaudited condensed consolidated financial statements issued and filed for the quarters ended June 30, 2008 and September 30, 2008.

These material weaknesses could result in a future material misstatement to substantially all the accounts and disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. Accordingly we have determined that each of the above control deficiencies represents a material weakness.

Internal control deficiencies could cause investors to lose confidence in our reported financial information. In addition, even if we are successful in strengthening our controls and procedures, our controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements. We can give no assurance that the measures we have taken to date, or any future measures we may take, will remediate the material weaknesses identified or that any additional material weaknesses and significant deficiencies or additional restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls.

Activity in the oilfield services industry is seasonal and may affect our revenues during certain periods.

Our operations are impacted by seasonal factors. Historically, our business has been negatively impacted during the winter months due to inclement weather, fewer daylight hours and holidays. Our well servicing rigs are mobile, and we operate a significant number of oilfield vehicles. During periods of heavy snow, ice or rain, we may not be able to move our equipment between locations, thereby reducing our ability to generate rig or truck hours. In addition, the majority of our well servicing rigs work only during daylight hours. In the winter months when daylight time becomes shorter, this reduces the amount of time that the well servicing rigs can work and therefore has a negative impact on total hours worked. Finally, we historically have experienced significant slowdown during the Thanksgiving and Christmas holiday seasons.

We rely heavily on our suppliers and do not maintain written agreements with any such suppliers.

Our ability to compete and grow will be dependent on our access to equipment, including well servicing rigs, parts and components, among other things, at a reasonable cost and in a timely manner. We do not maintain written agreements with any of our suppliers (other than operating leases for certain equipment), and we are therefore dependent on the relationships we maintain with them. Failure of suppliers to deliver such equipment, parts and components at a reasonable cost and in a timely manner would be detrimental to our ability to maintain existing customers and obtain new customers. No assurance can be given that we will be successful in maintaining our required supply of such items.

We rely heavily on two suppliers for potassium chloride, a principal raw material that is critical for our operations. While the materials are generally available, if we were to have a problem sourcing raw materials or transporting these materials from one of these two vendors, our ability to provide some of our services could be limited. Alternate suppliers exist for all other raw materials. The source and supply of materials has been consistent in the past, however, in periods of high industry activity, periodic shortages of certain materials have been experienced and costs have been affected. We do not have contracts with, but we do maintain relationships with, a number of suppliers in an attempt to mitigate this risk. However, if current or future suppliers are unable to provide the necessary raw materials, or otherwise fail to deliver products in the quantities required, any resulting delays in the provision of services to our customers could have a material adverse effect on our business, results of operations, financial condition and cash flows.

We do not maintain written agreements with respect to some of our salt water disposal wells.

Our ability to continue to provide well maintenance services depends on our continued access to salt water disposal wells. Four of our 14 salt water disposal wells are located on the premises of third parties who have not entered into a written lease with us. We do not maintain written surface leases or right of way agreements with these third parties and we are therefore dependent on the relationships we maintain with them. Failure to maintain relationships with these third parties could impair our ability to access and maintain the applicable salt water disposal wells and any well servicing equipment located on their property. If that occurred, we would increase the levels of fluid injection at our remaining salt water disposal wells. However, our permits to inject fluid into the salt water disposal wells is subject to maximum pressure limitations and if multiple salt water disposal wells became unavailable, this might adversely impact our operations.

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We extend credit to our customers which presents a risk of non-payment.

A substantial portion of our accounts receivable are with customers involved in the oil and natural gas industry, whose revenues may be affected by fluctuations in oil and natural gas prices. Collection of these receivables could be influenced by economic factors affecting this industry. We do not have significant exposure to any individual customer other than our top customer, which accounted for approximately 8.5% of the revenues for the year ended December 31, 2008.

Due to the nature of our business, we may be subject to environmental liability.

Our business operations and ownership of real property are subject to numerous federal, state and local environmental and health and safety laws and regulations, including those relating to emissions to air, discharges to water, treatment, storage and disposal of regulated materials, and remediation of soil and groundwater contamination. The nature of our business, including operations at our current and former facilities by prior owners, lessors or operators, exposes us to risks of liability under these laws and regulations due to the production, storage, use, transportation and disposal of materials that can cause contamination or personal injury if released into the environment. Environmental laws and regulations may have a significant effect on the costs of transportation and storage of raw materials as well as the costs of the transportation, treatment, storage and disposal of wastes. We believe we are in material compliance with applicable environmental and worker health and safety requirements. However, we may incur substantial costs, including fines, damages, criminal or civil sanctions, remediation costs, or experience interruptions in our operations for violations or liabilities arising under these laws and regulations. We may have the benefit of insurance maintained by us, our customers or others. However, we may become liable for damages against which we cannot adequately insure or against which we may elect not to insure because of high costs or other reasons.

Our customers are subject to similar environmental laws and regulations, as well as limits on emissions to the air and discharges into surface and sub-surface waters. Although regulatory developments that may occur in subsequent years could have the effect of reducing industry activity, we cannot predict the nature of any new restrictions or regulations that may be imposed. We may be required to increase operating expenses or capital expenditures in order to comply with any new restrictions or regulations.

Increasing trucking regulations may increase our costs and negatively affect our results of operations.

In connection with the services we provide, we operate as a motor carrier and therefore are subject to regulation by the U.S. Department of Transportation, or U.S. DOT, and by various state agencies. These regulatory authorities exercise broad powers, governing activities such as the authorization to engage in motor carrier operations and regulatory safety. There are additional regulations specifically relating to the trucking industry, including testing and specification of equipment and product handling requirements. The trucking industry is subject to possible regulatory and legislative changes that may affect the economics of the industry by requiring changes in operating practices or by changing the demand for common or contract carrier services or the cost of providing truckload services. Some of these possible changes include increasingly stringent environmental regulations and changes in the regulations that govern the amount of time a driver may drive in any specific period, onboard black box recorder devices, or limits on vehicle weight and size.

Interstate motor carrier operations are subject to safety requirements prescribed by the U.S. DOT. To a large degree, intrastate motor carrier operations are subject to state safety regulations that mirror federal regulations. Such matters as weight and dimension of equipment are also subject to federal and state regulations.

From time to time, various legislative proposals are introduced, including proposals to increase federal, state, or local taxes, including taxes on motor fuels, which may increase our costs or adversely affect the recruitment of drivers. Management cannot predict whether, or in what form, any increase in such taxes applicable to us will be enacted. We may be required to increase operating expenses or capital expenditures in order to comply with any new restrictions or regulations.

We are subject to extensive additional governmental regulation.

In addition to environmental and trucking regulations, our operations are subject to a variety of other United States and Mexico federal, state and local laws, regulations and guidelines, including laws and regulations relating to health and safety, the conduct of operations, and the manufacture, management, transportation, storage and disposal of certain materials used in our operations. We believe that we are in compliance with such laws, regulations and guidelines. Although we continue to enhance our infrastructure, we have invested financial and managerial resources to comply with applicable laws, regulations and guidelines and

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will continue to do so in the future. Although regulatory expenditures have not, historically, been material to us, such laws, regulations and guidelines are subject to change. Accordingly, it is impossible for us to predict the cost or effect of such laws, regulations or guidelines on our future operations.

Our operations are inherently risky, and insurance may not always be available in amounts sufficient to fully protect us.

We have an insurance and risk management program in place to protect our assets, operations and employees. We also have programs in place to address compliance with current safety and regulatory standards. However, our operations are subject to risks inherent in the oilfield services industry, such as equipment defects, malfunctions, failures, accidents and natural disasters. In addition, hazards such as unusual or unexpected geological formations, pressures, blow-outs, fires or other conditions may be encountered in drilling and servicing wells, as well as the transportation of fluids and company assets between locations. These risks and hazards could expose us to substantial liability for personal injury, loss of life, business interruption, property damage or destruction, pollution and other environmental damages.

Although we have obtained insurance against certain of these risks, such insurance is subject to coverage limits and exclusions and may not be available for the risks and hazards to which we are exposed. In addition, no assurance can be given that such insurance will be adequate to cover our liabilities or will be generally available in the future or, if available, that premiums will be commercially justifiable. If we were to incur substantial liability and such damages were not covered by insurance or were in excess of policy limits, or if we were to incur such liability at a time when we are not able to obtain liability insurance, our business, results of operations and financial condition could be materially adversely affected.

The market for oil and natural gas may be adversely affected by global demands to curtail use of such fuels.

Fuel conservation measures, alternative fuel requirements, increasing consumer demand for alternatives to oil and natural gas and technological advances in fuel economy and energy generation devices could reduce the demand for oil and other liquid hydrocarbons. We cannot predict the effect of changing demand for oil and natural gas products, and any major changes may have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our international operations could be adversely affected by war, civil disturbance, or political or economic turmoil, fluctuation in currency exchange rates and local import and export controls.

We recently began international operations in Mexico. While such operations are currently not significant to our total operations, we may continue to grow our business in Mexico. Foreign operations are subject to various risks, including the risk of war, civil disturbances and governmental activities that may limit or disrupt markets, restrict the movement of funds or result in the deprivation of contract rights or the taking of property without fair compensation. In certain countries, our operations may be subject to the additional risk of fluctuating currency values and exchange controls. In Mexico we are subject, and in any other international market in which we may operate we will be subject, to various laws and regulations that govern the operation and taxation of our business and the import and export of our equipment from country to country, the imposition, application and interpretation of which can prove to be uncertain.

We cannot predict how an exit by any of our principal equity investors could affect our operations or business.

As of March 20, 2009, John E. Crisp, Charles C. Forbes and Janet L. Forbes owned 15.22%, 15.66%, and 14.54%, respectively, of our capital stock. Our principal equity investors may transfer their interests in us or engage in other business combination transactions with a third party that could result in a change in ownership or a change of control of us. Any transfer of an equity interest in us or a change of control could affect our governance. We cannot be certain that our equity investors will not sell, transfer or otherwise modify their ownership interest in us, whether in transactions involving third parties or other investors, nor can we predict how a change of equity investors or change of control would affect our operations or business.

Our principal equity investors control important decisions affecting our governance and our operations, and their interests may differ from those of the other stockholders and noteholders.

Circumstances may arise in which the interests of our principal equity investors could be in conflict with those of the other stockholders and/or noteholders. In particular, our principal equity investors may have an interest in pursuing certain strategies or transactions that, in their judgment, enhance the value of their investment in us even though these strategies or transactions may involve risks to noteholders. Further conflicts of interest may arise between noteholders and our principal equity investors when we are faced with decisions that could have different implications for noteholders and our principal equity investors, including financial

17

budgets, potential competition, the issuance or disposition of securities, the payment of distributions by us, regulatory and legal positions and other matters. Because our principal equity investors control us, these conflicts may be resolved in a manner adverse to, or that imposes more risks on, the noteholders.

In addition, conflicts of interest may arise between us and one or more of our principal equity investors when we are faced with decisions that could have different implications for us and our principal equity investors. Although our bye-laws provide certain procedural protections and require that any business combination (as defined therein) between us and an interested shareholder (as defined therein) be approved by the board of directors and sixty-six and two-thirds percent of our outstanding voting shares, this does not address all conflicts of interest that may arise. For example, our principal equity investors and their affiliates are not prohibited from competing with us. Because our principal equity investors control us, conflicts of interest arising because of competition between us and a principal equity investor could be resolved in a manner adverse to us. It is possible that there will be situations where our principal equity investors’ interests are in conflict with our interests, and our principal equity investors acting through the Board of Directors or through our executive officers could resolve these conflicts in a manner adverse to us.

We are a Bermuda company and it may be difficult to enforce judgments against us.

We are a Bermuda exempted company. As a result, the rights of holders of our common shares will be governed by Bermuda law and our memorandum of association and Bye-laws. The rights of shareholders under Bermuda law may differ from the rights of shareholders of companies incorporated in other jurisdictions. As a result, it may be difficult for investors to enforce in Canada or the U.S. judgments obtained in Canadian or U.S. courts against us based on the civil liability provisions of U.S. or Canadian securities laws. It is doubtful whether courts in Bermuda will enforce judgments obtained in other jurisdictions, including the United States and Canada, against us or our directors or officers under the securities laws of those jurisdictions or entertain actions in Bermuda against us or our directors or officers under the securities laws of other jurisdictions.

Our Bye-laws restrict shareholders from bringing legal action against our officers and directors.

Our Bye-laws contain a broad waiver by our shareholders of any claim or right of action, both individually and on behalf of us, against any of our officers or directors. The waiver applies to any action taken by an officer or director, or the failure of an officer or director to take any action, in the performance of his or her duties, except with respect to any matter involving any fraud or dishonesty on the part of the officer or director. This waiver limits the right of shareholders to assert claims against the officers and directors unless the act or failure to act involves fraud or dishonesty.

We have anti-takeover provisions in our Bye-laws and elsewhere that may discourage a change of control.

Our Bye-laws contain provisions that could make it more difficult for a third party to acquire us without the consent of the Board of Directors. These provisions provide for the following:

• restrictions on the time period in which directors may be nominated;

• the Board of Directors to determine the powers, preferences and rights of the Preference Shares and to issue the Preference Shares without shareholder approval;

• Class B non-voting shares that are immediately convertible into common shares. In the event John E. Crisp, Charles C. Forbes and Janet L. Forbes converted all of their Class B non-voting shares into common shares, those three individuals would own a majority of our voting securities; and

• an anti-takeover provision that requires a majority of the Board of Directors to approve certain corporate transactions.

We also have a shareholder rights plan which makes it very difficult for anyone to accumulate more than a certain percentage of our outstanding equity without approval of the Board of Directors. These provisions could make it more difficult for a third party to acquire us, even if the third party’s offer may be considered beneficial by many shareholders. As a result, shareholders may be limited in their ability to obtain a premium for their shares.

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Future legal proceedings could adversely affect us and our operations.

Given the nature of our business, we are involved in litigation from time to time in the ordinary course of business. Although, except as set forth under “Part II, Item 1–Legal Proceedings,” we are not presently a party to any material legal proceedings, legal proceedings could be filed against us in the future. No assurance can be given as to the final outcome of any legal proceedings or that the ultimate resolution of any legal proceedings will not have a material adverse effect on us.

We may not be able to fully integrate future acquisitions.

We may undertake future acquisitions of businesses and assets in the ordinary course of business. Achieving the benefits of acquisitions depends in part on having the acquired assets perform as expected, successfully consolidating functions, retaining key employees and customer relationships, and integrating operations and procedures in a timely and efficient manner. Such integration may require substantial management effort, time and resources and may divert management’s focus from other strategic opportunities and operational matters, and ultimately we may fail to realize anticipated benefits of acquisitions.

Item 1B.     Unresolved Staff Comments

None.

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Item 2.     Properties

The following sets forth the locations from which the Company conducts its operations. The Company leases or rents all of the properties set forth below, except for the Alice rig yard and San Ygnacio truck yard. A description of the leases is set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Location	Date in Service	Service Offering
South Texas
Alice – truck location	9/1/2003	Fluid Logistics
Alice – rig location	9/1/2003	Well Servicing
Freer	9/1/2003	Fluid Logistics
Laredo	10/1/2003	Fluid Logistics
San Ygnacio	4/1/2004	Fluid Logistics
Goliad	8/1/2005	Fluid Logistics
Bay City	9/1/2005	Fluid Logistics
Edna	2/1/2006	Well Servicing/Fluid Logistics
Three Rivers	8/1/2006	Fluid Logistics
Carrizo Springs	12/1/2006	Fluid Logistics
Edinburg	11/30/2007	Fluid Logistics
West Texas
Ozona	3/1/2006	Well Servicing/Fluid Logistics
San Angelo	7/1/2006	Well Servicing/Fluid Logistics
Monahans	8/31/2007	Well Servicing/Fluid Logistics
Odessa	9/30/2007	Well Servicing/Fluid Logistics
Big Spring	10/15/2007	Well Servicing/Fluid Logistics
Denver City	4/10/2008	Well Servicing
Big Lake	7/16/2008	Well Servicing/Fluid Logistics
Andrews	8/27/2008	Well Servicing
East Texas
Marshall	12/1/2005	Fluid Logistics
Carthage	3/1/2007	Well Servicing
Kilgore	11/1/2007	Well Servicing/Fluid Logistics
Liberty	5/1/2008	Well Servicing
Nacogdoches	6/5/2008	Fluid Logistics
North Texas
Godley	2/15/2008	Well Servicing
Mississippi
Baxterville	3/20/2008	Well Servicing
Mexico
Poza Rica	12/01/2008	Well Servicing

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Item 3.     Legal Proceedings

There are no pending material legal proceedings, and the Forbes Group is not aware of any material threatened legal proceedings, to which the Forbes Group is a party or to which its property is subject, other than in the ordinary course of business.

Item 4.     Submission of Matters to a Vote of Security Holders

None.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Price Range of Common Shares

Our common shares began trading on the Toronto Stock Exchange (“TSX”) under the symbol “FRB.TO” immediately after the completion of our initial public offering in Canada on May 29, 2008. The following table sets forth, for the periods indicated, the high and low sales prices reported in Canadian dollars as reported on the TSX for our common shares for the year ended December 31, 2008 beginning with such date.

	High		Low
Fiscal Year 2008:
Second Quarter (beginning May 29, 2008)	CDN $	7.99	CDN $	6.70
Third Quarter	CDN $	7.90	CDN $	3.65
Fourth Quarter	CDN $	3.73	CDN $	1.30

As of March 27, 2009, the last reported sales price of our common shares on the TSX was CDN$0.41 per share. As of March 26, 2009, there were 46 stockholders of record of our common shares. All common shares held in street name are recorded in the Company’s stock register as being held by one stockholder.

We have reserved 5,220,000 shares for issuance under our incentive compensation plan.

Dividend Policy

Our current indenture and credit agreement limit the payment of dividends, other than dividends payable solely in our capital stock. To date, we have not paid cash dividends on our common shares, and currently intend to retain earnings for the development and growth of our business. Future decisions to pay cash dividends will be at the discretion of the Board of Directors and will depend upon our results of operations, financial condition and capital expenditure plans and restrictive covenants under our indenture and credit facility, along with other relevant factors.

Unregistered Sales of Equity Securities

In October 2008, we completed a private placement of an aggregate of 7,966,500 of our common shares at a price per share of CDN $4.00 for an aggregate purchase price in the amount of USD $30,000,000. Such common shares were sold in reliance on exemptions from registration provided by Section 4(2) of the Securities Act of 1933, as amended, and Regulation D promulgated thereunder and were issued on October 22, 2008.

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Item 6. Selected Financial Data

The statement of operations data for the years ended December 31, 2008, 2007 and 2006, and the balance sheet data as of December 31, 2008 and 2007, have been derived from our audited consolidated/combined financial statements included elsewhere in this Annual Report on Form 10-K. The statement of operations data for the years ended December 31, 2005 and 2004, and the balance sheet data as of December 31, 2006 and 2005 have been derived from our audited combined financial statements not included in this Annual Report on Form 10-K. The balance sheet data as of December 31, 2004 has been derived from our unaudited combined financial statements not included in this Annual Report on Form 10-K. Our historical results are not necessarily indicative of results to be expected for any future period. The data presented below have been derived from financial statements that have been prepared in accordance with accounting principles generally accepted in the United States and should be read with our financial statements, including notes, and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Annual Report on Form 10-K.

	Year Ended December 31,
	2008			2007			2006			2005			2004
	(dollars in thousands)
Statement of Operations Data:
Revenues:
Well servicing	$	189,980		$	103,601		$	58,574		$	24,022		$	9,014
Fluid logistics		170,949			103,405			74,141			36,799			13,580
Total revenues		360,929			207,006			132,715			60,821			22,594
Expenses:
Well servicing		128,614			60,570			32,453			16,346			6,759
Fluid logistics		117,940			69,887			49,620			23,684			9,678
General and administrative		17,700			8,824			6,026			2,747			1,026
Depreciation and amortization		33,724			15,342			7,410			3,771			1,582
Impairment of goodwill		4,364			—			—			—			—
Litigation Settlement		—			—			—			—			7,250
Total expenses		302,342			154,623			95,509			46,548			26,295
Operating income (loss)		58,587			52,383			37,206			14,273			(3,701	)
Other income (expense):
Interest expense		(25,798	)		(8,343	)		(5,074	)		(2,182	)		(580	)
Other income (expense)		38			237			141			(28	)		61
Income (loss) before income taxes		32,827			44,277			32,273			12,063			(4,220	)
Income tax expense (1)		(62,574	)		(683	)		—			—			—
Net income (loss)	$	(29,748	)	$	43,594		$	32,273		$	12,063		$	(4,220	)
Loss per share of Common Stock
Basic	$	(0.65	)
Diluted	$	(0.65	)

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	Year Ended December 31,
	2008	2007	2006	2005	2004
Operating Data:
Well servicing rigs (end of periods)	170	101	43	17	11
Rig hours	378,657	180,700	90,941	44,086	20,108
Heavy trucks (end of period) (2)	370	262	179	119	34
Trucking hours	1,115,593	711,171	514,082	251,511	91,969
Salt water disposal wells (end of period)	14	14	9	6	4
Locations (end of period)	27	18	12	7	4
Frac tanks (end of period)	1,370	951	568	241	105

(1) On May 29, 2008, in connection with the Bermuda Reorganization, the Forbes Group became a taxable entity, which resulted in $52.8 million of income tax expense that was recorded as a one-time, deferred income tax charge to recognize the conversion to a taxable entity. Prior to that time, the entities comprising the Forbes Group were flow through entities for federal income tax purposes and the only tax obligations of the entity were the Texas margin tax which was applicable after June 29, 2007.

(2) Includes vacuum trucks, high pressure pump trucks and other heavy trucks.

	Year Ended December 31,
	2008		2007		2006		2005		2004
									(unaudited)
	(dollars in thousands)
Balance Sheet Data:
Cash and cash equivalents	$	23,469	$	5,209	$	7,650	$	3,264	$	359
Property and equipment, net		330,951		204,132		92,131		46,786		22,909
Total assets		482,801		259,995		128,518		66,369		30,819
Total long-term debt		205,378		107,458		56,188		33,470		15,058
Total liabilities		324,383		189,536		89,718		55,103		29,252
Stockholder’s equity/Members’ equity/Partners’ capital		158,418		70,459		38,801		11,266		1,567

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying consolidated/combined financial statements and related notes included elsewhere in this Annual Report on Form 10-K. Any forward-looking statements made by or on our behalf are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Readers are cautioned that such forward-looking statements involve risks and uncertainties in that the actual results may differ materially from those projected in the forward-looking statements. Important factors that could cause actual results to differ include risks set forth in “Part I-Item 1A. Risk Factors” included herein.

Overview

Forbes Energy Services Ltd. (“FES Ltd”) and its domestic subsidiaries, Forbes Energy Services LLC (“FES LLC”), Forbes Energy Capital Inc. (“FES CAP”), C.C. Forbes, LLC (“CCF”), TX Energy Services, LLC (“TES”), Superior Tubing Testers, LLC (“STT”) and Forbes Energy International, LLC (“FEI LLC”), are headquartered in Alice, Texas and conduct business primarily in the state of Texas. On October 15, 2008, FES LLC and FEI LLC formed Forbes Energy Services México, S. de R.L. de C.V. (“FES Mexico”), a Mexican limited liability partnership (sociedad de responsabilidad limitada de capital variable), to conduct operations in Mexico.

As used in this Annual Report on Form 10-K, the “Company,” the “Forbes Group,” “we,” and “our” mean FES Ltd and its subsidiaries on and after May 29, 2008; and FES LLC and its subsidiaries from January 1, 2008 to May 28, 2008 (in each case referred to in the financial statements column headings as “Successor”); CCF, TES and STT from June 29, 2007 to December 31, 2007, and C.C. Forbes, L.P., Texas Energy Services, L.P. and Superior Tubing Testers, L.P. prior to June 29, 2007 (in each case prior to January 1, 2008, referred to in the financial statement column headings as “Predecessor”).

We are an independent oilfield services contractor that provides a wide range of well site services to oil and natural gas drilling and producing companies to help develop and enhance the production of oil and natural gas. These services include fluid hauling, fluid disposal, well maintenance, completion services, workovers and recompletions, plugging and abandonment, and tubing testing. Our operations are concentrated in the major onshore oil and natural gas producing regions of Texas, with one location in Baxterville, Mississippi and one location in Poza Rica, Mexico.

We currently conduct our operations through the following two business segments:

• Well Servicing. Our well servicing segment comprised 52.6% of consolidated revenues for the year ended December 31, 2008. At December 31, 2008, our well servicing segment utilized our modern fleet of 170 owned or leased well servicing rigs, which included 162 workover rigs and 8 swabbing rigs, and related assets and equipment with an average life of 2 years. These assets are used to provide (i) well maintenance, including remedial repairs and removal and replacement of downhole production equipment, (ii) well workovers, including significant downhole repairs, re-completions and re-perforations, (iii) completion and swabbing activities, and (iv) plugging and abandoning services. In addition, we have a fleet of 6 tubing testing units that are used to conduct pressure testing of oil and natural gas production tubing.

• Fluid Logistics. Our fluid logistics segment comprised 47.4% of consolidated revenues for the year ended December 31, 2008. Our fluid logistics segment utilized our fleet of owned or leased fluid transport trucks and related assets, including specialized vacuum, high-pressure pump and tank trucks, frac tanks, water wells, proprietary salt water disposal wells and facilities, and related equipment. These assets are used to provide, transport, store, and dispose of a variety of drilling and produced fluids used in, and generated by, oil and natural gas production. These services are required in most workover and completion projects and are routinely used in daily operations of producing wells.

We believe that our two business segments are complementary and create synergies in terms of selling opportunities. Our multiple lines of service allow us to capitalize on our existing customer base to grow within existing markets, generate more business from existing customers, and increase our operating profits. By offering our customers the ability to reduce the number of vendors they use, we believe we help improve our customers’ efficiency. This is demonstrated by the fact that 81.9% of our revenues for the year ended December 31, 2008 were from customers that utilized services of both of our business segments. Further, by having multiple service offerings that span the life cycle of the well, we believe we have a competitive advantage over smaller competitors offering more limited services.

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Factors Affecting Results of Operations

Oil and Natural Gas Prices

Demand for well servicing and fluid logistics services is generally a function of the willingness of oil and natural gas companies to make operating and capital expenditures to explore for, develop and produce oil and natural gas, which in turn is affected by current and anticipated levels of oil and natural gas prices. Exploration and production spending is generally categorized as either operating expenditures or capital expenditures. Activities by oil and natural gas companies designed to add oil and natural gas reserves are classified as capital expenditures, and those associated with maintaining or accelerating production, such as workover and fluid logistics services, are categorized as operating expenditures. Operating expenditures are typically more stable than capital expenditures and are less sensitive to oil and natural gas price volatility. In contrast, capital expenditures by oil and natural gas companies for drilling are more directly influenced by current and expected oil and natural gas prices and generally reflect the volatility of commodity prices.

Workover Rig Rates

Our well servicing segment revenues are dependent on the prevailing market rates for workover rigs. Market dayrates for workover rigs increased from 2003 through the first half of 2008, as high oil and natural gas prices and declining domestic production resulted in a substantial growth of drilling activity and demand for workover services that are used primarily to maintain or enhance production levels of existing producing wells. In the second half of 2008 and to date in 2009, we have experienced declines in demand and significant pricing pressure that are a result of the general economic decline and, more specifically, the precipitous decline in oil prices.

Fluid Logistics Rates

Our fluid logistics segment revenues are dependent on the prevailing market rates for fluid transport trucks and the related assets, including specialized vacuum, high-pressure pump and tank trucks, frac tanks and proprietary salt water disposal wells. Prior to the general economic decline, higher oil and natural gas prices resulted in growing demand for drilling and, since the decline, lower oil and natural gas prices have resulted in reduced demand for drilling and our services. Required disposal of fluids produced from wells and the increased number of wells in service through the first half of 2008 led to a higher demand for fluid logistics services. In the second half of 2008 and to date in 2009, fluid logistics rates have been under significant downward pressure.

Operating Expenses

Prior to the general economic decline, a strong oil and natural gas environment resulted in a higher demand for operating personnel and oilfield supplies and caused increases in the cost of those goods and services. In the second half of 2008 and to date in 2009, a weaker oil and natural gas environment has resulted in lower demand for operating personnel and oilfield supplies which has allowed us to decrease our costs, thereby offsetting a portion of the price decreases granted to our customers. Additionally, fuel costs, which comprise a substantial portion of our operating expenses, increased substantially over the last few years and in particular in the first half of 2008 before declining significantly in recent months. Future earnings and cash flows will be dependent on our ability to manage our overall cost structure and obtain price increases from our customers.

General and Administrative Expenses

Due to our substantial growth, we increased our professional staff in 2007 and 2008, which has resulted in increased general and administrative costs. Additionally, our expenses for information technology, accounting, rent, entertainment and third-party professional fees have also increased.

Capital Expenditures and Debt Service Obligations

As a general matter, our capital expenditures to maintain our assets have been relatively limited. We have incurred indebtedness to invest in new assets to grow our business. As a result, the indebtedness we incurred for our capital expenditures has significantly increased our debt service obligations. The majority of the net proceeds of the issuance (the “Debt Offering”) of our $205 million 11% senior secured notes (the “Senior Secured Notes”) was used to repay indebtedness incurred on capital expenditures. Most of our new assets have been acquired, and will continue to be acquired, through bank borrowings, short-term equipment vendor financings, cash flows from operations and other permitted financings. In the future, we expect our capital expenditures and our debt outstanding to increase as we continue to grow our business within the constraints of the covenants under our indenture and revolving credit facility. As of March 20, 2009, we had only $1.6 million in additional capacity available under our revolving credit agreement.

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Capital Expenditures and Operating Income Margins

The well servicing segment typically has higher operating income margins along with higher capital expenditures when compared with the fluid logistics segment, which has lower operating margins but also lower capital expenditure requirements.

Presentation

The following discussion and analysis is presented on a consolidated/combined basis to reflect the results of operations and financial condition of the Forbes Group. This financial information is presented on a combined basis as of and for periods ended on or prior to December 31, 2007, because the operating subsidiaries were under common management prior to the Delaware Reorganization (as defined below). The financial information as of and for the year ended December 31, 2008 is presented on a consolidated basis for FES LLC and its subsidiaries from and after January 1, 2008 to May 28, 2008, because of the completion of the reorganization in which FES LLC, a Delaware limited liability company, became the parent of the operating subsidiaries (the “Delaware Reorganization”) and on a consolidated basis for FES Ltd and its subsidiaries from and after May 29, 2008, because of the completion of the reorganization in which FES Ltd, a Bermuda corporation, became the direct parent of FES LLC and, as a result, the indirect parent of the operating subsidiaries (the “Bermuda Reorganization”).

We believe that we will experience increased general and administrative expenses over those historically recognized due to the adoption of a holding company structure, the increased costs of complying with Canadian reporting requirements and the requirements of the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act and remediating certain material weaknesses described under “Part II. Item 9A. Controls and Procedures—Material Weaknesses” and “Part I. Item 1A. Risk Factors – We face several risks relating to material weaknesses in our internal controls.”

Finally, we note that the limited liability companies and their predecessor entities that comprised the Forbes Group prior to January 1, 2008, were not, and until May 29, 2008, FES LLC and its subsidiaries were not, subject to federal income tax. All of the income, losses, credit, and deductions of these entities were passed through to the equity owners for purposes of their individual income tax returns, which is why these are referred to as “flow through entities” for federal income tax purposes. Accordingly, no provision for income taxes is included in the following discussion and analysis of our historical operations through May 28, 2008. As of May 29, 2008, in conjunction with the Canadian initial public offering and simultaneous U.S. private placement of FES Ltd’s common shares and the related Bermuda Reorganization, the Forbes Group became subject to U.S. federal income tax.

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Results of Operations

Comparison of Year Ended December 31, 2008 and December 31, 2007

Revenues. For the year ended December 31, 2008, revenues increased by $153.9 million, or 74.4%, to $360.9 million when compared to the prior year. During 2008, we expanded into new locations and deployed new assets to meet the growing demand for our services.

Well Servicing—Revenues from the well servicing segment increased by $86.4 million for the year ended December 31, 2008, or 83.4%, to $190.0 million compared to the prior year. The increase was largely due to our successful deployment of new well servicing rigs. We utilized 170 well servicing rigs at December 31, 2008, compared to 101 well servicing rigs at December 31, 2007, a 68.3% increase. Well servicing rig hours were 378,657 and 180,700 for the years ended December 31, 2008 and 2007, respectively. This represents a 109.6% increase rig hours. In addition to expanding the size of its fleet, in 2008 we expanded our well servicing operations to five new locations throughout Texas, one in Baxterville, Mississippi, and one in Mexico.

Fluid Logistics—Revenues from the fluid logistics segment for the year ended December 31, 2008 increased by $67.5 million, or 65.3%, to $170.9 million compared to the prior year. While the pricing environment in the fluid logistics segment remained relatively stable, our business segment revenues increased substantially due to our successful deployment of new assets. Trucking hours for the year ended December 31, 2008 and 2007 were 1,115,593 and 711,171, respectively, an increase of 56.9%. Our principal fluid logistics assets at December 31, 2008 and 2007 were as follows:

	As of December 31,
Asset	2008	2007	% Increase
Vacuum trucks	294	205	43.4	%
High-pressure pump trucks	19	14	35.7	%
Other heavy trucks	57	43	32.6	%
Frac tanks (includes leased)	1,370	951	44.1	%
Salt water disposal wells	14	14	—

Operating Expenses. Our consolidated operating expenses increased to $246.6 million for the year ended December 31, 2008, compared to $130.5 million for the year ended December 31, 2007, an increase of $116.1 million or 89.0%. Operating expenses as a percentage of revenues were 68.3% for the year ended December 31, 2008, compared to 63.0% for the year ended December 31, 2007.

Well Servicing—Operating expenses from the well servicing segment increased by $68.0 million, or 112.3%, to $128.6 million in 2008 as demand for the segment’s services continued to grow. This demand is reflected in our well servicing rig additions of 69 for 2008. Well servicing operating expenses as a percentage of well servicing revenues were 67.7% for the year ended December 31, 2008, compared to 58.5% for the year ended December 31, 2007. The increase in well servicing operating expense of $68.0 million was due in large part to an increase in labor costs of $34.5 million, or 99.5%, as the result of the addition of employees. Labor cost as a percentage of well servicing revenues was 36.3% for the year ended December 31, 2008, compared to 33.5% for the year ended December 31, 2007. The employee count at December 31, 2008, was 977 as compared with 625 employees at December 31, 2007. Fuel costs increased $3.8 million, or 92.9%, for the year ended December 31, 2008, when compared to the same period in the prior year due to the increased level of business and fuel price increases. We were able to pass a portion of this operating cost rate increase through to our customers. Fuel cost as a percentage of revenues was 4.2% and 4.0% for the years ended December 31, 2008 and 2007, respectively. Insurance was another significant expense that increased by $4.5 million, or 66.8%, from the year ended December 31, 2007 to the year ended December 31, 2008, due to additional employees and rising health care costs. Supplies & parts, repairs & maintenance, out of town expense, rent, bad debt expense, contract labor, uniforms, auto & truck expense, safety, property taxes, utilities and product & chemicals also increased $5.3 million, $4.2 million, $3.5 million, $2.5 million, $2.2 million, $2.0 million, $1.3 million, $1.0 million, $1.0 million, $1.0 million, $0.8 million, and $0.4 million respectively. All these expenses were consistent with the growth of our business.

Fluid Logistics—Operating expenses from the fluid logistics segment increased by $48.1 million, or 69.4%, to $117.9 million in 2008, primarily as a result of additions of new equipment and higher activity. Fluid logistics operating expenses as a percentage of fluid logistics revenues were 69.0% for the year ended December 31, 2008, compared to 67.6% for the year ended December 31,

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2007. The increase in fluid logistics operating expenses of $48.1 million was due in large part to an increase in labor costs of $12.3 million, or a 41.9% increase, as the result of the addition of employees and higher pay due to industry competition for labor. Labor cost as a percentage of revenues was 24.3% and 28.3% for the years ended December 31, 2008 and 2007, respectively. The employee count at December 31, 2008, was 868 as compared with 583 employees at December 31, 2007. Fuel costs increased $14.5 million, or 126.1%, for the year ended December 31, 2008, when compared to the same period in the prior year due to the increased level of business and fuel price increases. Fuel costs as a percentage of revenues was 15.2% and 11.1% for the twelve months ended December 31, 2008 and 2007, respectively. Product & Chemical expense, the third largest expense in fluids services, increased by $8.8 million or 656% from the year ended December 31, 2007, to the year ended December 31, 2008, primarily due to the rising chemical prices and increased level of business. Product and Chemicals prices increased 112.8% from January 2008 to December 2008. Repairs and maintenance and supplies and parts were other significant expenses that increased by $2.8 million or 60.4% and $1.5 million or 185%, respectively, due to direct result of added assets and higher activity levels. Contract services and salt and water disposal expenses also increased by $2.2 million and $2.7 million, respectively, from the year ended December 31, 2007, to the year ended December 31, 2008, due to the higher activity levels and growth of the business.

General and Administrative Expenses. General and administrative expenses from the combined operations for the year ended December 31, 2008 increased by approximately $8.2 million, or 86.2%, to $17.7 million when compared to the year ended December 31, 2007. Wages and professional fees increased approximately $6.1 million and $2.1 million, respectively, for the year ended December 31, 2008 compared to the year ended December 31, 2007. The increase in administrative cost is also related to the substantial growth which resulted in the need to increase professional staff. We expect these expenditures to continue to increase compared to prior periods due to our need to continue to invest in this area, including compliance with Commission reporting requirements, requirements related to the Sarbanes-Oxley Act and compliance with Canadian reporting requirements.

Depreciation and Amortization. Depreciation and amortization expenses increased by $19.1 million, or 128%, to $34.0 million in 2008 because of the new equipment acquired in 2007 and 2008 and increased basis in fixed assets in connection with the Delaware Reorganization effective January 1, 2008. Capital expenditures for the year ended December 31, 2008, were $142.0 million compared to $127.4 million for the year ended December 31, 2007.

Impairment of Goodwill. Goodwill and other intangible assets not subject to amortization are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. For the fourth quarter of 2008, we performed our annual impairment test for goodwill which resulted in an impairment of goodwill of $4.4 million. See “Goodwill” in the Critical Accounting Policies and Estimates section of Item 7 in this Form 10-K for more information. Prior to January 1, 2008, no goodwill was recorded in the financial statements.

Interest and Other Expenses. Interest and other expenses were $25.8 million in the year ended December 31, 2008, compared to $8.1 million in the year ended December 31, 2007. The increase is due to increases in our outstanding debt balances from $100.4 at December 31, 2007 to $212.2 at December 31, 2008. Substantially all of the interest expense incurred in both periods was due to the incurrence of debt to finance the purchase of additional equipment.

Income Tax Expense. On May 29, 2008, in connection with the Bermuda Reorganization, the Forbes Group became subject to federal income tax, which resulted in recognition of deferred income tax expense of approximately $54.1 million. Prior to that time, the entities comprising the Forbes Group were flow through entities for federal income tax purposes and the only income tax obligation of the Forbes Group was the Texas margin tax.

Comparison of Year Ended December 31, 2007 and December 31, 2006

Revenues. For the year ended December 31, 2007, revenues increased by $74.3 million, or 56.0%, to $207.0 million when compared to the prior year. During 2007, we expanded into new locations and deployed new assets to meet the growing demand for our services.

Well Servicing—Revenues from the well servicing segment increased by $45.0 million for the year ended December 31, 2007, or 76.9%, to $103.6 million compared to the prior year. The increase was largely due to our successful deployment of new well servicing rigs. We owned 101 well servicing rigs at December 31, 2007, compared to 43 well servicing rigs at December 31, 2006, a 134.9% increase. In addition to expanding the size of its fleet, in 2007 we expanded our well servicing operations to Carthage, Monahans, Odessa, Big Springs, Kilgore, and Edinburg, Texas.

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Fluid Logistics—Revenues from the fluid logistics segment for the year ended December 31, 2007, increased by $29.3 million, or 39.5%, to $103.4 million compared to the prior year. While the pricing environment in the fluid logistics segment remained relatively stable, our business segment revenues increased substantially due to our successful deployment of new assets and our expansion of operations into Carthage, Monahans, Odessa, Big Springs, Kilgore, and Edinburg, Texas. Our principal fluid logistics assets at December 31, 2007, and December 31, 2006, were as follows:

	As of December 31,
Asset	2007	2006	% Increase
Vacuum trucks	205	147	39.5	%
High-pressure pump trucks	14	7	100.0	%
Other heavy trucks	43	25	72.0	%
Frac tanks (includes leased)	951	568	67.4	%
Salt water disposal wells	14	9	55.6	%

Operating Expenses. Our operating expenses increased to $130.5 million for the year ended December 31, 2007, compared to $82.1 million for the year ended December 31, 2006, an increase of $48.4 million or 59.0%. Operating expenses as a percentage of revenues were 63.0% for the year ended December 31, 2007, compared to 61.8% for the year ended December 31, 2006.

Well Servicing—Operating expenses from the well servicing segment increased by $28.1 million, or 86.6%, to $60.6 million in 2007 as demand for the segment’s services continued to grow. This demand is reflected in our well servicing rig additions of 58 for 2007. Well servicing operating expenses as a percentage of well servicing revenues were 58.5% for the year ended December 31, 2007, compared to 55.4% for the year ended December 31, 2006. The increase in well servicing operating expense of $28.1 million was due in large part to an increase in labor costs of $18.3 million, or 112.4%, as the result of the addition of employees. Labor cost as a percentage of well servicing revenues was 33.4% for the year ended December 31, 2007, compared to 27.8% for the year ended December 31, 2006. The employee count at December 31, 2007, was 625 as compared with 316 employees at December 31, 2006. Fuel costs increased $2.0 million, or 94.9%, for the year ended December 31, 2007, when compared to the same period in the prior year due to the increased level of business and fuel price increases. Diesel fuel prices increased 56.5% from January 2007 to December 2007. We were able to pass a portion of this operating cost rate increase through to our customers. Fuel cost as a percentage of revenues was 3.9% and 3.6% for the years ended December 31, 2007 and 2006, respectively. Health insurance was another significant expense that increased by $2.3 million, or 147.2%, from the twelve months ended December 31, 2006, to the twelve months ended December 31, 2007, due to additional employees and rising health care costs. Other expenses were consistent with the growth of our business.

Fluid Logistics—Operating expenses from the fluid logistics segment increased by $20.3 million, or 40.8%, to $69.9 million in 2007, primarily as a result of the operation of the new equipment. Fluid logistics operating expenses as a percentage of fluid logistics revenues were 67.6% for the year ended December 31, 2007, compared to 66.9% for the year ended December 31, 2006. The increase in fluid logistics operating expenses of $20.3 million was due in large part to an increase in labor costs of $9.3 million, or a 46.6% increase, as the result of the addition of employees and higher pay due to industry competition for labor. Labor cost as a percentage of revenues was 28.3% and 26.9% for the years ended December 31, 2007 and 2006, respectively. The employee count at December 31, 2007, was 583 as compared with 431 employees at December 31, 2006. Fuel costs increased $4.2 million, or 57.1%, for the year ended December 31, 2007, when compared to the same period in the prior year due to the increased level of business and fuel price increases. Diesel fuel prices increased 56.5% from January 2007 to December 2007. We were able to pass a portion of this operating cost rate increase through to our customers. Fuel cost as a percentage of revenues was 11.1% and 9.9% for the years ended December 31, 2007 and 2006, respectively. Field expense increased $494,000, or 184.0%, from the year ended December 31, 2006, to the year ended December 31, 2007, due to increased business. Health insurance was another significant expense that increased by $631,000, or 65.8%, from the year ended December 31, 2006, to the year ended December 31, 2007, due to additional employees and rising health care costs. Other insurance expense increased $810,000, or 30.6%, as a result of the increase in the number of employees, the increase in the number of vehicles and equipment covered, and the increase in liability insurance costs. Other expenses were consistent with the growth of our business.

General and Administrative Expenses. General and administrative expenses from the combined operations increased by approximately $2.8 million, or 46.4%, to $8.8 million in 2007. Audit, legal, and third party accounting fees increased by approximately $1.5 million to $2.0 million from December 31, 2006 to December 31, 2007, due to additional temporary staffing

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related to preparing for audits and reviews, the Initial Equity Offering and the Debt Offering, and audit and review fees. We expect these expenses to continue to increase as we will be required to comply with future Canadian reporting requirements, Commission reporting requirements, and requirements related to the Sarbanes-Oxley Act.

Depreciation and Amortization. Depreciation and amortization expenses increased by $7.9 million, or 107.1%, to $15.3 million in 2007 because of the new equipment acquired in 2006 and 2007. Capital expenditures for the year ended December 31, 2007, were $127.2 million compared to $53.8 million for the year ended December 31, 2006.

Interest and Other Expenses. Interest and other expenses were $8.1 million in the year ended December 31, 2007, compared to $4.9 million in the year ended December 31, 2006. Substantially all of the interest expense incurred in both periods was due to the incurrence of debt to finance the purchase of additional equipment.

Liquidity and Capital Resources

Overview

Our Credit Facility (as defined below) and the indenture governing our Senior Secured Notes (as defined below) and the debt outstanding thereunder impose significant restrictions on us and increase our vulnerability to adverse economic and industry conditions that could limit our ability to obtain additional or replacement financing. While the principal indebtedness of the Credit Facility is not scheduled for repayment until April 2012 and the Senior Secured Notes not until February 2015, our inability to satisfy any obligations under these agreements would constitute an event of default. Under the Credit Facility, an event of default will be deemed to have occurred if there is a change in control over us or if a material adverse change occurs with regards to our consolidated financial position, our consolidated business, assets, operations, properties or prospects, our ability to timely pay the obligations under the Credit Facility or the enforceability of the material terms of any material loan document against us. The lender under the Credit Facility could, at some future date, make a determination that such a material adverse change has occurred, which is outside our control. The indenture governing the Senior Secured Notes does not have similar material adverse change or change in control events of default but does require an offer to redeem the Senior Secured Notes in the event of a change in control. It does contain a cross-default provision that would be triggered if the debt under the Credit Facility were accelerated. See a discussion of cross-default provisions in notes 9 and 10 to our consolidated/combined financial statements included herein. A default could result in all or a portion of our outstanding debt becoming immediately due and payable. If this would occur, we might not be able to obtain waivers or secure alternative financing to satisfy all of our obligations simultaneously. Given current market conditions, our ability to access the capital markets or to effect any asset sales might be restricted at a time when we would like or need to raise capital. In addition, the current economic conditions could also impact our customers and vendors and may cause then to fail to meet their obligations to us with little or no warning. These events could have a material adverse effect on our business, financial position, results of operations and cash flows and the ability to satisfy the obligations under our debt agreements. (Also see Notes 9 and 10 to our consolidated/combined financial statements included herein.)

The continued compliance with our debt covenants is dependent upon us obtaining a minimum level of earnings before interest, income taxes, depreciation, amortization and certain other add backs in accordance with our Indenture and Credit Facility, and maintaining a minimum level of net worth. Our forecasted EBITDA and net worth contain certain estimates and assumptions regarding rig and truck utilization, average hourly rates, and operating and general and administrative expenses, which could prove to be inaccurate. A material deviation from one or more of these estimates or assumptions could result in a violation of one or more of our contractual covenants, which could result in all or a portion of our outstanding debt becoming immediately due and payable.

Within certain constraints, we can conserve capital by reducing or delaying capital expenditures, deferring non-regulatory maintenance expenditures and further reducing operating and administrative costs. While postponing or eliminating capital expenditures would delay or reduce future cash flows, we believe these actions can provide us the flexibility to match our capital commitments to our available capital resources. Although we currently believe our liquidity and projected cash flows from operations will be sufficient to meet our cash requirements for the next year and the foreseeable future, the factors described above create uncertainty.

We have historically funded our operations, including capital expenditures, with bank borrowings, vendor financings, cash flow from operations, the issuance of our Senior Secured Notes and the proceeds from our Initial Equity Offering and our October 2008 U.S. private placement.

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As of December 31, 2008, we had $212.2 million in debt outstanding (including the Senior Secured Notes based on $205.0 million aggregate principal amount at an issue price of 97.635% of par). We believe that our cash and cash equivalents, cash flows from operations, available credit under the Credit Facility, and short-term credit from equipment vendors will be sufficient to finance our current and future operations, including our budgeted capital expenditures, for the next twelve months and for the foreseeable future.

As of December 31, 2008, we had $23.5 million in cash and cash equivalents, $205.4 million in long-term debt outstanding, $6.8 million in short-term debt outstanding, and $21.2 million of short-term (less than six months) equipment vendor financings for well servicing rigs and other equipment. In the year ended December 31, 2008, we incurred $142.0 million in capital expenditures, which included well servicing rigs, vacuum trucks, frac tanks, heavy trucks, pickup trucks, salt water disposal wells, and other related equipment. We financed these purchases with cash flow from operations, a portion of the proceeds of the Debt Offering, a portion of the proceeds from the Initial Equity Offering, proceeds from our October 2008 U.S. private placement and certain short-term vendor financings. In the fourth quarter of 2008 we entered into four operating leases for equipment that range in term from three to five years for total monthly payments of $303,000. In the first quarter or 2009 we entered into an additional operating lease for equipment with a five year term and a monthly payment of three thousand dollars.

At December 31, 2007, we had $5.2 million in cash and cash equivalents, $111.3 million in debt outstanding, and $57.2 million of vendor financings related to equipment purchases. In February 2008, we repaid substantially all of such debt and such vendor financings from the proceeds of the Debt Offering.

Cash Flows

Cash Flows from Operating Activities

Net cash provided by operating activities amounted to $65.2 million for the year ended December 31, 2008, compared to net cash provided by operating activities of $46.6 million for the year ended December 31, 2007, an increase of $18.6 million. This increase was primarily due to increased cash flow resulting from pre-tax earnings before deducting certain non-cash items such as depreciation, amortization, and our goodwill impairment. The largest item decreasing cash flows from operating activities was an increase in our accounts receivable of $28.9 million in 2008 as compared to an increase of $19.2 million in 2007. These increases were in line with our growth in revenues.

Net cash provided by operating activities increased to $46.6 million for the year ended December 31, 2007, as compared to $23.7 million for the year ended December 31, 2006. This increase was primarily a result of an increase in revenues from our well servicing and fluid logistics segments due to the increased service capacity resulting from our purchase of new property and equipment.

Cash Flows Used in Investing Activities

Net cash used in investing activities increased to $176.9 million for the year ended December 31, 2008, compared to $68.2 million for the year ended December 31, 2007. This increase was primarily the result of payments of vendor equipment financings from proceeds of the Debt Offering and payment for additional equipment purchases and certain vendor financings from our Initial Equity Offering and our October 2008 U.S. private placement.

Net cash used in investing activities increased to $68.2 million for the year ended December 31, 2007, as compared to $41.0 million for the year ended December 31, 2006. This increase was primarily a result of our purchase of new property and equipment, which amounted to $68.2 million for the year ended December 31, 2007, as compared to expenditures of $40.9 million for the year ended December 31, 2006.

Cash Flows from Financing Activities

Net cash provided by financing activities increased to $129.9 million for the year ended December 31, 2008, compared to $19.2 million for the year ended December 31, 2007, primarily due to the Debt Offering, the Initial Equity Offering, and the $30 million U.S. private placement of our common shares completed in October 2008. Additional borrowings amounted to $226.8 million and $58.8 million for the years ended December 31, 2008 and 2007, respectively. The 2008 borrowings were primarily related to our Debt Offering in February 2008. These borrowings were offset by debt repayments of $128.3 million and $27.4 million for the years ended December 31, 2008 and 2007, respectively.

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Net cash provided by financing activities decreased to $19.2 million for the year ended December 31, 2007, as compared to $21.7 million for the year ended December 31, 2006, primarily due to additional borrowings used to fund the purchase of additional equipment offset by debt repayments. Additional borrowings amounted to $60.6 million and $39.8 million for the years ended December 31, 2007 and 2006, respectively. These borrowings were offset by debt repayments of $27.8 million and $12.7 million for the years ended December 31, 2007 and 2006, respectively.

Senior Secured Notes

On February 12, 2008, we issued an aggregate of $205.0 million of 11.0% senior secured notes in the Debt Offering. The notes are our senior secured obligations. The notes are guaranteed on a senior secured basis by each of our existing and future domestic restricted subsidiaries. The notes and the guarantees are secured by second priority liens on substantially all of our assets, subject to certain exceptions and permitted liens. The notes are subject to redemption and requirements that we offer to purchase the notes upon a change of control, following certain asset sales, and if we have excess cash flow for any fiscal year beginning with fiscal 2008. The indenture governing the notes limits our and our restricted subsidiaries’ ability to, among other things, transfer or sell assets; pay dividends, redeem subordinated indebtedness, make investments or make other restricted payments; incur or guarantee additional indebtedness or issue disqualified capital stock; make capital expenditures that exceed certain amounts; create, incur or suffer to exist liens; incur dividend or other payment restrictions affecting certain subsidiaries; consummate a merger, consolidation or sale of all or substantially all of our assets; enter into transactions with affiliates; designate subsidiaries as unrestricted subsidiaries; engage in a business other than a business that is the same or similar to our current business and reasonably related businesses; and take or omit to take any actions that would adversely affect or impair in any material respect the liens in respect of the collateral securing the notes.

Revolving Credit Facility

On April 10, 2008, the Forbes Group entered into a Credit Facility. The Forbes Group can use borrowings under the Credit Facility for general corporate purposes. Any unpaid principal amount is due on the maturity date.

Borrowings under the Credit Facility accrue interest, at our option, at either (i) the greater of the Federal Funds Effective Rate in effect on such day plus 0.5% and the “prime rate” announced from time to time by Citibank, N.A., plus a margin of up to 1.25%, or (ii) the London Interbank Offered Rate, plus a margin of 1.75% to 2.25%. The applicable interest rate margin is based on our leverage ratio, as defined in the credit agreement governing the Credit Facility. Unpaid interest accrued on outstanding loans is payable quarterly.

The Credit Facility is secured by first priority security interests in substantially all of the Forbes Group’s assets, including those of all of the subsidiaries that rank senior to the security interest granted to the holders of the Senior Secured Notes. The credit agreement also contains customary representations, warranties and covenants for the type and nature of the Credit Facility, including certain limitations or restrictions on the Forbes Group’s and certain future subsidiaries’ ability to incur additional debt, guarantee others’ obligations, create, incur or permit to exist liens on assets, make investments or acquisitions, make certain dispositions of assets, make payments on certain subordinated indebtedness, pay dividends or other payments to equity holders, engage in mergers, consolidations or other fundamental changes, sell assets, change the nature of its business and engage in transactions with affiliates. The rights of the lender under the Credit Facility vis-à-vis the trustee and collateral agent under the indenture governing the Senior Secured Notes are governed by an intercreditor agreement among the Forbes Group, Citibank, N.A., the lender under the Credit Facility, and Wells Fargo Bank, National Association, the trustee and collateral agent under the indenture governing the Senior Secured Notes.

The Credit Agreement contains the following restrictive financial covenants, which provide that the Forbes Group shall not:

• Permit for the trailing twelve months as of the end of any fiscal quarter the ratio of Consolidated EBITDA to Consolidated Interest Expense, as both are defined in the Credit Agreement, to be less than 1.5 to 1.0. As of December 31, 2008 this ratio was 3.6 to 1.0.

• Permit Consolidated Net Worth to be less than $63.4 million for the fiscal year ended December 31, 2008, and for each fiscal year thereafter Consolidated Net Worth to be less than $63.4 million plus 50% of Consolidated Net Income for such year, as both are defined in the Credit Agreement. As of December 31, 2008 the excess over the covenant was approximately $95 million.

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• Permit the ratio of Senior Funded Debt to Consolidated Net Worth, as both are defined in the Credit Agreement, to be not greater than 2.50 to 1.00 for each fiscal quarter through September 30, 2008, and for fiscal quarters ending December 31, 2008 and thereafter, 2.00 to 1.0. As of December 31, 2008 this ratio was 1.3 to 1.0.

• Permit the ratio of Consolidated Senior Funded Debt to Consolidated EBITDA for the trailing twelve months, as both are defined in the Credit Agreement, to be more than 5.5 to 1.0 as of the last day of any fiscal quarter. As of December 31, 2008 this ratio was 2.2 to 1.0.

The Credit Agreement contains a provision that makes the occurrence of any Material Adverse Change an event of default. A “Material Adverse Change” is defined in the Credit Agreement to mean a material and adverse change from the state of affairs presented in the audited December 31, 2007 financial statements for the Forbes Group or as represented or warranted in any loan document to (a) the consolidated financial position of the Forbes Group, (b) the consolidated business, assets, operations, properties or prospects of the Forbes Group, (c) the Forbes Group’s ability to pay the obligations under the Credit Agreement or (d) the enforceability of the material terms of any material loan document against the Forbes Group. The occurrence of an event of default would allow the lender to accelerate the debt under the Credit Agreement. The Credit Agreement contains a cross-default provision that is triggered on the failure to comply with any other materially significant contract (including the indenture) if such failure is not remedied within any applicable grace period. The indenture contains a cross-default provision that is triggered on the default of any instrument evidencing or securing indebtedness (including the Credit Agreement), if that default is caused by failure to pay principal or interest prior to the expiration of any applicable grace period or if that default results in the acceleration of such indebtedness prior to its maturity, and such indebtedness, together with all other indebtedness where there has been such a default, aggregates $5.0 million or more.

As of December 31, 2008, we had no advances under the Credit Facility.

For additional information with respect to the Credit Facility and the Senior Secured Notes please refer to notes 9 and 10 of our consolidated/combined financial statements included herein.

Initial Public Offering and Simultaneous U.S. Private Placement

On May 29, 2008, FES Ltd completed the Initial Equity Offering. In the Initial Equity Offering, FES Ltd sold 24,644,500 common shares for CDN $7.00 per share and the common shares were listed on the Toronto Stock Exchange. Gross proceeds from the Initial Equity Offering were CDN $172,511,500, and net proceeds from the Initial Equity Offering after expenses were $162,465,730.

FES Ltd is a Bermuda company formed effective April 9, 2008 to act as the holding company for FES LLC and its subsidiaries. At the time of FES Ltd’s organization, 200 common shares were issued. On May 29, 2008, in conjunction with the Initial Equity Offering, the Forbes Group was reorganized, referred to herein as the Bermuda Reorganization, pursuant to which all of the members of FES LLC assigned approximately 63% of their membership interests in FES LLC to FES Ltd in exchange for 29,500,000 shares of FES Ltd’s Class B non-voting stock. Upon consummation of the Initial Equity Offering, FES Ltd contributed $120,000,000 cash as additional capital to FES LLC and FES LLC used the funds to redeem the remaining outstanding membership interests held by those members of FES LLC other than FES Ltd. The result was that FES LLC and its subsidiaries became wholly owned subsidiaries of FES Ltd.

October 2008 U.S. Private Placement of Common Shares

In October 2008, FES Ltd completed a U.S. private placement of 7,966,500 of its common shares at a price per share of CDN $4.00 for an aggregate purchase price in the amount of USD $30,000,000 based on the exchange rate between U.S. dollars and Canadian dollars then in effect of $1.00 to CDN$1.0622.

Contractual Obligations and Financing

The table below provides estimated timing of future payments for which we were obligated as of December 31, 2008.

Actual	Total		1 Year or Less		2-3 Years		4-5 Years		More than 5 years
	(in thousands)
Maturities of long-term debt, including current portion	$	212,190	$	6,815	$	11,526	$	3,087	$	190,762
Operating lease commitments		20,644		5,156		9,503		5,985		—
Interest on long-term debt		143,647		24,242		48,104		47,544		23,757
Total		376,481		36,213		69,133		56,616		214,519

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Seasonality

Our operations are impacted by seasonal factors. Historically, our business has been negatively impacted during the winter months due to inclement weather, fewer daylight hours, and holidays. Our well servicing rigs are mobile, and we operate a significant number of oilfield vehicles. During periods of heavy snow, ice or rain, we may not be able to move our equipment between locations, thereby reducing our ability to generate rig or truck hours. In addition, the majority of our well servicing rigs work only during daylight hours. In the winter months when daylight time becomes shorter, this reduces the amount of time that the well servicing rigs can work and, therefore, has a negative impact on total hours worked. Finally, during the fourth quarter, we historically have experienced significant slowdowns during the Thanksgiving and Christmas holiday seasons.

Critical Accounting Policies and Estimates

The preparation of our consolidated/combined financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenue and expenses during the applicable reporting periods. On an ongoing basis, management reviews its estimates, particularly those related to depreciation and amortization methods, useful lives and impairment of long-lived assets, and asset retirement obligations, using currently available information. Changes in facts and circumstances may result in revised estimates, and actual results could differ from those estimates.

Estimated Depreciable Lives

A substantial portion of our total assets is comprised of equipment. Each asset included in equipment is recorded at cost and depreciated using the straight-line method, which deducts equal amounts of the cost of such assets from earnings every year over the asset’s estimated economic useful life. As a result of these estimates of economic useful lives, net equipment as of December 31, 2008 totaled $331.0 million which represented 67.2% of total assets. Depreciation expense for the year ended December 31, 2008 totaled $30.6 million which represented 12.5% of total operating expenses. Given the significance of equipment to our financial statements, the determination of an asset’s economic useful life is considered to be a critical accounting estimate. The estimated economic useful life is monitored by management to determine its continued appropriateness.

Impairments

Long-lived assets, which include property, equipment, and finite lived intangible assets subject to amortization, comprise a significant amount of our total assets. We review the carrying values of these assets for impairment periodically, and at least annually for goodwill, or whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. An impairment loss is recorded in the period in which it is determined that the carrying amount is not recoverable. This requires us to make judgments regarding long-term forecasts of future revenues and costs related to the assets subject to review. These forecasts include assumptions related to the rates we bill our customers, equipment utilization, equipment additions, debt borrowings and repayments, staffing levels, pay rates, and other expenses. In turn, these forecasts are uncertain in that they require assumptions about demand for our products and services, future market conditions and technological developments. Significant and unanticipated changes to these assumptions could require a provision for impairment in a future period. Given the nature of these evaluations and their application to specific assets and specific times, it is not possible to reasonably quantify the impact of changes in these assumptions. Based on our analysis as of December 31, 2008, we concluded that goodwill was impaired and recorded a $4.4 million impairment charge. We also assessed our long-lived assets for impairment and concluded that no such impairment was necessary.

Allowance for Doubtful Accounts

The determination of the collectability of amounts due from our customers requires us to use estimates and make judgments regarding future events and trends, including monitoring our customers’ payment history and current credit worthiness to determine that collectability is reasonably assured, as well as consideration of the overall business climate in which our customers operate. Inherently, these uncertainties require us to make frequent judgments and estimates regarding our customers’ ability to pay amounts due us in order to determine the appropriate amount of valuation allowances required for doubtful accounts. Provisions for doubtful accounts are recorded when it becomes evident that the customer will not make the required payments at either contractual due dates or in the future. At December 31, 2008 and 2007, allowance for doubtful accounts totaled $2.8 million, or 3.9%, and $50 thousand, or 0.2%, of accounts receivable, respectively. We believe that our allowance for doubtful accounts is adequate to cover potential bad debt losses under current conditions; however, uncertainties regarding changes in the financial condition of our customers, either adverse or positive, could impact the amount and timing of any additional provisions for doubtful accounts that may be required. A five percent

35

change in the allowance for doubtful accounts would have had an impact on income from continuing operations before income taxes of approximately $0.1 million in 2008.

Revenue Recognition

Well Servicing — Well servicing consists primarily of maintenance services, workover services, completion services, plugging and abandonment services, and tubing testing. We price well servicing by the hour of service performed.

Fluid Logistics — Fluid logistics consists primarily of the sale, transportation, storage, and disposal of fluids used in drilling, production, and maintenance of oil and natural gas wells. We price fluid logistics by the job, by the hour, or by the quantities sold, disposed, or hauled.

We recognize revenue when services are performed, collection of the relevant receivables is probable, persuasive evidence of an arrangement exists, and the price is fixed or determinable.

Income Taxes

The Forbes Group was not subject to federal income tax until May 29, 2008. Prior to May 29, 2008 all income, losses, credits, and deductions of the Forbes Group were passed through to the equity owners’ individual tax returns. Accordingly, no provision for U.S. federal income taxes is included in the accompanying consolidated/combined financial statements through May 29, 2008. The Forbes Group is subject to the Texas margin tax. As of May 29, 2008, in conjunction with the Initial Equity Offering and the related Bermuda Reorganization, the Forbes Group became subject to U.S. federal income tax. For the year ended December 31, 2008 $61.6 million in federal income tax expense and $1.0 million in state tax expense was recorded. As of December 31, 2008 $62.1 million in deferred U.S. federal income tax is reflected in the FES Ltd’s balance sheet.

Current and deferred tax liabilities and assets are recorded in accordance with enacted tax laws and rates. Valuation allowances are established to reduce deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. In determining the need for valuation allowances, we have considered and made judgments and estimates regarding estimated future taxable income and ongoing prudent and feasible tax planning strategies. These estimates and judgments include some degree of uncertainty and changes in these estimates and assumptions could require us to adjust the valuation allowances for our deferred tax assets.

Goodwill

Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”) eliminates the amortization of goodwill and other intangible assets with indefinite lives. Intangible assets with lives restricted by contractual, legal, or other means will continue to be amortized over their useful lives. Goodwill and other intangible assets not subject to amortization are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. SFAS No. 142 requires a two-step process for testing impairment. First, the fair value of each reporting unit is compared to its carrying value to determine whether an indication of impairment exists. If impairment is indicated, then the fair value of the reporting unit’s goodwill is determined by allocating the unit’s fair value to its assets and liabilities (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination. The fair value for goodwill is measured as the difference between the fair value of the reporting unit’s assets (excluding goodwill) and its fair value.

In step one of the annual impairment test and due to the adverse equity market conditions affecting our common stock price and the declines in oil and natural gas prices in the fourth quarter of 2008 and continuing into 2009, we tested our fluid services business unit for goodwill impairment. The first step was to estimate the fair value of the fluid services segment using a weighting of the discounted cash flow method, the public company guideline method, and the guideline transaction method, weighted 45%, 45% and 10%, respectively. The discounted cash flow method and public company guideline method provided the strongest indication of value due to their ability to incorporate the current state of the oil field services industry as well as the recent changes in the credit and equity markets. The guideline transaction method involved considering private transactions that were relevant but were considered to a lesser degree. In order to validate the reasonableness of the estimated fair value obtained for this reporting unit, a reconciliation of fair value for all the major reporting units to our market capitalization was performed. For purposes of reconciliation to our market

36

capitalization, a control premium was applied. The control premium used in the reconciliation was derived from a market transaction data study. In addition, for purposes of calculating fair value, the market value of our debt as of December 31, 2008 was used. The measurement date for the stock price for the reconciliation was the 30 day average closing price, centered on December 31, 2008. The results of the fair value analysis for step one showed the carrying value of the fluid services business above the fair value as of December 31, 2008.

Based on the results of step one, impairment of goodwill for the fluids unit was indicated. We performed step two by allocating the estimated fair value to the tangible and intangible assets, which indicated that the entire value of the goodwill in the fluids services unit of $4.4 million was impaired. This non-cash charge eliminates the goodwill recorded in connection with the January 1, 2008 Delaware Reorganization. The goodwill associated with the Delaware Reorganization had no tax basis, and accordingly, there was no tax benefit derived from recording the impairment charge. We have has no other goodwill recorded on our balance sheet.

Self-Insured Risk Accruals

We are self-insured up to retention limits with regard to workers’ compensation and medical coverage of our employees. We have deductibles for workers’ compensation of $250,000 bodily injury per accident and $250,000 per each claim for disease. The medical coverage has a $125,000 deductible per individual plus a $250,000 aggregate deductible. Deductibles for automobile liability and general liability are $100,000 per occurrence. Workers’ compensation, general liability and automobile liability have an aggregate stop loss in the amount of $6,425,250. We maintain accruals in our consolidated balance sheets related to self-insurance retentions by using third-party actuarial data and historical claims history.

Asset Retirement Obligation

We have has established an estimate for recognition and measurement of a liability for an asset retirement obligation and an associated asset retirement cost for our salt water disposal wells. A liability has been recorded for the fair value of the future removal of the assets as well as for the associated retirement costs. An outside company was engaged to estimate the cost of plugging the wells.

Environmental

We are subject to extensive federal, state, and local environmental laws and regulations. These laws, which are constantly changing, regulate the discharge or release of materials into the environment and may require us to remove or mitigate the adverse environmental effects of the disposal or release of petroleum, chemical or other hazardous substances at various sites. Environmental expenditures are expensed or capitalized depending on their future economic benefit. Expenditures that relate to an existing condition caused by past operations and that have no future economic benefits are expensed. Liabilities for expenditures of a non-capital nature are recorded when environmental assessment and/or remediation is probable and the costs can be reasonably estimated. We believe, on the basis of presently available information, that regulation of known environmental matters will not materially affect our liquidity, capital resources or consolidated/combined financial condition. However, there can be no assurances that future costs and liabilities will not be material.

Share Based Compensation

We use the Black-Scholes option pricing model which requires extensive use of financial estimates and accounting judgment, including the expected volatility of our common stock over the estimated term of the options granted, estimates on the expected time period that employees will retain their vested stock options prior to exercising them, and the number of shares that are expected to be forfeited before the options are vested. The use of alternative assumptions could produce significantly different estimates of the fair value of the stock-based compensation and as a result, provide significantly different amounts recognized in our statement of operations. Stock-based compensation was $1.4 million for 2008.

Contingent Liabilities

We establish a provision for a contingent liability when it is probable that a liability has been incurred and the amount is estimable. We base our estimates and judgments on historical experience and on various other assumptions and information that are believed to be reasonable under the circumstances. There are no pending legal proceedings, and we are not aware of any threatened legal proceedings, to which we are a party or to which our property is subject, other than immaterial proceedings in the ordinary course of business.

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Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in GAAP, and enhances disclosures about fair value measurements. SFAS No. 157 applies when other accounting pronouncements require fair value measurements; it does not require new fair value measurement. SFAS No. 157 became effective for us on January 1, 2008, FASB Staff Position (“FSP”) 157-2 delays the effective date of SFAS 157 for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value on a recurring basis (at least annually). Beginning January 1, 2008, we applied the provisions of SFAS 157 to our financial instruments and the impact was not material. We are currently assessing the impact this standard will have when applied to our nonfinancial assets and liabilities and its potential impact on the our consolidated financial statements (primarily asset retirement obligations and nonfinancial assets and liabilities measured at fair value in conjunction with impairment testing).

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment of FASB Statement No. 115. This statement permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 became effective for us as of January 1, 2008. The adoption of SFAS No. 159, did not have a material impact on our results of operations, cash flows, and financial position.

In December 2007, the FASB issued SFAS No. 141R, Business Combinations. SFAS No. 141R replaces SFAS No. 141 and addresses the recognition and accounting for identifiable assets acquired, liabilities assumed, and noncontrolling interests in business combinations. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 (January 1, 2009, for us). An entity may not apply it before that date. We are currently assessing the impact this standard will have on our results of operations, cash flows, and financial position.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements. SFAS No. 160 addresses the accounting and reporting framework for minority interests by a parent company. This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 ( January 1, 2009, for us). Early adoption is prohibited. We are currently assessing the impact this standard will have on our results of operations, cash flows, and financial position.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States. This statement shall be effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board (PCAOB) amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The impact to the financial statements was not material.

In April 2008, the FASB issued FSP No. 142-3, “Determining the Useful Life of Intangible Assets” (FSP 142-3). FSP 142-3 amends the factors to be considered in determining the useful life of intangible assets. Its intent is to improve the consistency between the useful life of an intangible asset and the period of expected cash flows used to measure such asset’s fair value. FSP 142-3 is effective for fiscal years beginning after December 15, 2008. We are currently assessing the potential impact, if any, of FSP 142-3 on our financial statements.

In January 2009, the FASB proposed FSP No. FAS 107-b and APB 28-a, which would amend SFAS No. 107, “Disclosures About Fair Value of Financial Instruments” and APB Opinion No. 28 “Interim Financial Reporting,” to require disclosure of the fair value of financial instruments in interim financial statements as well as annual financial statements. In addition, entities would be required to disclose the method and significant assumptions used to estimate the fair value of financial instruments. If ratified, this proposed guidance would become effective for interim and annual periods ending after March 15, 2009. We are currently evaluating the effect this proposed guidance may have on our financial position, results of operations and cash flows.

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Subsequent Events

We entered into the Third Supplemental Indenture, dated as of February 6, 2009 (the “Third Supplemental Indenture”), to the indenture governing the Senior Secured Notes (the “Indenture”), with Wells Fargo Bank, National Association, as trustee (the “Trustee”) and certain subsidiary guarantors named therein after receiving the requisite number of consents from the holders of the Senior Secured Notes. The Third Supplemental Indenture amends the definition of Net Income (as defined in the Indenture) to provide for the exclusion, in certain circumstances, of certain non-cash charges for impairment writedowns or writeoffs of noncurrent assets and extraordinary, unusual or nonrecurring non-cash charges. Additionally, the Third Supplemental Indenture amends the Indenture to (i) make the Limitation on Capital Expenditures covenant more restrictive on us, (ii) require us during the first quarter of 2009 and by the end of the second quarter of 2010, to spend an aggregate of $10 million in cash to repurchase Senior Secured Notes upon specified terms and conditions and (iii) restrict our ability to incur any additional Indebtedness (as defined in the Indenture and including Additional Notes, which essentially means additional Notes issued under the Indenture or so-called “tack-on” notes) under the Fixed Charge Coverage Ratio test contained in Section 4.14(a) of the Limitation on the Incurrence of Indebtedness and Issuance of Preferred Stock covenant (“ratio debt”) that is secured by any of our assets or property or those of our subsidiaries.

On March 30, 2008, the Forbes Group received a consent, waiver and acknowledgement from Citibank, N.A. for the following loan covenants as of December 31, 2008; (1) the requirement to furnish to Citibank for the fiscal year ended 2008 an opinion from an independent certified public accounting firm assessing the Company’s internal controls and stating that there exists no material weakness except those to which Citibank does not object or which have been disclosed in the Credit Agreement, (2) the requirement to furnish to Citibank financial statements 45 days after each fiscal quarter ended in 2008 and 90 days after the fiscal year ended 2008 as long as the Company provides such financial statements within the SEC deadlines, including any extensions available thereunder, for the relevant Form 10-Q or Form 10-K, (3) the requirement to furnish to Citibank consolidating financial statements for all periods ended in 2008, and (4) the presence of the material weaknesses set forth in the Company’s 8-K filed on March 23, 2009. Citibank, N.A. also authorized a sale/lease-back transaction as long as it complies with the terms of the Indenture.

Subsequent to December 31, 2008, we received advances of $12.0 million on our Credit Facility. We also have $6.4 million in outstanding letters of credit resulting in remaining availability under the Credit Facility of $1.6 million. Our cash balance at March 26, 2009 was $36.9 million.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

In addition to the risks inherent in our operations, we are exposed to financial, market and economic risks. Changes in interest rates may result in changes in the fair market value of our financial instruments, interest income and interest expense. Our financial instruments that are exposed to interest rate risk are long-term borrowings. The following discussion provides information regarding our exposure to the risks of changing interest rates.

Our primary debt obligations are the outstanding Senior Secured Notes and borrowings under the Credit Facility, if any. Changes in interest rates do not affect interest expense incurred on our Senior Secured Notes as such notes bear interest at fixed rates. However, changes in interest rates would affect their fair values. In general, the fair market value of debt with a fixed interest rate will increase as interest rates fall. Conversely, the fair market value of debt will decrease as interest rates rise. A hypothetical change in interest rates of 10% relative to interest rates as of December 31, 2008 would have no impact on our interest expense for our notes.

The Credit Facility has a variable interest rate and, therefore, is subject to interest rate risk. A 100 basis point increase in interest rates on our variable rate debt would result in approximately $135,000 in additional annual interest expense.

We have not entered into any derivative financial instrument transactions to manage or reduce market risk or for speculative purposes.

Item 8. Consolidated/Combined Financial Statements and Supplementary Data

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Index To Financial Statements

Forbes Energy Services Ltd and Subsidiaries (A/K/A The “Forbes Group”)

Consolidated/Combined Financial Statements

	Page
Report of Independent Registered Public Accounting Firm	41
Consolidated/Combined Balance Sheets as of December 31, 2008 and 2007	43
Consolidated/Combined Statements of Operations for the years ended December 31, 2008, 2007, and 2006	44
Consolidated/Combined Statements of Changes in Shareholders’/Members’ Equity for the years ended December  31, 2008, 2007, and 2006	45
Consolidated/Combined Statements of Cash Flows for the years ended December 31, 2008, 2007, and 2006	46
Notes to Consolidated/Combined Financial Statements	47

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Item 8A. Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Shareholders of Forbes Energy Services Ltd.:

In our opinion, the consolidated balance sheet and the related consolidated statements of operations, changes in shareholders’ equity and cash flows present fairly, in all material respects, the financial position of Forbes Energy Services Ltd. and its subsidiaries (the “ Successor Company”) at December 31, 2008, and the results of their operations and their cash flows for the year ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Successor Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

March 31, 2009

Houston, Texas

41

To the Board of Directors and

Shareholders of Forbes Energy Services Ltd.:

In our opinion, the combined balance sheet and the related combined statements of operations, of changes in members’ equity and of cash flows present fairly, in all material respects, the financial position of Forbes Energy Services LLC. and its subsidiaries and affiliates (the “Predecessor Company”) at December 31, 2007 and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2007 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Predecessor Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

April 8, 2008

Houston, Texas

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Forbes Energy Services Ltd. and Subsidiaries (a/k/a the “Forbes Group”)

Consolidated/Combined Balance Sheets

	Successor- Consolidated December 31, 2008			Predecessor- Combined December 31, 2007
Assets
Current assets
Cash and cash equivalents	$	23,469,067		$	5,209,345
Accounts receivable–trade, net of allowance of $2.8 million and $50,000 for 2008 and 2007, respectively		69,095,522			42,998,005
Accounts receivable – related parties		97,672			151,676
Accounts receivable – other		605,925			505,101
Prepaid expenses		5,266,256			4,460,941
Other current assets		1,108,846			5,552
Total current assets		99,643,288			53,330,620
Property and equipment, net		330,951,116			204,132,089
Intangible assets, net		39,459,977			—
Deferred financing costs, net		12,709,207			—
Other assets		37,803			2,532,457
Total assets	$	482,801,391		$	259,995,166
Liabilities and Shareholders’/Members’ Equity
Current liabilities
Current maturities of long-term debt	$	6,811,802		$	3,823,422
Accounts payable – trade		28,653,204			66,496,676
Accounts payable – related parties		277,154			3,431,701
Accounts payable – income tax		1,005,872			—
Accrued interest payable		8,488,560			442,381
Accrued expenses		11,699,652			7,384,137
Total current liabilities		56,936,244			81,578,317
Long-term debt, net of current maturities		205,378,040			100,409,507
Notes payable – related parties		—			7,048,075
Deferred tax liability		62,068,620			500,000
Total liabilities		324,382,904			189,535,899
Commitments and contingencies (Note 13)
Members’ equity		—			70,459,267
Shareholders’ equity
Preference shares, $.01 par value, 10,000,000 shares authorized		—			—
Common shares, $.01 par value, 450,000,000 shares authorized, 32,611,200 shares issued and outstanding at December 31, 2008		326,112			—
Class B shares, $.01 par value, 40,000,000 shares authorized, 29,500,000 shares issued and outstanding at December 31, 2008		295,000			—
Additional paid-in capital		166,676,054			—
Retained earnings/(accumulated deficit)		(8,878,679	)		—
Total shareholders’ equity/members’ equity		158,418,487			70,459,267
Total liabilities and shareholders’/members’ equity	$	482,801,391		$	259,995,166

The accompanying notes are an integral part of these consolidated/combined financial statements.

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Forbes Energy Services Ltd. and Subsidiaries (a/k/a the “Forbes Group”)

Consolidated/Combined Statements of Operations

	Years Ended December 31
	Successor- Consolidated 2008			Predecessor-Combined
				2007			2006
Revenues
Well servicing	$	189,980,242		$	103,600,928		$	58,574,563
Fluid logistics		170,949,057			103,405,487			74,140,794
Total revenues		360,929,299			207,006,415			132,715,357
Expenses
Well servicing		128,614,600			60,570,743			32,452,953
Fluid logistics		117,940,153			69,887,441			49,620,296
General and administrative		17,700,341			8,823,299			6,026,184
Depreciation and amortization		33,724,218			15,341,906			7,409,381
Goodwill impairment		4,363,369			—			—
Total expenses		302,342,681			154,623,389			95,508,814
Operating income		58,586,618			52,383,026			37,206,543
Interest expense		(25,797,663	)		(8,342,652	)		(5,074,367	)
Other income, net		37,947			236,583			140,901
Income before taxes		32,826,902			44,276,957			32,273,077
Income tax expense		62,574,492			683,291			—
Net income(loss)	$	(29,747,590	)	$	43,593,666		$	32,273,077
Loss per share of common stock (Note 16)
Basic	$	(0.65	)		—			—
Diluted		(0.65	)		—			—
Weighted average number of shares outstanding
Basic		45,894,557			—			—
Diluted		45,894,557			—			—
Unaudited proforma earnings per share (Note 16)
Basic	$	0.37		$	0.52		$	0.39
Diluted		0.37			0.52			0.39
Unaudited proforma weighted average number of shares outstanding
Basic		55,994,843			54,144,700			54,144,700
Diluted		55,994,843			54,144,700			54,144,700

The accompanying notes are an integral part of these consolidated/combined financial statements.

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Forbes Energy Services Ltd. and Subsidiaries (a/k/a the “Forbes Group”)

Consolidated/Combined Statements of Changes in Shareholders’/Members’ Equity

	Total Members’ Equity
Balance December 31, 2005	$	11,265,843
Net income		32,273,077
Distributions		(4,738,188	)
Balance December 31, 2006		38,800,732
Net income		43,593,666
Distributions		(11,935,131	)
Balance December 31, 2007	$	70,459,267

				Additional Paid-In Capital		Retained Earnings			Total Members’ Equity			Total Shareholders’ Equity
	Capital Stock
	Shares	Amount
Balance December 31, 2007	—	$	—	$	—	$	—		$	70,459,267		$	—
January 1, 2008 Delaware reorganization – conversion of CCF	—		—		—		—			35,603,182			35,603,182
Acquisition of TES and STT	—		—		—		—			96,067,739			96,067,739
Distributions	—		—		—		—			(14,734,271	)		(14,734,271	)
Class B stock issued in connection with Bermuda Reorganization	29,500,000		295,000		95,772,739		20,868,911			(116,936,650	)		—
Common stock issued in Initial Equity Offering, net	24,644,700		246,447		39,691,348		—			—			39,937,795
Additional common stock issued	7,966,500		79,665		29,761,972		—			—			29,841,637
Stock-based compensation	—		—		1,449,995		—			—			1,449,995
Net loss	—		—		—		(29,747,590	)		—			(29,747,590	)
Balance December 31, 2008	62,111,200	$	621,112	$	166,676,054	$	(8,878,679	)	$	—		$	158,418,487

The accompanying notes are an integral part of these consolidated/combined financial statements.

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Forbes Energy Services Ltd. and Subsidiaries (a/k/a the “Forbes Group”)

Consolidated/Combined Statements of Cash Flows

	Years Ended December 31,
	Successor- Consolidated 2008			Predecessor-Combined
				2007			2006
Cash flows from operating activities:
Net Income (loss)	$	(29,747,590	)	$	43,593,666		$	32,273,077
Adjustments to reconcile net income/(loss) to net cash provided by operating activities
Depreciation and amortization expense		33,724,218			15,341,906			7,409,381
Amortization of Senior Secured Notes discount		610,289			—			—
Stock-based compensation		1,449,995			—			—
Impairment of goodwill		4,363,369			—			—
Deferred income tax		61,568,620			500,000			—
Loss on disposal of assets, net		682,851			36,836			126,622
Bad debt expense		2,739,473			55,455			848,334
Deferred loan cost amortization		5,976,131			253,935			104,478
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable		(28,937,814	)		(19,227,480	)		(10,441,547	)
Accounts receivable – related party		54,004			(151,676	)		—
Prepaid expenses		(1,015,810	)		(1,202,628	)		(1,524,796	)
Inventory		(892,800	)		(139,859	)		27,041
Accounts payable		4,110,765			1,631,865			(222,590	)
Accounts payable – related party		(3,154,547	)		2,620,226			—
Accrued expenses		4,626,861			3,091,203			(5,099,800	)
Income taxes payable		1,005,872			—			—
Accrued interest payable		8,046,179			178,361			158,561
Net cash provided by operating activities		65,210,066			46,581,810			23,658,761
Cash flows from investing activities:
Proceeds from sale of property and equipment		50,017			11,478			77,500
Payments for property and equipment		(176,940,028	)		(68,234,687	)		(40,883,585	)
Other		—			—			(150,000	)
Net cash used in investing activities		(176,890,011	)		(68,223,209	)		(40,956,085	)
Cash flows from financing activities:
Payments for debt issuance costs		(16,502,030	)		(1,653,208	)		(611,613	)
Proceeds from issuance of common stock		189,779,432			—			—
Purchase outstanding interest in Forbes Energy Services LLC		(120,000,000	)		—			—
Proceeds from related party debt issuance		—			1,800,000			700,000
Repayments of related party debt		(7,048,075	)		(431,000	)		(200,000	)
Proceeds from borrowings on debt		226,775,441			58,780,339			39,052,738
Repayments of debt		(128,330,830	)		(27,359,891	)		(12,519,654	)
Distributions to members		(14,734,271	)		(11,935,131	)		(4,738,188	)
Net cash provided by financing activities		129,939,667			19,201,109			21,683,283
Net increase (decrease) in cash and cash equivalents		18,259,722			(2,440,290	)		4,385,959
Cash and cash equivalents
Beginning of year		5,209,345			7,649,635			3,263,676
End of year	$	23,469,067		$	5,209,345		$	7,649,635

The accompanying notes are an integral part of these consolidated/combined financial statements.

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Forbes Energy Services Ltd. and Subsidiaries (a/k/a the “Forbes Group”)

Notes to Consolidated/Combined Financial Statements

1. Organization and Nature of Operations

Nature of Business

Forbes Energy Services Ltd. (“FES Ltd”) and its subsidiaries, Forbes Energy Services LLC (“FES LLC”), Forbes Energy Capital Inc. (“FES CAP”), C.C. Forbes, LLC (“CCF”), TX Energy Services, LLC (“TES”), Superior Tubing Testers, LLC (“STT”) and Forbes Energy International, LLC (“FEI LLC”) are headquartered in Alice, Texas, and conduct business primarily in the state of Texas. On October 15, 2008, FES LLC and FEI LLC formed Forbes Energy Services México, S. de R.L. de C.V. (“FES Mexico”), a Mexican limited liability partnership (sociedad de responsabilidad limitada de capital variable), to conduct operations in Mexico. As used in these consolidated/combined financial statements, the “Company,” the “Forbes Group,” “we,” or “our” means FES Ltd and all subsidiaries after May 29, 2008; FES LLC and its subsidiaries from January 1, 2008 to May 29, 2008 (in each case from January 1, 2008 referred to in the financial statements column headings as “Successor”); CCF, TES and STT from June 29, 2007 to December 31, 2007, and C.C. Forbes, L.P., Texas Energy Services, L.P. and Superior Tubing Testers, L.P. prior to June 29, 2007 (in each case prior to January 1, 2008, referred to in the financial statements column headings as “Predecessor”).

The Forbes Group is an independent oilfield services contractor that provides a wide range of well site services to oil and natural gas drilling and producing companies to help develop and enhance the production of oil and natural gas. These services include fluid hauling, fluid disposal, well maintenance, completion services, workovers and recompletions, plugging and abandonment, and tubing testing. The Forbes Group’s operations are concentrated in the major onshore oil and natural gas producing regions of Texas, with one location in Baxterville, Mississippi and one location in Poza Rica, Mexico.

2. Risk and Uncertainties

As an independent oilfield services contractor that provides a broad range of drilling-related and production-related services to oil and natural gas companies, primarily onshore in Texas, our revenue, profitability, cash flows and future rate of growth are substantially dependent on our ability to (1) maintain adequate equipment utilization, (2) maintain adequate pricing for the services we provide, and (3) maintain a trained work force. Failure to do so could adversely affect our financial position, results of operations, and cash flows.

Because our revenues are generated primarily from customers who are subject to the same factors generally impacting the oil and natural gas industry, our operations are also susceptible to market volatility resulting from economic, cyclical, weather related or other factors related to such industry. Changes in the level of operating and capital spending in the industry, decreases in oil and natural gas prices, or industry perception about future oil and natural gas prices could materially decrease the demand for our services, adversely affecting our financial position, results of operations and cash flows.

Our Credit Facility (as defined below) and the indenture governing our Senior Secured Notes (as defined below) and the debt outstanding thereunder impose significant restrictions on us and increase our vulnerability to adverse economic and industry conditions that could limit our ability to obtain additional or replacement financing. While the principal indebtedness of the Credit Facility is not scheduled for repayment until April 2012 and the Senior Secured Notes not until February 2015, our inability to satisfy any obligations under these agreements would constitute an event of default. Under the Credit Facility, an event of default will be deemed to have occurred if there is a change in control of the Forbes Group or if a material adverse change occurs in regards to the consolidated financial position of the Forbes Group, the consolidated business, assets, operations, properties or prospects of the Forbes Group, the Forbes Groups’ ability to timely pay the obligations under the Credit Facility or the enforceability of the material terms of any material loan document against the Forbes Group. The lender under the Credit Facility could, at some future date, make a determination that such a material adverse change has occurred, which is outside the control of the Forbes Group. The indenture governing the Senior Secured Notes does not have similar material adverse change or change in control events of default but does require an offer to redeem the Senior Secured Notes in the event of a change in control. It contains a cross-default provision that would be triggered if the debt under the Credit Facility were accelerated. See a discussion of cross-default provisions in Note 9, below. A default could result in all or a portion of our outstanding debt becoming immediately due and payable. If this should occur, we might not be able to obtain waivers or secure alternative financing to satisfy all of our obligations simultaneously. Given current market conditions, our ability to access the capital markets or to effect any asset sales might be restricted at a time when we would like or need to raise capital. In addition, the current economic conditions could also impact our customers and vendors and may cause them to fail to meet their obligations to us with little or no warning. These events could have a material adverse effect on our business, financial position,

results of operations and cash flows and our ability to satisfy the obligations under our debt agreements. (Also see Notes 9 and 10)

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Although we currently believe our liquidity and projected cash flows from operations will be sufficient to meet our cash requirements for the next twelve months and the foreseeable future, the factors described above create uncertainty. The continued compliance with our debt covenants is dependent upon us obtaining a minimum level of EBITDA and maintaining a minimum level of net worth. Our forecasted EBITDA and net worth contain certain estimates and assumptions regarding rig and truck utilization, average hourly rates, and operating and general and administrative expenses, which could prove to be inaccurate. A material deviation from one or more of these estimates or assumptions could result in a violation of one or more of our contractual covenants, which could result in all or a portion of our outstanding debt becoming immediately due and payable. Within certain constraints, we can conserve capital by reducing or delaying capital expenditures, deferring non-regulatory maintenance expenditures and further reducing operating and administrative costs. Postponing or eliminating capital expenditures would delay or reduce future cash flows, and we believe these actions can provide us the flexibility to match our capital commitments to our available capital resources.

3. Formation of Forbes Energy Services LLC and Forbes Energy Services Ltd. and the Initial Equity Offering

FES LLC is a Delaware limited liability company formed effective January 1, 2008 to act as the holding company for the three wholly-owned operating companies, CCF, TES, and STT. In the reorganization (the “Delaware Reorganization”), ownership of each of such three operating subsidiaries comprising our business was transferred to FES LLC by their equity investors in exchange for equity interests in FES LLC. Although FES LLC was the legal acquirer in the Delaware Reorganization, CCF was considered the acquirer for accounting purposes. As a result of this determination, the net assets of CCF remain at their historical cost, while purchase accounting was applied to TES and STT. The purchase prices of TES and STT were based on estimates of the enterprise value of each company. Amounts allocated to identifiable tangible and intangible assets acquired and liabilities assumed were based on valuations. FES LLC allocated $14.5 million as a step-up in book value to property and equipment of TES, $4.4 million to goodwill, and $42.3 million to other intangible assets. Total value added to the assets and stockholders’ equity was $61.1 million as a result of the Delaware Reorganization.

The Pro Forma unaudited results summarized below reflect our consolidated Pro Forma results of operations for the years ended December 31, 2007 and 2006 as if TES and STT were acquired January 1, 2007 and 2006, respectively. These results include amortization of the intangibles other than goodwill that resulted from the reorganization. Depreciation on the stepped up basis in the assets of TES is also included. Federal income tax expense was calculated at an assumed rate of 35% for both years.

	Year Ended December 31
	2007		2006
Revenues	$	207,006,415	$	132,715,357
Depreciation and amortization		20,703,122		12,770,600
Income before taxes		38,915,741		26,911,858
Net income		25,295,231		17,492,708

FES Ltd is a Bermuda corporation formed effective April 9, 2008 to act as the holding company for FES LLC and its subsidiaries. At the time of FES Ltd’s organization, 200 common shares were issued. On May 29, 2008, concurrent with the Initial Equity Offering, all of the members of FES LLC assigned 63% of their membership interests in FES LLC to FES Ltd in exchange for 29,500,000 shares of FES Ltd’s Class B non-voting stock. This transaction was accounted for as a transaction between entities under common control and deemed to be effective for accounting purposes as of January 1, 2008. Upon consummation of the Initial Equity Offering, FES Ltd contributed $120,000,000 cash as additional capital to FES LLC and FES LLC used the funds to redeem the remaining outstanding membership interests held by the members of FES LLC, other than FES Ltd. The result was that FES LLC and its subsidiaries became wholly owned subsidiaries of FES Ltd. (collectively, the “Bermuda Reorganization”).

On May 29, 2008, FES Ltd completed its Canadian initial public offering (the “Initial Equity Offering”) and simultaneous U.S. private placement of its common shares. In the Initial Equity Offering, FES Ltd sold 24,644,700 common shares for CDN $7.00 per share and the common shares are listed on the Toronto Stock Exchange under the symbol FRB.TO. Gross proceeds from the Initial Equity Offering were CDN $172,511,500 and net proceeds from the Initial Equity Offering after expenses were CDN $162,465,730.

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4. Summary of Significant Accounting Policies

Principles of Consolidation

The Forbes Group’s consolidated financial statements as of and for the year ended December 31, 2008 include the accounts of FES Ltd and all of its wholly owned, direct and indirect, and consolidated subsidiaries, from May 29, 2008 to December 31, 2008, and FES LLC and all of its wholly owned and consolidated subsidiaries from January 1, 2008 through May 28, 2008. All significant intercompany balances and transactions have been eliminated in the consolidation.

Principles of Combination

The Forbes Group’s combined financial statements as of and for the periods ended on or prior to December 31, 2007 include the accounts of CCF, TES, STT, and their predecessor partnerships, as they were under common management. All significant intercompany balances and transactions have been eliminated in the combination.

Use of Estimates

The preparation of consolidated/combined financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated/combined financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

Well Servicing–Well servicing consists primarily of maintenance services, workover services, completion services, plugging and abandonment services and tubing testing. The Forbes Group prices well servicing by the hour of service performed.

Fluid Logistics–Fluid logistics consists primarily of the sale, transportation, storage, and disposal of fluids used in drilling, production, and maintenance of oil and natural gas wells. The Forbes Group prices fluid logistics services by the job, by the hour, or by the quantities sold, disposed, or hauled.

The Forbes Group recognizes revenue when services are performed, collection of the relevant receivables is probable, persuasive evidence of an arrangement exists, and the price is fixed or determinable. In accordance with EITF Issue No. 06-03 “How Sales Taxes Collected from Customers and Remitted to Government Authorities Should be Presented in the Income Statement (That is, Gross Versus Net Presentation),” revenues are presented net of any sales taxes collected by the Forbes Group from its customers that are remitted to governmental authorities.

Income Taxes

The Forbes Group was not subject to U.S. federal income tax until May 29, 2008. Prior to May 29, 2008 all income, losses, credits, and deductions of the Forbes Group were passed through to the equity owners’ individual tax returns. Accordingly, no provision for U.S. federal income taxes is included in the accompanying consolidated/combined financial statements through May 29, 2008. In conjunction with the Initial Equity Offering of FES Ltd’s common shares on May 29, 2008 and the related Bermuda Reorganization, the Forbes Group became subject to U.S. federal income tax. As part of this reorganization, $52.8 million in deferred U.S. federal income taxes were recorded as income tax expense in accordance with SFAS No. 109, “Accounting for Income Taxes,” which requires that the tax effect of recognizing deferred tax items upon a change in tax status be included in current year operations.

Cash and Cash Equivalents

The Forbes Group considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable is based on earned revenues. The Forbes Group provides an allowance for doubtful accounts, which is based upon a review of outstanding receivables, historical collection information, and existing economic conditions. Provisions for doubtful accounts are recorded when it becomes evident that the customer will not make the required payments at either contractual due dates or in the future. At December 31, 2008 and 2007, the allowance for doubtful accounts totaled $2.8 million and $50,000, respectively.

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Property and Equipment

Property and equipment are recorded at cost. Improvements or betterments that extend the useful life of the assets are capitalized. Expenditures for maintenance and repairs are charged to expense when incurred. The costs of assets retired or otherwise disposed of and the related accumulated depreciation are eliminated from the accounts in the period of disposal. Gains or losses resulting from property disposals are credited or charged to operations currently. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets.

Goodwill

Goodwill results from business acquisitions and represents the excess of acquisition costs over the fair value of the net assets acquired. We account for goodwill and other intangible assets under the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). Goodwill and other intangible assets not subject to amortization are tested for impairment annually as of December 31, or more frequently if events or changes in circumstances indicate that the asset might be impaired. SFAS 142 requires a two-step process for testing impairment. First, the fair value of each reporting unit is compared to its carrying value to determine whether an indication of impairment exists. If impairment is indicated, then the fair value of the reporting unit’s goodwill is determined by allocating the unit’s fair value to its assets and liabilities (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination. The amount of impairment for goodwill is measured as the excess of its carrying value over its fair value. As discussed in Note 5, $4.4 million of goodwill was recorded in connection with the Delaware Reorganization effective January 1, 2008. An impairment charge of $4.4 million was recorded in the fourth quarter of 2008 which reduced the goodwill in our balance sheet to zero as of December 31, 2008.

Impairments

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, or SFAS No. 144, long-lived assets, such as property, and equipment, and finite-lived intangibles subject to amortization, are reviewed for impairment at a minimum annually, or whenever, in management’s judgment events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of such assets to estimated undiscounted future cash flows expected to be generated by the assets. Expected future cash flows and carrying values are aggregated at their lowest identifiable level. If the carrying amount of such assets exceeds their estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of such assets exceeds the fair value of the assets. The Forbes Group evaluated its asset group (other than goodwill) in accordance with FAS 144 which resulted in no impairment for the year ended December 31, 2008.

Environmental

The Forbes Group is subject to extensive federal, state, and local environmental laws and regulations. These laws, which are constantly changing, regulate the discharge of materials into the environment and may require the Forbes Group to remove or mitigate the adverse environmental effects of the disposal or release of petroleum or chemical substances at various sites. Environmental expenditures are expensed or capitalized depending on their future economic benefit. Expenditures that relate to an existing condition caused by past operations and that have no future economic benefits are expensed. Liabilities for expenditures of a non-capital nature are recorded when environmental assessment and/or remediation is probable and the costs can be reasonably estimated.

Deferred Financing Costs

Deferred financing costs are amortized over the period of the loan agreement on an effective interest basis, as a component of interest expense. Additionally, the Forbes Group includes gains and losses on early extinguishment of debt as a component of interest expense. For the twelve months ended December 31, 2008, 2007, 2006 amortization of deferred financing costs was $6.0 million, $0.3 million, and $0.1 million, respectively. Losses on early extinguishment of debt totaled $0.7 million in 2008 and zero for 2007 and 2006.

Share-Based Compensation

The Company accounts for share based-compensation in accordance with SFAS No. 123R. The Company measures share-based compensation cost as of the grant date based on the estimated fair value of the award less an estimated rate for pre-vesting forfeitures, and recognizes compensation expense on a straight-line basis over the vesting period. Compensation expense is

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recognized with an off-setting credit to additional paid-in capital, which is then transferred to common stock when the award is distributed or the option is exercised. Consideration received on the exercise of stock options is also credited to common stock.

Contingent Liabilities

We establish a provision for a contingent liability when it is probable that a liability has been incurred and the amount is estimable. We base our estimates and judgments on historical experience and on various other assumptions and information that are believed to be reasonable under the circumstances. There are no pending legal proceedings, and the Forbes Group is not aware of any threatened legal proceedings, to which the Forbes Group is a party or to which its property is subject, other than immaterial proceedings in the ordinary course of business.

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in GAAP, and enhances disclosures about fair value measurements. SFAS No. 157 applies when other accounting pronouncements require fair value measurements; it does not require new fair value measurement. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, with early adoption encouraged. FASB Staff Position (“FSP”) 157-2 delayed the effective date of SFAS 157 for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value on a recurring basis (at least annually). Beginning January 1, 2008, the Forbes Group has applied the provisions of SFAS 157 to its financial instruments and the impact is not material. The Forbes Group is currently assessing the impact this standard will have when applied to the Forbes Group’s nonfinancial assets and liabilities and its potential impact on the Forbes Group’s consolidated financial statements (primarily asset retirement obligations and nonfinancial assets and liabilities measured at fair value).

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment of FASB Statement No. 115. This statement permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Forbes Group adopted SFAS No. 159 beginning January 1, 2008. The Forbes Group has determined that the impact of this standard on the Forbes Group’s results of operations, cash flows, and financial position was not material.

In December 2007, the FASB issued SFAS No. 141R, Business Combinations. SFAS No. 141R replaces SFAS No. 141 and addresses the recognition and accounting for identifiable assets acquired, liabilities assumed, and noncontrolling interests in business combinations. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 (that is, January 1, 2009, for the Forbes Group). An entity may not apply it before that date. The Forbes Group is currently assessing the impact this standard will have on the Forbes Group’s results of operations, cash flows, and financial position.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements. SFAS No. 160 addresses the accounting and reporting framework for minority interests by a parent company. This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 (that is, January 1, 2009, for the Forbes Group). Early adoption is prohibited. The Forbes Group is currently assessing the impact this standard will have on the Forbes Group’s results of operations, cash flows, and financial position.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP in the United States. This statement will be effective following the SEC’s approval of the Public Company Accounting Oversight Board (PCAOB) amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The impact to the Forbes Group’s financial statements was not material.

In April 2008, the FASB issued FASB Staff Position (FSP) No. 142-3, “Determining the Useful Life of Intangible Assets” (FSP 142-3). FSP 142-3 amends the factors to be considered in determining the useful life of intangible assets. Its intent is to improve the consistency between the useful life of an intangible asset and the period of expected cash flows used to measure such asset’s

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fair value. FSP 142-3 is effective for fiscal years beginning after December 15, 2008 (that is, January 1, 2009, for the Forbes Group). The Company is currently assessing the potential impact, if any, of FSP 142-3 on its financial statements.

In January 2009, the FASB issued FSP No. FAS 107-b and APB 28-a, which would amend SFAS No. 107, “Disclosures About Fair Value of Financial Instruments” and APB Opinion No. 28, “Interim Financial Reporting,” to require disclosure of the fair value of financial instruments in interim financial statements as well as annual financial statements. In addition, entities would be required to disclose the method and significant assumptions used to estimate the fair value of financial instruments. If ratified, this proposed guidance would become effective for interim and annual periods ending after March 15, 2009. We are currently evaluating the effect this proposed guidance may have on our financial position, results of operations and cash flows.

5. Goodwill and Other Intangible Assets

Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”) eliminates the amortization of goodwill and other intangible assets with indefinite lives. Intangible assets with lives restricted by contractual, legal, or other means will continue to be amortized over their useful lives. Goodwill and other intangible assets not subject to amortization are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. SFAS No. 142 requires a two-step process for testing impairment. First, the fair value of each reporting unit is compared to its carrying value to determine whether an indication of impairment exists. If impairment is indicated, then the fair value of the reporting unit’s goodwill is determined by allocating the unit’s fair value to its assets and liabilities (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination. The fair value for goodwill is measured as the difference between the fair value of the reporting unit’s assets (excluding goodwill) and its fair value.

In step one of the annual impairment test and due to the adverse equity market conditions affecting our common stock price and the declines in oil and natural gas prices in the fourth quarter of 2008 and continuing into 2009, we tested our fluid services business unit for goodwill impairment. The first step was to estimate the fair value of the fluid services segment using a weighting of the discounted cash flow method, the public company guideline method, and the guideline transaction method, weighted 45%, 45% and 10%, respectively. The discounted cash flow method and public company guideline method provided the strongest indication of value due to their ability to incorporate the current state of the oil field services industry as well as the recent changes in the credit and equity markets. The guideline transaction method involved considering private transactions that were relevant but were considered to a lesser degree. In order to validate the reasonableness of the estimated fair value obtained for this reporting unit, a reconciliation of fair value for all the major reporting units to our market capitalization was performed. For purposes of reconciliation to the Company’s market capitalization, a control premium was applied. The control premium used in the reconciliation was derived from a market transaction data study. In addition, for purposes of calculating fair value, the market value of our debt as of December 31, 2008 was used. The measurement date for the stock price for the reconciliation was the 30-day average closing price, centered on December 31, 2008. The results of the fair value analysis for step one showed the carrying value of the fluid services business above the fair value as of December 31, 2008.

Based on the results of step one, impairment of goodwill for the fluid unit was indicated. The Company performed step two by allocating the estimated fair value to the tangible and intangible assets, which indicated that the entire value of the goodwill in the fluids services unit of $4.4 million was impaired. The goodwill associated with the Delaware Reorganization had no tax basis, and accordingly, there was no tax benefit derived from recording the impairment charge. The Company has no other goodwill recorded on our balance sheet.

Additionally in conjunction with the Delaware Reorganization effective January 1, 2008, the Forbes Group’s purchase price allocation assigned $42.3 million to other intangible assets with finite lives. Goodwill impairment test and in light of market conditions during the fourth quarter of 2008, we performed an assessment of our goodwill balance which indicated that our $4.4 million goodwill balance was impaired. Based on this, an impairment charge was recorded in the consolidated statement of operations resulting in goodwill of zero as of December 31, 2008. This impairment relates to our Fluid Logistics segment.

Our major classes of intangible assets subject to amortization under SFAS 142 consist of our customer relationships, trade name, safety training program and, dispatch software. Amortization expense for the twelve months ended December 31, 2008, 2007, and 2006 was $2.9 million, zero, and zero, respectively. Estimated aggregate amortization expense for each of the five succeeding fiscal years is $2.9 million per year.

The following sets forth the identified intangible assets by major asset class:

	As of December 31, 2008
	Useful Life (years)	Original Cost		Accumulated Amortization		Net Book Value
Customer relationships	15	$	31,895,919	$	2,216,395	$	29,769,524
Trade name	15		8,049,750		536,650		7,513,100
Safety training program	15		1,181,924		78,795		1,103,129
Dispatch software	10		1,135,282		113,528		1,021,754
Other	10		58,300		5,830		52,470
		$	42,321,175	$	2,951,198	$	39,459,977

6. Stock-Based Compensation

General

The Forbes Group’s 2008 Incentive Compensation Plan is a long-term retention plan that is intended to attract, retain and provide incentives for talented employees, including officers, and non-employee directors, and to align stockholder and employee interests. The Company believes its 2008 Incentive Compensation Plan is critical to its operations and productivity.

2008 Incentive Compensation Plan

From time to time, the Company grants stock options to its employees, including executive officers, and directors from its 2008 Incentive Compensation Plan. Standard options vest over a three-year period, with approximately one third vesting on the first, second and third anniversaries of the date of grant. For most grantees, options expire at the earlier of either one year after the

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termination of grantee’s employment by reason of death, disability or retirement, ninety days after termination of the grantee’s employment other than upon grantee’s death, disability or retirement, or ten years after the date of grant.

At December 31, 2008, 2,450,000 shares were available for future grants under the 2008 Incentive Compensation Plan. All options granted under this plan for the year ended December 31, 2008 were granted on the date of the Initial Equity Offering and were priced at the fair market value on the date of grant, based on the issue price of the Company’s common stock in such offering. No grants were made during fiscal years 2007 or 2006.

Stock Option Activities

The following table presents a summary of the Company’s stock option activity for the year ended December 31, 2008 (shares in thousands):

	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Options outstanding at December 31, 2007:	—	CDN$	—
Stock options:
Granted	2,770,000		7.00
Exercised	—		—
Canceled	—		—
Options outstanding at December 31, 2008:	2,770,000	$	7.00	9.41 years	—
Vested and expected to vest at December 31, 2008	2,770,000	$	7.00	9.41 years	—
Exercisable at December 31, 2008	—	CDN$	—	—	—

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between Forbes’s closing stock price on the last trading day of fiscal year 2008 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2008. This amount changes based on the fair market value of Forbes’s stock. No options were exercised in fiscal year 2008.

The weighted-average fair value of the stock options granted under the 2008 Incentive Compensation Plan during the year ended December 31, 2008 as defined by SFAS 123R was $2.91.

Stock-Based Compensation Expense

During the year ended December 31, 2008, the Company recorded total stock based compensation expense of $1.4 million. As no stock options were granted prior to 2008, the Company had no stock based compensation for fiscal years 2007 and 2006. No stock-based compensation costs were capitalized as of December 31, 2008 and 2007. As of December 31, 2008, total unrecognized stock-based compensation costs amounted to $6.0 million, net of estimated forfeitures and is expected to be recorded over a weighted-average period of 2.4 years.

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At December 31, 2008, outstanding options had a weighted average remaining contractual term of 9.4 years. The amount of unrecognized stock-based compensation will be affected by any future stock option grants and any termination of employment by any employee that has received stock option grants that are unvested as of their termination date.

At December 31, 2008, the Company has assumed an annualized forfeiture rate of approximately 3% for options granted during the year. Under the true-up provisions of SFAS 123R, the Company will record additional expense if the actual forfeiture rate is lower than estimated, and will record a recovery of prior expense if the actual forfeiture is higher than estimated.

Assumptions for Estimating Fair Value of Stock Option Grants

Upon adoption of SFAS No. 123R, the Company selected the Black-Scholes option pricing model as the most appropriate model for determining the estimated fair value for stock-based awards. The use of the Black-Scholes model requires the use of extensive actual employee exercise behavior data and the use of a number of complex assumptions including expected volatility and expected term.

The following table summarizes the assumptions used to value options granted during the year ended December 31, 2008:

Expected term		6 years
Risk-free interest rate		4.12%
Volatility		34.82%
Dividend yield		0.00%
Grant date fair value per share	CDN$	2.91

The expected term of employee stock options represents the weighted-average period that the stock options are expected to remain outstanding. The risk-free interest rate is based on the U.S. Treasury constant maturity interest rate with a term consistent with the expected life of the options. Because the Forbes Group was a newly formed public company when the options were granted, the expected term approved and the expected volatility is based on the price of comparable company’s common stock in the same industry over a historical period which approximates the expected term of the options granted. The dividend yield assumption is based on the Company’s expectation of dividend payouts.

Total stock-based compensation recognized in operations in the Company’s Statements of Operations for the year ended December 31, 2008 was $1.4 million.

7. Property and Equipment

Property and equipment at December 31, 2008 and 2007, consisted of the following:

	Estimated Life in Years	Successor- Consolidated 2008			Predecessor- Combined 2007
Well servicing equipment	3-15 years	$	278,168,921		$	158,973,304
Autos and trucks	5-10 years		78,043,817			60,386,415
Disposal wells	5-15 years		15,028,481			8,268,355
Building and improvements	5-30 years		4,598,976			2,813,116
Furniture and fixtures	3-10 years		2,140,493			1,287,552
Land			91,242			91,242
Other	3-15 years		65,503			91,665
			378,137,433			231,911,649
Accumulated depreciation			(47,186,317	)		(27,779,560	)
		$	330,951,116		$	204,132,089

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8. Accounts Payable and Accrued Liabilities

Accrued expenses and accounts payable at December 31, 2008 and 2007, consisted of the following:

	Successor- Consolidated 2008		Predecessor- Combined 2007
Accrued insurance	$	4,999,443	$	3,288,593
Accrued wages		3,252,788		1,553,889
Other accrued expenses		3,447,421		2,541,655
Total accrued expenses	$	11,699,652	$	7,384,137
Accounts payable – vendor financings	$	21,202,501	$	60,316,391
Accounts payable – other		7,450,703		6,180,285
Total accounts payable	$	28,653,204	$	66,496,676

9. Revolving Credit Facility

Citibank Credit Agreement

On April 10, 2008, the Forbes Group entered into a credit agreement (the “Credit Agreement”) with Citibank, N.A., which provides for a four-year senior secured revolving credit facility for up to $20 million (the “Credit Facility”). The Forbes Group can use the proceeds for general corporate purposes. Any unpaid principal amount is due on the maturity date.

Borrowings under the Credit Facility accrue interest, at the Forbes Group’s option, at either (i) the greater of the Federal Funds Effective Rate in effect on such day plus  ¹/2 of 1% and the Citibank, N.A. “prime rate” plus a margin of up to 1.25%, or (ii) the London Interbank Offered Rate, plus a margin of 1.75% to 2.25%. The applicable interest rate margin is based on the Forbes Group’s leverage ratio, as defined in the credit agreement governing the Credit Facility. Unpaid interest accrued on outstanding loans is payable quarterly.

The Credit Facility is secured by first priority security interests in substantially all of the Forbes Group’s assets that rank senior to the security interests granted to the holders of the Senior Secured Notes. The credit agreement also contains customary representations, warranties and covenants for the type and nature of the Credit Facility, including certain limitations or restrictions on the Forbes Group’s and certain future subsidiaries’ ability to incur additional debt, guarantee others’ obligations, create, incur or permit to exist certain liens on assets, make investments or acquisitions, make certain dispositions of assets, make payments on certain subordinated indebtedness, pay dividends or certain other payments to equity holders, engage in mergers, consolidations or other fundamental changes, change the nature of its business and engage in transactions with affiliates. The rights of the lender under the Credit Facility vis-à-vis the trustee and collateral agent under the indenture governing the Senior Secured Notes are governed by an intercreditor agreement among the Forbes Group, Citibank, N.A., the lender under the Credit Facility, and Wells Fargo Bank, National Association, the trustee and collateral agent under the indenture governing the Senior Secured Notes (see Note 10).

The Credit Agreement contains the following restrictive financial covenants, which provide that the Forbes Group shall not:

• Permit for the trailing twelve months as of the end of any fiscal quarter the ratio of Consolidated EBITDA to Consolidated Interest Expense, as both capitalized terms are defined in the Credit Agreement, to be less than 1.5 to 1.0. As of December 31, 2008 this ratio was 3.6 to 1.0.

• Permit Consolidated Net Worth to be less than $63.4 million for the fiscal year ended December 31, 2008, and for each fiscal year thereafter Consolidated Net Worth to be less than $63.4 million plus 50% of Consolidated Net Income for such year, as both capitalized terms are defined in the Credit Agreement. As of December 31, 2008 the excess over the covenant was approximately $95 million.

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• Permit the ratio of Senior Funded Debt to Consolidated Net Worth, as both capitalized terms are defined in the Credit Agreement, to be not greater than 2.5 to 1.0 for each fiscal quarter through September 30, 2008, and for fiscal quarters ending December 31, 2008 and thereafter, 2.0 to 1.0. As of December 31, 2008 this ratio was 1.3 to 1.0.

• Permit the ratio of Consolidated Senior Funded Debt to Consolidated EBITDA, as both capitalized terms are defined in the Credit Agreement, to be more than 5.5 to 1.0 as of the last day of any fiscal quarter. As of December 31, 2008 this ratio was 2.2 to 1.0.

The Credit Agreement contains a provision that makes the occurrence of any Material Adverse Change an event of default. A “Material Adverse Change” is defined in the Credit Agreement to mean a material and adverse change from the state of affairs presented in the audited December 31, 2007 (the date of the most recent audit at the time the Credit Facility was finalized) financial statements for the Forbes Group or as represented or warranted in any loan document to (a) the consolidated financial position of the Forbes Group, (b) the consolidated business, assets, operations, properties or prospects of the Forbes Group, (c) the Forbes Group’s ability to pay the obligations under the Credit Agreement or (d) the enforceability of the material terms of any material loan document against the Forbes Group. The occurrence of an event of default would allow the lender to accelerate the debt under the Credit Agreement. The Credit Agreement contains a cross-default provision that is triggered on the failure to comply with any other materially significant contract (including the indenture) if such failure is not remedied within any applicable grace period. The indenture contains a cross-default provision that is triggered on the default of any instrument evidencing or securing indebtedness (including the Credit Agreement), if that default is caused by failure to pay principal or interest prior to the expiration of any applicable grace period or if that default results in the acceleration of such indebtedness prior to its maturity, and such indebtedness, together with all other indebtedness where there has been such a default, aggregates $5.0 million or more. The Forbes Group was in compliance with the Credit Agreement or has received a waiver for all covenants as of December 31, 2008.

Significant adverse changes in our expected utilization levels and prices we are able to charge our customers could have a material adverse affect on our financial condition and results of operations and our ability to maintain future compliance with these covenants.

As of December 31, 2008, the Forbes Group had no borrowings under the Credit Facility.

10. Long-Term Debt

Long-term debt at December 31, 2008 and 2007, consisted of the following:

	Successor- Consolidated 2008			Predecessor- Combined 2007
11% Senior Secured Notes	$	200,762,039		$	—
FNB notes		—			72,653,530
Other equipment notes		8,185,907			26,080,729
Insurance notes		3,241,896			3,823,422
Other bank financing		—			1,675,248
		212,189,842			104,232,929
Less: Current maturities		(6,811,802	)		(3,823,422	)
	$	205,378,040		$	100,409,507

Consolidated debt maturities for each of the next five years amount to $6.8 million, $9.7 million, $1.8 million, $2.0 million and $1.1 million.

Senior Secured Notes

On February 12, 2008, FES LLC and FES CAP issued $205.0 million in principal amount of 11% senior secured notes (the “Senior Secured Notes”). The Forbes Group reflects $200.8 million of debt outstanding in its balance sheet which recognizes the original issue discount as the Senior Secured Notes were issued at 97.635% of par. After offering expenses, the Forbes Group realized net proceeds of approximately $188.7 million which was used to repay and fully extinguish all of the Forbes Group’s outstanding long-term debt and most current maturities, in addition to outstanding equipment vendor financings that were incurred prior to the issuance. The Senior Secured Notes mature on February 15, 2015, and require semi-annual interest

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payments at an annual rate of 11% on February 15 and August 15 of each year until maturity, with the first payment due on August 15, 2008. No principal payments are due until maturity. The Senior Secured Notes are senior obligations and rank equally in right of payment with other existing and future senior indebtedness and senior in right of payment to any subordinated indebtedness incurred by the Forbes Group in the future.

The Senior Secured Notes are guaranteed by FES Ltd, the parent company of FES LLC and Forbes Energy Capital Inc. FES Ltd has no independent assets or operations; and all of the parent company’s other direct and indirect subsidiaries are “100% owned” and, other than the subsidiary issuers and one minor subsidiary, guarantee the securities on a “full and unconditional” and “joint and several” basis. There are no significant restrictions on FES Ltd’s ability or the ability of any guarantor to obtain funds from its subsidiaries by such means as a dividend or loan except for certain restrictions contained in the Credit Facility restricting payment of dividends by the principal operating subsidiaries.

The Forbes Group may, at its option, redeem all or part of the Senior Secured Notes from time to time at specified redemption prices and subject to certain conditions required by the indenture governing the Senior Secured Notes. The Forbes Group is required to make an offer to purchase the notes and to repurchase any notes for which the offer is accepted at 101% of their principal amount, plus accrued and unpaid interest, if there is a change of control or if the Forbes Group has excess cash flow. The Forbes Group is required to make an offer to repurchase the notes and to repurchase any notes for which the offer is accepted at 100% of their principal amount, plus accrued and unpaid interest, following certain asset sales.

The Forbes Group is permitted under the terms of the indenture to incur additional indebtedness in the future, provided that certain financial conditions set forth in the Indenture are satisfied. The Forbes Group is subject to certain covenants contained in the indenture, including provisions that limit or restrict the Forbes Group’s and certain future subsidiaries’ abilities to incur additional debt, to create, incur or permit to exist certain liens on assets, to make certain dispositions of assets, to make payments on certain subordinated indebtedness, to pay dividends or certain other payments to equity holders, to engage in mergers, consolidations or other fundamental changes, to change the nature of its business, to engage in transactions with affiliates or to make capital expenditures in excess of certain amounts based on the year in which such expenditures are made.

Details of two of the significant restrictive covenants in the indenture are set forth below:

• Limitation on the incurrence of additional debt - In addition to certain defined Permitted Debt, the Forbes Group may only incur additional debt if it is unsecured and if the Fixed Charge Coverage Ratio (as defined) for the most recently completed four full fiscal quarters is at least 2.5 to 1.0 until December 31, 2009, and 3.0 to 1.0 thereafter. As of December 31, 2008 the Forbes Group could incur an additional $72 million in debt.

• Limitations on capital expenditures - Subject to certain adjustments, permitted Adjusted Capital Expenditures (as defined) that may be made by the Forbes Group are limited to the following amounts for the periods indicated:

Fiscal year ending December 31, 2009	$35 million
Fiscal year ending December 31, 2010	$85 million (assessed quarterly)
Fiscal year ending December 31, 2011	$115 million
Fiscal year ending December 31, 2012	$135 million
Fiscal year ending December 31, 2013	$135 million
Fiscal year ending December 31, 2014	$150 million
Period ending February 15, 2015	$ 19 million

Plus or minus for the periods ending 2011 through 2015 an amount by which Consolidated Cash Flow (as defined) exceeds or falls short of a specified target in each case for the immediately preceding year. The specified targets are:

Fiscal year ending December 31, 2011	$160 million
Fiscal year ending December 31, 2012	$ 200 million
Fiscal year ending December 31, 2013	$ 240 million
Fiscal year ending December 31, 2014	$ 280 million
Period ending February 15, 2015	$320 million (prorated)

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For the year ended December 31, 2008, after adjusting the Company’s capital expenditure limitation to recognize the Consolidated Cash Flow adjustment referenced above, to reflect the two equity offerings and to reduce for the net loss, capital expenditures were approximately $22 million less than the capital expenditure limit.

The Forbes Group was in compliance with the indenture or has received the requisite consents as of December 31, 2008 and entered into amendments embodied in the third supplemental indenture to the indenture.

For a discussion of relevant cross-default provisions see Note 9.

First National Bank Notes

Between August 2005 and October 2007, the Forbes Group entered into a series of promissory notes with First National Bank of Edinburg (“FNB”) with aggregate original principal amounts of approximately $92.8 million. The proceeds of these notes were used for working capital and for the purchase of certain vehicles and equipment. These notes accrued interest at a rate equal to the Prime Rate plus 1% and were payable monthly. These notes have been fully repaid with a portion of the proceeds from the sale of the Senior Secured Notes.

Other Notes

Between 2004 and 2007, the Forbes Group financed the purchase of certain vehicles and equipment through commercial loans, including loans from Paccar Financial Group, with aggregate original principal amounts of approximately $189.3 million. These loans accrued interest at rates ranging from 0% to 10.9%, were payable monthly and were collateralized by certain of the Forbes Group’s equipment. These notes have been fully repaid with a portion of the proceeds from the sale of the Senior Secured Notes.

New Paccar Notes

During 2008, the Forbes Group financed the purchase of certain vehicles and equipment through commercial loans with Paccar Financial Group, in an aggregate principal amount of approximately $8.2 million, which loans are currently outstanding. These loans are repayable in 60 monthly installments with the maturity dates ranging from May 2013 to October 2013. Interest accrues at rates ranging from 7.5% to 7.6% and is payable monthly. The loans are collateralized by equipment purchased with the proceeds of such loans.

Insurance Notes

During 2008, the Forbes Group entered into a promissory note with First Insurance Funding for the payment of insurance premiums in an aggregate principal amount outstanding as of December 31, 2008 of approximately $3.2 million. This note is payable in twelve monthly installments with a maturity date of September 15, 2009. Interest accrues at the rate of 3.7% and is payable monthly. The amount outstanding could be substantially offset by the cancellation of the related insurance coverage.

11. Financial Instruments

Effective January 1, 2008, the Company adopted the SFAS No. 157, which defines fair value, establishes a framework for measuring fair value when an entity is required to use a fair value measure for recognition or disclosure purposes and expands the disclosures about fair value measurements. The initial application of FAS 157 did not affect any of the Company’s recorded assets and liabilities. Effective January 1, 2009, FAS 157 is applicable to all nonfinancial assets and liabilities that are measured at fair value.

Our financial instruments that are not recorded at fair value include accounts receivable, accounts payable, accrued liabilities, and debt. We believe the carrying value of accounts receivable, accounts payable, and accrued liabilities approximates fair value due to the short maturity of these instruments. Our fair value assessment incorporates a variety of considerations, including the short-term duration of the instruments, our credit rating, and our historical incurrence of and expected future insignificance of bad debt expense, which includes an evaluation of counterparty credit risk. The estimated fair value of our 11% Senior Secured Notes is $113.8 million based on market trading prices at December 31, 2008. The fair value of Other Equipment Notes approximates carrying value at December 31, 2008.

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12. Related Party Transactions

In connection with the Bermuda Reorganization each of two executive officers/directors and one additional director were paid $36 million for his or her then remaining approximately 37% of the ownership interests in FES LLC originally held by such person from proceeds of FES Ltd’s Initial Equity Offering.

The Forbes Group enters into transactions with related parties in the normal course of conducting business. Accounts Receivable–related parties and Accounts Payable–related parties result from transactions with related parties which are at terms consistent with those available to third-party customers and from third-party vendors.

Certain members of the Forbes Group are also owners and managers of Alice Environmental Services, LP (“AES”). The Forbes Group has entered into the following transactions with AES and its subsidiaries:

• AES, through a wholly owned subsidiary, owns and operates an oil field supply store from which the Forbes Group purchases oil field supplies. This supply store was sold to an independent third party in May 2008.

• AES owns aircraft that the Forbes Group contracts to use from time to time.

• The Forbes Group has also entered into long-term operating leases with AES.

The Forbes Group recognized revenues from AES of approximately $11,000, $228,000, and $393,000, related to rig, trucking, and equipment and facilities rental activities; expenses of approximately $5.5 million, $4.3 million, and $5.3 million and capital expenditures of $2.4 million, $5.3 million and $247,000 from these transactions for the years ended December 31, 2008, 2007 and 2006 , respectively. Accounts payable to AES as of December 31, 2008 and 2007 resulting from such transactions were $106,000 and $3.2 million, respectively. During December 2008 the Forbes Group leased 10 workover rigs from AES under long-term operating leases. Accounts receivable from AES as of December 31, 2008 and 2007 resulting from such transactions were $0 and $76,000, respectively.

Dorsal Services, Inc. is a trucking service provider that provides services to the Forbes Group. One of FES Ltd’s executive officers, who also serves as a director of FES Ltd, is a partial owner of Dorsal Services, Inc. The Forbes Group recognized revenues of approximately $58,000, $61,000 and $6,000 related to trucking services, equipment rental, and wash out activities; expenses of approximately $1.4 million, $402,000 and $240,000; and capital expenditures of approximately $29,000, $194,000 and $266,000 to transactions with Dorsal Services, Inc. for the years ended December 31, 2008, 2007, and 2006, respectively. The Forbes Group had accounts receivable from and accounts payable to Dorsal Services, Inc. of $97,000 and $55,000, and $89,000 and $154,000, as of December, 2008 and 2007, respectively, resulting from such transactions.

Tasco Tool Services, Inc. is a down-hole tool company that is partially owned and managed by a company that is owned by two officers of FES Ltd. Tasco rents and sells tools to the Forbes Group from time to time. The Forbes Group had revenues from Tasco of $0, $11,000, and $0 and recognized expenses of approximately $314,000, $47,000 and $0 and capital expenditures of $50,000, $93,000 and $34,000 related to transactions with Tasco for the years ended December 31, 2008, 2007, and 2006, respectively. The Forbes Group had no accounts receivable for either period. Accounts payable to Tasco as of December 31, 2008 and 2007 were $40,000 and $60,000, respectively, resulting from these transactions.

The C.W. Hahl Lease, an oil and natural gas lease, is owned by an officer of FES Ltd. The Forbes Group recognized no revenues or expenses for the years ended December 31, 2008, 2007, and 2006 and had accounts receivable of $1,000 as of December 31, 2008 and 2007.

FCJ Management (“FCJ”) is a corporation that leases land and facilities to the Forbes Group and is owned by two of the executive officers of FES Ltd, who also serve as directors of FES Ltd, and a manager of one of the subsidiaries of FES Ltd. The Forbes Group recognized expenses of $18,000, $0 and $0 for the twelve months ended December 31, 2008, 2007, and 2006, respectively. No revenues have been recognized from FCJ for any period. The Forbes Group had no accounts receivable from FCJ or accounts payable to FCJ as of December 31, 2008 and 2007.

C&F Partners is an entity that is owned by an officer of FES Ltd. The Forbes Group recognized no revenues, expenses of $130,000, and no capital expenditures as of December 31, 2008. There was no accounts receivable balance and accounts payable were $42,000 as of December 31, 2008. The Forbes Group recognized no revenues, expenses, or capital expenditures for the periods ended December 31, 2007 and 2006.

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Related party long term note balances were paid in full as of February 12, 2008.

The Forbes Group rents or leases fifteen separate properties from AES for separate parcels of land and buildings. The leases were entered into at various dates subsequent to December 31, 2006. Each lease has a five-year term with the Forbes Group having the option to extend from between one and five years. Aggregate amounts paid for the fifteen rentals and leases were $0.9 million and $0.5 million for the years ended December 31, 2008 and 2007, respectively.

The Forbes Group entered into a waste water disposal operating agreement dated January 1, 2007, with AES pursuant to which AES leases its rights in a certain well bore and receives payments in the form of a minimum fee of $5,000 per month plus $0.15 per barrel for any barrel injected over 50,000 barrels. Under this agreement, AES also receives a “skim oil” payment of 20% of the amount realized by the Forbes Group for all oil and hydrocarbons removed from liquids injected into the premises. The agreement term is for three years and is renewable for successive three year terms as long as AES has rights to the well.

The Forbes Group entered into a waste water disposal lease agreement dated April 1, 2007, with AES. Under the agreement, the Forbes Group is entitled to use the leased land for the disposal of waste water for a term of five years with three successive three year renewal periods. The Forbes Group pays a monthly rental of $2,500 per month plus $.05 per barrel for any barrel over 50,000 barrels of waste water injected per month. Additionally, the Forbes Group pays an amount equal to 10% of all oil or other hydrocarbons removed from liquids injected or any skim oil.

The Forbes Group has a relationship with a bank in which the President, Chief Executive Officer, and director is also a director of the Forbes Group. As of December 31, 2008 the Forbes Group had $10.6 million on deposit with this bank.

13. Commitments and Contingencies

Concentrations of Credit Risk

Financial instruments which subject the Forbes Group to credit risk consist primarily of cash balances maintained in excess of federal depository insurance limits and trade receivables. The Forbes Group restricts investment of temporary cash investments to financial institutions with high credit standings. The Forbes Group’s customer base consists primarily of multi-national and independent oil and natural gas producers. The Forbes Group performs ongoing credit evaluations of its customers but generally does not require collateral on its trade receivables. Any concentrations of credit risk are considered by management to be limited due to the large number of customers comprising its customer base.

Major Customers

The Forbes Group had two individual customers that represented 8.5% and 8.3% of total consolidated revenues for the year ended December 31, 2008. For the year ended December 31, 2007, the Forbes Group had two individual customers that represented 11.5% and 11.0% of total combined revenues. The Forbes Group had two individual customers that represented 13% and 10% of total combined revenues for the year ended December 31, 2006.

Employee Benefit Plan

In 2005, the Forbes Group implemented a 401(k) retirement plan for substantially all of its employees based on certain eligibility requirements. The Forbes Group may provide profit sharing contributions to the plan at the discretion of management. No such discretionary contributions have been made since inception of the plan.

Self-Insurance

We are self-insured up to retention limits with regard to workers’ compensation and medical coverage of our employees. We have deductibles for workers’ compensation of $250,000 bodily injury per accident and $250,000 per each claim for disease. The medical coverage has a $125,000 deductible per individual plus a $250,000 aggregate deductible. Deductibles for automobile liability and general liability are $100,000 per occurrence. Workers’ compensation, general liability and automobile liability have an aggregate stop loss in the amount of $6,425,250. The Forbes Group has an estimated value of all unprocessed claims at December 31, 2008 and 2007 of approximately $2.0 million and $1.4 million, respectively, which are included in accrued expenses in the accompanying consolidated/combined balance sheet.

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Litigation

In accordance with SFAS 5, we establish a provision for a contingent liability when it is probable that a liability has been incurred and the amount is estimable. There are no pending legal proceedings, and the Forbes Group is not aware of any threatened legal proceedings, to which the Forbes Group is a party or to which its property is subject, other than proceedings that are immaterial and are in the ordinary course of business.

Leases

Future minimum lease payments under non-cancellable operating leases as of December 31, 2008 are as follows:

	Related Party		Other		Total
2009	$	4,403,020	$	753,332	$	5,156,352
2010		4,313,020		710,469		5,023,489
2011		4,023,020		456,152		4,479,172
2012		3,497,020		—		3,497,020
2013		2,487,764		—		2,487,764
Thereafter		—		—		—
Total	$	18,723,844	$	1,919,953	$	20,643,797

14. Supplemental Cash Flow Information

	Years Ended December 31,
	Successor- Consolidated 2008			Predecessor- Combined
				2007		2006
Cash paid for
Interest	$	17,026,761		$	8,164,287	$	4,658,661
Income tax		850,000			—		—
Supplemental schedule of non-cash investing and financing activities
Seller-financed purchases of property and equipment	$	8,185,907		$	5,236,173	$	2,992,404
Changes in accounts payable related to capital expenditures		(41,954,237	)		53,771,078		8,953,404
Note exchanged for acquisition of business		—			—		800,000
Sale of property and equipment on credit		—			—		450,000

15. Income Taxes

In conjunction with the Initial Equity Offering of FES Ltd’s common shares on May 29, 2008 and the related Bermuda Reorganization, the Forbes Group became subject to U.S. federal income tax. As part of this reorganization, $52.8 million in deferred income taxes were recorded as income tax expense in accordance with SFAS No. 109, “Accounting for Income Taxes,” which requires that the tax effect of recognizing deferred tax items upon a change in tax status be included in current year operations.

In addition, the Forbes Group is subject to the revised Texas Franchise tax. The State of Texas enacted the revised Texas Franchise Tax effective January 1, 2007. The revised Texas Franchise tax is a tax equal to one percent of Texas-sourced revenue reduced by the greater of (a) cost of goods sold (as defined by Texas law), (b) compensation (as defined by Texas law) or (c) thirty percent of the Texas-sourced revenue. The Forbes Group accounts for the revised Texas Franchise tax as an income tax in accordance with SFAS No. 109, as the tax is derived from a taxable base that consists of income less deductible expenses. For the years ended December 31, 2008 and 2007 the Forbes Group incurred current franchise tax expense of $1.0 million and $183 thousand, respectively. As of December 31, 2008 and 2007, the Forbes Group reflected on its balance sheet a franchise tax liability of $1.0 million and $183 thousand, respectively.

As a result, income tax expense for the year ended December 31, 2008 includes no current federal income tax and Texas Franchise tax of $1.0 million.

The Forbes Group was not subject to U.S. federal income tax until May 29, 2008. Prior to May 29, 2008 all income, losses, credits, and deductions of the Forbes Group were passed through to the equity owners’ individual tax returns. Accordingly, no provision for U.S. federal income taxes is included in the accompanying consolidated/combined financial statements through May 29, 2008 which is reflected as an item in our effective tax rate reconciliation of $4.8 million.

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A reconciliation of federal statutory income taxes to our effective tax expense follows.

The domestic and foreign components of income before income taxes were as follows:
	2008			2007			2006
Domestic	$	34,023,599		$	44,276,957		$	32,273,077
Foreign		(1,196,697	)		—			—
	$	32,826,902		$	44,276,957		$	32,273,077
The components of the provision for income taxes consisted of:
Current:
Federal	$	—		$	—		$	—
State		1,005,872			183,291			—
Foreign		—			—			—
Total current income tax provision		1,005,872			183,291			—
Deferred:
Federal		61,425,508			—			—
State		143,112			500,000			—
Foreign		—			—			—
Total deferred income tax provision		61,568,620			500,000			—
Total income tax provision	$	62,574,492		$	683,291		$	—
Effective Tax Rate Reconciliation	2008			2007			2006
Income taxes at statutory rate	$	11,489,416		$	—		$	—
Non-deductible expenses		324,282			—			—
State income taxes, net of federal benefit		775,850			683,291			—
Change in deferred tax valuation allowance		335,075			—			—
Deferred taxes due to change in tax status		52,835,075			—			—
Foreign rate difference		83,768
Goodwill Impairment		1,527,179
Tax pass through entity earnings		(4,796,153	)		—			—
	$	62,574,492		$	683,291		$	—
At December 31, significant components of our deferred tax assets and liabilities were:
	2008			2007			2006
Deferred tax assets:
Net operating loss carryforwards	$	9,643,434		$	—		$	—
Other		547,748			—			—
Total deferred tax assets		10,191,182			—			—
Valuation allowance for deferred tax assets		(335,075	)		—			—
Deferred tax liabilities:
Tax over book depreciation		(58,127,316	)		(500,000	)		—
Intangible assets		(13,797,411	)		—			—
Total deferred tax liabilities		(71,924,727	)		(500,000	)		—
Net deferred tax liabilities	$	(62,068,620	)	$	(500,000	)	$	—

We had a U.S. net operating loss carryforward at December 31, 2008 of approximately $26.5 million which is subject to expiration in 2028. Realization of deferred tax assets associated with net operating loss carryforwards is dependent upon generating sufficient taxable income in the appropriate jurisdiction prior to their expiration. Management believes it is more likely than not that the U.S. deferred tax asset will be realized through future taxable income or reversal of temporary differences. Additionally, at December 31, 2008 we had a Mexico net operation loss carryforward of approximately $1.2 million. We have provided a full valuation allowance against the Mexico deferred tax asset, as we have concluded that due to the start up nature of the business and not having an operating history that it is more likely than not that our net deferred tax asset in Mexico will not be realized.

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109” (FIN 48), which clarifies the accounting and disclosure for uncertainty in tax positions, as defined. FIN 48 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. The Company is subject to the provisions of FIN 48 after June 27, 2008 when it became subject to filing under the Securities Exchange Act of 1934. Prior to that date, the entity was a flow-through entity for tax purposes; therefore, the former owners are responsible for any tax adjustments related to prior years, although Management believes no uncertainties exist related to those prior years. The Forbes Group has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns and is unaware of any uncertain tax positions. The Company files tax returns in the U.S., Texas, and Mexico. The Forbes Group became subject to federal income taxes on May 29, 2008 and has not yet been required to file a federal income tax return. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to FIN 48. In addition, the Company was not required to record a cumulative effect adjustment related to the adoption of FIN 48.

The Company’s policy for recording interest and penalties associated with uncertain tax positions is to record such items as a component of tax expense.

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16. Earning/(Loss) per Share

The Forbes Group presents earnings per share information in accordance with the provisions of Statement of Financial Accounting Standards No. 128, “Earnings per Share” (“SFAS No. 128”). Under SFAS No. 128, basic earnings per common share are determined by dividing net earnings applicable to common stock by the weighted average number of common shares actually outstanding during the year. Because Class B shares are convertible into common shares at any time, they are considered common shares for purposes of calculating earning (loss) per share. Diluted earnings per common share is computed by dividing net income by the weighted. average number of common shares outstanding during the period plus the number of shares subject to potentially dilutive common stock equivalents. There are no dilutive common stock equivalents at December 31, 2008. Potential common stock equivalents that have been issued by the Forbes Group relate to outstanding stock options and are determined using the treasury stock method. The Forbes Group reported a net loss as of December 31, 2008, thus diluted earnings per share has been computed in the same manner as basic earnings per share.

Concurrent with the Equity Offering on May 29, 2008, we began conducting our business through, a newly formed Bermuda corporation and holding company. Historical net income per share was not presented for 2007 and prior since we were structured as a limited liability company, had limited member units and there were no ownership interests that were convertible into common stock or a common stock equivalent. The unaudited pro forma net income per share gives effect to the Bermuda Reorganization pursuant to which we changed from a flow through entity for federal income tax purposes to a “C” corporation, the issuance of our common stock in connection with our Initial Equity Offering on May 29, 2008, and an assumed effective tax rate of 37%, as though the Bermuda Reorganization and Initial Equity Offering had occurred on January 1, 2008, January 1, 2007, and January 1, 2006, respectively.

All outstanding options have been excluded from the diluted computations as they were antidilutive for all periods presented.

The following table sets forth the computation of basic and diluted earnings per share:

	Year Ended December 31,
	Successor			Predecessor
	2008			2007		2006
Basic:
Net loss	$	(29,747,590	)
Weighted-average common shares		45,894,557
Basic loss per share	$	(0.65	)
Diluted:
Net loss	$	(29,747,590	)
Weighted-average common shares		45,894,557
Dilutive effect of stock options		—
Weighted-average common shares - diluted		45,894,557
Diluted loss per share	$	(0.65	)
The following table sets forth the computation of unaudited pro forma basic and diluted earnings per share:
Pro Forma
Basic:
Net income	$	20,680,948		$	28,335,883	$	20,977,500
Weighted-average common shares		55,994,843			54,144,700		54,144,700
Basic earnings per share	$	0.37		$	0.52	$	0.39
Diluted:
Net income	$	20,680,948		$	28,335,883	$	20,977,500
Weighted-average common shares		55,994,843			54,144,700		54,144,700
Dilutive effect of stock options		—			—		—
Weighted-average common shares - diluted		55,994,843			54,144,700		54,144,700
Diluted earnings per share	$	0.37		$	0.52	$	0.39

17. Business Segment Information

The Forbes Group has determined that it has two reportable segments organized based on its products and services—well servicing and fluid logistics. The accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 4 hereof.

Well Servicing

The well servicing segment consists of operations in the U.S., which provide (i) well maintenance, including remedial repairs and removal and replacement of downhole production equipment, (ii) well workovers, including significant downhole repairs, re-completions and re-perforations, (iii) completion and swabbing activities, (iv) plugging and abandoning services and (v) pressure testing of oil and natural gas production tubing.

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Fluid Logistics

The fluid logistics segment consists of operations in the U.S., which provide, transport, store and dispose of a variety of drilling and produced fluids used in and generated by oil and natural gas production activities. These services are required in most workover and completion projects and are routinely used in daily producing well operations.

The following table sets forth certain financial information with respect to Forbes Group’s reportable segments (amounts in 000’s):

	Well Servicing		Fluid Logistics		Total
Year Ended December 31, 2008 Successor – Consolidated
Operating revenues	$	189,980	$	170,949	$	360,929
Direct operating costs		128,615		117,940		246,555
Segment profits	$	61,365	$	53,009	$	114,374
Depreciation and amortization	$	18,253	$	15,471	$	33,724
Capital expenditures		106,016		36,017		142,033
Total assets		294,352		188,449		482,801
Year Ended December 31, 2007 Predecessor – Combined
Operating revenues	$	103,601	$	103,405	$	207,006
Direct operating costs		60,570		69,887		130,457
Segment profits	$	43,031	$	33,518	$	76,549
Depreciation and amortization	$	9,411	$	5,931	$	15,342
Capital expenditures		91,860		35,548		127,408
Total assets		181,512		86,103		267,615
Year Ended December 31, 2006 Predecessor – Combined
Operating revenues	$	58,575	$	74,140	$	132,715
Direct operating costs		32,453		49,620		82,073
Segment profits	$	26,122	$	24,520	$	50,642
Depreciation and amortization	$	4,213	$	3,196	$	7,409
Capital expenditures		36,529		16,889		53,418
Total assets		87,937		51,217		139,154

Reconciliation of Forbes Group Operating Income As Reported:	Year Ended December 31,
	2008			2007			2006
Segment profits	$	114,374		$	76,549		$	50,642
General and administrative expense		17,700			8,824			6,026
Depreciation and amortization		33,724			15,342			7,409
Goodwill impairment		4,364			—			—
Operating income		58,587			52,383			37,207
Other income and expenses, net		(25,760	)		(8,106	)		(4,934	)
Income before income taxes	$	32,827		$	44,277		$	32,273
Reconciliation of the Forbes Group Assets as Reported	Year Ended December 31,
	2008			2007			2006
Total reportable segments	$	469,286		$	267,615		$	139,154
Elimination of Internal transaction		(405,882	)		(7,620	)		(10,636	)
Parent		419,398			—			—
Total assets	$	482,801		$	259,995		$	128,518

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18. Supplemental Financial Information

Quarterly Financial Data (Unaudited)

	Quarter Ended March 31, 2008		Quarter Ended June 30, 2008			Quarter Ended September 30, 2008		Quarter Ended December 31, 2008
Revenues	$	70,522,859	$	88,601,191		$	105,145,388	$	96,659,863
Operating income		13,640,490		18,280,383			19,870,511		6,795,235
Net income (loss)		7,522,898		(43,212,011	)(1)		8,273,355		(2,331,832	)(2)
Earnings (loss) per share: (3)
Basic			$	(1.13	)	$	0.15	$	(.04	)
Diluted				(1.13	)		0.15	$	(.04	)
	Quarter Ended March 31, 2007		Quarter Ended June 30, 2007			Quarter Ended September 30, 2007		Quarter Ended December 31, 2007
Revenues	$	42,051,629	$	46,749,393		$	55,838,888	$	62,366,505
Operating income		13,443,051		13,297,554			14,281,069		11,361,351
Net income (loss)		11,659,820		11,528,854			12,279,735		8,125,257

(1) On May 29, 2008, in connection with the Bermuda Reorganization, the Forbes Group became a taxable entity, which resulted in $52.8 million of the 2008 income tax expense that was recorded as a one-time, deferred income tax charge to recognize the conversion to a taxable entity. Prior to that time, the entities comprising the Forbes Group were flow through entities for federal income tax purposes and the only tax obligations of the entity were the Texas margin tax which was applicable after June 29, 2007.

(2) As of December 31, 2008 the Forbes Group performed its annual impairment test on goodwill, and recorded an impairment charge of $4.4 million in the fourth quarter of 2008.

(3) Concurrent with the Initial Equity Offering on May 29, 2008, we began conducting our business through a newly formed Bermuda corporation and holding company. Historically, net income per share was not presented for the quarter ended March 31, 2008 and prior since we were structured as a limited liability company with a limited number of members.

Restatement

Subsequent to the issuance of our consolidated financial statements for the quarters ended March 31, June 30, and September 30, 2008, we determined that those financial statements included errors relating to goodwill, classification of accounts within stockholders’ equity, and income tax accounting. In connection with the Delaware Reorganization effective January 1, 2008, an error was made in the application of purchase accounting that resulted in an overstatement of goodwill and an overstatement of members/shareholders’ of $30.1 million and the classification of accounts within stockholders’ equity. In connection with the Bermuda Reorganization effective on May 29, 2008, an additional error was made in the calculation of income tax expense and deferred income taxes in the amount of $7.6 million. As a result, we are restating our unaudited condensed consolidated financial statements for the quarters ended March 31, June 30 and September 30, 2008 to correct these three accounting errors, as follows:

	March 31, 2008 Three months			June 30, 2008 Three months			September 30, 2008 Three months
Goodwill, as previously reported	$	32,597,846		$	32,597,846		$	32,597,846
Restated adjustment	$	(28,234,477	)	$	(28,234,477	)	$	(28,234,477	)
Goodwill, as restated	$	4,363,369		$	4,363,369		$	4,363,369
Property and equipment, as previously reported	$	262,400,743		$	301,468,972		$	337,249,208
Restatement adjustment	$	(1,788,779	)	$	(1,706,762	)	$	(1,624,745	)
Property and equipment, as restated	$	260,611,964		$	299,762,210		$	335,624,463

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Total assets, as previously reported	$	416,719,875		$	467,503,900		$	518,594,889
Restatement adjustment	$	(30,023,256	)	$	(29,941,239	)	$	(29,859,222	)
Total assets, as restated	$	386,696,619		$	437,562,661		$	488,735,667
Deferred income tax liability, as previously reported		—		$	47,168,743		$	47,828,963
Restatement adjustment		—		$	7,697,551		$	11,746,797
Deferred income tax liability, as restated		—		$	54,866,294		$	59,575,760
Additional paid-in capital, as previously reported		—		$	39,964,703		$	40,617,901
Restatement adjustment		—		$	95,702,812		$	95,702,812
Additional paid-in capital, as restated		—		$	135,667,515		$	136,320,713
Members’ equity, as previously reported	$	165,915,147			—			—
Restatement adjustment	$	(30,023,256	)		—			—
Members’ equity, as restated	$	135,891,891			—			—
Retained earnings, as previously reported		—		$	118,400,050		$	126,729,657
Restatement adjustment		—		$	133,220,253		$	(133,276,505	)
Retained earnings (accumulated deficit), as restated		—		$	(14,820,203	)	$	(6,546,848	)
Total shareholders’ equity, as previously reported		—		$	158,906,200		$	167,889,005
Restatement adjustment		—		$	(37,517,441	)	$	(37,573,693	)
Total shareholders’ equity, as restated		—		$	121,388,759		$	130,315,312
Depreciation and amortization, as previously reported	$	7,122,040		$	7,513,098		$	9,157,283
Restatement adjustment	$	(82,017	)	$	(82,017	)	$	(82,017	)
Depreciation and amortization, as restated	$	7,040,023		$	7,431,081		$	9,075,266
Income tax expense, as previously reported	$	172,000		$	47,409,217		$	4,928,570
Restatement adjustment	$	—		$	7,576,202		$	138,269
Income tax expense, as restated	$	172,000		$	54,985,419		$	5,066,839
Net Income (loss), as previously reported	$	7,440,881		$	(35,717,826	)	$	8,329,607
Restatement adjustment	$	82,017		$	(7,494,185	)	$	(56252	)
Net income (loss), as restated	$	7,522,898		$	(43,212,011	)	$	8,273,355
Earnings (loss) per share of common stock, basic and diluted, as previously reported		—		$	(0.94	)	$	0.15
Restatement adjustment		—		$	(.19	)	$	—
Earnings (loss) per share of common stock, basic and diluted, as restated		—		$	(1.13	)	$	0.15

19. Subsequent Events

We entered into the Third Supplemental Indenture, dated as of February 6, 2009 (the “Third Supplemental Indenture”), to the indenture governing the Senior Secured Notes (the “Indenture”), with Wells Fargo Bank, National Association, as trustee (the “Trustee”) and certain subsidiary guarantors named therein after receiving the requisite number of consents from the holders of the Senior Secured Notes. The Third Supplemental Indenture amends the definition of Net Income (as defined in the Indenture) to provide for the exclusion, in certain circumstances, of certain non-cash charges for impairment writedowns or writeoffs of noncurrent assets and extraordinary, unusual or nonrecurring non-cash charges. Additionally, the Third Supplemental Indenture amends the Indenture to (i) make the Limitation on Capital Expenditures covenant more restrictive on us, (ii) require us during the first quarter of 2009 to spend an aggregate of $2.0 million to repurchase Senior Secured Notes and by the end of the second quarter of 2010, to spend an additional aggregate of $8 million in cash to repurchase Senior Secured Notes, in each case on specified terms and conditions and (iii) restrict our ability to incur any additional Indebtedness (as defined in the Indenture and including Additional Notes, which essentially means additional Notes issued under the Indenture or so-called “tack-on” notes) under the Fixed Charge Coverage Ratio test contained in Section 4.14(a) of the Limitation on the Incurrence of Indebtedness and Issuance of Preferred Stock covenant (“ratio debt”) that is secured by any of our assets or property or those of our subsidiaries.

On March 30, 2008, the Forbes Group received a consent, waiver and acknowledgement from Citibank, N.A. for the following loan covenants as of December 31, 2008; (1) the requirement to furnish to Citibank for the fiscal year ended 2008 an opinion from an independent certified public accounting firm assessing the Company’s internal controls and stating that there exists no material weakness except those to which Citibank does not object or which have been disclosed in the Credit Agreement, (2) the requirement to furnish to Citibank financial statements 45 days after each fiscal quarter ended in 2008 and 90 days after the fiscal year ended 2008 as long as the Company provides such financial statements within the SEC deadlines, including any extensions available thereunder, for the relevant Form 10-Q or form 10-K, (3) the requirement to furnish to Citibank consolidating financial statements for all periods ended in 2008, and (4) the presence of the material weaknesses set forth in the Company’s 8-K filed on March 23, 2009. Citibank, N.A. also authorized a sale/lease-back transaction as long as it complies with the terms of the Indenture.

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Item 9. Changes in Disagreements with Accountants on Accounting and Financial Disclosure

This information was previously reported in our registration statement on Form S-4, as amended (Registration No. 333-150853), and, therefore, is not required to be reported here pursuant to Instruction 1 of Item 304 of Reg. S-K.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2008. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a 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. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a 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 and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2008, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were not effective. See “Material Weaknesses” below.

Changes in Internal Control over Financial Reporting, including Remediation of Certain Material Weaknesses

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. We had identified various material weaknesses as of December 31, 2007 primarily related to internal accounting controls. We believe that many of these were attributable to our transition from a private company to a public reporting company. In connection with the preparation of our consolidated financial statements as of and for the year ended December 31, 2008 included in this Form 10-K and our assessment of the effectiveness of our disclosure controls and procedures, we have concluded that we successfully remediated the following specific control deficiencies, which represented material weaknesses in our internal control over financial reporting as of September 30, 2008:

• Prior to our effective remediation, we did not maintain effective controls over the recording of period-end adjustments and accruals necessary to ensure the completeness, accuracy and valuation of the combined accounts.

• Prior to our effective remediation, we did not maintain effective controls over revenue. Specifically, we did not maintain effective controls over the cut-off and completeness of unbilled fluid logistics revenue and associated accounts receivable. This control deficiency resulted in a prior restatement of the Forbes Group’s 2005 and 2006 combined financial statements.

• Prior to our effective remediation, we did not maintain effective control over accounts payable. Specifically, we did not maintain effective controls over cut-off and completeness of accounts payable and associated expenses and capital expenditures.

• Prior to our effective remediation, we did not maintain effective control over recording of invoices to the proper accounts in the general ledger, including the determination of capital and expense items.

• Prior to our effective remediation, we did not maintain effective control over “OTE” (Accounting for Out of Town Expenses) income statement account as it did not reconcile OTE reimbursement activity with the detailed supporting documentation in a timely manner.

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• Prior to our effective remediation, we did not maintain effective control over unissued checks as there were numerous check numbers omitted from the 2008 C.C. Forbes, LLC disbursements listing as a consequence of insufficient control in distributing checks in addition to lack of support for voided checks.

• Prior to our effective remediation, we did not maintain effective control over accrual of the liability for health insurance and workers’ compensation expense, as it did not consider all relevant information to assist it in estimating the level of accrual required relating to the incurred but not reported component of the health insurance and workers’ compensation expense.

On July 1, 2008, we substantially completed the basic conversion to a new accounting system, which is used to perform certain accounting and financial reporting functions. In connection with the system conversion, internal controls and procedures have been modified as necessary to reflect the new system environment; however, we believe certain financial reporting controls have not been remediated solely as a result of the conversion. Other than these changes and the remediation measures described in this section, no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal year ended December 31, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

This annual report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.

Material Weaknesses

In connection with the preparation of the Forbes Group’s consolidated financial statements for the year ended December 31, 2008, we identified control deficiencies that constitute material weaknesses in the design and operation of our internal control over financial reporting. The following material weaknesses were present at December 31, 2008.

• We did not maintain an appropriate accounting and financial reporting organizational structure to support the activities of the Forbes Group. Specifically, we did not maintain a sufficient complement of personnel with an appropriate level of accounting knowledge, experience and training to ensure the proper selection, application and implementation of GAAP.

• We did not maintain effective controls over the preparation and review of the combined financial statements and disclosures. Specifically, effective controls were not designed and in place around the oversight and review of the consolidated financial statements and disclosures.

• We did not design or maintain effective controls over purchase accounting. Specifically, we did not design and maintain effective controls over the accuracy and completeness of the purchase price allocation associated with the January 1, 2008 Delaware Reorganization. This material weakness resulted in the requirement to restate the Company’s unaudited condensed consolidated financial statements issued and filed for the quarters ended June 30, 2008 and September 30, 2008 (as well as the issued but unfiled financial statements for the quarter ended March 31, 2008).

• We did not design and maintain effective controls over the review of the accuracy and completeness of the income tax provision. This material weakness resulted in the requirement to restate the Company’s unaudited condensed consolidated financial statements issued and filed for the quarters ended June 30, 2008 and September 30, 2008.

These control deficiencies could result in a future material misstatement to substantially all the accounts and disclosures that would result in a material misstatement to the annual or interim combined financial statements that would not be prevented or detected. Accordingly, we have determined that each of the above control deficiencies represents a material weakness.

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Remediation

As mentioned above, we have identified certain material weaknesses that exist as of December 31, 2008 in our internal control over external financial reporting and complex, non-routine accounting issues.

We have implemented, or are in the process of implementing and continue to implement, remedial measures to address the above deficiencies on a going-forward basis. Specifically, in mid-2007 we hired a chief financial officer. In early 2008, we hired a controller and accounting staff, and in mid-2008, established our audit committee. In 2009, in response to the requirement to restate quarterly financial statements for the first, second, and third quarters of 2008 referred to in this Annual Report on Form 10-K, we engaged a professional services firm to assist our accounting staff with external financial reporting and complex, non-routine accounting issues.

We believe that certain material weaknesses that existed at December 31, 2007, as reflected in our Form 10-K for the year ended December 31, 2007 and subsequent filings, have been remediated. These material weaknesses primarily related to internal accounting controls and include controls over recording period end adjustments, controls over revenue, controls over accounts payable, controls over recording invoices to the proper accounts, controls over out-of-town expenses, controls over un-issued checks, and controls over accrual of liability for insurance expense. These material weaknesses were remediated through the measures taken above, through reorganization of the accounting department, and through engagement of a professional services firm which assessed our systems and controls, documented our systems and controls, then implemented the processes and controls necessary to address these material weaknesses. On a going-forward basis this firm will provide a periodic internal audit function.

Beginning with the year ending December 31, 2009, pursuant to Section 404 of the Sarbanes-Oxley Act, we will be required to deliver a report that assesses the effectiveness of our internal control over financial reporting, and our auditors will be required to audit and report on our assessment of and the effectiveness of our internal control over financial reporting. We have a substantial effort ahead of us to complete the documentation and testing of our internal control over financial reporting and remediate any additional material weaknesses identified during that activity. We may not be able to complete the required management assessment by our reporting deadline. An inability to complete this assessment would result in receiving something other than an unqualified report from our auditors with respect to our assessment of our internal control over financial reporting. In addition, if material weaknesses are not remediated, we would not be able to conclude that our internal control over financial reporting was effective, which would result in the inability of our external auditors to deliver an unqualified report on the effectiveness of our internal control over financial reporting.

Item 9B. Other Information

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required under this item will be filed in a Form 10-K/A within 120 days after December 31, 2008 pursuant to General Instruction G(3) of Form 10-K.

Item 11. Executive Compensation

The information required under this item will be filed in a Form 10-K/A within 120 days after December 31, 2008 pursuant to General Instruction G(3) of Form 10-K.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required under this item will be filed in a Form 10-K/A within 120 days after December 31, 2008 pursuant to General Instruction G(3) of Form 10-K.

Item 13. Certain Relationships and Related Transaction, and Director Independence

The information required under this item will be filed in a Form 10-K/A within 120 days after December 31, 2008 pursuant to General Instruction G(3) of Form 10-K.

Item 14. Principal Accounting Fees and Services

The information required under this item will be filed in a Form 10-K/A within 120 days after December 31, 2008 pursuant to General Instruction G(3) of Form 10-K.

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PART IV

Item 15. Exhibits, Financial Statement Schedules

(a) The following items are filed as part of this report:

1. Financial Statements. The financial statements and information required by Item 8 appear on pages 39 through 66 of this report. The Index to Consolidated Financial Statements appears on page 40.

2. Financial Statement Schedules. All schedules are omitted because they are not applicable or the required information is shown in the financial statements or the notes thereto.

3. Exhibits.

Number		Description of Exhibits
2.1	—	Agreement and Plan of Reorganization effective January 1, 2008 among Forbes Energy Services LLC and the respective members of C.C. Forbes, LLC, TX Energy Services, LLC and Superior Tubing Testers, LLC (incorporated by reference to Exhibit 2.1 to the Company’s Form S-4/A filed June 27, 2008, Registration No. 333-150853).
2.2	—	Agreement and Plan of Reorganization effective May 29, 2008 among Forbes Energy Services Ltd. and the members of Forbes Energy Services LLC (incorporated by reference to Exhibit 2.2 to the Company’s Form S-4/A filed June 27, 2008, Registration No. 333-150853).
3.1	—	Memorandum of Association of Forbes Energy Services Ltd. (incorporated by reference to Exhibit 3.11 to the Company’s Form S-4/A filed June 27, 2008, Registration No. 333-150853).
3.2	—	Amended and Restated Bye-laws of Forbes Energy Services Ltd. (incorporated by reference to Exhibit 3.12 to the Company’s Form S-4/A filed June 27, 2008, Registration No. 333-150853).
4.1*	—	Indenture, dated February 12, 2008 among Forbes Energy Services LLC and Forbes Energy Capital Inc., as issuers, the guarantors party thereto and Wells Fargo Bank, National Association, as trustee.
4.2	—	Supplemental Indenture (First Supplemental Indenture), dated May 29, 2008 among Forbes Energy Services Ltd., Forbes Energy Services LLC, Forbes Energy Capital Inc., the other Guarantors (as defined in the Indenture referred to therein) and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008).
4.3*	—	Supplemental Indenture (Second Supplemental Indenture), dated effective October 6, 2008 among Forbes Energy Services Ltd., Forbes Energy Services LLC, Forbes Energy Capital Inc., Forbes Energy International, LLC, the other Guarantors (as defined in the Indenture referred to therein) and Wells Fargo Bank, National Association, as trustee.
4.4	—	Third Supplemental Indenture, dated February 6, 2009 among Forbes Energy Services Ltd., Forbes Energy Services LLC, Forbes Energy Capital Inc., Forbes Energy International, LLC and the other Guarantors (as defined in the Indenture referred to therein) and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated February 6, 2009).
4.5*	—	Notation of Guarantee from Forbes Energy Services Ltd.
4.6*	—	Notation of Guarantee from Forbes Energy International, LLC.
4.7*	—	Registration Rights Agreement, dated as of February 7, 2008, among Jefferies & Company, Inc., Forbes Energy Services Inc., Forbes Energy Capital Inc. and the guarantors party thereto.
4.8	—	Specimen 144A Global 11% Senior Secured Exchange Note due 2015 (incorporated by reference to Exhibit 4.5 to the Company’s Form S-4/A filed June 27, 2008, Registration No. 333-150853).

71

Number		Description of Exhibits
4.9	—	Rights Agreement effective May 19, 2008 between Forbes Energy Services Ltd. and CIBC Mellon Trust Company, as Rights Agent, which includes as Exhibit A the Certificate of Designations of Series A Junior Participating Preferred Shares, as Exhibit B the form of Right Certificate and as Exhibit C the form of Summary of Rights to Purchase Shares (incorporated by reference to Exhibit 4.8 to the Company’s Form S-4/A filed June 27, 2008, Registration No. 333-150853).
10.1*	—	Credit Agreement dated April 10, 2008 among C.C. Forbes, LLC, TX Energy Services, LLC and Superior Tubing Testers, LLC, as borrowers, Forbes Energy Services LLC, as guarantor, and Citibank, N.A., as lender, governing the Credit Facility.
10.2*	—	Intercreditor Agreement dated April 10, 2008 among C.C. Forbes, LLC, TX Energy Services, LLC, Superior Tubing Testers, LLC, as borrowers, Forbes Energy Services LLC and Forbes Energy Capital Inc., as issuers, Citibank, N.A. and Wells Fargo Bank, National Association.
10.3	—	Forbes Energy Services Ltd. Incentive Compensation Plan effective May 19, 2008 (incorporated by reference to Exhibit 10.1 to the Company’s Form S-4/A filed June 27, 2008, Registration No. 333-150853).
10.4	—	Employment Agreement effective May 1, 2008 by and between John E. Crisp and Forbes Energy Services LLC (incorporated by reference to Exhibit 10.2 to the Company’s Form S-4/A filed June 27, 2008, Registration No. 333-150853).
10.5	—	Employment Agreement effective May 1, 2008 by and between Charles C. Forbes and Forbes Energy Services LLC (incorporated by reference to Exhibit 10.3 to the Company’s Form S-4/A filed June 27, 2008, Registration No. 333-150853).
10.6	—	Employment Agreement effective May 1, 2008 by and between L. Melvin Cooper and Forbes Energy Services LLC (incorporated by reference to Exhibit 10.4 to the Company’s Form S-4/A filed June 27, 2008, Registration No. 333-150853).
10.7	—	Form of Indemnification Agreement for directors, officers and key employees (incorporated by reference to Exhibit 10.5 to the Company’s Form S-4/A filed June 27, 2008, Registration No. 333-150853).
10.8	—	Form of Executive Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.6 to the Company’s Form S-4/A filed June 27, 2008, Registration No. 333-150853).
10.9	—	Form of Director Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.7 to the Company’s Form S-4/A filed June 27, 2008, Registration No. 333-150853).
10.10		Commercial Equipment Lease Agreement, dated October 15, 2008 among Forbes Energy Services LLC and Alice Environmental Services, LP. (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008).
21.1*		Subsidiaries of the Company.
31.1*	—	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
31.2*	—	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
32.1*	—	Certification of Chief Executive Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	—	Certification of Chief Financial Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1*	—	Press Release dated August 14, 2008.

* Filed herewith.

72

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Alice, the State of Texas, on March 31, 2009.

FORBES ENERGY SERVICES LTD.
By:	/s/ John E. Crisp
	John E. Crisp
	President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ John E. Crisp (John E. Crisp)	Chairman of the Board, President, Chief Executive Officer and Director (Principal Executive Officer)	March 31, 2009
/s/ L. Melvin Cooper (L. Melvin Cooper)	Senior Vice President, Chief Financial Officer and Secretary (Principal Financial and Accounting Officer)	March 31, 2009
/s/ Charles C. Forbes (Charles C. Forbes)	Executive Vice President, Chief Operating Officer and Director	March 31, 2009
/s/ Dale Bossert (Dale Bossert)	Director	March 31, 2009
/s/ Travis H. Burris (Travis H. Burris)	Director	March 31, 2009
/s/ Janet L. Forbes (Janet L. Forbes)	Director	March 31, 2009
/s/ William W. Sherrill (William W. Sherrill)	Director	March 31, 2009

EXHIBIT INDEX

Number			Description of Exhibits
2.1		—	Agreement and Plan of Reorganization effective January 1, 2008 among Forbes Energy Services LLC and the respective members of C.C. Forbes, LLC, TX Energy Services, LLC and Superior Tubing Testers, LLC (incorporated by reference to Exhibit 2.1 to the Company’s Form S-4/A filed June 27, 2008, Registration No. 333-150853).
2.2		—	Agreement and Plan of Reorganization effective May 29, 2008 among Forbes Energy Services Ltd. and the members of Forbes Energy Services LLC (incorporated by reference to Exhibit 2.2 to the Company’s Form S-4/A filed June 27, 2008, Registration No. 333-150853).
3.1		—	Memorandum of Association of Forbes Energy Services Ltd. (incorporated by reference to Exhibit 3.11 to the Company’s Form S-4/A filed June 27, 2008, Registration No. 333-150853).
3.2		—	Amended and Restated Bye-laws of Forbes Energy Services Ltd. (incorporated by reference to Exhibit 3.12 to the Company’s Form S-4/A filed June 27, 2008, Registration No. 333-150853).
4.1	*	—	Indenture, dated February 12, 2008 among Forbes Energy Services LLC and Forbes Energy Capital Inc., as issuers, the guarantors party thereto and Wells Fargo Bank, National Association, as trustee.
4.2		—	Supplemental Indenture (First Supplemental Indenture), dated May 29, 2008 among Forbes Energy Services Ltd., Forbes Energy Services LLC, Forbes Energy Capital Inc., the other Guarantors (as defined in the Indenture referred to therein) and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008).
4.3	*	—	Supplemental Indenture (Second Supplemental Indenture), dated effective October 6, 2008 among Forbes Energy Services Ltd., Forbes Energy Services LLC, Forbes Energy Capital Inc., Forbes Energy International, LLC, the other Guarantors (as defined in the Indenture referred to therein) and Wells Fargo Bank, National Association, as trustee.
4.4		—	Third Supplemental Indenture, dated February 6, 2009 among Forbes Energy Services Ltd., Forbes Energy Services LLC, Forbes Energy Capital Inc., Forbes Energy International, LLC and the other Guarantors (as defined in the Indenture referred to therein) and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated February 6, 2009).
4.5	*	—	Notation of Guarantee from Forbes Energy Services Ltd.
4.6	*		Notation of Guarantee from Forbes Energy International, LLC.
4.7	*	—	Registration Rights Agreement, dated as of February 7, 2008, among Jefferies & Company, Inc., Forbes Energy Services Inc., Forbes Energy Capital Inc. and the guarantors party thereto.
4.8		—	Specimen 144A Global 11% Senior Secured Exchange Note due 2015 (incorporated by reference to Exhibit 4.5 to the Company’s Form S-4/A filed June 27, 2008, Registration No. 333-150853).
4.9		—	Rights Agreement effective May 19, 2008 between Forbes Energy Services Ltd. and CIBC Mellon Trust Company, as Rights Agent, which includes as Exhibit A the Certificate of Designations of Series A Junior Participating Preferred Shares, as Exhibit B the form of Right Certificate and as Exhibit C the form of Summary of Rights to Purchase Shares (incorporated by reference to Exhibit 4.8 to the Company’s Form S-4/A filed June 27, 2008, Registration No. 333-150853).
10.1	*	—	Credit Agreement dated April 10, 2008 among C.C. Forbes, LLC, TX Energy Services, LLC and Superior Tubing Testers, LLC, as borrowers, Forbes Energy Services LLC, as guarantor, and Citibank, N.A., as lender, governing the Credit Facility.

Number		Description of Exhibits
10.2*	—	Intercreditor Agreement dated April 10, 2008 among C.C. Forbes, LLC, TX Energy Services, LLC, Superior Tubing Testers, LLC, as borrowers, Forbes Energy Services LLC and Forbes Energy Capital Inc., as issuers, Citibank, N.A. and Wells Fargo Bank, National Association.
10.3	—	Forbes Energy Services Ltd. Incentive Compensation Plan effective May 19, 2008 (incorporated by reference to Exhibit 10.1 to the Company’s Form S-4/A filed June 27, 2008, Registration No. 333-150853).
10.4	—	Employment Agreement effective May 1, 2008 by and between John E. Crisp and Forbes Energy Services LLC (incorporated by reference to Exhibit 10.2 to the Company’s Form S-4/A filed June 27, 2008, Registration No. 333-150853).
10.5	—	Employment Agreement effective May 1, 2008 by and between Charles C. Forbes and Forbes Energy Services LLC (incorporated by reference to Exhibit 10.3 to the Company’s Form S-4/A filed June 27, 2008, Registration No. 333-150853).
10.6	—	Employment Agreement effective May 1, 2008 by and between L. Melvin Cooper and Forbes Energy Services LLC (incorporated by reference to Exhibit 10.4 to the Company’s Form S-4/A filed June 27, 2008, Registration No. 333-150853).
10.7	—	Form of Indemnification Agreement for directors, officers and key employees (incorporated by reference to Exhibit 10.5 to the Company’s Form S-4/A filed June 27, 2008, Registration No. 333-150853).
10.8	—	Form of Executive Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.6 to the Company’s Form S-4/A filed June 27, 2008, Registration No. 333-150853).
10.9	—	Form of Director Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.7 to the Company’s Form S-4/A filed June 27, 2008, Registration No. 333-150853).
10.10	—	Commercial Equipment Lease Agreement, dated October 15, 2008 among Forbes Energy Services LLC and Alice Environmental Services, LP. (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008).
21.1*	—	Subsidiaries of the Company.
31.1*	—	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
31.2*	—	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
32.1*	—	Certification of Chief Executive Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	—	Certification of Chief Financial Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith.

EX-4.1

Exhibit 4.1

FORBES ENERGY SERVICES LLC

FORBES ENERGY CAPITAL INC.

AND EACH OF THE GUARANTORS PARTY HERETO

11% SENIOR SECURED NOTES DUE 2015

INDENTURE

Dated as of February 12, 2008

Wells Fargo Bank, National Association,

as Trustee and Collateral Agent

CROSS-REFERENCE TABLE*

Trust Indenture Act Section	Indenture Section
310(a)(1)	7.10
(a)(2)	7.10
(a)(3)	N.A.
(a)(4)	N.A.
(a)(5)	7.10
(b)	7.10
(c)	N.A.
311(a)	7.11
(b)	7.11
(c)	N.A.
312(a)	2.05
(b)	13.03
(c)	13.03
313(a)	7.06
(b)(1)	N.A.
(b)(2)	7.06; 7.07
(c)	7.06; 13.02
(d)	7.06
314(a)	13.02; 13.05
(b)	13.02
(c)(1)	13.04
(c)(2)	13.04
(c)(3)	N.A.
(d)	N.A.
(e)	13.05
(f)	N.A.
315(a)	7.01
(b)	7.05; 13.02
(c)	7.01
(d)	7.01
(e)	6.10
316(a) (last sentence)	2.09
(a)(1)(A)	6.04
(a)(1)(B)	6.02
(a)(2)	N.A.
(b)	6.06; 9.02
(c)	2.12
317(a)(1)	6.07
(a)(2)	6.08
(b)	2.04
318(a)	13.01
(b)	N.A.
(c)	13.01

N.A. means not applicable.

* This Cross Reference Table is not part of this Indenture.

TABLE OF CONTENTS

		Page
	ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01	Definitions.	1
Section 1.02	Other Definitions.	24
Section 1.03	Incorporation by Reference of TIA.	25
Section 1.04	Rules of Construction.	25
	ARTICLE 2 THE NOTES
Section 2.01	Form and Dating.	26
Section 2.02	Execution and Authentication.	27
Section 2.03	Registrar and Paying Agent.	28
Section 2.04	Paying Agent to Hold Money in Trust.	28
Section 2.05	Holder Lists.	28
Section 2.06	Transfer and Exchange.	28
Section 2.07	Replacement Notes.	36
Section 2.08	Outstanding Notes.	37
Section 2.09	Treasury Notes.	37
Section 2.10	Temporary Notes.	37
Section 2.11	Cancellation.	37
Section 2.12	Defaulted Interest; Additional Interest.	38
Section 2.13	Persons Deemed Owners.	38
	ARTICLE 3 REDEMPTION AND PURCHASE
Section 3.01	Notices to Trustee.	38
Section 3.02	Selection of Notes to Be Redeemed or Purchased.	38
Section 3.03	Notice of Redemption.	39
Section 3.04	Effect of Notice of Redemption.	40
Section 3.05	Deposit of Redemption or Purchase Price.	40
Section 3.06	Notes Redeemed or Purchased in Part.	40
Section 3.07	Optional Redemption.	40
Section 3.08	No Mandatory Redemption.	41
Section 3.09	Offer to Purchase by Application of Excess Proceeds or From Excess Cash Flow.	41
	ARTICLE 4 COVENANTS
Section 4.01	Payments on Notes.	43
Section 4.02	Maintenance of Office or Agency.	43
Section 4.03	Taxes.	44
Section 4.04	Stay, Extension and Usury Laws.	44
Section 4.05	Maintenance of Insurance.	44
Section 4.06	Compliance Certificate.	44
Section 4.07	New Parent.	45
Section 4.08	Limited Liability Company or Corporate Existence.	45
Section 4.09	Restrictions on Activities of Capital.	45

i

		Page
Section 4.10	Offer to Repurchase Upon Change of Control.	46
Section 4.11	Asset Sales.	47
Section 4.12	Excess Cash Flow Offer.	49
Section 4.13	Restricted Payments.	50
Section 4.14	Incurrence of Indebtedness and Issuance of Preferred Stock.	52
Section 4.15	Limitation on Capital Expenditures.	55
Section 4.16	Liens.	56
Section 4.17	Dividend and Other Payment Restrictions Affecting Subsidiaries.	57
Section 4.18	Transactions with Affiliates.	58
Section 4.19	Business Activities.	59
Section 4.20	Additional Guarantees.	60
Section 4.21	Designation of Restricted and Unrestricted Subsidiaries.	60
Section 4.22	Payments for Consent.	61
Section 4.23	Impairment of Security Interest.	61
Section 4.24	Real Estate Mortgages and Filings.	61
Section 4.25	Disposal Well Mortgages and Filings	62
Section 4.26	Leasehold Mortgages and Filings; landlord Waivers.	63
Section 4.27	Other Collateral.	63
Section 4.28	Reports.	63
	ARTICLE 5 SUCCESSORS
Section 5.01	Merger, Consolidation, or Sale of Assets.	65
Section 5.02	Successor Corporation Substituted.	66
	ARTICLE 6 DEFAULTS AND REMEDIES
Section 6.01	Events of Default.	66
Section 6.02	Acceleration.	68
Section 6.03	Other Remedies.	68
Section 6.04	Waiver of Past Defaults.	68
Section 6.05	Control by Majority.	69
Section 6.06	Limitation on Suits.	69
Section 6.07	Rights of Holders of Notes to Receive Payment.	69
Section 6.08	Collection Suit by Trustee or Collateral Agent.	70
Section 6.09	Trustee May File Proofs of Claim.	70
Section 6.10	Priorities.	70
Section 6.11	Undertaking for Costs.	71
Section 6.12	Willful Event of Default.	71
	ARTICLE 7 TRUSTEE
Section 7.01	Duties of Trustee.	71
Section 7.02	Rights of Trustee.	72
Section 7.03	Individual Rights of Trustee.	73
Section 7.04	Trustee’s Disclaimer.	73
Section 7.05	Notice of Defaults.	73
Section 7.06	Reports by Trustee to Holders of the Notes.	73
Section 7.07	Compensation and Indemnity.	73
Section 7.08	Replacement of Trustee.	74
Section 7.09	Successor Trustee by Merger, etc.	75

ii

		Page
Section 7.10	Eligibility; Disqualification.	75
Section 7.11	Preferential Collection of Claims Against Issuers.	75
Section 7.12	Trustee in Other Capacities; Collateral Agent and Paying Agent.	76
	ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01	Option to Effect Legal Defeasance or Covenant Defeasance.	76
Section 8.02	Legal Defeasance and Discharge.	76
Section 8.03	Covenant Defeasance.	77
Section 8.04	Conditions to Legal or Covenant Defeasance.	77
Section 8.05	Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions.	78
Section 8.06	Repayment to Company.	79
Section 8.07	Reinstatement.	79
	ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01	Without Consent of Holders of Notes.	79
Section 9.02	With Consent of Holders of Notes.	80
Section 9.03	Compliance with TIA.	81
Section 9.04	Revocation and Effect of Consents.	81
Section 9.05	Notation on or Exchange of Notes.	81
Section 9.06	Trustee to Sign Amendments, etc.	82
	ARTICLE 10 SATISFACTION AND DISCHARGE
Section 10.01	Satisfaction and Discharge.	82
Section 10.02	Application of Trust Money.	83
	ARTICLE 11 GUARANTEES
Section 11.01	Guarantee.	83
Section 11.02	Limitation on Guarantor Liability.	85
Section 11.03	Execution and Delivery of Guarantee.	85
Section 11.04	Guarantors May Consolidate, etc., on Certain Terms.	85
Section 11.05	Releases.	86
	ARTICLE 12 SECURITY
Section 12.01	Grant of Security Interests; Intercreditor Agreement.	87
Section 12.02	Recording and Opinions.	88
Section 12.03	Release of Collateral.	89
Section 12.04	Specified Releases of Collateral.	89
Section 12.05	Release upon Satisfaction or Defeasance of all Outstanding Obligations.	90
Section 12.06	Form and Sufficiency of Release.	90
Section 12.07	Purchaser Protected.	90
Section 12.08	Authorization of Actions to be Taken by the Collateral Agent Under the Collateral Agreements.	90
Section 12.09	Authorization of Receipt of Funds by the Trustee Under the Collateral Agreements.	91
Section 12.10	Replacement of Collateral Agent.	91

iii

		Page
	ARTICLE 13 MISCELLANEOUS
Section 13.01	TIA Controls.	91
Section 13.02	Notices.	91
Section 13.03	Communication by Holders of Notes with Other Holders of Notes.	92
Section 13.04	Certificate and Opinion as to Conditions Precedent.	93
Section 13.05	Statements Required in Certificate or Opinion.	93
Section 13.06	Rules by Trustee and Agents.	93
Section 13.07	No Personal Liability of Directors, Officers, Employees and Stockholders.	93
Section 13.08	Governing Law.	94
Section 13.09	No Adverse Interpretation of Other Agreements.	94
Section 13.10	Successors.	94
Section 13.11	Severability.	94
Section 13.12	Counterpart Originals.	94
Section 13.13	Table of Contents, Headings, etc.	94
	EXHIBITS
Exhibit A	FORM OF NOTE
Exhibit B	FORM OF CERTIFICATE OF TRANSFER
Exhibit C	FORM OF CERTIFICATE OF EXCHANGE
Exhibit D	FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Exhibit E	FORM OF NOTATION OF GUARANTEE
Exhibit F	FORM OF SUPPLEMENTAL INDENTURE

iv

INDENTURE dated as of February 12, 2008 among Forbes Energy Services LLC, a Delaware limited liability company (including any and all successors thereto, the “Company”), as co-issuer of the 11% Senior Secured Notes due 2015 (the “Notes”), Forbes Energy Capital Inc., a Delaware corporation (including any and all successors thereto, “Capital” and together with the Company as co-issuers of the Notes, the “Issuers”), as co-issuer of the Notes, the Guarantors (as defined herein) and Wells Fargo Bank, National Association and any and all successors thereto, as trustee (in such capacity, the “Trustee”) and as collateral agent (in such capacity, the “Collateral Agent”).

The Issuers, the Guarantors, the Trustee and the Collateral Agent agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders (as defined) of the Notes:

ARTICLE 1

DEFINITIONS AND INCORPORATION

BY REFERENCE

Section 1.01 Definitions.

“144A Global Note” means the Global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A.

“Acquired Debt” means, with respect to any specified Person:

(1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person (regardless of the form of the applicable transaction by which such Person became a Subsidiary) or expressly assumed in connection with the acquisition of assets from any such Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Restricted Subsidiary of, such specified Person or of such Indebtedness being incurred in connection with the acquisition of assets; and

(2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.

Acquired Debt will be deemed to be incurred on the date the acquired Person becomes a Subsidiary or the date of the related acquisition of assets from such Person.

“Additional Interest” means all additional interest then owing on the Notes pursuant to the Registration Rights Agreement.

“Additional Notes” means Notes (other than the Initial Notes) issued after the Issue Date under this Indenture in accordance with Sections 2.01, 2.02 and 4.14 hereof, as part of the same class as the Initial Notes.

“Adjusted Capital Expenditures” means, for any period, Capital Expenditures and Capital Lease Obligations incurred by any New Parent, the Company and their Restricted Subsidiaries during such period, but excluding in each case (i) any such expenditure made to restore, replace or rebuild property to the condition of such property immediately prior to any damage, loss, destruction or condemnation of such property, to the extent such expenditure is made with insurance proceeds, condemnation awards or damage recovery proceeds relating to any such damage, loss, destruction or condemnation, (ii) any such

1

expenditure constituting reinvestment of the Net Proceeds of any Asset Sale permitted by this Indenture and (iii) any Capital Expenditures made or deemed to be made resulting from the acquisition of property or assets by any New Parent, the Company or any of their Restricted Subsidiaries the consideration for which acquisition was Equity Interests (other than Disqualified Stock) of any New Parent, the Company or any of their Restricted Subsidiaries otherwise permitted by this Indenture.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For 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; provided that beneficial ownership of 10% or more of the Voting Stock of a Person will be deemed to be control. For purposes of this definition, the terms “controlling,” “controlled by” and “under common control with” have correlative meanings.

“Agent” means any Registrar, co-registrar, Paying Agent or additional paying agent.

“Applicable Premium” means, with respect to any Note on any redemption date, the greater of:

(1) 1.0% of the principal amount of the Note; or

(2) the excess of:

(a) the present value of such redemption date of (i) the redemption price of the Note at February 15, 2012, (such redemption price being set forth in Section 3.07 hereof) plus (ii) all required interest payments due on the Note through February 15, 2012 (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points; over

(b) the principal amount of the Note, if greater.

“Applicable Procedures” means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange.

“Asset Sale” means:

(1) the sale, lease, conveyance or other voluntary disposition of any assets or rights; provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of either (a) any New Parent and its Restricted Subsidiaries taken as a whole or (b) the Company and its Restricted Subsidiaries taken as a whole will, in each case, be governed by Section 4.10 hereof, and/or Section 5.01 hereof, and not by Section 4.11 hereof; and

(2) the issuance or sale of Equity Interests in any of any New Parent’s or the Company’s Restricted Subsidiaries or the sale of Equity Interests in any of their Subsidiaries; provided that, for the avoidance of doubt, the sale of Equity Interests of the Company (and any New Parent) will be governed by Section 4.10 and Article 5 of this Indenture and not by Section 4.11 of this Indenture.

Notwithstanding the preceding, none of the following items will be deemed to be an Asset Sale:

(1) any single transaction or a series of related transactions that involves assets having a Fair Market Value of less than $2.0 million;

2

(2) a transfer of assets, including, with respect to Restricted Subsidiaries, Equity Interests, between or among any New Parent, the Company and their Restricted Subsidiaries;

(3) (a) an issuance of Equity Interests by a Restricted Subsidiary of any New Parent or the Company to any New Parent, the Company or to a Restricted Subsidiary of the Company or any New Parent or (b) the issuance of Equity Interests of the Company to any New Parent;

(4) the sale or lease of products, services or accounts receivable in the ordinary course of business and any sale or other disposition of damaged, worn-out or obsolete assets in the ordinary course of business;

(5) the sale or other disposition of cash or Cash Equivalents;

(6) a Restricted Payment that is permitted in accordance with Section 4.13 or a Permitted Investment; and

(7) any trade or exchange by the Company or any Restricted Subsidiary of the Company of equipment or other assets for equipment or other assets owned or held by another Person, provided that the Fair Market Value of the assets traded or exchanged by the Company or such Restricted Subsidiary (together with any cash or Cash Equivalents) is reasonably equivalent to the Fair Market Value of the assets (together with any cash or Cash Equivalents) to be received by the Company or such Restricted Subsidiary.

“Attributable Debt” means, in respect of a sale and leaseback transaction, 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 and 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.

“Bankruptcy Law” means Title 11, U.S. Code or any similar federal or state law for the relief of debtors.

“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 after the passage of time. The terms “Beneficially Owns” and “Beneficially Owned” have a corresponding meaning.

“Board of Directors” means:

(1) with respect to a corporation, the board of directors of the corporation or any committee thereof duly authorized to act on behalf of such board;

(2) with respect to a partnership, the board of directors of the general partner of the partnership;

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(3) with respect to a limited liability company, the managing member or members or any controlling committee of managing members thereof; and

(4) with respect to any other Person, the board or committee of such Person serving a similar function.

“Business Day” means any day other than a Saturday, Sunday, or any day on which banks in Houston, Texas or in New York, New York are authorized or required by law to close.

“Capital” has the meaning set forth in the preeamble hereto.

“Capital Expenditures” means for any period all direct or indirect (by way of acquisition of securities of a Person or the expenditure of cash or the transfer of property or the incurrence of Indebtedness) expenditures in respect of the purchase or other acquisition of fixed or capital assets determined in conformity with GAAP.

“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 prepared 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;

(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, whether or not 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 six months from the date of acquisition;

(3) certificates of deposit and Eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers’ acceptances with maturities not exceeding six months and overnight bank deposits, in each case, with any domestic commercial bank having capital and surplus in excess of $500.0 million and a Thomson Bank Watch Rating of “B” or better;

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

(5) commercial paper having one of the two highest ratings obtainable from Moody’s Investors Service, Inc. or Standard & Poor’s Ratings Services and, in each case, maturing within six months after the date of acquisition;

(6) deposits available for withdrawal on demand with any commercial bank not meeting the qualifications specified in clause (3) above, provided all deposits referred to in this clause (6) are made in the ordinary course of business and do not exceed $2.0 million in the aggregate at any one time; and

(7) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds set forth in clauses (1) through (7) 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 properties or assets of either (a) any New Parent and its Subsidiaries taken as a whole or (b) the Company and its Subsidiaries taken as a whole, in either case, to any “person” (as that term is used in Section 13(d) of the Exchange Act) other than the Permitted Holders;

(2) the adoption of a plan relating to the liquidation or dissolution of any New Parent or the Company;

(3) the consummation of any transaction (including, without limitation, any merger or consolidation), the result of which is that any Person, other than a Permitted Holder, becomes the Beneficial Owner, directly or indirectly, of more than 35% of the Voting Stock of any New Parent or the Company, measured by voting power rather than number of shares;

(4) the consummation of the first transaction (including, without limitation, any merger or consolidation) the result of which is that any Person other than a Permitted Holder becomes the Beneficial Owner, directly or indirectly, of more of the Voting Stock of any New Parent or the Company (measured by voting power rather than number of shares) than is at the time Beneficially Owned by the Permitted Holders in the aggregate; or

(5) after an initial public offering of any New Parent or the Company, the first day on which a majority of the members of the Board of Directors of such New Parent or the Company, as the case may be, are not Continuing Directors.

For the avoidance of doubt, a Change of Control will not be deemed to have occurred solely as a result of the formation of and the transfer of ownership of any Equity Interests of the Company or any New Parent to any New Parent; provided that none of the events set forth in paragraphs (1) through (5) above has occurred.

“Clearstream” means Clearstream Banking, S.A.

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“Collateral” means collateral as such term is defined in the Security Agreement, all property mortgaged under the Mortgages and any other property, whether now owned or hereafter acquired, upon which a Lien securing the Obligations under this Indenture, the Collateral Agreements, the Notes or the Note Guarantees is granted or purported to be granted under any Collateral Agreement; provided, however, that “Collateral” shall not include any Excluded Collateral.

“Collateral Agent” means the party named as the collateral agent for the Holders of Notes in this Indenture until a successor replaces it in accordance with the provisions of this Indenture and thereafter means any such successor.

“Collateral Agreements” means, collectively, the Intercreditor Agreement, the Security Agreement, each Mortgage and each other instrument creating Liens in favor of the Trustee as required by this Indenture, in each case, as the same may be in force from time to time.

“Common Stock” of any Person means any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person’s common stock, whether outstanding on the Issue Date or issued after the Issue Date, and includes, without limitation, all series and classes of such common stock.

“Company” has the meaning set forth in the preeamble hereto.

“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 extraordinary loss plus 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

(4) depreciation, amortization (including amortization of intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) 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, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income; minus

(5) non-cash items increasing such Consolidated Net Income for such period, other than the accrual of revenue in the ordinary course of business.

in each case, on a consolidated basis and determined in accordance with GAAP, it being understood that for any reference period that includes time prior to the date of formation of the Company and the reorganization that results in the Guarantors on the Issue Date becoming Subsidiaries of the Company, such amounts shall be determined on a combined rather than a consolidated basis in accordance with GAAP.

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Notwithstanding the preceding, the provision for taxes based on the income or profits of, and the depreciation, amortization and other non-cash expenses of, a Restricted Subsidiary of any New Parent or the Company will be added to Consolidated Net Income to compute Consolidated Cash Flow of such New Parent or the Company, as the case may be, only to the extent that a corresponding amount would be permitted at the date of determination to be dividended to such New Parent or the Company, as the case may be, by such Restricted Subsidiary without prior governmental approval (that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Restricted Subsidiary or its stockholders.

“Consolidated 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 or combined 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 only to the extent of the amount of dividends or similar distributions paid in cash to the specified Person or a Restricted Subsidiary of the Person;

(2) the Net Income of any Restricted Subsidiary 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; and

(3) the cumulative effect of a change in accounting principles will be excluded.

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

(1) was a member of such Board of Directors of the Company on the Issue Date or was a member of any such New Parent’s Board of Directors on the date such New Parent was required to become a party to this Indenture; or

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

“Corporate Trust Office of the Trustee” will be at the address of the Trustee specified in Section 13.02 hereof or such other address as to which the Trustee may give notice to the Company.

“Credit Facilities” means, one or more debt facilities (including, without limitation, one or more credit agreements, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith) or commercial paper facilities, in each case, with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such

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lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, supplemented, renewed, refunded, replaced (whether upon or after termination or otherwise) or refinanced (including by means of sales of debt securities to institutional investors) in whole or in part from time to time.

“Custodian” means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto.

“Default” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

“Definitive Note” means a certificated Note registered in the name of the Holder thereof and issued in accordance with Sections 2.01, 2.02 and 2.06 hereof, substantially in the form of Exhibit A hereto except that such Note shall not bear the Global Note Legend and shall not have the “Schedule of Exchanges of Interests in the Global Note” attached thereto.

“Depositary” means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as Depositary hereunder and having become such pursuant to the applicable provision of this Indenture.

“Disposal Well Assets” means all rights, titles, interests and estates in and to any and all salt water disposal wells, including property and equipment of whatever nature, together with all fixtures and improvements pertaining thereto, in each case that is now owned or hereafter acquired and used, held for use or useful in connection with the provision of salt water disposal services (excluding rental equipment or other personal property).

“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 date on which the Notes mature. 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 any New Parent or the Company to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale will not constitute Disqualified Stock if the terms of such Capital Stock provide that any New Parent or the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.13 hereof. The amount of Disqualified Stock deemed to be outstanding at any time for purposes of this Indenture will be the maximum amount that such New Parent, the Company and their 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.

“Domestic Subsidiary” means any Restricted Subsidiary of any New Parent or the Company that is not a Foreign Subsidiary.

“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 an underwritten public offering of Common Stock of the Company or any New Parent pursuant to a registration statement filed with the SEC (other than on Form S-8), a public offering in a foreign jurisdiction, or any private placement of Common Stock of any New Parent or the Company to any Person other than issuances upon exercise of options by employees of any New Parent, the Company or any of their Restricted Subsidiaries.

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“Euroclear” means Euroclear Bank, S.A./N.V., as operator of the Euroclear system.

“Excess Cash Flow” means, for any period, Consolidated Cash Flow for such period, adjusted as follows:

(1) minus the cash portion of Fixed Charges (net of interest income) and the cash portion of any related financing fees with respect to such period;

(2) minus Permitted Tax Distributions made or to be made or the cash portion of all federal, state, local and foreign income taxes and franchise or margin taxes paid or payable (without duplication) by any New Parent and its Restricted Subsidiaries or the Company and its Restricted Subsidiaries during such period;

(3) minus all Capital Expenditures made or committed to be made during such period by any New Parent and its Restricted Subsidiaries or the Company and its Restricted Subsidiaries; and

(4) minus or plus, respectively, any net increase or decrease in Working Capital from the beginning to the end of such period.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exchange Notes” means Notes issued in exchange for Initial Notes or Additional Notes pursuant to an exchange offer effected pursuant to the Registration Rights Agreement (or a similar agreement entered into with respect to Additional Notes).

“Excluded Collateral” means:

(5) undocumented interests in real property with respect to which an Issuer or any Guarantor is an owner (which will include salt water disposal wells located on property owned by third parties for which there are no written leases or that otherwise are not reasonably susceptible to mortgages, easements or other liens or rights to access or use), but, subject to the requirements of Section 4.25, only for so long as such interests are not subject to a valid and enforceable real property lease;

(6) light trucks and other non-commercial passenger motor vehicles;

(7) rental equipment and leasehold interests in real property with respect to which the Company or a Guarantor is a tenant or subtenant as set forth in the Security Agreement;

(8) the Voting Stock of any Foreign Subsidiary in excess of 65% of the outstanding Voting Stock of such Foreign Subsidiary;

(9) accounts that are exclusively used for payroll purposes as set forth in the Security Agreement;

(10) rights under any contracts that contain a valid and enforceable prohibition on assignment of such rights other than to the extent that any such prohibition would be rendered ineffective pursuant to any applicable law or principles of equity, but only for so long as such prohibition exists and is effective and valid; and

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(11) property and assets owned by the Issuers or any Guarantor in which a Lien may not be granted without governmental approval or consent or in which the granting of a Lien is prohibited by applicable law but only for so long as the Issuers or the applicable Guarantor has not obtained such approval or consents.

In addition, if the Trustee determines that the burden or cost of obtaining a security interest (or a perfection thereof) in any assets sufficiently outweighs the benefit to the Holders of the Notes of the security to be afforded thereby (or the perfection thereof) or that related title insurance, surveys, opinions or other documentation is not deemed to be sufficiently material to the Holders of the Notes, the Trustee, in its discretion, may exclude such assets from the requirement that a security interest be granted therein or that security interests therein be perfected, as the case may be. In making any such determination, the Trustee may rely on an Officer’s Certificate or Opinion of Counsel.

“Existing Indebtedness” means Indebtedness of the Company and its Subsidiaries (other than Indebtedness under the Credit Facilities) in existence on the Issue Date, until such amounts are repaid.

“Fair Market Value” means the value that would be paid by a willing and able buyer to an unaffiliated willing seller in an arm’s length, free market transaction for cash not involving distress or necessity of either party, determined in good faith by the Board of Directors of any New Parent or the Company, whichever entity is then the ultimate parent company, or a duly authorized committee thereof (unless otherwise provided in this Indenture) as evidenced by a resolution of such Board of Directors or committee.

“First Lien Collateral Agent” means the collateral agent for any party holding secured obligations of any New Parent, the Company and/or their Restricted Subsidiaries, the rank of which security will be contractually senior to the Holders of Notes pursuant to an Intercreditor Agreement, named in any Credit Facility and any successor or replacement collateral agent designated as such by the holders of First Lien Obligations.

“Fixed Charge Coverage Ratio” means with respect to any specified Person for any 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 revolving credit borrowings) or issues, repurchases or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated 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 or consolidations, or any Person or any of its Restricted Subsidiaries acquired by the specified Person or any of its Restricted Subsidiaries, and including any related financing transactions and including increases in ownership of Restricted Subsidiaries, during the 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;

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(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;

(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 on the Calculation Date will be deemed to have been a Restricted Subsidiary at all times during such four-quarter period;

(5) any Person that is not a Restricted Subsidiary on the Calculation Date will be deemed not to have been a Restricted Subsidiary 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 Hedging Obligation applicable to such Indebtedness if such Hedging Obligation 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, 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, 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 Hedging Obligations in respect of interest rates; plus

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

(3) any interest 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; plus

(4) the product of (a) all dividends, whether paid or accrued and whether or not in cash, on any series of preferred stock of such Person or any of its Restricted Subsidiaries, other than dividends on Equity Interests payable solely in Equity Interests of the Company or any New Parent (other than Disqualified Stock) or to any New Parent, the Company or a Restricted Subsidiary of the Company or any New Parent, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, determined on a consolidated basis in accordance with GAAP.

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“Flow Through Entity means an entity that is treated as a partnership not taxable as a corporation, a grantor trust, a disregarded entity, an “S” corporation or a qualified subchapter “S” subsidiary for U.S. federal income tax purposes or subject to treatment on a comparable basis for purposes of state, local or foreign tax law.

“Foreign Subsidiary” means any Restricted Subsidiary of the Company that was not formed under the laws of the United States or any state of the United States or the District of Columbia.

“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time.

“Global Note Legend” means the legend set forth in Section 2.06(g)(2) hereof, which is required to be placed on all Global Notes issued under this Indenture.

“Global Notes” means, individually and collectively, each of the Restricted Global Notes deposited with or on behalf of and registered in the name of the Depositary or its nominee, substantially in the form of Exhibit A hereto and that bears the Global Note Legend and that has the “Schedule of Exchanges of Interests in the Global Note” attached thereto, issued in accordance with Sections 2.01 and 2.06(b)(3) hereof.

“Government Securities” means direct obligations of, or obligations guaranteed by, the United States of America, and the payment for which the United States pledges its full faith and credit.

“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 (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take or pay or to maintain financial statement conditions or otherwise).

“Guarantors” means (1) each Domestic Subsidiary of the Company on the Issue Date (other than Capital) and (2) each other Domestic Subsidiary of the Company or any New Parent that executes a Note Guarantee in accordance with the provisions of this Indenture, in each case, together with their respective successors and assigns until the Note Guarantee of such Person has been released in accordance with the provisions of this Indenture.

“Hedging Obligations” means, with respect to any specified Person, the obligations of such Person under:

(1) interest rate swap agreements (whether from fixed to floating or from floating to fixed), interest rate cap agreements and interest rate collar agreements;

(2) other agreements or arrangements designed to manage interest rates or interest rate risk; and

(3) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates or commodity prices.

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“Holder” or a “Holder of Notes” means a Person in whose name a Note is registered.

“IAI Global Note” means a Global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold to Institutional Accredited Investors.

“Immaterial Subsidiary” means, as of any date, any Restricted Subsidiary whose total assets, as of that date, are less than $250,000 and whose total revenues for the most recent 12-month period do not exceed $250,000; provided that a Restricted Subsidiary will not be considered to be an Immaterial Subsidiary if it, directly or indirectly, guarantees or otherwise provides direct credit support for any Indebtedness of an Issuer.

“Indebtedness” means, with respect to any specified Person, any indebtedness of such Person (excluding accrued expenses and trade payables), whether or not contingent,

(1) in respect of borrowed money:

(2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof);

(3) in respect of banker’s acceptances;

(4) representing Capital Lease Obligations;

(5) representing the balance deferred and unpaid of the purchase price of any property or services due more than six months after such property is acquired or such services are completed; or

(6) representing any Hedging Obligations.

if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) 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 others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness of any other Person.

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

“Indenture Documents” means, collectively, this Indenture, the Notes, the Note Guarantees and the Collateral Agreements.

“Independent Director” means a member of the Board of Directors of any New Parent or the Company, whichever entity is then the ultimate parent company, who qualifies as “independent” within the meaning of the listing requirements of either the New York Stock Exchange or the Nasdaq Stock Market.

“Indirect Participant” means a Person who holds a beneficial interest in a Global Note through a Participant.

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“Initial Notes” means the $200,000,000 aggregate principal amount of Notes issued under this Indenture on the date hereof.

“Initial Purchaser” means Jefferies & Company, Inc.

“Institutional Accredited Investor” means an institution that is an “accredited investor” as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.

“Intercreditor Agreement” means an intercreditor agreement whose terms, as confirmed in an Officers’ Certificate delivered to the Trustee, are substantially consistent with the intercreditor agreement described in the Offering Circular and that is entered into in connection with entering into any Credit Facility, among the First Lien Collateral Agent, the Collateral Agent, the Issuers and the Guarantors, as the same may be amended, supplemented or modified from time to time.

“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 (including Note Guarantees or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If any new Parent, the Company or any their Subsidiaries sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of any New Parent or the Company, as the case may be, such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of such New Parent or the Company, then such New Parent or the Company, as the case may be, will be deemed to have made an Investment on the date of any such sale or disposition equal to the Fair Market Value of such New Parent’s or the Company’s Investments in such Subsidiary that were not sold or disposed of in an amount determined as provided in Section 4.13(c) hereof. The acquisition by any New Parent, the Company or any of their Subsidiaries of a Person that holds an Investment in a third Person will be deemed to be an Investment by such New Parent, the Company or such Subsidiary in such third Person in an amount equal to the Fair Market Value of the Investments held by the acquired Person in such third Person in an amount determined as provided in Section 4.13(c) hereof. 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.

“Issue Date” means the date on which Notes are first issued under this Indenture.

“Issuers” has the meaning set forth in the preeamble hereto.

“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, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.

“Mortgages” means the mortgages, deeds of trust, deeds to secure Indebtedness or other similar documents granting Liens on any New Parent’s, the Company’s and their Domestic Subsidiaries’ Premises, the Leased Premises and/or the Disposal Well Assets to secure the Notes or the Note Guarantees.

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“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 any New Parent, the Company or any of their 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, sales commissions, recording fees, title transfer fees, title insurance premiums, appraiser fees and costs incurred in connection with preparing such asset for sale, and any relocation expenses incurred as a result of the Asset Sale, and taxes paid or estimated in good faith to be payable as a result of the Asset Sale after taking into account any available tax credits or deductions and any tax sharing arrangements, (2) amounts required to be applied to the repayment of Indebtedness, other than Indebtedness under a Credit Facility, secured by a Lien on the asset or assets that were the subject of such Asset Sale, and (3) any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP or any amount placed in escrow, until such time as such reserve is reversed or such escrow 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.

“Non-Recourse Debt” means Indebtedness:

(1) as to which none of any New Parent, the Company or any of their 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) constitutes the lender;

(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 of any New Parent, the Company or any of their 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; and

(3) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of any New Parent, the Company or any of their Restricted Subsidiaries.

“Non-U.S. Person” means a Person who is not a U.S. Person as defined under Regulation S of the Securities Act.

“Note Guarantee” means the Guarantee by each Guarantor of the Issuers’ obligations under this Indenture and the Notes, executed pursuant to the provisions of this Indenture and the Guarantee by each Guarantor of any Exchange Notes.

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“Notes” has the meaning assigned to it in the preamble to this Indenture. The Initial Notes and the Additional Notes shall be treated as a single class for all purposes under this Indenture, and unless the context otherwise requires, all references to the “Notes” shall include the Initial Notes, any Additional Notes and any Exchange Notes.

“Obligations” means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

“Offering Circular” means the Issuers’ final Offering Circular, dated February 7, 2008, regarding the issuance and sale of the Initial Notes.

“Officer” means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person.

“Officers’ Certificate” means a certificate signed on behalf of (i) the Company by one Officer of the Company and (ii) Capital by one Officer of Capital, each of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company or Capital, as applicable, that meets the requirements of Section 13.05 hereof.

“Opinion of Counsel” means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 13.05 hereof. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee.

“Participant” means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream).

“Permitted Affiliate Lease” means a lease for any premises or buildings occupied by the Company or a Restricted Subsidiary of the Company on the Issue Date that has been entered into with an Affiliate of the Company, the terms of which are fully and accurately summarized in all material respects under the caption “Transactions with Related Persons” in the Offering Circular, and any amendment, extension or other modification thereto; provided that any such amendment, extension or modification (1) is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary, as the case may be, than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary, as the case may be, with an unrelated Person or, if there is no such comparable transaction, on terms that are fair and reasonable to the Company or such Restricted Subsidiary, as the case may be, and reflect an arms’-length negotiation as determined by the Independent Directors and (2) is not, in the good faith determination of the Independent Directors or the Board of Directors of such New Parent or the Company, whichever entity is then the ultimate parent company, materially worse for the Holders.

“Permitted Affiliate Store Transactions” means purchases from or returns to the oil field supply store owned by Alice Environmental Services, LP by any New Parent, the Company or any of their Restricted Subsidiaries, as such transactions are described under “Transactions with Related Persons” in the Offering Circular, in each case on terms that are no less favorable to any such New Parent, the Company or the relevant Restricted Subsidiary, as the case may be, than those that would have been obtained in a comparable transaction by any such New Parent, the Company or such Restricted Subsidiary with an unrelated Person or, if there is no such comparable transaction, on terms that are fair and reasonable to any such New Parent, the Company or such Restricted Subsidiary and reflect an arms’-length negotiation as determined by the Independent Directors.

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

“Permitted Holders” means (1) John E. Crisp, Charles C. Forbes and Janet L. Forbes and (2) any Affiliate or family member of a Person set forth in clause (1) of this definition.

“Permitted Investments” means:

(1) any Investment in any New Parent, the Company or in any of their Restricted Subsidiaries;

(2) any Investment in Cash Equivalents;

(3) any Investment by any New Parent, the Company or any of their Restricted Subsidiaries in a Person, if as a result of such Investment:

(a) such Person becomes a Restricted Subsidiary of such New Parent or the Company, as the case may be; or

(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, any New Parent, the Company or any of their Restricted Subsidiaries;

(4) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.11 or any non-cash consideration received in connection with a disposition of assets excluded from the definition of “Asset Sales”;

(5) any acquisition of assets or Capital Stock solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of any New Parent or the Company, whichever entity is then the ultimate parent company;

(6) any Investments received in compromise or resolution of, or upon the foreclosure, perfection or enforcement of any Lien in favor of any New Parent, the Company or any of their Restricted Subsidiaries, in each case (a) obligations of trade creditors or customers that were incurred in the ordinary course of business of the Company or any of its Restricted Subsidiaries, 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;

(7) Investments represented by Hedging Obligations;

(8) loans or advances to employees made in the ordinary course of business of any New Parent, the Company or any of their Restricted Subsidiaries in an aggregate principal amount not to exceed $500,000 at any one time outstanding;

(9) investments in or repurchases of the Notes; and

(10) other Investments in any Person 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 (10) since the date Issue Date that are at the time outstanding, not to exceed $5.0 million;

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provided, however, that the funds invested in Permitted Investments in any New Parent, the Company or any of their Restricted Subsidiaries, will, in such entity in which the funds are invested, be subject to Section 4.15 hereof.

“Permitted Liens” means:

(1) Liens on assets of any New Parent, the Company or any of their Restricted Subsidiaries securing Indebtedness and other Obligations under Credit Facilities that are permitted by the terms of this Indenture to be incurred pursuant to clause (1) of the second paragraph of Section 4.14;

(2) Liens in favor of the Company or the Guarantors;

(3) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with any New Parent, the Company or any of their Restricted Subsidiaries; 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 any such New Parent, the Company or such Restricted Subsidiary, as the case may be;

(4) Liens on property (including Capital Stock) existing at the time of acquisition of the property by any New Parent, the Company or any of their Restricted Subsidiaries; provided that such Liens were in existence prior to, such acquisition, and not incurred in contemplation of, such acquisition;

(5) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business;

(6) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (4) of the second paragraph of Section 4.14 covering only the assets constructed or acquired with or financed by such Indebtedness;

(7) Liens existing on the Issue Date;

(8) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided that any accrual or other appropriate provision as is required in conformity with GAAP has been made therefor;

(9) Liens imposed by law, such as carriers’, warehousemen’s, landlord’s and mechanics’ Liens, in each case, incurred in the ordinary course of business;

(10) 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 such Person;

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(11) Liens created for the benefit of (or to secure) the Notes and all other Obligations under this Indenture, the Collateral Agreements and the Note Guarantees;

(12) Liens to secure any Permitted Refinancing Indebtedness permitted to be incurred under this Indenture; provided, however, that:

(a) the new Lien is limited to all or part of the same property and assets that secured or, under the written agreements pursuant to which the original Lien arose, could secure the original Indebtedness (plus improvements and accessions to such property, or proceeds or distributions thereof); and

(b) the Indebtedness secured by the new Lien is not increased to any amount greater than the sum of (i) the outstanding principal amount, or, if greater, committed amount, of the original Indebtedness and (ii) an amount necessary to pay any fees and expenses, including premiums, related to such renewal, refunding, refinancing, replacement, defeasance or discharge; and

(13) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other assets relating to such letters of credit and products and proceeds thereof;

(14) judgment Liens not giving rise to an Event of Default so long as any appropriate legal proceeding that may have been duly initiated for the review of such judgment has not been finally terminated or the period within which such proceeding may be initiated has not expired;

(15) rights of banks to set off deposits against Indebtedness owed to said banks;

(16) Liens upon specific items of inventory or other goods and proceeds of the Company or its Restricted Subsidiaries to secure the Company’s or any such Restricted Subsidiary’s obligations in respect of bankers’ acceptances issued or created for the account of any such Person to facilitate the purchase, shipment or storage of such inventory or other goods in the ordinary course of business;

(17) Liens securing Hedging Obligations permitted to be entered into by this Indenture;

(18) Liens arising from precautionary Uniform Commercial Code financing statements in connection with operating leases or consignment of goods; and

(19) Liens incurred in the ordinary course of business of any New Parent, the Company or any of their Restricted Subsidiaries with respect to obligations that do not exceed $10.0 million at any one time outstanding.

“Permitted New Parent Business” means the ownership directly or indirectly by any New Parent of the Equity Interests of the Company and reasonably related, complementary or incidental activities.

“Permitted Refinancing Indebtedness” means any Indebtedness of any New Parent, the Company or any of their Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge other Indebtedness of such New Parent, the Company or any of their Restricted Subsidiaries (other than intercompany Indebtedness), as the case may be; provided that:

(1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness extended, renewed, refunded, refinanced, replaced, defeased or discharged (plus all accrued interest on the Indebtedness and the amount of all fees and expenses, including premiums, incurred in connection therewith);

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(2) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged;

(3) if the Indebtedness being extended, renewed, refunded, refinanced, replaced, defeased or discharged is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable, taken as a whole, to the Holders of Notes as those contained in the documentation governing the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged; and

(4) such Indebtedness is incurred either by such New Parent, the Company or by one of their Restricted Subsidiaries who is the obligor on the Indebtedness being extended, renewed, refunded, refinanced, replaced, defeased or discharged.

“Permitted Tax Distributions” means:

(1) with respect to each tax year or portion thereof that any New Parent or the Company qualifies (or any predecessor in interest qualified) as a Flow Through Entity, the distribution by such New Parent or the Company, whichever entity is then the ultimate parent company, to the holders of Equity Interests of such New Parent or the Company, as the case may be, of an amount equal to the product of (x) the amount of aggregate net taxable income of such New Parent or the Company allocated to the holders of Equity Interests of such New Parent or the Company, as the case may be, for such period and (y) the Presumed Tax Rate for such period; provided that to the extent that the aggregate net taxable income of such New Parent or the Company for a taxable year actually reported to the holders of the Equity Interests is less than the aggregate net taxable income assumed in calculating such amounts for a taxable year, the holders of such Equity Interests can return an amount equal to the product of such shortfall and the Presumed Tax Rate used in such calculations, or an amount equal to such product shall be deducted from the next scheduled Permitted Tax Distributions payable to such holders for later years; and

(2) if any New Parent or the Company (whichever is then the ultimate parent company) is not a Flow Through Entity, the payment by such parent entity (or distribution by the Company to New Parent) of the combined federal, state and local income taxes that would be paid by such entity if it were a separate Delaware corporation filing separate federal, state and local income tax returns with respect to its taxable income for such period (or, to the extent applicable because there are corporate subsidiaries, if it were the common parent of an affiliated group filing consolidated or combined returns with respect to the taxable income of such entity, the Company and the Company’s consolidated corporate subsidiaries for such period).

For purposes of such computation, it will be assumed that any net operating loss carryforwards or other carryforwards or tax attributes, such as alternative minimum tax carryforwards, that arise in any period will be available to offset taxable income payable in later years (regardless of any change in status as a Flow Through Entity). Notwithstanding anything to the contrary, for purposes of clause (b) above, the applicable taxable income or taxes shall not include taxable income or taxes resulting from any change in the status from a Flow Through Entity to an entity taxable as a corporation.

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

“Presumed Tax Rate” means 39.6% or, if there is a change in applicable federal, state or local tax rates, such other rate as the Chief Financial Officer of any New Parent or the Company, whichever entity is then the ultimate parent company, certifies in writing to the Trustee to be a reasonable approximation of the highest, net marginal federal, state and local income taxation rates payable by the holders of Equity Interests of such New Parent or the Company, as the case may be, or with respect to the aggregate net taxable income of such New Parent or the Company.

“principal” means the principal amount due at maturity of the Notes.

“Private Placement Legend” means the legend set forth in Section 2.06(g)(1) hereof to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture.

“QIB” means a “qualified institutional buyer” as defined in Rule 144A.

“QIB Global Note” means a Global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold to QIBs.

“Redemption Date” means the applicable date or dates set for redemption of Notes pursuant to Section 3.07.

“Redemption Price” means the applicable redemption price for redemption of Notes pursuant to Section 3.07.

“Registration Rights Agreement” means the Registration Rights Agreement entered into as of February 7, 2008, among the Issuers, the Guarantors and the Initial Purchaser.

“Regulation S” means Regulation S promulgated under the Securities Act.

“Regulation S Global Note” means a Regulation S Temporary Global Note or Regulation S Permanent Global Note, as appropriate.

“Regulation S Permanent Global Note” means a permanent Global Note in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Regulation S Temporary Global Note upon expiration of the Restricted Period.

“Regulation S Temporary Global Note” means a temporary Global Note in the form of Exhibit A hereto and bearing the legend referred to in Section 2.06(f)(3) deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes initially sold in reliance on Rule 903 of Regulation S.

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“Related Party” means:

(1) any controlling stockholder, 80% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of a Person set forth in clause (1) of the definition of “Permitted Holder”; or

(2) any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, members, owners or Persons beneficially holding an 80% or more controlling interest of which consist of any one or more Permitted Holder.

“Responsible Officer,” when used with respect to the Trustee, means any officer within the Corporate Trust Administration of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers who has responsibility for administration of this Indenture and also means, with respect to a particular corporate trust matter related to this Indenture, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject.

“Restricted Definitive Note” means a Definitive Note bearing the Private Placement Legend.

“Restricted Global Note” means a Global Note bearing the Private Placement Legend.

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

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

“Restricted Subsidiary” of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary.

“Rule 144” means Rule 144 promulgated under the Securities Act.

“Rule 144A” means Rule 144A promulgated under the Securities Act.

“Rule 903” means Rule 903 promulgated under the Securities Act.

“Rule 904” means Rule 904 promulgated under the Securities Act.

“SEC” means the U.S. Securities and Exchange Commission or any successor commission or agency.

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

“Security Agreement” means the Security Agreement, dated as of the Issue Date, among the Issuer and the Guarantors in favor of the Collateral Agent, as amended or supplemented from time to time in accordance with its terms.

“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 Issue 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 documentation governing such Indebtedness as of the Issue Date, 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.

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“Subordinated Indebtedness” means any Indebtedness that is subordinated in right of payment to the rights of the Holders of the Notes.

“Subsidiary” means, with respect to any specified Person:

(1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders’ agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees of the corporation, association or other business entity 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 (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof).

“TIA” means the Trust Indenture Act of 1939, as amended (15 U.S.C. §§ 77aaa-77bbbb).

“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.I5 (519) that 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 February 15, 2012; provided, however, that if the period from the redemption date to February 15, 2012, is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used.

“Unrestricted Subsidiary” means any Subsidiary of any New Parent or the Company that is designated by the Board of Directors of such New Parent or the Company, whichever entity is then the ultimate parent company, as an Unrestricted Subsidiary pursuant to a resolution of such Board of Directors, but only to the extent that such Subsidiary:

(1) has no Indebtedness other than Non-Recourse Debt;

(2) except as permitted by Section 4.18, is not party to any agreement, contract, arrangement or understanding with any New Parent, the Company or any of their Restricted Subsidiaries unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to such New Parent, the Company or such Restricted Subsidiary, as the case may be, than those that might be obtained at the time from Persons who are not Affiliates of the Company;

(3) is a Person with respect to which none of any New Parent, the Company or any of their 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

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(4) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of any of any New Parent, the Company or any of their Restricted Subsidiaries.

“U.S. Person” means a U.S. Person as defined in Rule 902(k) promulgated under the Securities Act.

“Voting Stock” of any specified Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the directors, managers or trustees, as applicable, of such Person or that is convertible into such voting Capital Stock.

“Weighted Average Life to Maturity” means, when applied to any Indebtedness 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, in respect of the Indebtedness, 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 principal amount of such Indebtedness.

“Working Capital” means, as of any date, the difference between (x) current assets, other than cash and cash equivalents, of any New Parent and its Restricted Subsidiaries or the Company and its Restricted Subsidiaries for such date and (y) current liabilities of any New Parent and its Restricted Subsidiaries or the Company and its Restricted Subsidiaries for such date; provided, however, that the amount of accounts receivable at any date shall be the average of accounts receivable on the last day of each of the three fiscal months immediately preceding such date.

Section 1.02 Other Definitions.

Term	Defined in Section
“Affiliate Transaction”	4.18
“Asset Sale Offer”	4.11
“Authentication Order”	2.02
“Calculation Date”	1.01
“Capital”	Preamble
“Change of Control Offer”	4.10
“Change of Control Payment”	4.10
“Change of Control Payment Date”	4.10
“Collateral Agent”	Preamble
“Company”	Preamble
“Covenant Defeasance”	8.03
“DTC”	2.03
“Event of Default”	6.01
“Excess Cash Flow Offer”	4.12
“Excess Cash Flow Offer Amount”	4.12
“Excess Proceeds”	4.11
“incur”	4.14
“Indemnified Party”	7.07

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Term	Defined in Section
“Interest Payment Date”	Exhibit A
“Issuers”	Preamble
“Lease” or “Leases”	4.26
“Leased Premises”	4.26
“Legal Defeasance”	8.02
“New Parent”	4.07
“Notes”	Preamble
“Offer Amount”	3.09
“Offer Period”	3.09
“Offer to Purchase”	3.09
“Other Collateral”	4.27
“Paying Agent”	2.03
“Payment Default”	6.01
“Permitted Debt”	4.14
“Premises”	4.24
“Purchase Date”	3.09
“Record Date”	Exhibit A
“Registrar”	2.03
“Restricted Payments”	4.13
“Trustee”	Preamble

Section 1.03 Incorporation by Reference of TIA.

Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture.

The following TIA terms used in this Indenture have the following meanings:

“indenture securities” means the Notes;

“indenture security Holder” means a Holder of a Note;

“indenture to be qualified” means this Indenture;

“indenture trustee” or “institutional trustee” means the Trustee; and

“obligor” on the Notes and the Note Guarantees means the Issuers and the Guarantors, respectively, and any successor obligor upon the Notes and the Note Guarantees, respectively.

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

Section 1.04 Rules of Construction.

Unless the context otherwise requires:

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

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

(3) “or” is not exclusive;

(4) words in the singular include the plural, and in the plural include the singular;

(5) “will” shall be interpreted to express a command;

(6) provisions apply to successive events and transactions;

(7) references to sections of or rules under the Securities Act will be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time; and

(8) for the avoidance of doubt, in this Indenture, the phrase “any New Parent and its Restricted Subsidiaries or the Company and its Restricted Subsidiaries” means “any New Parent and its Restricted Subsidiaries (if the New Parent is then the ultimate parent company) or the Company and its Restricted Subsidiaries (if the Company is then the ultimate parent company).”

ARTICLE 2

THE NOTES

Section 2.01 Form and Dating.

(a) General. The Notes and the Trustee’s certificate of authentication will be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note will be dated the date of its authentication. The Notes shall be issued in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof.

The Issuers may issue Additional Notes from time to time after the Issue Date provided such issuance and incurrence would then comply with Section 4.14. The Initial Notes and the Additional Notes shall be treated as a single class for all purposes under this Indenture, and unless the context otherwise requires, all references to the “Notes” shall include the Initial Notes, any Additional Notes and any Exchange Notes.

The terms and provisions contained in the Notes will constitute, and are hereby expressly made, a part of this Indenture and the Issuers, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling.

(b) Global Notes. Notes issued in global form will be substantially in the form of Exhibit A hereto (including the Global Note Legend thereon and the “Schedule of Exchanges of Interests in the Global Note” attached thereto). Notes issued in definitive form will be substantially in the form of Exhibit A hereto (but without the Global Note Legend thereon and without the “Schedule of Exchanges of Interests in the Global Note” attached thereto). Each Global Note will represent such of the outstanding Notes as will be specified therein and each shall provide that it represents the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any

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increase or decrease in the aggregate principal amount of outstanding Notes represented thereby will be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof.

(c) Temporary Global Notes. Notes offered and sold in reliance on Regulation S will be issued initially in the form of the Regulation S Temporary Global Note, which will be deposited on behalf of the purchasers of the Notes represented thereby with the Trustee, as custodian for the Depositary, and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of Euroclear or Clearstream, duly executed by the Issuers and authenticated by the Trustee as hereinafter provided.

Following the termination of the Restricted Period, beneficial interests in the Regulation S Temporary Global Note will be exchanged for beneficial interests in the Regulation S Permanent Global Note pursuant to the Applicable Procedures. Simultaneously with the Trustee’s authentication of the Regulation S Permanent Global Note, the Trustee will cancel the Regulation S Temporary Global Note. The aggregate principal amount of the Regulation S Temporary Global Note and the Regulation S Permanent Global Note 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 the case may be, in connection with transfers of interest as hereinafter provided.

(d) Euroclear and Clearstream Procedures Applicable. The provisions of the “Operating Procedures of the Euroclear System” and “Terms and Conditions Governing Use of Euroclear” and the “General Terms and Conditions of Clearstream Banking” and “Customer Handbook” of Clearstream will be applicable to transfers of beneficial interests in the Regulation S Temporary Global Note and the Regulation S Permanent Global Note that are held by Participants through Euroclear or Clearstream.

Section 2.02 Execution and Authentication.

At least one Officer of each Issuer must sign the Notes for the Issuers by manual or facsimile signature.

If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note will nevertheless be valid.

A Note will not be valid until authenticated by the manual signature of the Trustee. The signature will be conclusive evidence that the Note has been authenticated under this Indenture.

The Trustee will, upon receipt of a written order of the Issuers signed by an Officer of each Issuer (an “Authentication Order”), authenticate Notes for original issue that may be validly issued under this Indenture, including any Additional Notes. The aggregate principal amount of Notes outstanding at any time may not exceed the aggregate principal amount of Notes authorized for issuance by the Issuers pursuant to one or more Authentication Orders, except as provided in Section 2.07 hereof.

The Trustee may appoint an authenticating agent acceptable to the Issuers to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Issuers.

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Section 2.03 Registrar and Paying Agent.

The Issuers will maintain an office or agency where Notes may be presented for registration of transfer or for exchange (“Registrar”) and an office or agency where Notes may be presented for payment (“Paying Agent”). The Registrar will keep a register of the Notes and of their transfer and exchange. The Issuers may appoint one or more co-registrars and one or more additional paying agents. The term “Registrar” includes any co-registrar and the term “Paying Agent” includes any additional paying agent. The Issuers may change any Paying Agent or Registrar without notice to any Holder. The Issuers will notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Issuers fail to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Trustee will initially act as Paying Agent and Registrar. The Issuers or any of their Subsidiaries may act as Paying Agent or Registrar, so long as no Event of Default is continuing.

The Issuers initially appoint The Depository Trust Company (“DTC”) to act as Depositary with respect to the Global Notes.

The Issuers initially appoint the Trustee to act as Custodian with respect to the Global Notes.

Section 2.04 Paying Agent to Hold Money in Trust.

The Issuers will require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium, if any, or interest on the Notes, and will notify the Trustee of any default by the Issuers in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Issuers at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Issuers or a Subsidiary) will have no further liability for the money. If the Issuers or a Subsidiary acts as Paying Agent, it will segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Issuers, the Trustee will serve as Paying Agent for the Notes.

Section 2.05 Holder Lists.

The Trustee will preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA § 312(a). If the Trustee is not the Registrar, the Issuers will furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Issuers shall otherwise comply with TIA § 312(a).

Section 2.06 Transfer and Exchange.

(a) Transfer and Exchange of Global Notes. A Global Note may not be transferred except as a whole by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to 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 Global Notes will be exchanged by the Company for Definitive Notes if:

(1) the Issuers deliver to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Issuers within 90 days after the date of such notice from the Depositary;

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(2) the Issuers in their sole discretion determine that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee; provided that in no event shall the Regulation S Temporary Global Note be exchanged by the Issuers for Definitive Notes prior to (A) the expiration of the Restricted Period and (B) the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act;or

(3) there has occurred and is continuing a Default or Event of Default with respect to the Notes and the Registrar has received a request from the Depositary to issue Definitive Notes.

Upon the occurrence of either of the preceding events in (1) or (2) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b) or (c) hereof.

(b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes will be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes will be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also will require compliance with either subparagraph (1) or (2) below, as applicable, as well as one or more of the other following subparagraphs, as applicable:

(1) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Regulation S Temporary Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers set forth in this Section 2.06(b)(1).

(2) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(1) above, the transferor of such beneficial interest must deliver to the Registrar either:

(A) both:

(1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged; and

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(2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase; or

(B) both:

(1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged; and

(2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above;

provided that in no event shall Definitive Notes be issued upon the transfer or exchange of beneficial interests in the Regulation S Temporary Global Note prior to (A) the expiration of the Restricted Period and (B) the receipt by the Registrar of any certificates required pursuant to Rule 903 under the Securities Act.

Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof.

(3) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(2) above and the Registrar receives the following:

(A) If the transferee will take delivery in the form of a beneficial interest in the QIB Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof;

(B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Temporary Global Note or the Regulation S Permanent Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and

(C) if the transferee will take delivery in the form of a beneficial interest in the IAI Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable.

(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.

(1) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If in accordance with Section 2.06(a) a beneficial interest in a Restricted Global Note is to be exchanged for a Restricted Definitive Note or transferred to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation:

(A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof;

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(B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof;

(C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof;

(D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof;

(E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) or (C) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable;

(F) if such beneficial interest is being transferred to the Issuers or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or

(G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof,

the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Issuers shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(1) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein.

(2) Beneficial Interests in Regulation S Temporary Global Note to Definitive Notes. Notwithstanding Sections 2.06(c)(1)(A) and (C) hereof, a beneficial interest in the Regulation S Temporary Global Note may not be exchanged for a Definitive Note or transferred to a Person who takes delivery thereof in the form of a Definitive Note prior to (A) the expiration of the Restricted Period and (B) the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act, except in the case of a transfer pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904.

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(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.

(1) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation:

(A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof;

(B) if such Restricted Definitive Note is being transferred to a QIB a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof;

(C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof;

(D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof;

(E) if such Restricted Definitive Note is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) of this Section 2.06, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable;

(F) if such Restricted Definitive Note is being transferred to the Issuers or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or

(G) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof,

the Trustee will cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the QIB Global Note, in the case of clause (C) above, the Regulation S Global Note, and in all other cases, the IAI Global Note.

(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder’s compliance with the provisions of this Section 2.06(e), the Registrar will register the transfer or exchange of Definitive Notes. Prior to such registration of transfer

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or exchange, the requesting Holder must present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder must provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e).

(1) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following:

(A) If the transfer will be made pursuant to Rule 144A, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (10) thereof;

(B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and

(C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable.

(f) Legends. The following legends will appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture.

(1) Private Placement Legend.

(A) Except as permitted by subparagraph (B) of this Section 2.06, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form:

“THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY U.S. STATE OR NON-U.S. SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”)), (B) IT IS A NON-U.S. PURCHASER AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, PURSUANT TO RULE 904 OF REGULATION S, OR (C) IT IS AN INSTITUTIONAL “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT, AND (2) AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD AS MAY BE

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PRESCRIBED BY RULE 144(K) (OR ANY SUCCESSOR PROVISION THEREOF) UNDER THE SECURITIES ACT) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR ANY PREDECESSOR OF THIS SECURITY) AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO 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. PURCHASERS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, PURSUANT TO RULE 904 OF REGULATION S, (E) TO AN INSTITUTIONAL “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND THE SECURITIES LAWS OF ANY OTHER JURISDICTION, INCLUDING ANY STATE OF THE UNITED STATES, SUBJECT TO THE COMPANY’S AND THE TRUSTEE’S, OR TRANSFER AGENT’S, AS APPLICABLE, RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E), OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE OR TRANSFER AGENT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.”

(2) Global Note Legend. Each Global Note will bear a legend in substantially the following form:

“THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (2) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (3) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (4) THIS GLOBAL NOTE MAY BE

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TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF FORBES ENERGY SERVICES LLC OR FORBES ENERGY CAPITAL INC.

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS 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. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (“DTC”), TO THE ISSUERS OR THEIR 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 MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.”

(3) Regulation S Temporary Global Note Legend. The Regulation S Temporary Global Note will bear a Legend in substantially the following form:

“THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN).”

(g) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note will be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note will be reduced accordingly and an endorsement will be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note will be increased accordingly and an endorsement will be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase.

(h) General Provisions Relating to Transfers and Exchanges.

(1) To permit registrations of transfers and exchanges, the Issuers will execute and the Trustee will authenticate Global Notes and Definitive Notes upon receipt of an Authentication Order in accordance with Section 2.02 hereof or at the Registrar’s request.

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(2) No service charge will be made to a Holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Issuers may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.11 and 9.05 hereof).

(3) The Registrar will not be required to register the transfer of or exchange of any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part.

(4) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes will be the valid obligations of the Issuers, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange.

(5) Neither the Registrar nor the Issuers will be required:

(A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection;

(B) to register the transfer of or to exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part; or

(C) to register the transfer of or to exchange a Note between a record date and the next succeeding interest payment date.

(6) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Issuers may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Issuers shall be affected by notice to the contrary.

(7) The Trustee will authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof.

(8) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile.

Section 2.07 Replacement Notes.

If any mutilated Note is surrendered to the Trustee or the Issuers and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Issuers will issue and the Trustee, upon receipt of an Authentication Order, will authenticate a replacement Note if the Trustee’s requirements are met. If required by the Trustee or the Issuers, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of (i) the Trustee to protect the Trustee and (ii) the Issuers to protect the Issuers, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Issuers may charge for their expenses in replacing a Note.

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Every replacement Note is an additional obligation of the Issuers and will be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder.

Section 2.08 Outstanding Notes.

The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those set forth in this Section 2.08 as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Issuers or an Affiliate of the Issuers holds the Note; however, Notes held by the Issuers or a Subsidiary of the Issuers shall not be deemed to be outstanding for purposes of Section 3.07(c) hereof.

If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a protected purchaser.

If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.

If the Paying Agent (other than the Issuers, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes will be deemed to be no longer outstanding and will cease to accrue interest.

Section 2.09 Treasury Notes.

In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Issuers or any Guarantor, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuers or any Guarantor, will be considered as though not outstanding, except that for the purposes of determining whether the Trustee will be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned will be so disregarded.

Section 2.10 Temporary Notes.

Until certificates representing Notes are ready for delivery, the Issuers may prepare and the Trustee, upon receipt of an Authentication Order, will authenticate temporary Notes. Temporary Notes will be substantially in the form of certificated Notes but may have variations that the Issuers consider appropriate for temporary Notes. Without unreasonable delay, the Issuers will prepare and the Trustee will authenticate (upon receipt of an Authentication Order) definitive Notes in exchange for temporary Notes. Holders of temporary Notes will be entitled to all of the benefits of this Indenture.

Section 2.11 Cancellation.

The Issuers at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent will forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else will cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and will destroy canceled Notes (subject to the record retention requirement of the Exchange Act). Certification of the cancellation of all canceled Notes will be delivered to the Issuers. The Issuers may not issue new Notes to replace Notes that they have paid or that have been delivered to the Trustee for cancellation.

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Section 2.12 Defaulted Interest; Additional Interest.

The Issuers will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal, premium, if any, and interest (without regard to any applicable grace period) from time to time on demand at the rate equal to 2% per annum in excess of the then applicable interest rate on the Notes to the extent lawful to the Persons who are Holders on a subsequent special record date, in each case at the rate provided as set forth in the Notes and consistent with Section 4.01 hereof. The Issuers will notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Issuers will fix or cause to be fixed each such special record date and payment date; provided that no such special record date may be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Issuers (or, upon the written request of the Issuers, the Trustee in the name and at the expense of the Issuers) will mail or cause to be sent to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid.

The Issuers will pay Additional Interest, if any, to Holders of Notes pursuant to the Registration Rights Agreement.

All reference to “interest” in this Indenture and the Notes mean the initial interest rate borne by the Notes and any increases in that rate due to defaulted interest or Additional Interest, unless this Indenture states otherwise.

Section 2.13 Persons Deemed Owners.

The Holder of a Note may be treated as its owner for all purposes. Only Holders have rights under this Indenture and the Notes.

ARTICLE 3

REDEMPTION AND PURCHASE

Section 3.01 Notices to Trustee.

If the Issuers elect to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, the Issuers must furnish to the Trustee, at least 35 days but not more than 60 days before a redemption date, an Officers’ Certificate setting forth:

(1) the clause of this Indenture pursuant to which the redemption shall occur;

(2) the Redemption Date;

(3) the principal amount of Notes to be redeemed; and

(4) the Redemption Price.

Section 3.02 Selection of Notes to Be Redeemed or Purchased.

If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee will select Notes for redemption or purchase on a pro rata basis, by lot or by such other method as the Trustee considers fair and appropriate, unless otherwise required by law or applicable stock exchange requirements.

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In the event of partial redemption or purchase, the particular Notes to be redeemed or purchased will be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption or purchase date by the Trustee from the outstanding Notes not previously called for redemption or purchase.

The Trustee will promptly notify the Issuers in writing of the Notes selected for redemption or purchase and, in the case of any Note selected for partial redemption or purchase, the principal amount thereof to be redeemed or purchased. Notes and portions of Notes selected will be in minimum amounts of $2,000 and integral multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed or purchased, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed or purchased. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption or purchase also apply to portions of Notes called for redemption or purchase.

Section 3.03 Notice of Redemption.

Subject to the provisions of Section 3.09 hereof, at least 30 days but not more than 60 days before a redemption date, the Issuers will mail or cause to be mailed, by first class mail or sent electronically, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address, except that 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 satisfaction and discharge of this Indenture pursuant to Articles 8 or 10 hereof.

The notice will identify the Notes to be redeemed and will state:

(1) the applicable Redemption Date;

(2) the applicable Redemption Price;

(3) If the Notes are being redeemed in part:

(a) the Trustee shall select Notes for redemption as follows: (i) if the relevant Notes are listed on any national securities exchange, in compliance with the requirements of such exchange on which the Notes are listed; or (ii) on a pro rata basis, by lot or by such other method as the Trustee considers fair and appropriate, unless otherwise required by law or applicable stock exchange requirements; and in either case, not in parts of $2,000 or less; and the portion of the principal amount of such Notes to be redeemed and that, after the redemption date upon surrender of such Notes, a new Note or Notes in principal amount equal to the unredeemed portion will be issued upon cancellation of the original Note; the name and address of the Paying Agent;

(4) that Notes called for redemption must be surrendered to the Paying Agent to collect the applicable Redemption Price;

(5) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the applicable Redemption Date;

(6) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and

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

At the Issuers’ request, the Trustee will give the notice of redemption in the Issuers’ name and at the Issuers’ expense; provided, however, that the Issuers have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers’ Certificate requesting that the Trustee give such notice and setting forth the information (or a shorter period as agreed to by the Trustee) to be stated in such notice as provided in this Section 3.03 above.

Section 3.04 Effect of Notice of Redemption.

Once notice of redemption is sent in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional.

Section 3.05 Deposit of Redemption or Purchase Price.

No later than 10:00 a.m. New York City time on the redemption or purchase date, the Company will deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption or purchase price of and accrued interest on all Notes to be redeemed or purchased on that date. The Trustee or the Paying Agent will promptly return to the Issuers any money deposited with the Trustee or the Paying Agent by the Issuers in excess of the amounts necessary to pay the redemption or purchase price of, and accrued interest on, all Notes to be redeemed or purchased.

If the Issuers comply with the provisions of the preceding paragraph, on and after the redemption or purchase date, interest will cease to accrue on the Notes or the portions of Notes called for redemption or purchase. If a Note is redeemed or purchased on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption or purchase is not so paid upon surrender for redemption or purchase because of the failure of the Issuers to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption or purchase date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof.

Section 3.06 Notes Redeemed or Purchased in Part.

Upon surrender of a Note that is redeemed or purchased in part, the Issuers will issue and, upon receipt of an Authentication Order, the Trustee will authenticate for the Holder at the expense of the Issuers a new Note equal in principal amount to the unredeemed or unpurchased portion of the Note surrendered.

Section 3.07 Optional Redemption.

(a) Except as set forth in clauses (b), (c) and (d) of this Section 3.07, the Notes shall not be redeemable at the option of the Issuers prior to February 15, 2012.

(b) At any time prior to February 15, 2012, the Issuers may redeem the Notes, at their option, in whole or in part, upon not less than 30 nor more than 60 days’ prior notice, at a Redemption Price equal to 100% of the principal amount of Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest and Additional Interest, if any, to the Redemption Date, subject to the rights of Holders of Notes on the relevant Record Date to receive interest due on the relevant interest payment date.

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(c) After February 15, 2012, the Issuers may redeem the Notes, at their option, in whole or in part, upon not less than 30 nor more than 60 days’ notice, at the Redemption Prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Additional Interest, if any, to the applicable Redemption Date, if redeemed during the twelve-month period beginning on February 15 of the years set forth below:

Period	Percentage
2012	105.750	%
2013	102.875	%
2014 and thereafter.	100.000	%

(d) At any time, or from time to time, prior to February 15, 2011, the Issuers may, at their option, use an amount not to exceed the net cash proceeds of one or more Equity Offerings to redeem up to 35% of the aggregate principal amount of the Notes originally issued under this Indenture at a redemption price of 111.500% of the aggregate principal amount thereof plus accrued and unpaid interest thereon, to the Redemption Date; provided that (i) at least 65% of the principal amount of Notes originally issued under this Indenture remains outstanding immediately after any such redemption; and (ii) the Issuers make such redemption not more than 45 days after the consummation of any such Equity Offering.

(e) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof.

Section 3.08 No Mandatory Redemption.

The Issuers are not required to make mandatory redemption or sinking fund payments with respect to the Notes.

Section 3.09 Offer to Purchase by Application of Excess Proceeds or From Excess Cash Flow.

In the event that, pursuant to (i) Section 4.11 hereof or (ii) Section 4.12 hereof, the Issuers shall be required to commence an Asset Sale Offer or an Excess Cash Flow Offer (together, an “Offer to Purchase”), they will follow the procedures specified below and, with respect to an Asset Sale Offer, in Sections 4.11(c), (d), (e) and (f) and, with respect to an Excess Cash Flow Offer, Section 4.12:

(a) The applicable Offer to Purchase shall be made to all Holders and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets.

(b) The applicable Offer to Purchase will remain open for a period of at least 20 Business Days following its commencement and not more than 30 Business Days, except to the extent that a longer period is required by applicable law (the “Offer Period”).

(c) No later than three Business Days after the termination of the applicable Offer Period (the “Purchase Date”), the Issuers will apply all Excess Proceeds or the Excess Cash Flow Offer Amount (together, the “Offer Amount”) to the purchase of Notes and such other pari passu Indebtedness (on a pro rata basis, if applicable) or, if less than the applicable Offer Amount has been tendered, all Notes and other Indebtedness tendered in response to the applicable Offer to Purchase. Payment for any Notes so purchased will be made in the same manner as interest payments are made.

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(d) If the applicable Purchase Date is on or after a Record Date and on or before the related Interest Payment Date, any accrued and unpaid interest will be paid to the Person in whose name a Note is registered at the close of business on such Record Date, and no additional interest will be payable to Holders who tender Notes pursuant to the applicable Offer to Purchase.

(e) Upon the commencement of an applicable Offer to Purchase, the Issuers will send, by first class mail, a notice to the Trustee and each of the Holders. The notice will contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the applicable Offer to Purchase. The notice, which will govern the terms of the applicable Offer to Purchase, will state:

(1) that the Offer to Purchase is being made pursuant to this Section 3.09 and either Section 4.11 or Section 4.12 hereof and the length of time the Offer to Purchase will remain open;

(2) the Offer Amount, the purchase price and the Purchase Date;

(3) that any Note not tendered or accepted for payment will continue to accrue interest;

(4) that, unless the Issuers default in making such payment, any Note accepted for payment pursuant to the Offer to Purchase will cease to accrue interest after the Purchase Date;

(5) that Holders electing to have a Note purchased pursuant to an Offer to Purchase may elect to have Notes purchased in minimum amounts of $2,000 and integral multiples of $1,000 only;

(6) that Holders electing to have Notes purchased pursuant to any Offer to Purchase will be required to surrender the Notes, with the form entitled “Option of Holder to Elect Purchase” attached to the Notes completed, or transfer by book-entry transfer, to the Issuers, a Depositary, if appointed by the Issuers, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date;

(7) that Holders will be entitled to withdraw their election if the Issuers, the Depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter (sent in accordance with Section 13.02 if the Trustee is the Paying Agent) 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;

(8) that, if the aggregate principal amount of Notes and other pari passu Indebtedness surrendered by holders thereof exceeds the Offer Amount, the Issuers will select the Notes and other pari passu Indebtedness to be purchased on a pro rata basis based on the principal amount of Notes and such other pari passu Indebtedness surrendered (with such adjustments as may be deemed appropriate by the Issuers so that only Notes in minimum amounts of $2,000 and integral multiples of $1,000, will be purchased); and

(9) that Holders whose Notes were purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer).

On or before the applicable Purchase Date, the Issuers will, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes or portions thereof

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tendered pursuant to the applicable Offer to Purchase, or if less than the Offer Amount has been tendered, all Notes tendered, and will deliver or cause to be delivered to the Trustee the Notes properly accepted together with 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 3.09. The Issuers, the Depositary or the Paying Agent, as the case may be, will promptly (but in any case not later than five days after the Purchase Date) 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 Issuers for purchase, and the Issuers will promptly issue a new Note, and the Trustee, upon delivery of an Authentication Order, will authenticate and mail or deliver (or cause to be transferred by book entry) such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Issuers to the Holder thereof. The Issuers will publicly announce the results of the applicable Offer to Purchase on the Purchase Date.

Other than as specifically provided in this Section 3.09, any purchase pursuant to this Section 3.09 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof.

The Issuers 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 applicable Offer to Purchase. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 3.09, Section 4.11 or Section 4.12 of this Indenture, the Issuers will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under such sections of this Indenture by virtue of such conflict.

ARTICLE 4

COVENANTS

Section 4.01 Payments on Notes.

The Issuers will pay or cause to be paid the principal of, premium, if any, and interest on, the Notes on the dates and in the manner provided in this Indenture and the Notes. Principal, premium, if any, and interest will be considered paid on the date due if the Paying Agent, if other than the Issuers or a Subsidiary thereof, holds as of 10:00 a.m. New York City time on the due date money deposited by the Issuers in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Issuers shall pay Additional Interest, if any, pursuant to the Registration Rights Agreement, in the same manner, on the dates and in the amounts in each case as other interest is paid as set forth in the Notes.

Section 4.02 Maintenance of Office or Agency.

The Company will maintain an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company fails to maintain any such required office or agency or fails to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. Such office shall initially be at Wells Fargo Bank, National Association, 213 Court Street, Suite 703, Middletown, Connecticut 06457, Attention: Corporate Trust Services.

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

The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03 hereof.

Section 4.03 Taxes.

Any New Parent or the Company will pay, and will cause each of their Subsidiaries to pay, prior to delinquency, all of their respective material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes.

Section 4.04 Stay, Extension and Usury Laws.

Each Issuer and each of the Restricted Subsidiaries of the Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and each Issuer and each of the Restricted Subsidiaries of the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law has been enacted.

Section 4.05 Maintenance of Insurance.

Any New Parent or the Company shall maintain insurance (including appropriate self-insurance) against loss or damage of the kinds that, in the good faith judgment of any New Parent or the Company, whichever is then the ultimate parent company, adequate and appropriate for the conduct of the business of such company and its Restricted Subsidiaries in a prudent manner, with reputable insurers or with the government of the United States or an agency or instrumentality thereof, in such amounts, with such deductibles, and by such methods as shall be customary, in the good faith judgment of any New Parent or the Company, whichever is then the ultimate parent company, for companies similarly situated in the industry in which such company and its Restricted Subsidiaries are engaged.

Section 4.06 Compliance Certificate.

(a) The Issuers and each Guarantor (to the extent that such Guarantor is so required under the TIA) shall deliver to the Trustee, within 90 days after the end of each fiscal year after the date of this Indenture, an Officers’ Certificate stating that a review of the activities of the Issuers and their Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Issuers have kept, observed, performed and fulfilled their obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Issuers have kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default has occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Issuers are taking or propose to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Issuers are taking or propose to take with respect thereto.

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(b) So long as any of the Notes are outstanding, the Issuers will deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers’ Certificate specifying such Default or Event of Default and what action the Issuers are taking or propose to take with respect thereto.

Section 4.07 New Parent.

If the owners of the Equity Interests of the Company form one or more new parent companies to own directly or indirectly Equity Interests of the Company (any such new parent company, a “New Parent”), then:

(1) such New Parent will be required, pursuant to a supplemental indenture to (a) become a party to this Indenture at the time any such New Parent becomes the direct or indirect owner of any such Equity Interests of the Company and (b) agree to be bound by all applicable provisions of this Indenture, including but not limited to the covenants set forth under Articles 4 , 5, 12 and 13 hereof;

(2) any Subsidiary of such New Parent that is to become one of its Restricted Subsidiaries will, unless it has previously done so, guarantee the Notes by becoming a Guarantor pursuant to a supplemental indenture; and

(3) the Board of Directors of the Company at such time will become the initial Board of Directors of such New Parent.

Section 4.08 Limited Liability Company or Corporate Existence.

Subject to Article 5 hereof, each of the Issuers shall do or cause to be done all things necessary to preserve and keep in full force and effect:

(1) its limited liability company or corporate existence, as the case may be, and the corporate, limited liability company, partnership or other existence of each of its Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of such Issuer or any such Subsidiary; and

(2) the rights (charter and statutory), licenses and franchises of such Issuer and any of its Subsidiaries;

provided, however, that the Issuers shall not be required to preserve any such right, license or franchise, or the corporate, limited liability company, partnership or other existence of any of their Subsidiaries, if the Board of Directors of the Company or any New Parent shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Issuers and their Subsidiaries, taken as a whole, and that the loss thereof would not have a material adverse effect on the Issuers and their Subsidiaries, taken as a whole.

Section 4.09 Restrictions on Activities of Capital.

Capital shall not hold any material assets, become liable for any material obligations or engage in any significant business activities; provided that Capital may be a co-obligor or guarantor with respect to

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Indebtedness if the Company is an obligor or guarantor on such Indebtedness and the net proceeds of such Indebtedness are received by the Company or one or more Guarantors. At any time after the Company is or becomes a corporation, Capital may consolidate or merge with or into any New Parent, the Company or any Restricted Subsidiary of the Company.

Section 4.10 Offer to Repurchase Upon Change of Control.

(a) Upon the occurrence of a Change of Control, the Issuers will make an offer (a “Change of Control Offer”) to each Holder to repurchase all or any part (equal to minimum amounts of $2,000 and integral multiples of $1,000) of that Holder’s Notes at a purchase price in cash equal to 101% of the aggregate principal amount of Notes repurchased plus accrued and unpaid interest and Additional Interest, if any, on the Notes repurchased to the date of purchase, subject to the rights of Holders on the relevant record date to receive interest due on the relevant Interest Payment Date that is on or prior to the date of repurchase (the “Change of Control Payment”). Within ten days following any Change of Control, the Issuers will mail a notice to each Holder and the Trustee describing the transaction or transactions that constitute the Change of Control and stating:

(1) that the Change of Control Offer is being made pursuant to this Section 4.10 and that all Notes tendered will be accepted for payment;

(2) 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 Payment Date”);

(3) that any Note not tendered will continue to accrue interest;

(4) 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 will cease to accrue interest after the Change of Control Payment Date;

(5) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled “Option of Holder to Elect Purchase” attached to the Notes completed, or transfer by book-entry transfer, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date;

(6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter (sent in accordance with Section 13.02 if the Trustee is the Paying Agent) setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have the Notes purchased; and

(7) 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 at least $2,000 in principal amount or an integral multiple of $1,000.

The Issuers 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 the repurchase of the Notes as a result of a Change in Control. To the extent that the

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provisions of any securities laws or regulations conflict with the provisions of this Section 4.10, the Issuers will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section 4.10 by virtue of such compliance.

(b) On or before the Change of Control Payment Date, the Issuers will, to the extent lawful:

(1) accept for payment all Notes or portions of Notes properly tendered pursuant to the Change of Control Offer;

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

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

The Paying Agent will promptly deliver to each Holder of Notes properly tendered the Change of Control Payment for such Notes, and the Trustee will promptly 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, with each new Note in a minimum principal amount of $2,000 and integral multiples of $1,000. The Issuers will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

The provisions of this Section 4.10 that require the Issuers to make a Change of Control Offer following a Change of Control will be applicable whether or not any other provisions of this Indenture are applicable.

Notwithstanding anything to the contrary in this Section 4.10, the Issuers will not be required to make a Change of Control Offer if (1) a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.10 and Section 3.09 hereof and purchases all Notes properly tendered and not withdrawn under the Change of Control Offer, or (2) notice of redemption has been given pursuant to Section 3.07 hereof, unless and until there is a default in payment of the applicable redemption price.

Section 4.11 Asset Sales.

(a) Any New Parent will not, the Company will not and neither of them will permit any of their Restricted Subsidiaries to, consummate an Asset Sale unless:

(1) such New Parent, the Company or the Restricted Subsidiary, as the case may be, receives consideration at the time of the Asset Sale at least equal to the Fair Market Value of the assets or Equity Interests issued or sold or otherwise disposed of; and

(2) at least 75% of the consideration received in the Asset Sale by such New Parent, the Company or such Restricted Subsidiary, as the case may be, 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 such New Parent’s or the Company’s most recent combined or consolidated balance sheet, of such New Parent, the Company or any of

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their Restricted Subsidiaries (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Note Guarantee) that are assumed by the transferee of any such assets or Equity Interests pursuant to a customary novation agreement that releases such New Parent, the Company or such Restricted Subsidiary, as the case may be, from further liability;

(B) any securities, notes or other obligations received by such New Parent, the Company or any of their Restricted Subsidiaries from such transferee that are contemporaneously, subject to ordinary settlement periods, converted by such New Parent, the Company or such Restricted Subsidiary, as the case may be, into cash, to the extent of the cash received in that conversion; and

(C) any stock or assets of the kind referred to in clauses (2) or (4) of Section 4.11(b) hereof.

(b) Within 365 days after the receipt of any Net Proceeds from an Asset Sale, any such New Parent, the Company or the applicable Restricted Subsidiary, as the case may be, shall apply such Net Proceeds:

(1) to repay Indebtedness and other Obligations under any Credit Facility, and if the Indebtedness repaid is revolving credit Indebtedness, such New Parent, the Company or applicable borrower or borrowers will be required to correspondingly reduce commitments with respect thereto;

(2) to acquire (including by merger or consolidation) all or substantially all of the assets of, or any Capital Stock of, another Permitted Business, if, after giving effect to any such acquisition of Capital Stock, the Permitted Business is or becomes a Restricted Subsidiary of any New Parent or of the Company;

(3) to make Capital Expenditures; or

(4) to acquire other assets that are not classified as current assets under GAAP and that are used or useful in a Permitted Business.

Pending the final application of any Net Proceeds, such New Parent, the Issuers or the applicable Restricted Subsidiary, as the case may be, may temporarily reduce revolving credit borrowings or otherwise invest the Net Proceeds in any manner that is not prohibited by this Indenture.

(c) Any Net Proceeds from Asset Sales that are not applied or invested as provided Section 4.11(b) hereof will constitute “Excess Proceeds.” When the aggregate amount of Excess Proceeds exceeds $5.0 million, the Issuers will, within five days thereof, make an Offer to Purchase Notes pursuant to this Section 4.10 and Section 3.09 (an “Asset Sale Offer”) to all Holders of Notes pursuant to Section 3.09 hereof and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum principal amount of Notes and such other 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 the principal amount plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase, 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 other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee will select the Notes and the Issuers or such other agent will select for 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.

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(d) Any New Parent will not, the Issuers will not and none of them will permit their Restricted Subsidiaries to, enter into or suffer to exist any agreement (other than any agreement governing Credit Facilities for Indebtedness permitted to be incurred pursuant to clause (1) of Section 4.14(b)) that would place any restriction of any kind (other than pursuant to law or regulation) on the ability of the Issuers to make an Asset Sale Offer.

(e) The Issuers 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 this Section 4.11, the Issuers will comply with the applicable securities laws and regulations and will not be deemed to have breached their obligations under this Section 4.11 by virtue of such compliance.

Section 4.12 Excess Cash Flow Offer.

(a) If any New Parent and its Restricted Subsidiaries or the Company and its Restricted Subsidiaries has Excess Cash Flow for any fiscal year commencing with the fiscal year ending December 31, 2008, each Holder will have the right to require the Issuers to repurchase all or any part of that Holder’s Notes (in minimum amounts of $2,000 and integral multiples of $1,000) at a purchase price in cash equal to 101% of the principal amount of the Notes repurchased, plus any accrued and unpaid interest and Additional Interest, if any, to the date of purchase (subject to the rights of Holders of Notes on the relevant Record Date to receive interest due on the relevant Interest Payment Date that is on or prior to the date of repurchase), with 50% of Excess Cash Flow of such New Parent and its Restricted Subsidiaries or the Company and its Restricted Subsidiaries, in each case, on a consolidated basis for such fiscal year (less the amount of any open market purchases and any redemptions of Notes pursuant to this Indenture made during such fiscal year).

(b) Within 90 days after the end of any fiscal year, commencing with the fiscal year ending December 31, 2008, the Issuers will send a notice to each Holder and the Trustee describing the offer to repurchase Notes with Excess Cash Flow (the “Excess Cash Flow Offer”) and offering to purchase Notes on the 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 sent. The Issuers will be required to purchase Notes validly tendered in response to an Excess Cash Flow Offer in accordance with the procedures set forth in this Section 4.12 and Section 3.09 and such notice. The Issuers will not be required to make an Excess Cash Flow Offer if the Excess Cash Flow for such relevant fiscal year is less than $5.0 million. With respect to each Excess Cash Flow Offer, the Issuers shall be entitled to reduce the applicable amount of the Excess Cash Flow Offer (the “Excess Cash Flow Offer Amount”) with respect thereto by the aggregate repurchase price of any Notes theretofore repurchased by the Issuers in the open market or redeemed by the Issuers pursuant to this Indenture (to the extent such amount has not previously reduced any Excess Cash Flow Offer Amount). If the aggregate principal amount of Notes tendered pursuant to an Excess Cash Flow Offer exceeds the Excess Cash Flow Offer Amount, the Trustee will select the Notes to be accepted for purchase on a pro rata basis. If the aggregate repurchase price of Notes tendered pursuant to an Excess Cash Flow Offer is less than the applicable Excess Cash Flow Offer Amount, the Issuers may, subject to the other provisions of this Indenture, use any such Excess Cash Flow for any purpose not otherwise prohibited by this Indenture.

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Section 4.13 Restricted Payments.

(a) Any New Parent shall not, the Company shall not and neither of them shall permit any of their Restricted Subsidiaries to, directly or indirectly:

(1) declare or pay any dividend or make any other payment or distribution on account of such New Parent’s or the Company’s Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving such New Parent or the Company) or to the direct or indirect holders of such New Parent’s or the Company’s Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of such New Parent or the Company or dividends, payments or distributions by the Company to any such New Parent), as the case may be;

(2) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving any such New Parent or the Company) any Equity Interests of such New Parent or the Company or any other direct or indirect parent of the Company;

(3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness of such New Parent, the Company or any Guarantor that is contractually subordinated to the Notes or to any Note Guarantee (excluding any intercompany Indebtedness between or among such New Parent, the Company and any of their Restricted Subsidiaries), except a payment of interest or 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) above being collectively referred to as “Restricted Payments”),

unless, at the time of and after giving effect to such Restricted Payment:

(1) no Default or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment;

(2) any such New Parent or the Company, as the case may be, would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.14(a) hereof; and

(3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by such New Parent, the Company and their Restricted Subsidiaries after the Issue Date (excluding Restricted Payments permitted by clauses (2) through (10) of paragraph (b) of this Section 4.13), is less than the sum, without duplication, of:

(A) 50% of the Consolidated Net Income of such New Parent or the Company, as the case may be, for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the Issue Date to the end of such New Parent’s or the Company’s, as the case may be, most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus

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(B) subject to Section 4.14(b)(2), 100% of the aggregate net cash proceeds received by such New Parent or the Company, as the case may be, since the Issue Date as a contribution to its common equity capital or from the issue or sale of Equity Interests of such New Parent or the Company (other than Disqualified Stock), as the case may be, or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of such New Parent or the Company, as the case may be, that have been converted into or exchanged for such Equity Interests (other than any such Equity Interests, Disqualified Stock or convertible or exchangeable debt securities sold to a Subsidiary of the Company); plus

(C) to the extent that any Restricted Investment that was made after the Issue Date is sold for cash or otherwise liquidated or repaid for cash, the lesser of (i) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (ii) the initial amount of such Restricted Investment; plus

(D) to the extent that any Unrestricted Subsidiary of such New Parent or the Company designated as such after the Issue Date is redesignated as a Restricted Subsidiary after the Issue Date, the lesser of (i) the Fair Market Value of such New Parent’s or the Company’s Investment in such Subsidiary, as the case may be, as of the date of such redesignation or (ii) such Fair Market Value as of the date on which such Subsidiary was originally designated as an Unrestricted Subsidiary after the Issue Date; plus

(E) 50% of any dividends received by such New Parent, the Company or any of their Restricted Subsidiaries, as the case may be, after the Issue Date from an Unrestricted Subsidiary of such New Parent or the Company, to the extent that such dividends were not otherwise included in the Consolidated Net Income of such New Parent or the Company, as the case may be, for such period.

(b) So long as no Default has occurred and is continuing or would be caused thereby (provided that with respect to clause (9) below, the no Default limitation is not required), the preceding provisions will not prohibit:

(1) the payment of any dividend or distribution or the consummation of any irrevocable redemption within 60 days after the date of declaration of the dividend or distribution or giving of the redemption notice, as the case may be, if at the date of declaration or notice, the dividend, distribution or redemption payment would have complied with the provisions of this Indenture;

(2) the making of any Restricted Payment in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of any such New Parent or the Company, as the case may be) of, Equity Interests of such New Parent or the Company (other than Disqualified Stock), as the case may be, or from the substantially concurrent contribution of common equity capital to such New Parent or the Company, as the case may be; provided that the amount of any such net cash proceeds that are utilized for any such Restricted Payment will be excluded from clause (3)(B) of paragraph (a) of this Section 4.13;

(3) the repurchase, redemption, defeasance or other acquisition or retirement for value of Indebtedness of such New Parent, the Company or any Guarantor that is contractually subordinated to the Notes or to any Note Guarantee with the net cash proceeds from a substantially concurrent incurrence of Permitted Refinancing Indebtedness;

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(4) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of such New Parent, the Company or any of their Restricted Subsidiaries held by any current or former officer, director or employee of such New Parent, the Company or any of their Restricted Subsidiaries, as the case may be, pursuant to an agreement approved by the Board of Directors of such New Parent or the Company, as the case may be; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests may not exceed $500,000 in any twelve-month period;

(5) the repurchase of Equity Interests deemed to occur upon the exercise of stock options to the extent such Equity Interests represent a portion of the exercise price of those stock options or the repurchase of stock appreciation rights by way of cashless exercise or in connection with the satisfaction of withholding tax obligations;

(6) the declaration and payment of regularly scheduled or accrued dividends to holders of any class or series of Disqualified Stock of such New Parent, the Company or any of their Restricted Subsidiaries issued after the Issue Date in accordance with the Fixed Charge Coverage Ratio test set forth in Section 4.14(a) hereof;

(7) in connection with an acquisition by such New Parent, the Company or any of their Restricted Subsidiaries, the return to such New Parent, the Company or any of their Restricted Subsidiaries, as the case may be, of Equity Interests of such New Parent, the Company or such Restricted Subsidiary constituting a portion of the purchase price consideration in settlement of indemnification claims;

(8) the purchase by such New Parent or the Company of fractional shares of Equity Interests arising out of stock dividends, splits or combinations or business combinations;

(9) Permitted Tax Distributions; and

(10) other Restricted Payments in an aggregate amount not to exceed $5.0 million since the Issue Date.

(c) 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 such New Parent, the Company or such Restricted Subsidiary, 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 covenant will be determined by the Board of Directors of such New Parent or the Company, whichever entity is then the ultimate parent company, whose resolution with respect thereto will be delivered to the Trustee. Such Board of Directors’ determination must be based upon an opinion or appraisal issued by a reputable accounting, appraisal or investment banking firm if the Fair Market Value exceeds $5.0 million.

Section 4.14 Incurrence of Indebtedness and Issuance of Preferred Stock.

(a) Any New Parent will not, the Company will not and neither of them will permit any of their 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 (including Acquired Debt), and any such New Parent or the Company will not issue any Disqualified Stock and neither of them will permit any of their Restricted Subsidiaries to issue any shares

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of preferred stock; provided, however, that such New Parent or the Company, whichever entity is then the ultimate parent company, may incur Indebtedness (including Acquired Debt) or issue Disqualified Stock, and the Guarantors may incur Indebtedness (including Acquired Debt) or issue preferred stock, if the Fixed Charge Coverage Ratio for such New Parent’s or the Company’s, as the case may be, most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock or such preferred stock is issued, as the case may be, would have been at least 2.5 to 1 until December 31, 2009 and 3.0 to 1 thereafter, in each case, 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 the Disqualified Stock or the preferred stock had been issued, as the case may be, at the beginning of such four-quarter period.

(b) The provisions of Section 4.14(a) hereof will not prohibit the incurrence of any of the following items of Indebtedness (collectively, “Permitted Debt”):

(1) the incurrence by such New Parent, the Company and any Guarantor of additional Indebtedness and letters of credit under any Credit Facility (A) in an aggregate principal amount at any one time outstanding under this clause (1) (with letters of credit being deemed to have a principal amount equal to the maximum stated amount thereof of the Company and its Restricted Subsidiaries thereunder) not to exceed $20.0 million, less the aggregate amount of all Net Proceeds of Asset Sales applied by any such New Parent, the Company or any of their Restricted Subsidiaries since the Issue Date to repay any term Indebtedness under a Credit Facility or to repay any revolving credit Indebtedness under a Credit Facility and in each case, effect a corresponding commitment reduction thereunder pursuant to Section 4.11 hereof;

(2) (A) the incurrence by any such New Parent, the Company and their Restricted Subsidiaries of Existing Indebtedness and (B) encumbrances or restrictions existing under agreements existing on the Issue Date as in effect on that date;

(3) the incurrence by any such New Parent, the Company and the Guarantors of Indebtedness represented by the Notes and the related Note Guarantees to be issued on the Issue Date and the Exchange Notes and the related Note Guarantees to be issued pursuant to the Registration Rights Agreement;

(4) the incurrence by any such New Parent, the Company or any of their 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, construction, installation or improvement of property, plant or equipment used in the business of any such New Parent, the Company or any of their Restricted Subsidiaries, as the case may be, in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to renew, refund, refinance, replace, defease or discharge any Indebtedness incurred pursuant to this clause (4), not to exceed $10.0 million at any time outstanding;

(5) the incurrence by any such New Parent, the Company or any of their Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge any Indebtedness (other than intercompany Indebtedness) that was permitted by this Indenture to be incurred under Section 4.14(a) hereof or clauses (2), (3), (4), (5) or (12) of this Section 4.14(b);

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(6) the incurrence by any such New Parent, the Company or any of their Restricted Subsidiaries of intercompany Indebtedness between or among such New Parent, the Company and any of their Restricted Subsidiaries; provided, however, that:

(A) if such New Parent, the Company or any Guarantor is the obligor on such Indebtedness and the payee is not such New Parent, the Company or a Guarantor, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations then due with respect to the Notes and the Note Guarantees; and

(B) any (i) subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than such New Parent, the Company or any of their Restricted Subsidiaries, or (ii) sale or other transfer of any such Indebtedness to a Person that is not any of such New Parent, the Company or any of their Restricted Subsidiaries, will be deemed, in each case, to constitute an incurrence of such Indebtedness by such New Parent, the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (6);

(7) the issuance by any such New Parent’s or the Company’s Restricted Subsidiaries to such New Parent, the Company or to any of their Restricted Subsidiaries of shares of preferred stock; provided, however, that any (A) subsequent issuance or transfer of Equity Interests that results in any such preferred stock being held by a Person other than such New Parent, the Company or such Restricted Subsidiary, or (B) sale or other transfer of any such preferred stock to a Person that is not any of such New Parent, the Company or such Restricted Subsidiary, will be deemed, in each case, to constitute an issuance of such preferred stock by such Restricted Subsidiary that was not permitted by this clause (7);

(8) the incurrence by any such New Parent, the Company or any of their Restricted Subsidiaries of Hedging Obligations in the ordinary course of business;

(9) the guarantee by any such New Parent, the Company or any of the Guarantors of Indebtedness of such New Parent, the Company or any of their Restricted Subsidiaries, as the case may be, that was permitted to be incurred by another provision of this Section 4.14; provided that if the Indebtedness being guaranteed is subordinated to or pari passu with the Notes, then the Guarantee shall be subordinated or pari passu, as applicable, to the same extent as the Indebtedness guaranteed;

(10) the incurrence by any such New Parent, the Company or any of their Restricted Subsidiaries of Indebtedness in respect of workers’ compensation claims, self-insurance obligations, bankers’ acceptances, bids, performance and surety bonds in the ordinary course of business, including Note Guarantees or obligations of such New Parent, the Company or such Restricted Subsidiary, as the case may be, with respect to letters of credit supporting such bid, performance or surety obligations (in each case other than for an obligation for money borrowed);

(11) the incurrence by any such New Parent, the Company or any of their 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, so long as such Indebtedness is covered within five Business Days; and

(12) the incurrence by any such New Parent, the Company or any of the Guarantors of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to extend, renew,

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refund, refinance, replace, defease or discharge any Indebtedness incurred pursuant to this clause (12), not to exceed $5.0 million at any one time outstanding after giving pro forma effect to such incurrence and the application of the proceeds therefrom.

Any New Parent and the Issuers will not incur, and will not permit any Guarantor to incur, any Indebtedness (including Permitted Debt) that is contractually subordinated in right of payment to any other Indebtedness of such New Parent, the Issuers or such Guarantor unless such Indebtedness is also contractually subordinated in right of payment to the Notes and the applicable Note Guarantee on substantially identical terms; provided, however, that no Indebtedness will be deemed to be contractually subordinated in right of payment to any other Indebtedness of the Issuers solely by virtue of being unsecured or by virtue of being secured on a first or junior Lien basis.

For purposes of determining compliance with this Section 4.14, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Debt set forth in clauses (1) through (12) of Section 4.14(b), or is entitled to be incurred pursuant to Section 4.14(a), any such New Parent or the Company, as the case may be, will be permitted to classify such item of Indebtedness on the date of its incurrence, or later reclassify all or a portion of such item of Indebtedness, in any manner that complies with this Section 4.14, and such item of Indebtedness will be treated as having been incurred pursuant to such category. Indebtedness under Credit Facilities outstanding on the Issue Date and authenticated under this Indenture will initially be deemed to have been incurred on such date in reliance on the exception provided by clause (1) of the definition of Permitted Debt. The accrual of interest, the accretion or amortization of original issue discount, if applicable, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, the reclassification of preferred stock as Indebtedness due to a change in accounting principles, and the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this Section 4.14; provided, in each such case, that the amount of any such accrual, accretion or payment is included in Fixed Charges of such New Parent or the Company, as the case may be, as accrued. Notwithstanding any other provision of this Section 4.14, the maximum amount of Indebtedness that any such New Parent, the Company or any Restricted Subsidiary may incur pursuant to this covenant shall not be deemed to be exceeded solely as a result of fluctuations in exchange rates or currency values.

The 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) the principal amount of the Indebtedness, in the case of any other Indebtedness; and

(3) in respect of Indebtedness of another Person secured by a Lien on the assets of the specified Person, the lesser of:

(A) the Fair Market Value of such assets at the date of determination; and

(B) the amount of the Indebtedness of the other Person.

Section 4.15 Limitation on Capital Expenditures.

Any New Parent will not, the Company will not and neither of them will permit any of their Restricted Subsidiaries to make or commit to make any Capital Expenditure, except Adjusted Capital

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Expenditures not exceeding the amount set forth below for such period, provided that the amount of Adjusted Capital Expenditures permitted in any fiscal year may increase beyond the amount set forth below by the sum of the amounts contained in the second clause (3) in Section 4.13(a) provided that any such increase in Adjusted Capital Expenditures made with such amount will be excluded from the sum of the amounts in such clause (3) in Section 4.13(a)(3):

Period	Amount
Fiscal Year ending December 31, 2008	$89 million plus or minus the amount by which Consolidated Cash Flow for the year ending December 31, 2007 exceeds or falls below, respectively, $70 million.
Fiscal Year ending December 31, 2009	$70 million plus or minus the amount by which Consolidated Cash Flow for the year ending December 31, 2008 exceeds or falls below, respectively, $110 million.
Fiscal Year ending December 31, 2010	$85 million plus or minus the amount by which Consolidated Cash Flow for the year ending December 31, 2009 exceeds or falls below, respectively, $130 million.
Fiscal Year ending December 31, 2011	$115 million plus or minus the amount by which Consolidated Cash Flow for the year ending December 31, 2010 exceeds or falls below, respectively, $160 million.
Fiscal Year ending December 31, 2012	$135 million plus or minus the amount by which Consolidated Cash Flow for the year ending December 31, 2011 exceeds or falls below, respectively, $200 million.
Fiscal Year ending December 31, 2013	$135 million plus or minus the amount by which Consolidated Cash Flow for the year ending December 31, 2012 exceeds or falls below, respectively, $240 million.
Fiscal Year ending December 31, 2014	$150 million plus or minus the amount by which Consolidated Cash Flow for the year ending December 31, 2013 exceeds or falls below, respectively, $280 million.
Period ending February 15, 2015	The product of (a) 12.6% and (b) $150 million plus or minus the amount by which Consolidated Cash Flow for the year ending December 31, 2014 exceeds or falls below, respectively, $320 million.

Section 4.16 Liens.

Any New Parent will not, the Company will not and neither of them will permit any of their Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien of any kind on any asset now owned or hereafter acquired, except Permitted Liens.

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Section 4.17 Dividend and Other Payment Restrictions Affecting Subsidiaries.

Any New Parent will not, the Company will not and neither of them will permit any of their 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 to:

(1) pay dividends or make any other distributions on its Capital Stock to any such New Parent, the Company or any of their Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any Indebtedness owed to any such New Parent, the Company or any of their Restricted Subsidiaries;

(2) make loans or advances to any such New Parent, the Company or any of their Restricted Subsidiaries; or

(3) sell, lease or transfer any of its properties or assets to any such New Parent, the Company or any of their Restricted Subsidiaries.

However, the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of:

(1) agreements governing Existing Indebtedness and any Credit Facilities as in effect on the Issue Date or permitted by Section 4.14(b)(1) and any amendments, restatements, modifications, renewals, supplements, extensions, refundings, replacements or refinancings of those agreements; provided that the amendments, restatements, modifications, renewals, supplements, extensions, refundings, replacements or refinancings are not materially more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements on the Issue Date;

(2) this Indenture, the Notes and the Note Guarantees;

(3) applicable law, rule, regulation or order;

(4) any instrument governing Indebtedness or Capital Stock of a Person acquired by any such New Parent, the Company or any of their Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness or Capital Stock was incurred or issued in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred;

(5) customary non-assignment provisions in leases, contracts and licenses entered into in the ordinary course of business, including by reason of customary provisions restricting the transfer of copyrighted or patented materials consistent with industry practice;

(6) purchase money obligations for property acquired in the ordinary course of business and Capital Lease Obligations that impose restrictions on the property purchased or leased of the nature set forth in clause (3) of the preceding paragraph;

(7) any agreement for the sale or other disposition of a Restricted Subsidiary or assets that restricts distributions by that Restricted Subsidiary pending the sale or other disposition;

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(8) 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;

(9) Liens permitted to be incurred under the provisions of Section 4.16 that limit the right of the debtor to dispose of the assets subject to such Liens;

(10) provisions limiting the disposition or distribution of assets or property in joint venture agreements, asset sale agreements, sale-leaseback agreements, stock sale agreements and other similar agreements entered into with the approval of the Board of Directors of any such New Parent or the Company, whichever entity is then the ultimate parent company, which limitation is applicable only to the assets that are the subject of such agreements;

(11) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business; and

(12) any instrument governing Indebtedness of a Foreign Subsidiary; provided that such Indebtedness was not prohibited by the terms of this Indenture.

Section 4.18 Transactions with Affiliates.

(a) Any New Parent will not, the Company will not and neither of them will permit any of their Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or 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 such New Parent or the Company, as the case may be (each, an “Affiliate Transaction”), unless:

(1) the Affiliate Transaction is on terms that are no less favorable to such New Parent, the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by such New Parent, the Company or such Restricted Subsidiary, as the case may be, with an unrelated Person or, if there is no such comparable transaction, on terms that are fair and reasonable to such New Parent, the Company or such Restricted Subsidiary and reflect an arms’-length negotiation as determined by the Independent Directors;

(2) the Company delivers to the Trustee:

(A) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $500,000, whether or not subject to the following clause (2)(B) of this Section 4.18, a resolution of the Board of Directors of such New Parent or the Company, whichever is then the ultimate parent company, set forth in an Officers’ Certificate certifying that such Affiliate Transaction complies with this covenant and that such Affiliate Transaction has been approved by a majority of the disinterested members of such Board of Directors who are Independent Directors; and

(B) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $2.5 million, an opinion as to the fairness to such New Parent, the Company or such Restricted Subsidiary, as the case may be, of such Affiliate Transaction from a financial point of view issued by a reputable accounting, appraisal or investment banking firm.

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(b) The following items will not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of Section 4.18(a):

(1) any employment agreement, employee benefit plan, officer or director indemnification agreement or any similar arrangement entered into by any such New Parent, the Company or any of their Restricted Subsidiaries in the ordinary course of business and payments pursuant thereto;

(2) transactions between or among any such New Parent, the Company and/or their Restricted Subsidiaries;

(3) transactions with a Person (other than an Unrestricted Subsidiary of the Company) that is an Affiliate of any such New Parent or the Company solely because such New Parent or the Company, as the case may be, owns, directly or through a Restricted Subsidiary, an Equity Interest in, or controls, such Person;

(4) payment of reasonable directors’ fees to Persons who are not employees of any such New Parent or the Company, whichever entity is then the ultimate parent company;

(5) any issuance of Equity Interests (other than Disqualified Stock) of any such New Parent or the Company, whichever entity is then the ultimate parent company, to Affiliates of such New Parent or the Company;

(6) Restricted Payments that do not violate the provisions of Section 4.13 hereof;

(7) loans or advances to employees in the ordinary course of business not to exceed $500,000 in the aggregate at any one time outstanding;

(8) registration rights or similar agreements with officers, directors or significant shareholders of any such New Parent or the Company, whichever entity is then the ultimate parent company, provided that any such registration rights do not materially interfere with or impede the rights granted to Holders under the Registration Rights Agreement;

(9) Permitted Tax Distributions;

(10) Permitted Affiliate Leases; and

(11) Permitted Affiliate Store Transactions.

Section 4.19 Business Activities.

The Company will not, and will not permit any of its Restricted Subsidiaries to, engage in any business other than Permitted Businesses, except to such extent as would not be material to the Company and its Restricted Subsidiaries taken as a whole; and any New Parent will engage only in Permitted New Parent Businesses.

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Section 4.20 Additional Guarantees.

If any New Parent, the Company or any of their Restricted Subsidiaries acquires or creates another Domestic Subsidiary after the Issue Date that is not declared by the Board of Directors of such New Parent or the Company, whichever entity is then the ultimate parent company, to be an Unrestricted Subsidiary, then such New Parent or the Company, whichever entity is then the ultimate parent company, will (1) cause that newly acquired or created Domestic Subsidiary to (a) execute a supplemental indenture pursuant to which it becomes a Guarantor and (b) execute an amendment to the Registration Rights Agreement pursuant to which it becomes subject to the obligations of a Guarantor thereunder, and (2) deliver an Opinion of Counsel and Officers’ Certificate satisfactory to the trustee, in each case within 10 business days of the date on which such Domestic Subsidiary was acquired or created; provided that any Domestic Subsidiary that constitutes an Immaterial Subsidiary need not become a Guarantor until such time as it ceases to be an Immaterial Subsidiary.

Section 4.21 Designation of Restricted and Unrestricted Subsidiaries.

(a) The Board of Directors of any New Parent or the Company, whichever entity is then the ultimate parent company, may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate Fair Market Value of all outstanding Investments owned by such New Parent, the Company and their Restricted Subsidiaries in the Subsidiary designated as Unrestricted 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 Section 4.13(a) hereof or under one or more clauses of the definition of “Permitted Investments,” as determined by such New Parent or the Company, as the case may be. That designation will only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an “Unrestricted Subsidiary.” As of the Issue Date, all Subsidiaries of the Company will be Restricted Subsidiaries.

(b) 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 and will be deemed as of the date of such failure to be a Restricted Subsidiary for purposes of this Indenture. In that event, any Indebtedness of such Subsidiary will be deemed to be incurred by such Restricted Subsidiary of any such New Parent or the Company as of such date and, if such Indebtedness is not permitted to be incurred as of such date under Section 4.14, such New Parent, the Company or both of them, as the case may be, will be in Default of such covenant.

(c) The Board of Directors of a New Parent or the Company, whichever entity is then the ultimate parent company, may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary of such New Parent or the Company, as the case may be; provided that such designation will be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of such New Parent or 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 4.14 hereof, 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 or Event of Default would be in existence following such designation.

(d) Any change in the designation of a Subsidiary of a New Parent or the Company as an Unrestricted Subsidiary or as a Restricted Subsidiary, as the case may be, will be evidenced by such New Parent or the Company, whichever entity is then the ultimate parent company, to the Trustee by filing with the Trustee a certified copy of a resolution of its Board of Directors giving effect to such designation and an Officers’ Certificate certifying that such designation complied with and was permitted by this Section 4.21.

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Section 4.22 Payments for Consent.

No New Parent, the Company or any of their Restricted Subsidiaries shall, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid and is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement.

Section 4.23 Impairment of Security Interest.

Subject to any Intercreditor Agreement, no New Parent, Issuer or any of their Restricted Subsidiaries will take or omit to take any action which would adversely affect or impair in any material respect the Liens in favor of the Collateral Agent with respect to the Collateral, except as otherwise permitted or required by the Collateral Agreements or this Indenture. No New Parent, Issuer or any of their Restricted Subsidiaries will enter into any agreement that requires the proceeds received from any sale of Collateral to be applied to repay, redeem, defease or otherwise acquire or retire any Indebtedness of any Person, other than as permitted by this Indenture and the Collateral Agreements (including any Intercreditor Agreement). Any New Parent and the Issuers shall and they shall cause each Guarantor to, at their sole cost and expense, execute and deliver all such agreements and instruments and take all further action as the Collateral Agent or the Trustee shall reasonably request to more fully or accurately describe the property intended to be Collateral or the obligations intended to be secured by the Collateral Agreements. Any New Parent and the Issuers shall, and they shall cause each Guarantor to, at their sole cost and expense, file any such notice filings or other agreements or instruments as may be reasonably necessary or desirable under applicable law to perfect the Liens created by the Collateral Agreements.

Section 4.24 Real Estate Mortgages and Filings.

With respect to any real property other than the Disposal Well Assets and Excluded Collateral (individually and collectively, the “Premises”) owned by any New Parent, the Company or a Domestic Subsidiary on the Issue Date with a Fair Market Value in excess of $500,000 and with respect to any such property to be acquired by any such New Parent, the Company or a Domestic Subsidiary after the Issue Date with a purchase price in excess of $500,000 (within 90 days of the acquisition thereof), such New Parent or the Company, whichever entity is then the ultimate parent company, shall deliver to the Collateral Agent (subject to the terms of the Intercreditor Agreement):

(1) fully executed counterparts of Mortgages, duly executed by such New Parent, the Company or the applicable Domestic Subsidiary, together with evidence of the completion (or satisfactory arrangements for the completion), of all recordings and filings of such Mortgage as may be necessary to create a valid, perfected Lien, (subject to no liens other than Permitted Liens) against the properties purported to be covered thereby;

(2) mortgagee’s title insurance policies in favor of the Collateral Agent, as mortgagee for the ratable benefit of the Collateral Agent, the Trustee and the Holders in an amount equal to 100% of the Fair Market Value of the Premises purported to be covered by the related Mortgage, insuring that title to such property is indefeasible and that the interests created by the Mortgage constitute valid Liens thereon free and clear of all Liens, defects and encumbrances other than Permitted Liens together with typical endorsements, coinsurance and reinsurance and shall be accompanied by evidence of the payment in full of all premiums thereon;

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(3) with respect to each of the covered Premises, the most recent survey of such Premises, together with either (i) an updated survey certification in favor of the Trustee and the Collateral Agent from the applicable surveyor stating that, based on a visual inspection of the property and the knowledge of the surveyor, there has been no change in the facts depicted in the survey or (ii) an affidavit from such New Parent, the Company and the Guarantors, as the case may be, stating that there has been no change sufficient for the title insurance company to remove all standard survey exceptions and issue the endorsements;

(4) an opinion from local counsel and special regulatory counsel in each state where a Premises is located in form and substance reasonably satisfactory to the Collateral Agent and covering typical collateral matters, including without limitation, the enforceability of the relevant Mortgages; and

(5) an Officers’ Certificate by such 90th day certifying that all items in this Section 4.24 have been delivered.

Section 4.25 Disposal Well Mortgages and Filings

(a) With respect to any Disposal Well Assets owned by the Company or a Domestic Subsidiary on the Issue Date, or acquired by any New Parent, the Company or a Domestic Subsidiary after the Issue Date, subject to the immediately succeeding paragraph, excluding in all cases Excluded Collateral:

(1) such New Parent or the Company, whichever entity is then the ultimate parent company, shall deliver to the Collateral Agent, as mortgagee, fully executed counterparts of Mortgages or amendments and supplements to prior Mortgages, duly executed by such New Parent or the Company or the applicable Domestic Subsidiary, as the case may be (together with evidence of the completion-or satisfactory arrangements for the completion-of all recordings and filings of such instruments), as may be necessary to create a valid, perfected Lien (subject to no Liens other than Permitted Liens) on such Disposal Well Assets; and

(2) such New Parent or the Company, whichever entity is then the ultimate parent company, shall deliver to the Collateral Agent an opinion from local counsel in each state where such Disposal Well Assets are located, covering typical matters, including without limitation, the enforceability of the relevant Mortgage, as it may be supplemented or amended.

(b) Each such Mortgage, amendment or supplement shall be delivered by the Company promptly after such Mortgage, amendment or supplement is entered into by the parties thereto, but in no event later than (1) 45 days either (a) after the acquisition of such Disposal Well Assets by any such New Parent, the Company or a Domestic Subsidiary or (b) if such Disposal Well Assets were previously Excluded Collateral but have ceased to be Excluded Collateral, after such cessation or (2) the first business day of each fiscal quarter after such acquisition or cessation; provided that if, prior to such date, such New Parent, the Company or a Domestic Subsidiary grants a Lien on such Disposal Well Assets to secure any applicable Credit Facility or any other Indebtedness secured by a first priority security interest in the Collateral, such Mortgage, amendment or supplement must be delivered to the Collateral Agent at the same time as such grant to secure the first priority Liens.

(c) With respect to any Disposal Well Assets owned by the Company or a Domestic Subsidiary on, or acquired after the Issue Date that are situated on real property for which the Company or any Domestic Subsidiary has not entered into a written lease or does not otherwise have a written leasehold interest therein, the Company shall, and shall cause any applicable Domestic Subsidiary to, use its reasonable best efforts to (1) enter into such leases on commercially reasonable terms to permit the Collateral Agent to take a perfected security interest in such Disposal Well Assets and/or such leasehold interest, as the case may be, and (2) perform the covenant set forth in subsection (a) of this Section 4.25.

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Section 4.26 Leasehold Mortgages and Filings; landlord Waivers.

(a) Any New Parent, the Company and each of their Domestic Subsidiaries shall execute and file Mortgages with respect to such New Parent’s, the Company’s and such Domestic Subsidiaries’ leasehold interests in the premises (the “Leased Premises”) leased by such New Parent or the Company or such Domestic Subsidiary, as the case may be, pursuant to written leases that may be mortgaged by their terms or the terms of the landlord consents (collectively, the “Leases” and, individually, a “Lease”).

(b) Prior to or on the Issue Date or, if later, the effective date of any Lease, such New Parent, the Company and each such Domestic Subsidiary, as the case may be, shall provide to the Collateral Agent all of the items set forth in clauses (2), (3) and (4) of Section 4.24 and shall use their commercially reasonable efforts to obtain an agreement executed by the lessor under the Lease, whereby such lessor consents to the Mortgage and waives or subordinates its landlord Lien (whether granted by the instrument creating the leasehold estate or by applicable law), if any, and which shall be entered into by the Collateral Agent.

(c) Each of any New Parent, the Company and any Domestic Subsidiary that is a lessee of, or becomes a lessee of, real property, is, and will be, required to use commercially reasonable efforts to deliver to the Collateral Agent a landlord waiver executed by the lessor of such real property; provided that if such lease is in existence on the Issue Date, such New Parent, the Company or the Domestic Subsidiary that is the lessee thereunder shall have 90 days from the Issue Date to satisfy such requirement.

Section 4.27 Other Collateral.

With respect to any assets or property (herein called “Other Collateral”) that is not Excluded Collateral or addressed in or subject to Sections 4.24, 4.25 and 4.26 hereof or subject to the Collateral Agreements and is owned by the Company or a Domestic Subsidiary on the Issue Date or acquired by any New Parent, the Company or a Domestic Subsidiary, as the case may be, after the Issue Date, such New Parent, the Company or such Domestic Subsidiary, as the case may be, will promptly grant Liens covering such Other Collateral to the Collateral Agent pursuant to a document or instrument on commercially reasonable terms that contains provisions similar to those of the Security Agreement, if such Other Collateral is personal property, or provisions similar to those of the Mortgages set forth in Section 4.24 if such Other Collateral is real property.

Section 4.28 Reports.

(a) Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, any New Parent or the Company will furnish to the Trustee and the Holders of Notes or request the Trustee to furnish to the Holders of Notes at the expense of the Issuers, within the time periods specified in the SEC’s rules and regulations:

(1) all quarterly and annual reports that would be required to be filed with the SEC on Forms 10-Q and 10-K if the Company were required to file such reports, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that describes the financial condition and results of operations of the Company and its consolidated Subsidiaries, as the case may be; 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.

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in each case, within the time periods specified in the SEC’s rules and regulations, provided, that (1) it is understood that the Company will furnish to the Holders of Notes an Annual Report on Form 10-K for the year ended December 31, 2007 by April 15, 2008, but such annual report need only include the financial statements, Notes related thereto and a “Management’s Discussion and Analysis of Financial Condition and Results of Operation” in accordance with the rules and regulations of the SEC applicable to such report, in all material respects; and (2) if a New Parent is formed, such New Parent may become the reporting company contemplated hereby, provided that such election would comply with the applicable rules and regulations of the SEC.

(b) All such reports will be prepared in all material respects in accordance with all of the rules and regulations applicable to such reports. Each annual report on Form 10-K of such New Parent or the Company, as applicable, will include a report on such New Parent’s or the Company’s consolidated financial statements by such New Parent’s or the Company’s certified independent accountants. In addition, any such New Parent or the Company, whichever entity is then the ultimate parent company, will post the reports on its website within the time periods specified in the rules and regulations applicable to such reports and, following the consummation of the exchange offer contemplated by the Registration Rights Agreement, such New Parent or the Company, whichever entity is then the ultimate parent company, will file a copy of each of the reports referred to in clauses (1) and (2) above with the SEC for public availability within those time periods (unless the SEC will not accept such a filing).

(c) If, at any time after consummation of the exchange offer contemplated by the Registration Rights Agreement, any such New Parent or the Company, as the case may be, is no longer subject to the periodic reporting requirements of the Exchange Act for any reason, such company will nevertheless continue filing the reports specified in the preceding paragraphs of this covenant with the SEC within the time periods specified above unless the SEC will not accept such a filing. Neither any such New Parent nor the Company will take any action for the purpose of causing the SEC not to accept any such filings.

(d) Any such New Parent or the Company, as the case may be, will hold a quarterly conference call for the Holders of the Notes and securities analysts to discuss such financial information no later than ten Business Days after distribution of such financial information.

(e) If any such New Parent or the Company, as the case may be, has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual financial information required by paragraph (a) of this Section 4.28 will include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, and in Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the financial condition and results of operations of such New Parent or the Company, as the case may be, and their Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of such New Parent or the Company, as the case may be.

(f) In addition, the Issuers and the Guarantors agree that, for so long as any Notes remain outstanding, if at any time they are not required or permitted to file with the SEC the reports required by this Section 4.28, they will furnish to the Holders of Notes and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

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ARTICLE 5

SUCCESSORS

Section 5.01 Merger, Consolidation, or Sale of Assets.

(a) Any New Parent will not and the Company will not, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not any such New Parent or the Company, as the case may be, is the surviving corporation); or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of either (a) the Company and its Restricted Subsidiaries taken as a whole or (b) any such New Parent and its Restricted Subsidiaries taken as a whole, in one or more related transactions, to another Person, unless:

(1) either: (A) such New Parent is the Surviving Corporation in a transaction with such New Parent, (B) the Company is the surviving corporation in a transaction with the Company; or (C) the Person formed by or surviving any such consolidation or merger (if other than such New Parent or the Company) or to which such sale, assignment, transfer, conveyance or other disposition has been made is a corporation or limited liability company organized or existing under the laws of the United States, any state of the United States or the District of Columbia; provided that if the Person formed by or surviving any such consolidation or merger or the Person to which such sale, assignment, transfer, conveyance or other disposition has been made is not a corporation and Capital would not then be a co-issuer of the Notes, such Person causes a corporation to co-issue the Notes in the same way as Capital will do so on the Issue Date and causes such corporation to enter into the covenant under Section 4.09;

(2) the Person formed by or surviving any such consolidation or merger (if other than such New Parent or the Company) or the Person to which such sale, assignment, transfer, conveyance or other disposition has been made assumes all the obligations of the Company under the Notes, this Indenture and the Registration Rights Agreement pursuant to a supplemental indenture and an amendment thereto, respectively;

(3) immediately after such transaction, no Default or Event of Default exists; and

(4) such New Parent, the Company or the Person, as the case may be, formed by or surviving any such consolidation or merger (if other than such New Parent or the Company, as the case may be), or to which such sale, assignment, transfer, conveyance or other disposition has been made would, on the date of such transaction 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 Section 4.14(a) hereof.

(b) In addition, neither any such New Parent nor the Company will directly or indirectly, lease all or substantially all of the properties and assets of it and its Restricted Subsidiaries taken as a whole, in one or more related transactions, to any other Person.

(c) This Section 5.01:

(1) will not apply to a merger of any such New Parent or the Company with an Affiliate solely for the purpose of reincorporating such New Parent or the Company, as the case may be, in another jurisdiction;

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(2) will not apply to any consolidation or merger, or any sale, assignment, transfer, conveyance, lease or other disposition of assets between or among any such New Parent, the Company and their Restricted Subsidiaries or between or among Restricted Subsidiaries; and

(3) will apply, for the avoidance of doubt, to a sale, assignment, transfer, conveyance or other disposition of the Equity Interests of the Company by any such New Parent, other than to another New parent.

Section 5.02 Successor Corporation Substituted.

Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the properties or assets of the Company or its Restricted Subsidiaries in a transaction that is subject to, and that complies with the provisions of, Section 5.01 hereof, the successor Person formed by such consolidation or into or with which the Company or Restricted Subsidiaries is or are merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (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 successor Person and not to the Company or the applicable Restricted Subsidiaries), and may exercise every right and power of the Company or Restricted Subsidiaries under this Indenture with the same effect as if such successor Person had been named as the Company or Restricted Subsidiaries herein; provided, however, that the predecessor Company or Restricted Subsidiaries shall not be relieved from the obligation to pay the principal of and interest on the Notes except in the case of a sale of all of the Company’s or the applicable Restricted Subsidiaries’ assets in a transaction that is subject to, and that complies with the provisions of, Section 5.01 hereof.

ARTICLE 6

DEFAULTS AND REMEDIES

Section 6.01 Events of Default.

Each of the following is an “Event of Default”:

(1) default for 30 days in the payment when due of interest on, or Additional Interest, if any, with respect to, the Notes;

(2) default in the payment when due (at maturity, upon redemption or otherwise) of the principal of, or premium, if any, on, the Notes;

(3) failure by any New Parent, the Issuers or any of the their Restricted Subsidiaries to comply with the provisions set forth in Sections 3.09, 4.07, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14 or Article 5 hereof;

(4) failure by any New Parent, the Company or any of their Restricted Subsidiaries for 60 days after notice to such New Parent or the Company, as the case may be, by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding voting as a single class to comply with any of the other agreements in this Indenture;

(5) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by any New Parent, the Company or any of their Restricted Subsidiaries (or the payment of which is guaranteed by such New Parent, the Company or any of their Restricted Subsidiaries), whether such Indebtedness or Guarantee now exists, or is created after Issue Date, if that default;

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(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 on the date of such default (a “Payment Default”); or

(B) results in the acceleration of such Indebtedness prior to its express 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 $5.0 million or more;

(6) failure by any New Parent, the Company or any of their Restricted Subsidiaries to pay final judgments entered by a court or courts of competent jurisdiction aggregating in excess of $5.0 million, which judgments are not paid, discharged or stayed for a period of 60 days;

(7) except as permitted by this Indenture, any Note 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 Guarantor, or any Person acting on behalf of any Guarantor, denies or disaffirms its obligations under its Note Guarantee;

(8) any Collateral Agreement at any time for any reason shall cease to be in full force and effect in all material respects, or ceases to give the Collateral Agent the Liens, rights, powers and privileges purported to be created thereby, superior to and prior to the rights of all third Persons other than the holders of Permitted Liens and subject to no other Liens except as expressly permitted by the applicable Collateral Agreement or this Indenture; or the Company or any of the Guarantors, directly or indirectly, contest in any manner the effectiveness, validity, binding nature or enforce ability of any Collateral Agreement;

(9) the Issuers or any of their Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries of the Issuers that, taken together, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law:

(A) commences a voluntary case;

(B) consents to the entry of an order for relief against it in an involuntary case;

(C) consents 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) 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 Issuers or any of their Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries of the Issuers that, taken together, would constitute a Significant Subsidiary in an involuntary case;

(B) appoints a custodian of the Issuers or any of their Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries of the Issuers that, taken together, would constitute a Significant Subsidiary or for all or substantially all of the property of the Issuers or any of their Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries of the Issuers that, taken together, would constitute a Significant Subsidiary; or

(C) orders the liquidation of an Issuer or any of their Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries of the Issuers that, taken together, would constitute a Significant Subsidiary;

and the order or decree remains unstayed and in effect for 60 consecutive days.

Section 6.02 Acceleration.

In the case of an Event of Default specified in clause (9) or (10) of Section 6.01 hereof, with respect to any New Parent, the Company, any Restricted Subsidiary of such New Parent or the Company that is a Significant Subsidiary or any group of Restricted Subsidiaries of such New Parent or the Company that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately.

The Holders of a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may, on behalf of the Holders of all of the Notes, rescind an acceleration or waive any existing Default or Event of Default and its consequences under this Indenture except a continuing Default or Event of Default in the payment of principal, interest, premium or Additional Interest, if any.

Section 6.03 Other Remedies.

If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture.

The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding.

A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law.

Section 6.04 Waiver of Past Defaults.

Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive an 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, premium, if any, or interest on, the Notes (including in connection with an

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offer to purchase); provided, however, that the Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration. 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.

Section 6.05 Control by Majority.

Subject to Section 7.01(e), Holders of a majority in aggregate principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power, including with respect to the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default if it determines that withholding notice is in their interest, except a Default or Event of Default relating to the payment of principal, interest, premium or Additional Interest, if any.

Section 6.06 Limitation on Suits.

Subject to Section 7.01, in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under this Indenture at the request or direction of any Holders of Notes unless such Holders have offered to the Trustee an indemnity or security satisfactory to the Trustee against any loss, liability or expense. Except to enforce the right to receive payment of principal, interest, premium, or Additional Interest, if any, when due, no Holder of a Note may pursue any remedy with respect to this Indenture or the Notes unless:

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

(2) Holders of at least 25% in aggregate principal amount of the then outstanding Notes have requested the Trustee to pursue the remedy;

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

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

(5) Holders of a majority in aggregate principal amount of the then outstanding Notes have not given the Trustee a direction inconsistent with such request within such 60-day period.

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

Section 6.07 Rights of Holders of Notes to Receive Payment.

Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder; provided that a Holder shall not have the right to institute any such

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suit for the enforcement of payment if and to the extent that the institution or prosecution thereof or the entry of judgment therein would, under applicable law, result in the surrender, impairment, waiver or loss of the Lien of this Indenture upon any property subject to such Lien.

Section 6.08 Collection Suit by Trustee or Collateral Agent.

If an Event of Default specified in Sections 6.01(1) or (2) hereof occurs and is continuing, the Trustee or the Collateral Agent may recover judgment (a) in its own name and (b)(1) in the case of the Trustee, as trustee of an express trust or (2) in the case of the Collateral Agent, as collateral agent on behalf of the Holders, in each case against the Issuers for the whole amount of principal of, premium, if any, and interest remaining unpaid on, the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, the Collateral Agent and their respective agents and counsel.

Section 6.09 Trustee May File Proofs of Claim.

The Trustee shall be authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee or the Collateral Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, the Collateral Agent, or their respective agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee or the Collateral Agent, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, the Collateral Agent, or their respective agents and counsel, and any other amounts due the Trustee or the Collateral Agent under the Collateral Agreements and Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee or the Collateral Agent, as the case may be, to vote in respect of the claim of any Holder in any such proceeding.

Section 6.10 Priorities.

If the Trustee collects any money or property pursuant to this Article 6, it shall pay out the money or property in the following order:

First: to the Trustee, the Collateral Agent, the Paying Agent and the Registrar for amounts due under Section 7.07 hereof, including payment of all compensation, expenses and liabilities incurred, and all advances made, by the Trustee or the Collateral Agent, as the case may be, and the costs and expenses of collection;

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

Third: to the Company or to such party as a court of competent jurisdiction shall direct.

The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10.

Section 6.11 Undertaking for Costs.

In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee or the Collateral Agent, as the case may be, for any action taken or omitted by it as a Trustee or the Collateral Agent, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee or the Collateral Agent, as the case may be, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in aggregate principal amount of the then outstanding Notes.

Section 6.12 Willful Event of Default.

In the case of any Event of Default occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Issuers with the intention of avoiding payment of the premium that the Issuers would have had to pay if the Issuers then had elected to redeem the Notes pursuant Sections 3.09, 4.10 or 4.11 hereof, an equivalent premium will also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Notes. If an Event of Default occurs by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Issuers with the intention of avoiding the prohibition on redemption of the Notes prior to that date, then an additional premium specified in this Indenture will also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Notes.

ARTICLE 7

TRUSTEE

Section 7.01 Duties of Trustee.

(a) If an Event of Default has occurred and is continuing, the Trustee will exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

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

(1) the duties of the Trustee will be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

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(2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee will examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture.

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

(1) this paragraph does not limit the effect of paragraph (b) of this Section 7.01;

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

(3) the Trustee will not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof.

(d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section 7.01.

(e) No provision of this Indenture will require the Trustee to expend or risk its own funds or incur any liability. The Trustee will be under no obligation to exercise any of its rights and powers under this Indenture or the Collateral Agreements at the request or direction of any Holders, unless such Holder has offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense.

(f) The Trustee will not be liable for interest on any money received by it except as the Trustee may agree in writing with the Issuers. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

Section 7.02 Rights of Trustee.

(a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document.

(b) Before the Trustee acts or refrains from acting, it may require an Officers’ Certificate or an Opinion of Counsel or both. The Trustee will not be liable for any action it takes or omits to take in good faith in reliance on such Officers’ Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel will be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.

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

(d) The Trustee will not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture.

(e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Issuers will be sufficient if signed by an Officer of each of the Issuers.

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Section 7.03 Individual Rights of Trustee.

The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuers or any Affiliate of the Issuers with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as Trustee (if this Indenture has been qualified under the TIA) or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.

Section 7.04 Trustee’s Disclaimer.

The Trustee will not be responsible for and makes no representation as to the validity or adequacy of this Indenture, the Notes or the Collateral Agreements, and it shall not be accountable for the Issuers’ use of the proceeds from the Notes or any money paid to the Issuers or upon the Issuers’ direction under any provision of this Indenture, it will not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it will not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication.

Section 7.05 Notice of Defaults.

If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee will send to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest on, any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes.

Section 7.06 Reports by Trustee to Holders of the Notes.

(a) Within 60 days after each August 15 beginning with the August 15 following the Issue Date, and for so long as Notes remain outstanding, the Trustee will send to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA § 313(a) (but if no event set forth in TIA § 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also will comply with TIA § 313(b)(2) and § 313(b)(1). The Trustee will also transmit by mail all reports as required by TIA § 313(c).

(b) A copy of each report at the time of its sending to the Holders of Notes will be sent by the Trustee to the Issuers and filed by the Trustee with the SEC and each stock exchange on which the Notes are listed in accordance with TIA § 313(d). The Issuers will promptly notify the Trustee when the Notes are listed on any stock exchange.

Section 7.07 Compensation and Indemnity.

(a) The Issuers will pay to the Trustee, Collateral Agent, Paying Agent and Registrar (each, an “Indemnified Party”) from time to time reasonable compensation for their acceptance of this Indenture and the Collateral Agreements and services hereunder and thereunder. The Trustee’s compensation will not be limited by any law on compensation of a Trustee of an express trust. The Issuers will reimburse each Indemnified Party promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses will include the reasonable compensation, disbursements and expenses of the Indemnified Party’s agents and counsel.

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(b) The Issuers and the Guarantors will indemnify the Indemnified Party against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture or the Collateral Agreements, including the costs and expenses of enforcing this Indenture against the Issuers and the Guarantors (including this Section 7.07) and defending itself against any claim (whether asserted by the Issuers, the Guarantors, any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence, bad faith or willful misconduct. The Indemnified Party will notify the Issuers promptly of any claim for which it may seek indemnity. Failure by the Indemnified Party to so notify the Issuers will not relieve the Issuers or any of the Guarantors of their obligations hereunder or under the Collateral Agreements. The Issuers or such Guarantor will defend the claim and the Indemnified Party will cooperate in the defense. The Indemnified Party may have separate counsel and the Issuers will pay the reasonable fees and expenses of one such counsel. Neither the Issuers nor any Guarantor need pay for any settlement made without its consent, which consent will not be unreasonably withheld.

(c) The obligations of the Issuers and the Guarantors under this Section 7.07 will survive the satisfaction and discharge of this Indenture and the termination of the Collateral Agreements.

(d) To secure the Issuers’ and the Guarantors’ payment obligations in this Section 7.07, each Indemnified Party will have a Lien prior to the Notes on all money, property or Collateral held or collected by the Trustee, in its capacity as Trustee, or the Collateral Agent in its capacity as Collateral Agent, except, in the case of the Trustee, that held in trust to pay principal, premium, if any, and interest on particular Notes pursuant to Article 8 hereof. Such Lien will survive the satisfaction and discharge of this Indenture.

(e) When an Indemnified Party incurs expenses or renders services after an Event of Default specified in Section 6.01(9) or (10) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law.

(f) The Trustee will comply with the provisions of TIA § 313(b)(2) to the extent applicable.

Section 7.08 Replacement of Trustee.

(a) A resignation or removal of the Trustee and appointment of a successor Trustee will become effective only upon the successor Trustee’s acceptance of appointment as provided in this Section 7.08.

(b) The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Issuers. The Holders of a majority in aggregate principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Issuers in writing. The Issuers may remove the Trustee if:

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

(2) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law;

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

(4) the Trustee becomes incapable of acting.

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(c) If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Issuers will promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in aggregate principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Issuers.

(d) If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Issuers, or the Holders of at least 10% in aggregate principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee.

(e) If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10 hereof, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

(f) A successor Trustee will deliver a written acceptance of its appointment to the retiring Trustee and to the Issuers. Thereupon, the resignation or removal of the retiring Trustee will become effective, and the successor Trustee will have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee will mail a notice of its succession to Holders. The retiring Trustee will promptly transfer all property held by it as Trustee to the successor Trustee; provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Issuers’ obligations under Section 7.07 hereof will continue for the benefit of the retiring Trustee.

Section 7.09 Successor Trustee by Merger, etc.

If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act will be the successor Trustee. As soon as practicable, the successor Trustee shall mail a notice of its succession to the Issuer and the Holders of Notes. Any such successor must nevertheless be eligible and qualified under the provisions of Section 7.10 hereof.

Section 7.10 Eligibility; Disqualification.

There will at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $100.0 million as set forth in its most recent published annual report of condition.

This Indenture will always have a Trustee who satisfies the requirements of TIA § 310(a)(1), (2) and (5). The Trustee is subject to TIA § 310(b); provided, however, that there shall be excluded from the operation of TIA § 310(b)(1) any indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Company are outstanding, if the requirements for such exclusion set forth in TIA § 310(b)(1) are met.

Section 7.11 Preferential Collection of Claims Against Issuers.

The Trustee is subject to TIA § 311(a), excluding any creditor relationship listed in TIA § 311(b). A Trustee who has resigned or been removed shall be subject to TIA § 311(a) to the extent indicated therein.

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Section 7.12 Trustee in Other Capacities; Collateral Agent and Paying Agent.

References to the Trustee in Sections 7.01(b), (d), (f), (g) and (h), 7.02, 7.03, 7.04, 7.07, and 7.08 shall be understood to include the Trustee when acting in its other capacities under this Indenture, including, without limitation, as Paying Agent and Collateral Agent. Without limiting the foregoing, and for the avoidance of doubt, such Sections shall be read to apply to the Collateral Agent and the Collateral Agreements, mutatis mutandis, in addition to this Indenture. The privileges, rights, indemnities, immunities and exculpatory provisions contained in this Indenture shall apply to the Trustee, whether it is acting under this Indenture or the other Indenture Documents.

ARTICLE 8

LEGAL DEFEASANCE AND COVENANT DEFEASANCE

Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance.

The Issuers may at any time, at the option of the Board of Directors of a New Parent or the Company, whichever entity is then the ultimate parent company, evidenced by a resolution set forth in an Officers’ Certificate, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article 8.

Section 8.02 Legal Defeasance and Discharge.

Upon the Issuers’ exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Issuers and each of the Guarantors will, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from their obligations with respect to all outstanding Notes (including the Note Guarantees) on the date the conditions set forth in Section 8.04 below are satisfied (hereinafter, “Legal Defeasance”). For this purpose, Legal Defeasance means that the Company and the Guarantors will be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes (including the Note Guarantees), which will thereafter be deemed to be “outstanding” only for the purposes of Section 8.06 hereof and the other Sections of this Indenture referred to in clauses (1) and (2) below, and to have satisfied all their other obligations under such Notes, the Note Guarantees and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which will survive until otherwise terminated or discharged hereunder:

(1) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, and interest, premium and Additional Interest, if any, on, such Notes when such payments are due from the trust referred in Section 8.05 hereof;

(2) the Issuers’ Obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust;

(3) the rights, powers, trusts, duties and immunities of the Trustee, and the Issuers’ and the Guarantors’ obligations in connection therewith; and

(4) this Article 8.

Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof.

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Section 8.03 Covenant Defeasance.

Upon the Issuers’ exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company and each of the Guarantors will, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from each of their obligations under the covenants contained in Sections 3.09, 4.08, 4.10 through and including 4.22 and 4.28 hereof; clause (4) of Section 5.01 hereof and any Liens securing the Notes and the Note Guarantees shall be released with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 hereof are satisfied (hereinafter, “Covenant Defeasance”), and the Notes will thereafter be deemed not “outstanding” for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but will continue to be deemed “outstanding” for all other purposes hereunder. For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes and Note Guarantees, the Company and the Guarantors may omit to comply with and will have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply will not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes and Note Guarantees will be unaffected thereby. In addition, upon the Company’s exercise under Section 8.01 hereof of the option applicable to this Section 8.03, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, the breach or non compliance with the covenants defeased pursuant to this Section 8.03 hereof will not constitute Events of Default.

Section 8.04 Conditions to Legal or Covenant Defeasance.

In order to exercise either Legal Defeasance or Covenant Defeasance under either Section 8.02 or 8.03 hereof:

(1) the Issuers must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of Notes, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non-callable Government Securities, in amounts as will be sufficient, in the opinion of a nationally recognized investment bank, appraisal firm or firm of independent public accountants, to pay the principal of, and interest, premium and Additional Interest, if any, on, the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and the Issuers must specify whether the Notes are being defeased to such stated date for payment or to a particular redemption date;

(2) in the case of Legal Defeasance, the Issuers must deliver to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that (a) the Issuers have received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel will confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

(3) in the case of Covenant Defeasance, the Issuers must deliver to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

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(4) no Default or Event of Default has occurred and is continuing on the date of such deposit (other than a Default or Event of Default resulting from the incurrence of Indebtedness or the grant of Liens securing such Indebtedness, all or a portion of the proceeds of which will be used to defease the Notes pursuant to this Article 8 concurrently with such incurrence);

(5) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which any New Parent, the Company or any of its Subsidiaries is a party or by which any New Parent, the Company or any of its Subsidiaries is bound;

(6) the Issuers must deliver to the Trustee an Officers’ Certificate stating that the deposit was not made by the Issuers with the intent of preferring the Holders of Notes over the other creditors of the Issuers with the intent of defeating, hindering, delaying or defrauding any creditors of the Issuers or others;

(7) the Issuers must deliver to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with; and

(8) concurrently with the satisfaction of the conditions set forth in this Section 8.04, any Liens securing the Notes or the Note Guarantees shall terminate and be released, and the Trustee, on demand and at the expense of the Issuers, shall execute proper instruments acknowledging such release.

Section 8.05 Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions.

Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the “Trustee”) pursuant to Section 8.04 hereof in respect of the outstanding Notes will be (i) held in trust, (ii) at the written direction of the Issuers, such money may be invested, prior to maturity of the Notes, in Government Securities, and (iii) applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law.

The Company will pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes.

Notwithstanding anything in this Article 8 to the contrary, the Trustee will deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(1) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.

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Section 8.06 Repayment to Company.

Subject to any unclaimed property law, any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest on, any Note and remaining unclaimed for two years after such principal, premium, if any, or interest has become due and payable shall be paid to the Company or (if then held by the Company) will be discharged from such trust; and the Holder of such Note will thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money or Government Securities, and all liability of the Company as trustee thereof, will thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in The New York Times or The Wall Street Journal, notice that such money remains unclaimed and that, after a date specified therein, which will not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company.

Section 8.07 Reinstatement.

If the Trustee or Paying Agent is unable to apply any U.S. dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Issuers’ and the Guarantors’ obligations under this Indenture and the Notes and the Note Guarantees will be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Issuers or any Guarantor make any payment of principal of, premium, if any, or interest on, any Note following the reinstatement of its obligations, the Company will be subrogated to the rights of the Holders of such Notes to receive such payment from the money or Government Securities held by the Trustee or Paying Agent.

ARTICLE 9

AMENDMENT, SUPPLEMENT AND WAIVER

Section 9.01 Without Consent of Holders of Notes.

Notwithstanding Section 9.02 hereof, without the consent of any Holder, the Issuers, the Guarantors, the Trustee and, if any amendment or supplement relates to any Collateral Agreement, the Collateral Agent, may amend or supplement this Indenture, the Notes, the Collateral Agreements or the Note Guarantees:

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

(2) to provide for uncertificated Notes in addition to or in place of certificated Notes;

(3) to provide for the assumption of an Issuer’s or a Guarantor’s obligations to Holders of Notes and Note Guarantees in the case of a merger or consolidation or sale of all or substantially all of such Issuer’s or such Guarantor’s assets, as applicable pursuant to Article 5;

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(4) to make any change that would provide any additional rights or benefits to the Holders of Notes or that does not adversely affect the legal rights under this Indenture, the Notes, any Collateral Agreement or the Note Guarantees of any such Holder;

(5) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA;

(6) to conform the text of this Indenture, the Notes, or the Note Guarantees to any provision of the “Description of Notes” section of the Offering Circular to the extent that such provision was intended to be a verbatim recitation of a provision of this Indenture, the Notes or the Note Guarantees;

(7) to provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture as of the Issue Date (including Section 4.14);

(8) to allow any Guarantor to execute a supplemental indenture and/or a Note Guarantee with respect to the Notes;

(9) to allow any New Parent to execute a supplemental indenture as set forth under Section 4.07; or

(10) in connection with any addition or release of Collateral permitted under the terms of this Indenture or the Collateral Agreements.

Section 9.02 With Consent of Holders of Notes.

Except as provided in section 9.01 and in the next succeeding paragraph of this Section 9.02, this Indenture, the Notes, the Collateral Agreements or the Note Guarantees may be amended or supplemented with the consent of the Holders of at least a majority in aggregate principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes), and any existing Default or Event of Default or compliance with any provision of this Indenture, the Notes, the Collateral Agreements or the Note Guarantees may be waived with the consent of the Holders of a majority in aggregate principal amount of the then outstanding Notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes). Section 2.08 hereof shall determine which Notes are considered to be “outstanding” for purposes of this Section 9.02.

Without the consent of each Holder of Notes, an amendment, supplement or waiver may not:

(1) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver;

(2) reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the redemption or repurchase of the Notes (other than provisions relating to the covenants contained in Sections 3.09, 4.10 and 4.11 hereof);

(3) reduce the rate of or change the time for payment of interest, including default interest, on any Note;

(4) waive a Default or Event of Default in the payment of principal of, or interest, premium or Additional Interest, if any, on, the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the payment default that resulted from such acceleration);

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(5) make any Note payable in money other than that stated in the Notes;

(6) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of, or interest, premium or Additional Interest, if any, on, the Notes;

(7) waive a redemption or repurchase payment with respect to any Note (other than a payment required by Sections 4.10 or 4.11 hereof);

(8) release any Guarantor from any of its obligations under its Note Guarantee or this Indenture, except in accordance with the terms of this Indenture;

(9) release all or substantially all of the Collateral from the Liens created pursuant to the Collateral Agreements, except in accordance with this Indenture and the Collateral Agreements; or

(10) make any change in the preceding amendment and waiver provisions.

Section 9.03 Compliance with TIA.

Every amendment or supplement to this Indenture or the Notes will be set forth in an amended or supplemental indenture that complies with the TIA as then in effect.

Section 9.04 Revocation and Effect of Consents.

Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder’s Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation in accordance with Section 13.02 before the date the amendment, supplement or waiver becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder.

The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver. If a record date is fixed, then notwithstanding the provisions of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to consent to such amendment or waiver or to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date.

Section 9.05 Notation on or Exchange of Notes.

The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver.

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Failure to make the appropriate notation or issue a new Note will not affect the validity and effect of such amendment, supplement or waiver.

Section 9.06 Trustee to Sign Amendments, etc.

Upon the request of the Issuers, accompanied by a resolution of the Board of Directors authorizing the execution of any such amended or supplemental indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 or this Section 9.06 hereof, the Trustee shall join with the Issuers and the Guarantors in the execution of such amended or supplemental indenture.

It shall not be necessary for the consent of Holders of Notes under Sections 9.01 or 9.02 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof.

After an amendment, supplement or waiver under this Section 9.06 becomes effective, the Issuers shall send to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in principal amount of the Notes then outstanding may waive compliance in a particular instance by the Company with any provision of this Indenture of the Notes.

The Trustee will sign any amended or supplemental indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. In executing any amended or supplemental indenture, the Trustee will be entitled to receive and (subject to Section 7.01 hereof) will be fully protected in relying upon, in addition to the documents required by Section 13.04 hereof, an Officers’ Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture.

ARTICLE 10

SATISFACTION AND DISCHARGE

Section 10.01 Satisfaction and Discharge.

This Indenture will be discharged and will cease to be of further effect as to all Notes and Note Guarantees issued hereunder and the Trustee, on demand and at the expense of the Issuers, will execute proper instruments acknowledging satisfaction and discharge of this Indenture, when:

(1) either:

(a) all Notes that have been authenticated, except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has been deposited in trust and thereafter repaid to the Issuers, have been delivered to the Trustee for cancellation; or

(b) all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the delivering of a notice of redemption or otherwise or will become due and payable within one year and the Issuers or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non-callable Government Securities, in amounts as will be sufficient, without consideration of any reinvestment of interest, to pay and discharge the entire Indebtedness on the Notes not delivered to the Trustee for cancellation for principal, interest, premium and Additional Interest, if any, to the date of maturity or redemption;

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(2) no Default or Event of Default has occurred and is continuing on the date of the deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit or the granting of Liens to secure such borrowings) and the deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which an Issuer or any Guarantor is a party or by which an Issuer or any Guarantor is bound;

(3) the Issuers have or any Guarantor has paid or caused to be paid all sums payable by it under this Indenture; and

(4) the Issuers have delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of the Notes at maturity or on the redemption date, as the case may be.

In addition, the Issuers must deliver an Officers’ Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.

Notwithstanding the satisfaction and discharge of this Indenture, if money has been deposited with the Trustee pursuant to subclause (b) of clause (1) of this Section 10.01, the provisions of Sections 10.02 and 8.06 hereof will survive. In addition, nothing in this Section 10.01 will be deemed to discharge those provisions of Section 7.07 hereof, that, by their terms, survive the satisfaction and discharge of this Indenture.

Section 10.02 Application of Trust Money.

Subject to the provisions of Section 8.06 hereof, all money deposited with the Trustee pursuant to Section 10.01 hereof shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Issuers acting as their own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law.

If the Trustee or Paying Agent is unable to apply any money or Government Securities in accordance with Section 10.01 hereof by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Issuers’ and any Guarantor’s obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 10.01 hereof; provided that if the Issuers have made any payment of principal of, premium, if any, or interest on, any Notes because of the reinstatement of its obligations, the Issuers shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or Government Securities held by the Trustee or Paying Agent.

ARTICLE 11

GUARANTEES

Section 11.01 Guarantee.

(a) Subject to Section 11.02, each of the Guarantors hereby, jointly and severally, unconditionally guarantees on a senior secured basis to the extent, with respect to security, set forth in

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Article 12 and the Collateral Agreements, to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and the Collateral Agent and their respective successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes, the Collateral Agreements or the obligations of the Issuers hereunder or thereunder, that:

(1) the principal of, premium, if any, and interest on, the Notes will be promptly paid in full when due, subject to any applicable grace period, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Issuers to the Holders, the Trustee and the Collateral Agent hereunder or thereunder or under any Collateral Agreement will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and

(2) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable grace period, whether at stated maturity, by acceleration or otherwise.

Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors will be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection.

(b) The Guarantors hereby agree that their obligations hereunder are unconditional, irrespective of the validity, regularity or enforceability of the Notes, this Indenture or any Collateral Agreement, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Issuers, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Issuers, any right to require a proceeding first against the Issuers, protest, notice and all demands whatsoever and covenant that this Note Guarantee will not be discharged except by complete performance of the obligations contained in the Notes and this Indenture.

(c) If any Holder, the Collateral Agent or the Trustee is required by any court or otherwise to return to the Issuers, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Issuers or the Guarantors, any amount paid by the Issuers or any Guarantor to the Trustee, the Collateral Agent or such Holder, this Note Guarantee, to the extent theretofore discharged, will be reinstated in full force and effect.

(d) Each Guarantor agrees that it will not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders, the Collateral Agent and the Trustee, on the other hand, (1) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (2) in the event of any declaration of acceleration of such obligations as provided in Article 6 hereof, such obligations (whether or not due and payable) will forthwith become due and payable by the Guarantors for the purpose of this Note Guarantee. The Guarantors will have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantee.

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Section 11.02 Limitation on Guarantor Liability.

Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Note Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Note Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of such Guarantor will be limited to the maximum amount that will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article 11, result in the obligations of such Guarantor under its Guarantee not constituting a fraudulent transfer or conveyance.

Section 11.03 Execution and Delivery of Guarantee.

To evidence its Note Guarantee set forth in Section 11.01 hereof, each Guarantor hereby agrees that a notation of such Note Guarantee substantially in the form attached as Exhibit E hereto will be signed by an Officer of such Guarantor (by manual or facsimile signature) on each Note authenticated and delivered by the Trustee and that this Indenture will be executed on behalf of such Guarantor by one of its Officers.

Each Guarantor hereby agrees that its Guarantee set forth in Section 11.01 hereof will remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Note Guarantee.

If an Officer whose signature is on this Indenture or on the Note Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Note Guarantee is endorsed, the Note Guarantee will be valid nevertheless.

The delivery of any Note by the Trustee, after the authentication thereof hereunder, will constitute due delivery of the Note Guarantee set forth in this Indenture on behalf of the Guarantors.

In the event that the Company or any of its Restricted Subsidiaries creates or acquires any Domestic Subsidiary after the Issue Date, if required by Section 4.20 hereof, the Company will cause such Domestic Subsidiary to comply with the provisions of Section 4.20 hereof and this Article 11, to the extent applicable.

Section 11.04 Guarantors May Consolidate, etc., on Certain Terms.

Except as otherwise provided in Section 11.05 hereof, a Guarantor may not transfer, sell or otherwise dispose of all or substantially all of its assets to, or consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person, other than a New Parent, the Company or another Guarantor, unless:

(1) immediately after giving effect to that transaction, no Default or Event of Default exists; and

(2) either:

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(a) subject to Section 11.05 hereof, the Person acquiring the property in any such transfer, sale or disposition or the Person formed by or surviving any such consolidation or merger assumes all the obligations of that Guarantor under this Indenture, its Note Guarantee and the Collateral Agreements pursuant to a supplemental indenture and an amendment to the Registration Rights Agreement; or

(b) the Net Proceeds of such transfer, sale or other disposition are applied in accordance with the applicable provisions of this Indenture;

provided, however, that the transfer, sale or other disposition of all or substantially all of the assets of, or the consolidation or merger into another person, of a New Parent will be governed by Article 5 hereof and may be subject to Section 4.10 hereof.

In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Note Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Guarantor, such successor Person will succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of the Note Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Issuers and delivered to the Trustee. All the Note Guarantees so issued will in all respects have the same legal rank and benefit under this Indenture as the Note Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Note Guarantees had been issued at the date of the execution hereof.

Except as set forth in Articles 4 and 5 hereof, and notwithstanding clauses 2(a) and (b) above, nothing contained in this Indenture or in any of the Notes will prevent any consolidation or merger of a Guarantor with or into any Issuer, any New Parent or another Guarantor, or will prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to any Issuer, any New Parent or another Guarantor.

Section 11.05 Releases.

The Note Guarantee of a Guarantor will be released:

(1) in connection with any transfer, sale or other disposition of all or substantially all of the assets of that Guarantor (including by way of merger or consolidation) to a Person that is not (either before or after giving effect to such transaction) a New Parent, an Issuer or a Restricted Subsidiary of a New Parent or an Issuer, if the transfer, sale or other disposition does not violate Section 4.11 hereof with respect to that Guarantor (other than any New Parent) and Section 4.10 and Article 5 hereof with respect to any New Parent;

(2) in connection with any transfer, sale or other disposition of all of the Capital Stock of that Guarantor to a Person that is not (either before or after giving effect to such transaction) an Issuer or a Restricted Subsidiary of an Issuer, if the sale or other disposition does not violate Section 4.11 hereof with respect to Guarantors (other than any New Parent) and Section 4.10 and Article 5 hereof with respect to any New Parent;

(3) if the Company designates that Guarantor to be an Unrestricted Subsidiary in accordance Section 4.21 hereof;

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(4) upon Legal Defeasance or Satisfaction and Discharge of this Indenture in Accordance with Articles 8 and 10 hereof; or

(5) as may be provided in any intercreditor agreement we enter into in connection with any future Credit Facility.

Any Guarantor not released from its obligations under its Guarantee as provided in this Section 11.05 will, subject to Section 11.02, remain liable for the full amount of principal of and interest and premium, if any, on the Notes and for the other obligations of any Guarantor under this Indenture as provided in this Article 11.

ARTICLE 12

SECURITY

Section 12.01 Grant of Security Interests; Intercreditor Agreement.

(a) The Issuers and the Guarantors:

(1) shall grant a security interest in the Collateral as set forth in the Collateral Agreements to the Collateral Agent for the benefit of the Holders and the Trustee, to secure the due and punctual payment of the principal of, premium, if any, and interest on the Notes and amounts due hereunder and under the Note Guarantees when and as the same shall be due and payable, whether at Stated Maturity thereof, on an Interest Payment Date, by acceleration, purchase, repurchase, redemption or otherwise, and interest on the overdue principal of, premium, if any, and interest (to the extent permitted by law), if any, on the Notes and the performance of all other Obligations of the Issuers and the Guarantors to the Holders, the Collateral Agent and the Trustee under this Indenture, the Collateral Agreements, the Note Guarantees and the Notes, subject to the terms of any Intercreditor Agreement and any other Permitted Liens;

(2) hereby covenant (A) to perform and observe their obligations under the Collateral Agreements and (B) take any and all commercially reasonable actions (including without limitation the covenants set forth in Sections 4.23 through 4.27) required to cause the Collateral Agreements to create and maintain, as security for the Obligations contained in this Indenture, the Notes, the Collateral Agreements and the Note Guarantees valid and enforceable, perfected (except as expressly provided herein or therein) security interests in and on all the Collateral, in favor of the Collateral Agent, superior to and prior to the rights of all third Persons, and subject to no other Liens, in each case, except as expressly permitted herein or therein and shall warrant and defend the title to the Collateral against the claims of all persons whatsoever;

(3) shall warrant and defend the title to the Collateral against the claims of all persons, subject to any Intercreditor agreement and any Permitted Liens; and

(4) shall do or cause to be done, at their sole cost and expense, all such actions and things as may be necessary or proper, or as may be required by the provisions of the Collateral Agreements, to assure and confirm to the Collateral Agent the security interests in the Collateral contemplated hereby and by the Collateral Agreements, as from time to time constituted, so as to render the same available for the security and benefit of this Indenture and of the Notes and Note Guarantees secured hereby, according to the intent and purpose herein and therein expressed.

(b) Each Holder, by its acceptance of a Note:

(1) appoints the Collateral Agent to act as its agent (and by its signature below, the Collateral Agent accepts such appointment);

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(2) consents and agrees to the terms of each Collateral Agreement, as the same may be in effect or may be amended, restated, supplemented or otherwise modified from time to time in accordance with their respective terms, and authorizes and directs the Collateral Agent to enter into the Collateral Agreements and to perform its obligations and exercise its rights thereunder in accordance therewith; and

(3) appoints and authorizes the Collateral Agent and the Trustee to enter into an Intercreditor Agreement with a First Lien Collateral Agent and, as a result thereof acknowledges that any Lien on the Collateral will thereby and at that time become contractually subordinated to any Lien held by a First Lien Collateral Agent pursuant to the terms of such Intercreditor Agreement as a Lien that shall be prior to any other Lien other than the Lien held by the First Lien Collateral Agent.

(c) This Article 12, the Security Agreement and the other Collateral Agreements (other than the Intercreditor Agreement) will be subject to the terms, limitations and conditions set forth in any Intercreditor Agreement.

Section 12.02 Recording and Opinions.

(a) The Issuers shall, and shall cause each of their Restricted Subsidiaries to, at their sole cost and expense, take or cause to be taken all commercially reasonable action required to perfect (except as expressly provided in the Collateral Agreements), maintain (with the priority required under the Collateral Agreements), preserve and protect the security interests in the Collateral granted by the Collateral Agreements, including (i) the filing of financing statements, continuation statements, collateral assignments and any instruments of further assurance, in such manner and in such places as may be required by law to preserve and protect fully the rights of the Holders, the Collateral Agent, and the Trustee under this Indenture and the Collateral Agreements to all property comprising the Collateral pursuant to the terms of the Collateral Agreements, and (ii) the delivery of the certificates evidencing the certificated securities pledged under the Collateral Agreements, duly endorsed in blank or accompanied by undated stock powers or other instruments of transfer executed in blank, it being understood that concurrently with the execution of this Indenture the Issuers and their Restricted Subsidiaries have delivered financing statements for filing by the Collateral Agent or its agents. The Issuers shall from time to time promptly pay all financing and continuation statement recording and/or filing fees, charges and recording and similar taxes relating to this Indenture, the Collateral Agreements and any amendments hereto or thereto and any other instruments of further assurance required pursuant thereto.

(b) The Issuers shall furnish to the Trustee and the Collateral Agent (if other than the Trustee), on or within one month of February 15 of each year, commencing February 15, 2009, an Opinion of Counsel either (1) stating that, in the opinion of such counsel, all action necessary to perfect or continue the perfection of the security interests created by the Collateral Agreements and reciting the details of such action or referring to prior Opinions of Counsel in which such details are given have been taken or (2) stating that, in the Opinion of such Counsel, no such action is necessary to perfect or continue the perfection of any security interest created under any of the Collateral Agreements.

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Section 12.03 Release of Collateral.

(a) The Collateral Agent shall not at any time release Collateral from the security interests created by the Collateral Agreements unless such release is in accordance with the provisions of this Indenture and the applicable Collateral Agreements.

(b) The release of any Collateral from the terms of the Collateral Agreements shall not be deemed to impair the security under this Indenture in contravention of the provisions hereof if and to the extent the Collateral is released pursuant to this Indenture and the Collateral Agreements. To the extent applicable, the Issuer will cause TIA Section 313(b) relating to reports, and TIA Section 314(d), relating to the release of property or securities to be subjected to the Lien of the Collateral Documents, to be complied with. Any certificate or opinion required by TIA Section 314(d) may be made by an officer of the Issuers except in case where TIA Section 314(d) requires that such certificate or opinion be made by an independent Person, which Person will be an independent engineer, appraiser or other expert selected or reasonably satisfactory to the Trustee. Notwithstanding anything to the contrary in this Section 12.03(b), the Issuers will not be required to comply with all or any portion of TIA Section 314(d) if it determines, in good faith based on advice of counsel, that under the terms of TIA Section 314(d) and/or any interpretation or guidance as to the meaning thereof of the SEC and its staff, including “no action” letters or exemptive orders, all or any portion of TIA Section 314(d) is inapplicable to one or a series of released Collateral.

Section 12.04 Specified Releases of Collateral.

(a) Notwithstanding anything to the contrary in Section 12.03, Collateral may be released from the Lien and security interest created by the Collateral Agreements at any time or from time to time in accordance with the provisions of the Collateral Agreements, including any Intercreditor Agreement, or as provided hereby. Upon the request of the Issuer pursuant to an Officers’ Certificate certifying, and an Opinion of Counsel stating, that all conditions precedent hereunder have been met and without the consent of any Holder, the Issuer and the Guarantors will be entitled to releases of assets included in the Collateral from the Liens securing the obligations under this Indenture, the Notes and the Note Guarantees, and the Collateral Agent shall release the same from such Liens, under any one or more of the following circumstances:

(1) to enable the Issuer (or a Guarantor) to consummate asset sales and dispositions permitted or not prohibited under Section 4.11, in each case to a Person other than the Issuers, any New Parent or a Guarantor; provided that such Liens will not be released if such sale or disposition is prohibited by Article 5 or such release would cause the Issuers to have to comply with section 4.10 and the Issuers are not in compliance therewith;

(2) if any Subsidiary that is a Guarantor is released from its Note Guarantee, such Subsidiary’s assets will also be released from the Liens securing the Notes and the Note Guarantee; or

(3) as set forth, and subject to the conditions stated, in Sections 8.03, 9.01 and 9.02.

(b) Upon receipt of an Officers’ Certificate and Opinion of Counsel and any necessary or proper instruments of termination, satisfaction or release prepared by the Issuer or the Guarantors, as the case may be, the Collateral Agent shall execute, deliver or acknowledge such instruments or releases to evidence the release of any Collateral permitted to be released pursuant to this Indenture or the Collateral Agreements, including the Intercreditor Agreement.

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Section 12.05 Release upon Satisfaction or Defeasance of all Outstanding Obligations.

The Liens on all Collateral that secures the Obligations under this Indenture, the Notes and the Note Guarantees will be terminated and released:

(1) if the Issuers exercise Legal Defeasance or Covenant Defeasance as set forth under Article 8;

(2) upon satisfaction and discharge of this Indenture as set forth under Article 10;

(3) upon payment in full in immediately available funds of the principal of, premium, if any, and accrued and unpaid interest on the Notes and all other Obligations under this Indenture (excluding contingent indemnity obligations) that are then due and payable; or

(4) as described under Article 9.

Upon receipt of an Officers’ Certificate and Opinion of Counsel and any necessary or proper instruments of termination, satisfaction or release prepared by the Issuer or the Guarantors, as the case may be, the Collateral Agent shall execute, deliver or acknowledge such instruments or releases to evidence the release of any Collateral permitted to be released pursuant to this Indenture or the Collateral Agreements, including the Intercreditor Agreement.

Section 12.06 Form and Sufficiency of Release.

In the event that the Issuers or any Guarantor has sold, exchanged, or otherwise disposed of or proposes to sell, exchange or otherwise dispose of any portion of the Collateral that may be sold, exchanged or otherwise disposed of by such Issuer or Guarantor to any Person other than an Issuer or a Guarantor, and such Issuer or Guarantor requests in writing that the Collateral Agent furnish a written disclaimer, release or quit-claim of any interest in such property under this Indenture and the Collateral Agreements, the Collateral Agent shall execute, acknowledge and deliver to such Issuer or Guarantor (in proper form prepared by such Issuer or Guarantor) such an instrument promptly after satisfaction of the conditions set forth herein for delivery of any such release. Notwithstanding the preceding sentence, all purchasers and grantees of any property or rights purporting to be released herefrom shall be entitled to rely upon any release executed by the Collateral Agent hereunder as sufficient for the purpose of this Indenture and as constituting a good and valid release of the property therein described from the Lien of this Indenture or of the Collateral Agreements.

Section 12.07 Purchaser Protected.

No purchaser or grantee of any property or rights purporting to be released herefrom shall be bound to ascertain the authority of the Trustee or the Collateral Agent to execute the release or to inquire as to the existence of any conditions herein prescribed for the exercise of such authority; nor shall any purchaser or grantee of any property or rights permitted by this Indenture to be sold or otherwise disposed of by the Issuer be under any obligation to ascertain or inquire into the authority of the Issuer to make such sale or other disposition.

Section 12.08 Authorization of Actions to be Taken by the Collateral Agent Under the Collateral Agreements.

Subject to the provisions of the applicable Collateral Agreements, the Trustee and each Holder, by acceptance of any Notes agrees that (a) the Collateral Agent shall execute and deliver the

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Collateral Agreements, and all agreements, documents and instruments incidental thereto, and act in accordance with the terms thereof, (b) the Collateral Agent may, in its sole discretion and without the consent of the Trustee or the Holders, take all actions it deems necessary or appropriate in order to (i) enforce any of the terms of the Collateral Agreements and (ii) collect and receive any and all amounts payable in respect of the Obligations of the Issuers and the Guarantors hereunder and under the Notes, the Note Guarantees and the Collateral Agreements and (c) the Collateral Agent shall have power to institute and to maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Collateral by any act that may be unlawful or in violation of the Collateral Agreements or this Indenture, and suits and proceedings as the Collateral Agent may deem expedient to preserve or protect its interests and the interests of the Trustee and the Holders in the Collateral (including the power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the security interest thereunder or be prejudicial to the interests of the Collateral Agent, the Holders or the Trustee). Notwithstanding the foregoing, the Collateral Agent may, at the expense of the Issuers, request the direction of the Holders with respect to any such actions and upon receipt of the written consent of the Holders of at least a majority in aggregate principal amount of the then outstanding Notes, shall take such actions; provided that all actions so taken shall, at all times, be in conformity with the requirements of the Intercreditor Agreement.

Section 12.09 Authorization of Receipt of Funds by the Trustee Under the Collateral Agreements.

The Collateral Agent is authorized to receive any funds for the benefit of itself, the Trustee and the Holders distributed under the Collateral Agreements and to the extent not prohibited under the Intercreditor Agreement, for turnover to the Trustee to make further distributions of such funds to itself, the Trustee and the Holders in accordance with the provisions of Section 6.10 and the other provisions of this Indenture.

Section 12.10 Replacement of Collateral Agent.

A resignation or removal of the Collateral Agent and appointment of a successor Collateral Agent may be effected pursuant to the terms of the Security Agreement.

ARTICLE 13

MISCELLANEOUS

Section 13.01 TIA Controls.

The terms of the Notes include those stated herein and those made part of this Indenture by the TIA, which applies to this Indenture and is incorporated by reference herein. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA §318(c), the imposed duties will control.

Section 13.02 Notices.

Any notice or communication by the Issuers, any Guarantor or the Trustee to the others is duly given if in writing and delivered in Person or by first class mail (registered or certified, return receipt requested), facsimile transmission or overnight air courier guaranteeing next day delivery, to the others’ address:

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If to the Issuers and/or any Guarantor:

FORBES ENERGY SERVICES LLC

P.O. Box 250

Alice, Texas 78333

Attention: Chief Financial Officer

If to the Trustee and Collateral Agent:

Wells Fargo Bank, National Association

Corporate Trust Services

213 Court Street, Suite 703

Middletown, Connecticut 06457

Facsimile No.: (860) 704-6219

Attention: Corporate Trust Services – Relationship Manager

The Issuers, any Guarantor or the Trustee, by notice to the others, may designate additional or different addresses for subsequent notices or communications.

All notices and communications (other than those sent to Holders) will be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if transmitted by facsimile; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery.

Any notice or communication to a Holder will be mailed by first class mail, certified or registered, return receipt requested, by overnight air courier guaranteeing next day delivery or by electronic means to its address shown on the register kept by the Registrar. Any notice or communication will also be so sent to any Person set forth in TIA § 313(c), to the extent required by the TIA. Failure to send a notice or communication to a Holder or any defect in it will not affect its sufficiency with respect to other Holders.

If a notice or communication is given in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it.

If the Issuers give a notice or communication to Holders, the Issuers will give a copy to the Trustee and each Agent at the same time.

Notwithstanding any other provision of this Indenture or any Note, where this Indenture or any Note provides for notice of any event (including any notice of redemption) to a Holder of a Global Note (whether by mail or otherwise), such notice shall be sufficiently given if given to the Depositary for such Note (or its designee), pursuant to the customary procedures of such Depositary.

Section 13.03 Communication by Holders of Notes with Other Holders of Notes.

Holders may communicate pursuant to TIA § 312(b) with other Holders with respect to their rights under this Indenture, any Collateral Agreement, any Note Guarantee or the Notes. The Issuers, the Trustee, the Collateral Agent, the Registrar and anyone else shall have the protection of TIA § 312(c).

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Section 13.04 Certificate and Opinion as to Conditions Precedent.

Upon any request or application by the Issuers or any Guarantor to the Trustee or the Collateral Agent, as the case may be, to take any action under this Indenture or any Collateral Agreement, the Issuers shall furnish to the Trustee or the Collateral Agent, as the case may be:

(1) an Officers’ Certificate in form and substance reasonably satisfactory to the Trustee or the Collateral Agent, as the case may be (which must include the statements set forth in Section 13.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture or any Collateral Agreement relating to the proposed action have been satisfied; and

(2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which must include the statements set forth in Section 13.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied.

Section 13.05 Statements Required in Certificate or Opinion.

Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture or any Collateral Agreement (other than a certificate provided pursuant to TIA § 314(a)(4)) must comply with the provisions of TIA § 314(e) and must include:

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

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

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

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

Section 13.06 Rules by Trustee and Agents.

The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions.

Section 13.07 No Personal Liability of Directors, Officers, Employees and Stockholders.

No director, officer, employee, incorporator or stockholder or other owner of Capital Stock of the Issuers or any Guarantor, as such, will have any liability for any obligations of the Issuers or the Guarantors under the Notes, this Indenture or the Note 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.

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Section 13.08 Governing Law.

THE LAW OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES.

Section 13.09 No Adverse Interpretation of Other Agreements.

This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Issuers or their Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.

Section 13.10 Successors.

All agreements of the Issuers and the Guarantors in this Indenture and the Notes will bind their successors. All agreements of the Trustee and the Collateral Agent in this Indenture will bind its successors. All agreements of each Guarantor in this Indenture will bind its successors, except as otherwise provided in Section 11.05 hereof.

Section 13.11 Severability.

In case any provision in this Indenture or in the Notes is invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby.

Section 13.12 Counterpart Originals.

The parties may sign any number of copies of this Indenture. Each signed copy will be an original, but all of them together represent the same agreement.

Section 13.13 Table of Contents, Headings, etc.

The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and will in no way modify or restrict any of the terms or provisions hereof.

[Signatures on following page]

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

FORBES ENERGY SERVICES LLC, as an Issuer
By:	/s/ John E. Crisp
Name:	John E. Crisp
Title:	President and Chief Executive Officer
FORBES ENERGY CAPITAL INC., as an Issuer
By:	/s/ John E. Crisp
Name:	John E. Crisp
Title:	President and Chief Executive Officer
C.C. FORBES, LLC, as a Guarantor
By:	/s/ John E. Crisp
Name:	John E. Crisp
Title:	Executive Vice President and Chief Operating Officer
TX ENERGY SERVICES, LLC, as a Guarantor
By:	/s/ John E. Crisp
Name:	John E. Crisp
Title:	President, Chief Executive Officer and Secretary
SUPERIOR TUBING TESTERS, LLC, as a Guarantor
By:	/s/ John E. Crisp
Name:	John E. Crisp
Title:	Executive Vice President
WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee and Collateral Agent
By:	/s/ Joseph P. O’Donnell
Name:	Joseph P. O’Donnell
Title:	Vice President
Indenture

EXHIBIT A

[Face of QIB/IAI/Reg S Note]

[Insert the Global Note Legend, if applicable pursuant to the provisions of this Indenture]

[Insert the Private Placement Legend, if applicable pursuant to the provisions of this Indenture]

[Insert Regulation S Temporary Global Note Legend, if applicable, pursuant to the provisions of this Indenture]

[ADDITIONAL LEGEND: THE HOLDER OF THIS SECURITY IS ENTITLED TO THE BENEFITS OF THE REGISTRATION RIGHTS AGREEMENT AND COLLATERAL DOCUMENTS (EACH, AS DEFINED IN THE INDENTURE).]

[FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), THIS NOTE IS ISSUED WITH ORIGINAL ISSUE DISCOUNT. THE ISSUERS AGREE TO PROVIDE PROMPTLY TO THE HOLDER OF THIS NOTE, UPON WRITTEN REQUEST, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE ISSUE PRICE, THE ISSUE DATE AND THE YIELD TO MATURITY. ANY SUCH WRITTEN REQUEST SHOULD BE SENT TO CHIEF FINANCIAL OFFICER, FORBES ENERGY SERVICES LLC, AT THE FOLLOWING ADDRESS: P.O. BOX 250, ALICE, TEXAS 78333.]

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CUSIP/CINS: 144A - 345140AA5

AI - 345140AB3

Reg S - U34499AA8

11% Senior Secured Notes due 2015

FORBES ENERGY SERVICES LLC

FORBES ENERGY CAPITAL INC.

No.      $                    

Forbes Energy Services LLC, a Delaware limited liability company (including any and all successors thereto, the “Company”), as co-issuer of the 11% Senior Secured Notes due 2015 (the “Notes”), Forbes Energy Capital Inc., a Delaware corporation (including any and all successors thereto, “Capital” and together with the Company as co-issuers of the Notes, the “Issuers”), as co-issuer of the Notes, promises to pay to Cede & Co., or registered assigns, the principal sum of                      DOLLARS on February 15, 2015. This Note is being issued at a discount at 97.635% of the principal amount due at maturity on February 15, 2015.

Interest Payment Dates: February 15 and August 15

Record Dates: February 1 and August 1

Dated: February 12, 2008

FORBES ENERGY SERVICES LLC
By:
Name:	John E. Crisp
Title:	President and Chief Executive Officer
FORBES ENERGY CAPITAL INC.
By:
Name:	John E. Crisp
Title:	President and Chief Executive Officer

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This is one of the Notes referred to

in the within-mentioned Indenture:

WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Trustee
By:
	Authorized Signatory

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[Back of Note]

11% Senior Secured Notes due 2015

Capitalized terms used herein have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.

(1) INTEREST. Forbes Energy Services LLC, a Delaware limited liability company and Forbes Energy Capital Inc., a Delaware corporation (collectively, the “Issuers”), promise to pay interest on the principal amount of this Note at a rate of 11% per annum, from February 12, 2008 until maturity. The Issuers will pay interest semi-annually in arrears on February 15 and August 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each, an “Interest Payment Date”). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof (each, a “Record Date”) and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided further that the first Interest Payment Date shall be August 15, 2008. The Issuers will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal, premium, if any, and interest (without regard to any applicable grace period), from time to time on demand at a rate equal to 2% per annum in excess of the then applicable interest rate on the Notes to the extent lawful. The Issuers will notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Issuers will fix or cause to be fixed each such special record date and payment date; provided that no such special record date may be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Issuers (or, upon the written request of the Issuers, the Trustee in the name and at the expense of the Issuers) will mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. The Issuers will pay Additional Interest, if any, to Holders of Notes pursuant to the Registration Rights Agreement. Defaulted interest and Additional Interest, if any, will be paid on regular Interest Payment Dates in the same manner as other interest is paid on the Notes. All reference to “interest” in this Note and the Indenture mean the initial interest rate borne by the Notes and any increases in that rate due to defaulted interest or Additional Interest (unless the Indenture states otherwise). Defaulted interest and Additional Interest will be in addition to any other interest payable from time to time with respect to the Notes. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months.

(2) METHOD OF PAYMENT. The Issuers will pay interest on the Notes (except defaulted interest) to the Persons who are Holders at the close of business on February 1 or August 1 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes will be payable as to principal, premium, if any, and interest at the office or agency of the Issuers maintained for such purpose, or, at the option of the Issuers, payment of interest may be made by check mailed to the Holders at their addresses set forth in the register of Holders; provided that (1) payment by wire transfer of immediately available funds will be required with respect to principal of, interest and premium, if any, on, all Global Notes and all other Notes the Holders of which will have provided wire transfer instructions to the Issuers or the Paying Agent and (2) such payment by check may only be paid so long as no event of default under the Indenture is continuing. Such payment will be in such coin or currency of the United States of America as at the time of payment is legal tender for

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payment of public and private debts. The principal of the Notes shall be payable only upon surrender of any Note at the specified offices of the Paying Agent. If the due date for payment of the principal in respect of any Note is not a Business Day at the place in which it is presented for payment, the Holder thereof shall not be entitled to payment of the amount due until the next succeeding Business Day at such place.

(3) PAYING AGENT AND REGISTRAR. Initially, Wells Fargo Bank, National Association, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Issuers may change any Paying Agent or Registrar without notice to any Holder. The Issuers or any of their Subsidiaries may act in any such capacity; provided no Event of Default is continuing.

(4) INDENTURE; REGISTRATION RIGHTS AGREEMENT AND COLLATERAL AGREEMENT. The Issuers issued the Notes under an Indenture dated as of February 12, 2008 (the “Indenture”) among the Issuers, the Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended, which applies to the Indenture and is incorporated by reference therein. The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Indenture does not limit the aggregate principal amount of Notes that may be issued thereunder. Holders are entitled to the benefits of the Registration Rights Agreement and the Collateral Agreements.

(5) RANKING. This Note shall constitute a senior obligation of the Issuers and the Obligations of the Issuers under the Indenture and this Note shall be secured pursuant to the Collateral Documents and will be subject to the Intercreditor Agreement, if any.

(6) OPTIONAL REDEMPTION AND PURCHASE. The Notes are subject to redemption and purchase as provided in Article III of the Indenture.

(7) MANDATORY REDEMPTION. The Issuers are not be required to make mandatory redemption or sinking fund payments with respect to the Notes.

(8) REPURCHASE AT THE OPTION OF HOLDER.

(a) If there is a Change of Control, the Issuers will be required to make a Change of Control Offer to each Holder to repurchase all or any part (equal to minimum amounts of $2,000 and integral multiples of $1,000) of each Holder’s Notes at a purchase price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Additional Interest, if any, thereon to the date of purchase, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date (the “Change of Control Payment”). Within 10 days following any Change of Control or, at the Issuers’ option, prior to such Change of Control but after public announcement thereof, the Issuers will mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as required by the Indenture.

(b) If the Issuers or a Restricted Subsidiary of the Issuers consummates an Asset Sale, the Issuers in circumstances specified in the Indenture may be required to commence an offer to all Holders of Notes and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets an Asset Sale Offer pursuant to Section

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3.09 of the Indenture to purchase the maximum principal amount of Notes and such other pari passu Indebtedness that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Additional Interest, if any, thereon to the date of purchase, in accordance with the procedures set forth in the Indenture. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Issuers prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled “Option of Holder to Elect Purchase” attached to the Notes.

(c) If any New Parent and its Restricted Subsidiaries or the Company and its Restricted Subsidiaries has Excess Cash Flow for any fiscal year commencing with the fiscal year ending December 31, 2008, each Holder will have the right to require the Issuers to repurchase all or any part of that Holder’s Notes (in minimum amounts of $2,000 and integral multiples of $1,000) at a purchase price in cash equal to 101% of the principal amount of the Notes repurchased, plus any accrued and unpaid interest and Additional Interest, if any, to the date of purchase (subject to the rights of Holders of Notes on the relevant Record Date to receive interest due on the relevant Interest Payment Date that is on or prior to the date of repurchase), with 50% of Excess Cash Flow of such New Parent and its Restricted Subsidiaries or the Company and its Restricted Subsidiaries, in each case, on a consolidated basis for such fiscal year (less the amount of any open market purchases and any redemptions of Notes pursuant to the Indenture made during such fiscal year).

(9) NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address, except that 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 satisfaction or discharge of the Indenture. Notes in denominations larger than $2,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed.

(10) DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $2,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Issuers may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Issuers need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Issuers need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date.

(11) PERSONS DEEMED OWNERS. The Holder of a Note may be treated as its owner for all purposes. Only Holders have rights under the Indenture and this Note.

(12) AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture, the Notes or the Note Guarantees may be amended or supplemented with the consent of the Holders of at least a majority in aggregate principal amount of the then outstanding Notes, voting as a single class, and any existing Default or Event or Default or compliance with any provision of the Indenture, the Notes or the Note Guarantees may be waived with the consent of the Holders of a majority in aggregate principal amount of the then outstanding Notes, voting as a single class. Without the consent of any Holder of a Note, the Indenture, the Notes or the Note Guarantees may be amended or supplemented to cure any ambiguity, defect or inconsistency and to effect certain other changes as set forth in the Indenture.

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(13) DEFAULTS AND REMEDIES. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes will become due and payable immediately without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in aggregate principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest or premium, if any,) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may, on behalf of the Holders of all of the Notes, rescind an acceleration or waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest or premium, if any, on, or the principal of, the Notes. The Issuers are required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Issuers are required, upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default.

(14) TRUSTEE DEALINGS WITH THE ISSUERS. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Issuers or their Affiliates, and may otherwise deal with the Issuers or their Affiliates, as if it were not the Trustee.

(15) NO RECOURSE AGAINST OTHERS. No director, officer, employee, incorporator or equity holder of any New Parent, the Company, Capital or any Guarantor, as such, will have any liability for any obligations of any New Parent, the Company, Capital or the Guarantors under the Notes, the Indenture or the Note 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.

(16) AUTHENTICATION. This Note will not be valid until authenticated by the manual signature of the Trustee or an authenticating agent.

(17) ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

(18) CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuers have caused CUSIP numbers to be printed on the Notes, and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption, and reliance may be placed only on the other identification numbers placed thereon.

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(19) GOVERNING LAW. THE LAW OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO CONSTRUE THE INDENTURE, THIS NOTE AND THE NOTE GUARANTEES.

The Issuers will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to:

FORBES ENERGY SERVICES LLC

P.O. Box 250

Alice, Texas 78333

Attention: Chief Financial Officer

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ASSIGNMENT FORM

To assign this Note, fill in the form below:

(I) or (we) assign and transfer this Note to:
	(Insert assignee’s legal name)
(Insert assignee’s soc. sec. or tax I.D. no.)
(Print or type assignee’s name, address and zip code)

and irrevocably appoint

to transfer this Note on the books of the Issuers. The agent may substitute another to act for him.

Date:                     

Your Signature:

(Sign exactly as your name appears on the face of this Note)

Signature Guarantee*:

* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

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OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Note purchased by the Issuers pursuant to Sections 3.09, 4.10, 4.11 or 4.12 of the Indenture, check the appropriate box below:

¨  Section 3.09            ¨  Section 4.10            ¨  Section 4.11            ¨  Section 4.12

If you want to elect to have only part of the Note purchased by the Issuers pursuant to Sections 3.09, 4.10, 4.11 or 4.12 of the Indenture, state the amount you elect to have purchased:

$                    

Date:

Your Signature:

    (Sign exactly as your name appears on the face of this Note)

Tax Identification No.:

Signature Guarantee*:

* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

A-10

SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE ^*

The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:

Date of Exchange Amount of
decrease in
Principal Amount
of
this Global Note Amount of
increase in
Principal Amount
of
this Global Note Principal Amount
of this Global Note
following such
decrease
(or increase) Signature of
authorized officer
of Trustee or
Custodian

^* This schedule should be included only if the Note is issued in global form.

A-11

EXHIBIT B

FORM OF CERTIFICATE OF TRANSFER

FORBES ENERGY SERVICES LLC

P.O. Box 250

Alice, Texas 78333

Attention: Chief Financial Officer

Wells Fargo Bank, National Association

Corporate Trust Services

213 Court Street, Suite 703

Middletown, Connecticut 06457

Facsimile No.: (860) 704-6219

Attention: Corporate Trust Services – Relationship Manager

Re: 11% Senior Secured Notes due 2015

Reference is hereby made to the Indenture, dated as of February 12, 2008 (the “Indenture”), among Forbes Energy Services LLC, a Delaware limited liability company, Forbes Energy Capital Inc., a Delaware corporation (collectively, the “Issuers”), the Guarantors party thereto and Wells Fargo Bank, National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

                                         , (the “Transferor”) owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $             in such Note[s] or interests (the “Transfer”), to                                          (the “Transferee”), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that:

[CHECK ALL THAT APPLY]

1. ¨ Check if Transferee will take delivery of a beneficial interest in the QIB Global Note or a Restricted Definitive Note pursuant to Rule 144A. The Transfer is being effected pursuant to an in accordance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Personal and each such account is a “qualified institutional buyer” within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A, and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transfer enumerated in the Private Placement Legend printed on the QIB Global Note and/or the Restricted Definitive Note and in the Indenture and the Securities Act.

2. ¨ Check if Transferee will take delivery of a beneficial interest in the Regulation S Temporary Global Note, the Regulation S Permanent] Global Note or a Restricted Definitive Note pursuant to Regulation S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a Person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and

B-1

neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Permanent Global Note, the Regulation S Temporary Global Note and/or the Restricted Definitive Note and in the Indenture and the Securities Act.

3. ¨ Check and complete if Transferee will take delivery of a beneficial interest in the IAI Global Note or a Restricted Definitive Note pursuant to any provision of the Securities Act other than Rule 144A or Regulation S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one):

(a) ¨ such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act;

or

(b) ¨ such Transfer is being effected to the Issuers or a subsidiary thereof;

or

(c) ¨ such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act;

or

(d) ¨ such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144, Rule 903 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the IAI Global Note and/or the Restricted Definitive Notes and in the Indenture and the Securities Act.

This certificate and the statements contained herein are made for your benefit and the benefit of the Issuers.

B-2

[Insert Name of Transferor]

By:

Name:

Title:

Dated:

B-3

ANNEX A TO CERTIFICATE OF TRANSFER

1. The Transferor owns and proposes to transfer the following:

[CHECK ONE OF (a) OR (b)]

(a) a beneficial interest in the:

(i) ¨ QIB Global Note (CUSIP             ), or

(ii) ¨ Regulation S Global Note (CUSIP             ), or

(iii) ¨ IAI Global Note (CUSIP             ); or

2. After the Transfer the Transferee will hold:

[CHECK ONE]

(a) a beneficial interest in the:

(i) ¨ QIB Global Note (CUSIP             ), or

(ii) ¨ Regulation S Global Note (CUSIP             ), or

(iii) ¨ IAI Global Note (CUSIP             ); or

in accordance with the terms of the Indenture.

B-4

EXHIBIT C

FORM OF CERTIFICATE OF EXCHANGE

FORBES ENERGY SERVICES LLC

P.O. Box 250

Alice, Texas 78333

Attention: Chief Financial Officer

Wells Fargo Bank, National Association

Corporate Trust Services

213 Court Street, Suite 703

Middletown, Connecticut 06457

Facsimile No.: (860) 704-6219

Attention: Corporate Trust Services – Relationship Manager

Re: 11% Senior Secured Notes due 2015

Reference is hereby made to the Indenture, dated as of February 12, 2008 (the “Indenture”), among Forbes Energy Services LLC, a Delaware limited liability company, Forbes Energy Capital Inc., a Delaware corporation (collectively, the “Issuers”), the Guarantors party thereto and Wells Fargo Bank, National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

                                         , (the “Owner”) owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $             in such Note[s] or interests (the “Exchange”). In connection with the Exchange, the Owner hereby certifies that:

1. Exchange of Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes

(a) ¨ Check if Exchange is from beneficial interest in a Restricted Global Note to Restricted Definitive Note. In connection with the Exchange of the Owner’s beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner’s own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act.

(b) ¨ Check if Exchange is from Restricted Definitive Note to beneficial interest in a Restricted Global Note. In connection with the Exchange of the Owner’s Restricted Definitive Note for a beneficial interest in the [CHECK ONE] ¨QIB Global Note, ¨ Regulation S Global Note, ¨IAI Global Note with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner’s own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act.

C-1

This certificate and the statements contained herein are made for your benefit and the benefit of the Issuers.

[Insert Name of Transferor]

By:

Name:

Title:

Dated:

C-2

EXHIBIT D

FORM OF ACCREDITED INVESTOR LETTER

FORBES ENERGY SERVICES LLC

P.O. Box 250

Alice, Texas 78333

Attention: Chief Financial Officer

Wells Fargo Bank, National Association

Corporate Trust Services

213 Court Street, Suite 703

Middletown, Connecticut 06457

Facsimile No.: (860) 704-6219

Attention: Corporate Trust Services – Relationship Manager

Re: 11% Senior Secured Notes due 2015

Ladies and Gentlemen:

We are delivering this letter in connection with an offering of 11 % Senior Secured Notes due 2015 (the “Securities”) of Forbes Energy Services LLC and Forbes Energy Capital Inc. (together, the “Company”), as described in the offering circular, dated February 7, 2008 (as amended or supplemented, the “offering circular”) relating to the offering of the Securities. We hereby confirm that:

1. We are an institutional “accredited investor” within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the “Securities Act”);

2. Any purchase of Securities by us will be for our own account or the account of one or more other accredited investors as to which we exercise sole investment discretion;

3. We are not acquiring the Securities for or on behalf of, and will not transfer the Securities to, any pension or welfare plan (as defined in Section 3 of the Employee Retirement Income Security Act of 1974, as amended) except as permitted in the section entitled “Notice to Investors” of the offering circular;

4. We have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of purchasing the Securities, and we and any accounts for which we are acting are able to bear the economic risks of an entire loss of our or their investment in the Securities;

5. We are not acquiring Securities with a view to any distribution thereof in a transaction that would violate the Securities Act or the securities laws of any state of the United States or any other applicable jurisdiction; provided that the disposition of our property and the property of any accounts for which we are acting as fiduciary shall remain at all times within our and their control;

6. We have received a copy of the offering circular and acknowledge that we have had access to such financial and other information, and have been afforded the opportunity to ask such questions of representatives of the Company and receive answers thereto, as we deem necessary to verify the information contained in the offering circular; and

7. We acknowledge that the Securities have not been registered under the Securities Act and that the Securities may not be offered or sold within the United States or to, or for the benefit of, U.S. persons except as set forth below.

D-1

We agree, on our own behalf and on behalf of each account for which we acquire any Securities that, for a period of two years after the later of the date of (x) original issuance of the Securities and (y) the last date on which the Securities or any part thereof were owned by the Company or an affiliate of the Company, such Securities may be offered, resold, pledged or otherwise transferred only (i) to the Company; (ii) inside the United States to a person that we reasonably believe to be a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act) in compliance with Rule 144A; (iii) inside the United States to a person we reasonably believe to an accredited investor that, prior to such transfer, furnishes to the trustee under the indenture relating to the Securities a signed letter containing certain representations and agreements (a form of which can be obtained from the trustee)); (iv) outside the United States to persons other than U.S. persons in offshore transactions meeting the requirements of Rule 904 under Regulation S under the Securities Act; (v) pursuant to the exemption from registration provided by Rule 144 under the Securities Act (if available); or (vi) pursuant to an effective registration statement under the Securities Act, and in each case, in accordance with any applicable laws of any state of the United States or any other applicable jurisdiction.

We understand that Wells Fargo Bank, National Association, as trustee, will not be required to accept for registration for transfer any Securities acquired by us, except upon presentation of evidence satisfactory to the Company and the trustee that the foregoing restrictions on transfer have been complied with. We further understand that the Securities purchased by us will bear a legend reflecting the substance of this paragraph. We further agree to provide to any person acquiring any of the Securities from us a notice advising such person that resales of the Securities are restricted as stated herein and that certificates representing the Securities will bear a legend to that effect.

We acknowledge that you, the Company, the trustee and others will rely upon our acknowledgements, representations and agreements set forth herein, and we agree to notify you promptly in writing if any of our acknowledgements, representations and agreements herein cease to be accurate and complete.

We represent to you that we have full power to make the foregoing acknowledgements, representations and agreements on our own behalf or on behalf of any investor account for which we are acting as a fiduciary or agent.

As used herein, the terms “offshore transaction,” “United States” and “U.S. person” have the respective meanings given to them in Regulation S under the Securities Act.

[Insert Name of Accredited Investor]

By:

Name:

Title:

Dated:

D-2

EXHIBIT E

FORM OF NOTATION OF GUARANTEE

For value received, each Guarantor (which term includes any successor Person under the Indenture) has, jointly and severally, unconditionally guaranteed, to the extent set forth in the Indenture and subject to the provisions in the Indenture dated as of dated as of February 12, 2008 (the “Indenture”), among Forbes Energy Services LLC, a Delaware limited liability company, Forbes Energy Capital Inc., a Delaware corporation (collectively, the “Issuers”), the Guarantors party thereto and Wells Fargo Bank, National Association, as trustee (the “Trustee”), (a) the due and punctual payment of the principal of, premium, if any, and interest on, the Notes, whether at maturity, by acceleration, redemption or otherwise, the due and punctual payment of interest on overdue principal of and interest on the Notes, if any, if lawful, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantors to the Holders of Notes and to the Trustee pursuant to the Guarantee and the Indenture, and the limitations thereon, are expressly set forth in Article 11 of the Indenture and reference is hereby made to the Indenture for the precise terms of the Guarantee.

Capitalized terms used but not defined herein have the meanings given to them in the Indenture.

C.C. FORBES, LLC, as a Guarantor
By:
Name:	John E. Crisp
Title:	Executive Vice President and Chief Operating Officer
TX ENERGY SERVICES, LLC, as a Guarantor
By:
Name:	John E. Crisp
Title:	President, Chief Executive Officer and Secretary
SUPERIOR TUBING TESTERS, LLC, as a Guarantor
By:
Name:	John E. Crisp
Title:	Executive Vice President

E-1

EXHIBIT F

FORM OF SUPPLEMENTAL INDENTURE

TO BE DELIVERED BY SUBSEQUENT GUARANTORS

SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”), dated as of                     , 2007, among                                  (the “Guaranteeing Subsidiary”), a subsidiary of Forbes Energy Services LLC (or its permitted successor), a Delaware limited liability company (the “Company”), the other Guarantors (as defined in the Indenture referred to herein) and Wells Fargo Bank, National Association, as trustee under the Indenture referred to below (the “Trustee”).

WITNESSETH

WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the “Indenture”), dated as of February 12, 2008 providing for the issuance of 11% Senior Secured Notes due 2015 (the “Notes”);

WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company’s Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the “Guarantee”); and

WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:

1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.

2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees to provide an unconditional Guarantee on the terms and subject to the conditions set forth in the Guarantee and in the Indenture including but not limited to Article 11 thereof, and subject to the limitations therein.

3. NO RECOURSE AGAINST OTHERS. No director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, will have any liability for any obligations of the Company or the Guarantors under the Notes, the Indenture or the Note 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.

4. NEW YORK LAW TO GOVERN. THE LAW OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO CONSTRUE THE INDENTURE, THE NOTES AND THE NOTE GUARANTEES.

5. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

6. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof.

F-1

7. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company.

F-2

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

Dated:                     , 20    

[GUARANTEEING SUBSIDIARY], as a Guarantor
By:
Name:
Title:
FORBES ENERGY SERVICES LLC, as an Issuer
By:
Name:
Title:
FORBES ENERGY CAPITAL INC., as an Issuer
By:
Name:
Title:
C.C. FORBES, LLC, as a Guarantor
By:
Name:
Title:
TX ENERGY SERVICES, LLC, as a Guarantor
By:
Name:
Title:
SUPERIOR TUBING TESTERS, LLC, as a Guarantor
By:
Name:
Title:
WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee
By:
	Authorized Signatory

F-3

EX-4.3

Exhibit 4.3

SUPPLEMENTAL INDENTURE

SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”), dated as of October 6, 2008, among Forbes Energy International, LLC, a Delaware limited liability company (the “New Sub”), Forbes Energy Services Ltd., a company organized under the laws of Bermuda (the “New Parent”), Forbes Energy Services LLC, a Delaware limited liability company (the “Company”), Forbes Energy Capital Inc., a Delaware corporation, the other Guarantors (as defined in the Indenture referred to herein) and Wells Fargo Bank, National Association, as trustee under the Indenture referred to below (the “Trustee”).

W I T N E S S E T H

WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the “Indenture”), dated as of February 12, 2008 and as supplemented from time to time, providing for the issuance of 11% Senior Secured Notes due 2015 (the “Notes”);

WHEREAS, the Indenture provides that the New Sub shall execute and deliver to the Trustee a supplemental indenture pursuant to which the New Sub shall become a party to the Indenture, agree to be bound by all applicable provisions of the Indenture, and unconditionally guarantee all of the Company’s Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the “Guarantee”); and

WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Sub and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:

1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.

2. AGREEMENT TO GUARANTEE. The New Sub hereby provides an unconditional Guarantee on the terms and subject to the conditions set forth in the Guarantee and in the Indenture including but not limited to Article 11 thereof, and subject to the limitations therein.

3. AGREEMENT TO BECOME A PARTY. The New Sub hereby agrees to become a party to the Indenture and to be bound by all applicable provisions of the Indenture including but not limited to the covenants set forth under Articles 4, 5, 12 and 13 thereof.

4. NO RECOURSE AGAINST OTHERS. No director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, will have any liability for any obligations of the Company or the Guarantors under the Notes, the Indenture or the Note 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.

5. NEW YORK LAW TO GOVERN. THE LAW OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO CONSTRUE THE INDENTURE, THE NOTES AND THE NOTE GUARANTEES.

1

6. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

7. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof.

8. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the New Sub and the Company.

[Remainder of page left blank intentionally]

2

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

FORBES ENERGY INTERNATIONAL, LLC, as a Guarantor
By:	/s/ L. Melvin Cooper
	L. Melvin Cooper,
	Senior Vice President, Chief Financial Officer and Assistant Secretary
FORBES ENERGY SERVICES LTD., as a Guarantor
By:	/s/ L. Melvin Cooper
	L. Melvin Cooper,
	Senior Vice President and Chief Financial Officer
FORBES ENERGY SERVICES LLC, as an Issuer
By:	/s/ L. Melvin Cooper
	L. Melvin Cooper,
	Senior Vice President and Chief Financial Officer
FORBES ENERGY CAPITAL INC., as an Issuer
By:	/s/ L. Melvin Cooper
	L. Melvin Cooper,
	Senior Vice President and Chief Financial Officer
C.C. FORBES, LLC, as a Guarantor
By:	/s/ L. Melvin Cooper
	L. Melvin Cooper,
	Senior Vice President and Chief Financial Officer
TX ENERGY SERVICES, LLC, as a Guarantor
By:	/s/ L. Melvin Cooper
	L. Melvin Cooper,
	Senior Vice President and Chief Financial Officer
SUPERIOR TUBING TESTERS, LLC, as a Guarantor
By:	/s/ L. Melvin Cooper
	L. Melvin Cooper,
	Senior Vice President and Chief Financial Officer
WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee
By:	/s/ Martin Reed
	Martin Reed
	Vice President

Signature Page to Supplemental Indenture

EX-4.5

Exhibit 4.5

NOTATION OF GUARANTEE

For value received, Forbes Energy Services Ltd. (the “New Parent”) has unconditionally guaranteed, to the extent set forth in and subject to the provisions of that certain Indenture dated as of February 12, 2008 (the “Indenture”), among Forbes Energy Services LLC, a Delaware limited liability company, Forbes Energy Capital Inc., a Delaware corporation (collectively, the “Issuers”), the Guarantors party thereto (the “Guarantors”) and Wells Fargo Bank, National Association, as trustee (the “Trustee”), and that certain Supplemental Indenture dated as of May 29, 2008, among the New Parent, the Issuers, the Guarantors and the Trustee, (a) the due and punctual payment of the principal of, premium, if any, and interest on, the Notes, whether at maturity, by acceleration, redemption or otherwise, the due and punctual payment of interest on overdue principal of and interest on the Notes, if any, if lawful, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantors to the Holders of Notes and to the Trustee pursuant to the Guarantee and the Indenture, and the limitations thereon, are expressly set forth in Article 11 of the Indenture and reference is hereby made to the Indenture for the precise terms of the Guarantee.

Capitalized terms used but not defined herein have the meanings given to them in the Indenture.

FORBES ENERGY SERVICES LTD., as a Guarantor
By:	/s/ L. Melvin Cooper
Name:	L. Melvin Cooper
Title:	Senior Vice President and Chief Financial Officer

EX-4.6

Exhibit 4.6

NOTATION OF GUARANTEE

For value received, Forbes Energy International, LLC, a Delaware limited liability company (the “New Sub”) has unconditionally guaranteed, to the extent set forth in and subject to the provisions of that certain Indenture dated as of February 12, 2008 and as supplemented from time to time (the “Indenture”), among Forbes Energy Services LLC, a Delaware limited liability company, Forbes Energy Capital Inc., a Delaware corporation (collectively, the “Issuers”), the Guarantors named therein or added thereto by supplement (the “Guarantors”) and Wells Fargo Bank, National Association, as trustee and collateral agent (the “Trustee”), and that certain Supplemental Indenture dated as of October 6, 2008, among the New Sub, the Issuers, the Guarantors and the Trustee, (a) the due and punctual payment of the principal of, premium, if any, and interest on, the Notes, whether at maturity, by acceleration, redemption or otherwise, the due and punctual payment of interest on overdue principal of and interest on the Notes, if any, if lawful, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantors to the Holders of Notes and to the Trustee pursuant to the Guarantee and the Indenture, and the limitations thereon, are expressly set forth in Article 11 of the Indenture and reference is hereby made to the Indenture for the precise terms of the Guarantee.

Capitalized terms used but not defined herein have the meanings given to them in the Indenture.

FORBES ENERGY INTERNATIONAL, LLC, as a Guarantor
By:	/s/ L. Melvin Cooper
Name:	L. Melvin Cooper
Title:	Senior Vice President, Chief Financial Officer and Assistant Secretary

EX-4.7

Exhibit 4.7

REGISTRATION RIGHTS AGREEMENT

Dated as of February 7, 2008

Among

Forbes Energy Services LLC,

as a Co-Issuer,

Forbes Energy Capital Inc.,

as a Co-Issuer,

The Guarantors

listed on the signature pages hereto

and

Jefferies & Company, Inc.,

as Initial Purchaser

$205,000,000 aggregate principal amount of 11% Senior Secured Notes due 2015

TABLE OF CONTENTS

		Page
SECTION 1.	DEFINITIONS	1
SECTION 2.	EXCHANGE OFFER	4
SECTION 3.	SHELF REGISTRATION	8
SECTION 4.	ADDITIONAL INTEREST	9
SECTION 5.	REGISTRATION PROCEDURES	11
SECTION 6.	REGISTRATION EXPENSES	18
SECTION 7.	INDEMNIFICATION	19
SECTION 8.	RULES 144 AND 144A	22
SECTION 9.	UNDERWRITTEN REGISTRATIONS	22
SECTION 10.	MISCELLANEOUS	23

-i-

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement, dated as of February 7, 2008 (this “Agreement”), is entered into among Forbes Energy Services LLC, a Delaware limited liability company (the “Company”), Forbes Energy Capital Inc., a Delaware corporation (“Capital”), the guarantors listed on the signature pages hereto (the “Guarantors”), and Jefferies & Company, Inc., as the initial purchaser (the “Initial Purchaser”).

This Agreement is entered into in connection with the Note Purchase Agreement, dated February 7, 2008, among the Company, Capital, the Guarantors and the Initial Purchaser (the “Note Purchase Agreement”), pursuant to which the Company agreed to issue and sell $205,000,000 in aggregate principal amount of the Company’s 11% Senior Secured Notes due 2015 (the “Notes”) to the Initial Purchaser (the “Offering”) in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended, and the rules and regulations of the Securities and Exchange Commission (the “Commission”) thereunder (collectively, the “Securities Act”). The execution and delivery of this Agreement is a condition to the Initial Purchaser’s obligation to purchase the Notes under the Note Purchase Agreement.

The parties hereby agree as follows:

Section 1. Definitions.

As used in this Agreement, the following terms shall have the following meanings:

“Action” shall have the meaning set forth in Section 7(c) hereof.

“Additional Interest” shall have the meaning set forth in Section 4(a) hereof.

“Advice” shall have the meaning set forth in Section 5 hereof.

“Agreement” shall have the meaning set forth in the first introductory paragraph hereto.

“Applicable Period” shall have the meaning set forth in Section 2(b) hereof.

“Board of Directors” shall have the meaning set forth in Section 5 hereof.

“Business Day” shall mean a day that is not a Legal Holiday.

“Co-Issuers” shall mean the Company, Capital and the Guarantors, such that the obligations of the Company, Capital and the Guarantors under this Agreement shall be joint and several obligations in every respect including but not limited to the obligations to pay any Additional Interest, other amounts and any indemnification and contribution obligations, in each case, as set forth in this Agreement, and shall also include such parties’ permitted successors and assigns.

“Commission” shall have the meaning set forth in the introductory paragraph hereto.

“Company” shall have the meaning set forth in the preamble hereof.

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“Day” shall mean a calendar day.

“Damages Payment Date” shall have the meaning set forth in Section 4(b) hereof.

“Delay Period” shall have the meaning set forth in Section 5 hereof.

“Effectiveness Period” shall have the meaning set forth in Section 3(b) hereof.

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

“Exchange Notes” shall have the meaning set forth in Section 2(a) hereof.

“Exchange Offer” shall have the meaning set forth in Section 2(a) hereof.

“Exchange Offer Registration Statement” shall have the meaning set forth in Section 2(a) hereof.

“Guarantors” shall have the meaning set forth in the preamble hereof.

“Holder” shall mean any holder of a Registrable Note or Registrable Notes.

“Indenture” shall mean the Indenture, dated as of February 12, 2008, among the Company, the Guarantors and Wells Fargo Bank, National Association, as trustee, pursuant to which the Notes are being issued, as amended or supplemented from time to time in accordance with the terms thereof.

“Initial Purchaser” shall have the meaning set forth in the preamble hereof.

“Inspectors” shall have the meaning set forth in Section 5(n) hereof.

“Issue Date” shall mean February 12, 2008, the date of original issuance of the Notes.

“Legal Holiday” shall mean a Saturday, a Sunday or a day on which banking institutions in New York, New York are required by law, regulation or executive order to remain closed.

“Losses” shall have the meaning set forth in Section 7(a) hereof.

“NASD” shall have the meaning set forth in Section 5(r) hereof.

“Note Purchase Agreement shall have the meaning set forth in the introductory paragraph hereto.

“Notes” shall have the meaning set forth in the introductory paragraph hereto.

“Offering” shall have the meaning set forth in the introductory paragraph hereto.

“Participant” shall have the meaning set forth in Section 7(a) hereof.

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“Participating Broker-Dealer” shall have the meaning set forth in Section 2(b) hereof.

“Person” shall mean an individual, corporation, partnership, joint venture association, joint stock company, trust, unincorporated limited liability company, government or any agency or political subdivision thereof or any other entity.

“Private Exchange” shall have the meaning set forth in Section 2(b) hereof.

“Private Exchange Notes” shall have the meaning set forth in Section 2(b) hereof.

“Prospectus” shall mean the prospectus included in any Registration Statement (including, without limitation, any prospectus subject to completion and a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

“Records” shall have the meaning set forth in Section 5(n) hereof.

“Registrable Notes” shall mean each Note upon its original issuance and at all times subsequent thereto, each Exchange Note as to which Section 2(c)(iv) hereof is applicable upon original issuance and at all times subsequent thereto and each Private Exchange Note upon original issuance thereof and at all times subsequent thereto, in each case until (i) a Registration Statement (other than, with respect to any Exchange Note as to which Section 2(c)(iv) hereof is applicable, the Exchange Offer Registration Statement) covering such Note, Exchange Note or Private Exchange Note has been declared effective by the Commission and such Note, Exchange Note or such Private Exchange Note, as the case may be, has been disposed of in accordance with such effective Registration Statement, (ii) such Note has been exchanged by a Person other than a broker-dealer pursuant to the Exchange Offer for an Exchange Note or Exchange Notes that may be resold without restriction under state and federal securities laws or, following the exchange by a broker-dealer in the Exchange Offer of a 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, (iii) such Note, Exchange Note or Private Exchange Note, as the case may be, ceases to be outstanding or (iv) such Note, Exchange Note or Private Exchange Note has been sold in compliance with Rule 144 or is salable pursuant to Rule 144(k) (or any similar provision then in force other than Rule 144A).

“Registration Default” shall have the meaning set forth in Section 4(a) hereof.

“Registration Statement” shall mean any appropriate registration statement of the Co-Issuers covering any of the Registrable Notes filed with the Commission under the Securities Act, and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.

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“Regulation S Notes” shall mean the Notes issued and sold outside the United States to the Initial Purchaser in a transaction exempt from the registration requirements of the Securities Act in reliance upon Regulation S promulgated under the Securities Act.

“Requesting Participating Broker-Dealer” shall have the meaning set forth in Section 2(b) hereof.

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

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

“Rule 415” shall mean Rule 415 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission.

“Securities Act” shall have the meaning set forth in the introductory paragraph hereof.

“Shelf Filing Date” shall have the meaning set forth in Section 3(a) hereof.

“Shelf Filing Event” shall have the meaning set forth in Section 2(c) hereof.

“Shelf Registration” shall have the meaning set forth in Section 3(a) hereof.

“Shelf Registration Statement” shall mean a Registration Statement filed in connection with a Shelf Registration.

“TIA” shall mean the Trust Indenture Act of 1939, as amended.

“Trustee” shall mean the trustee under the Indenture and the trustee (if any) under any indenture governing the Exchange Notes and Private Exchange Notes.

“Underwritten registration or underwritten offering” shall mean a registration in which securities of any Co-Issuer are sold to an underwriter for reoffering to the public.

Section 2. Exchange Offer.

(a) The Co-Issuers shall (i) file within 90 days of the Issue Date a Registration Statement (the “Exchange Offer Registration Statement”) with the Commission on an appropriate registration form with respect to a registered offer (the “Exchange Offer”) to exchange any and all of the Registrable Notes for a like aggregate principal amount of notes (the “Exchange Notes”) that are identical in all material respects to the Notes (except that the

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Exchange Notes shall not contain terms with respect to transfer restrictions or Additional Interest upon a Registration Default) and (ii) use their commercially reasonable efforts to cause the Exchange Offer Registration Statement to be declared effective under the Securities Act within 210 days after the Issue Date. To the extent not prohibited by any applicable law or applicable interpretation of the Commission, upon the Exchange Offer Registration Statement being declared effective by the Commission, the Co-Issuers will: (i) commence the Exchange Offer as soon as practicable after the Exchange Offer Registration Statement is declared effective, (ii) keep the Exchange Offer open for not less than 20 business days (or longer if required by applicable law) after the date notice of the Exchange Offer is mailed to Holders, and (iii) use all commercially reasonable efforts to issue within 30 business days, or longer, if required by the federal securities laws, after the date on which the Exchange Offer Registration Statement is declared effective Exchange Notes in exchange for Notes tendered prior thereto in the Exchange Offer and to otherwise consummate the Exchange Offer

Each Holder that participates in the Exchange Offer will be required to represent to the Co-Issuers in writing that (i) any Exchange Notes to be received by it will be acquired in the ordinary course of its business, (ii) it has no arrangement or understanding with any Person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Notes in violation of the provisions of the Securities Act or, if it is an affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iii) if such Holder is not a broker-dealer, it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes, (iv) if such Holder is a broker-dealer that will receive Exchange Notes for its own account in exchange for Notes that were acquired as a result of market-making or other trading activities, it will comply with the applicable provisions of the Securities Act in connection with any resale of such Exchange Notes, (v) such Holder has full power and authority to transfer the Notes in exchange for the Exchange Notes and that the Co-Issuers will acquire good and unencumbered title thereto free and clear of any liens, restrictions, charges or encumbrances and not subject to any adverse claims; and (vi) such Holder is not an “affiliate” (as defined in Rule 405 promulgated under the Securities Act) of the Co-Issuers.

(b) The Co-Issuers and the Initial Purchaser acknowledge that the staff of the Commission has taken the position that any broker-dealer that elects to exchange Notes that were acquired by such broker-dealer for its own account as a result of market-making or other trading activities for Exchange Notes in the Exchange Offer (a “Participating Broker-Dealer”) may be deemed to be an “underwriter” within the meaning of the Securities Act and must deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes (other than a resale of an unsold allotment resulting from the original offering of the Regulation S Notes).

The Co-Issuers and the Initial Purchasers also acknowledge that the staff of the Commission has taken the position that if the Prospectus contained in the Exchange Offer Registration Statement includes a plan of distribution containing a statement to the above effect and the means by which Participating Broker-Dealers may resell the Exchange Notes, without naming the Participating Broker-Dealers or specifying the amount of Exchange Notes owned by them, such Prospectus may be delivered by Participating Broker-Dealers to satisfy their prospectus delivery obligations under the Securities Act in connection with resales of Exchange Notes for their own accounts, so long as the Prospectus otherwise meets the requirements of the Securities Act.

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In light of the foregoing, if requested by a Participating Broker-Dealer (a “Requesting Participating Broker-Dealer”), the Co-Issuers agree to use their reasonable best efforts to keep the Exchange Offer Registration Statement continuously effective for a period not to exceed 120 days after the date on which the Exchange Offer Registration Statement is declared effective, or such longer period if extended pursuant to the last paragraph of Section 5 hereof (such period, the “Applicable Period”), or such earlier date as all Requesting Participating Broker-Dealers shall have notified the Co-Issuers in writing that such Requesting Participating Broker-Dealers have resold all Exchange Notes acquired in the Exchange Offer. The Co-Issuers shall include a plan of distribution in such Exchange Offer Registration Statement that meets the requirements set forth in the preceding paragraph.

If, prior to consummation of the Exchange Offer, the Initial Purchaser or any Holder, as the case may be, holds any Notes acquired by it that have, or that are reasonably likely to be determined to have, the status of an unsold allotment in an initial distribution, or any Holder is not entitled to participate in the Exchange Offer, the Co-Issuers upon the request of the Initial Purchaser or any such Holder, as the case may be, shall simultaneously with the delivery of the Exchange Notes in the Exchange Offer, issue and deliver to the Initial Purchasers or any such Holder, as the case may be, in exchange (the “Private Exchange”) for such Notes held by the Initial Purchaser or any such Holder, as the case may be, a like principal amount of notes (the “Private Exchange Notes”) of the Co-Issuers that are identical in all material respects to the Exchange Notes except that the Private Exchange Notes may be subject to restrictions on transfer and bear a legend to such effect. The Private Exchange Notes shall be issued pursuant to the same indenture as the Exchange Notes and bear the same CUSIP number as the corresponding Exchange Notes.

For each Note surrendered in the Exchange Offer, the Holder will receive an Exchange Note having a principal amount equal to that of the surrendered Note. Interest on each Exchange Note and Private Exchange Note issued pursuant to the Exchange Offer and in the Private Exchange will accrue from the last interest payment date on which interest was paid on the Notes surrendered in exchange therefor or, if no interest has been paid on the Notes, from the Issue Date.

Upon consummation of the Exchange Offer in accordance with this Section 2, the Co-Issuers shall have no further registration obligations other than the Co-Issuers’ continuing registration obligations with respect to (i) Private Exchange Notes, (ii) Exchange Notes held by Participating Broker-Dealers and (iii) Notes or Exchange Notes as to which clause (c)(iii) of this Section 2 applies.

In connection with the Exchange Offer, the Co-Issuers shall:

(1) mail or cause to be mailed to each Holder entitled to participate in the Exchange Offer a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents;

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(2) utilize the services of a depositary for the Exchange Offer with an address in the Borough of Manhattan, The City of New York;

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

(4) otherwise comply in all material respects with all applicable laws, rules and regulations.

As soon as practicable after the close of the Exchange Offer and the Private Exchange, if any, the Co-Issuers shall:

(1) accept for exchange all Notes validly tendered and not validly withdrawn by the Holders pursuant to the Exchange Offer and the Private Exchange, if any;

(2) deliver or cause to be delivered to the Trustee for cancellation all Notes so accepted for exchange; and

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

The Exchange Offer and the Private Exchange shall not be subject to any conditions, other than that (i) the Exchange Offer or Private Exchange, as the case may be, does not violate applicable law or any applicable interpretation of the staff of the Commission, (ii) no action or proceeding shall have been instituted or threatened in any court or by any governmental agency which might materially impair the ability of the Co-Issuers to proceed with the Exchange Offer or the Private Exchange, and no material adverse development shall have occurred in any existing action or proceeding with respect to the Co-Issuers and (iii) all governmental approvals shall have been obtained, which approvals the Co-Issuers deem necessary for the consummation of the Exchange Offer or Private Exchange.

The Exchange Notes and the Private Exchange Notes shall be issued under (i) the Indenture or (ii) an indenture identical in all material respects to the Indenture (in either case, with such changes as are necessary to comply with any requirements of the Commission to effect or maintain the qualification thereof under the TIA) and which, in either case, has been qualified under the TIA and shall provide that (a) the Exchange Notes shall not be subject to the transfer restrictions set forth in the Indenture and (b) the Private Exchange Notes shall be subject to the transfer restrictions set forth in the Indenture. The Indenture or such indenture shall provide that the Exchange Notes, the Private Exchange Notes and the Notes shall vote and consent together on all matters as one class and that none of the Exchange Notes, the Private Exchange Notes or the Notes will have the right to vote or consent as a separate class on any matter.

(c) In the event that:

(i) the Co-Issuers are not:

(A) required to file the Exchange Offer Registration Statement;

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(B) permitted to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or the applicable interpretations of the staff of the Commission;

(ii) for any reason the Exchange Offer is not consummated within 240 days of the Issue Date;

(iii) a Holder notifies the Company prior to the 20^th Business Day following consummation of the Exchange Offer that:

(A) it is prohibited by law or Commission policy from participating in the Exchange Offer;

(B) it may not resell the exchange notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales; or

(C) it is a broker-dealer and owns notes acquired directly from the Issuers or an affiliate of the Issuers; or

(iv) the Initial Purchaser so requests with respect to Regulation S Notes or corresponding Private Exchange Notes that have, or that are reasonably likely to be determined to have, the status of unsold allotments in an initial distribution and such Holder so notifies the Company.

(each such event referred to in clauses (i) through (iv) of this sentence, a “Shelf Filing Event”), then the Co-Issuers shall file a Shelf Registration pursuant to Section 3 hereof.

Section 3. Shelf Registration.

If at any time a Shelf Filing Event shall occur, then:

(a) The Co-Issuers shall file promptly with the Commission a Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 covering all of the Registrable Notes not exchanged in the Exchange Offer, Private Exchange Notes and Exchange Notes as to which Section 2(c) is applicable (the “Shelf Registration”). The Co-Issuers shall use their reasonable best efforts to file with the Commission the Shelf Registration as promptly as practicable but in any event within 30 days of notice of the Shelf Filing Event (the “Shelf Filing Date”). The Shelf Registration shall be on Form S-1 or another appropriate form permitting registration of such Registrable Notes for resale by Holders in the manner or manners designated by them (including, without limitation, one or more underwritten offerings). The Co-Issuers shall not permit any securities other than the Registrable Notes to be included in the Shelf Registration.

(b) The Co-Issuers shall use their reasonable best efforts:

(i) to cause the Shelf Registration Statement to be declared effective under the Securities Act on or prior to the 90^th day after the Shelf Filing Event; and

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(ii) to keep the Shelf Registration Statement effective until the earliest of (A) the time when the Notes covered by the Shelf Registration Statement can be sold pursuant to Rule 144 without any information under clause (c), (e), (f) and (h) of Rule 144, (B) two years from the Issue Date and (c) the date on which all Notes registered thereunder are disposed of in accordance therewith subject to extension pursuant to the penultimate paragraph of Section 5 hereof (the “Effectiveness Period”); provided, however, that (x) the Effectiveness Period in respect of the Shelf Registration shall be extended to the extent required to permit dealers to comply with the applicable prospectus delivery requirements of Rule 174 under the Securities Act and as otherwise provided herein and (y) the Co-Issuers may suspend the effectiveness of the Shelf Registration Statement by written notice to the Holders solely as a result of the filing of a post-effective amendment to the Shelf Registration Statement to incorporate annual audited financial information with respect to the Co-Issuers where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related Prospectus, provided that the Effectiveness Period in respect of the Shelf Registration shall be extended by such number of days for which effectiveness is suspended under this clause (y).

(c) Supplements and Amendments. The Co-Issuers agree to supplement or make amendments to the Shelf Registration Statement as and when required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration Statement or by the Securities Act or rules and regulations thereunder for shelf registration, or if reasonably requested by the Holders of a majority in aggregate principal amount of the Registrable Notes covered by such Registration Statement or by any underwriter of such Registrable Notes.

Section 4. Additional Interest.

(a) The Co-Issuers and the Initial Purchaser agree that the Holders will suffer damages if the Co-Issuers fail to fulfill their obligations under Section 2 or Section 3 hereof and that it would not be feasible to ascertain the extent of such damages with precision. Accordingly, the Co-Issuers agree that if:

(i) the Co-Issuers fail to file the Exchange Offer Registration Statement with the Commission on or prior to the 90^th day after the Issue Date,

(ii) the Exchange Offer Registration Statement is not declared effective on or prior to the 210^th day following the Issue Date or, if that day is not a Business Day, the next day that is a Business Day or is declared effective but thereafter ceases to be effective or usable in connection with the Exchange Offer;

(iii) the Exchange Offer is not consummated on or prior to the 30^th day following the date on which the Exchange Offer Registration Statement is declared effective;

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(iv) a Shelf Registration Statement required to be filed pursuant to Section 2(c) is not filed on or prior to the 30^th day following the Shelf Filing Event, or, if that day is not a Business Day, the next day that is a Business Day;

(v) a Shelf Registration Statement that is required to be filed pursuant to Section 2(c) is not declared effective by the 90^th day after the Shelf Filing Event (or if such day is not a Business Day, the next day that is a Business Day), or is declared effective by such date but thereafter ceases to be effective or usable, except if the Shelf Registration ceases to be effective or usable as specifically permitted by the penultimate paragraph of Section 5 hereof; or

(vi) the Shelf Registration Statement does not remain continuously effective for the Effectiveness Period

(each such event referred to in clauses (i) through (vi) a “Registration Default”), Additional Interest in the form of additional cash interest (“Additional Interest”) will accrue on the affected Notes and the affected Exchange Notes, as applicable. The amount of Additional Interest will be equal to $0.05 per week for $1,000 principal amount of Registrable Notes for the first 90-day period immediately following the occurrence of a Registration Default, increasing by $0.05 per week per $1,000 principal amount of Registrable Notes with respect to each subsequent 90-day period up to a maximum amount of additional interest for all Registration Defaults of $0.50 per week per $1,000 principal amount of Registrable Notes, from and including the date on which any such Registration Default shall occur to, but excluding, the earlier of (1) the date on which all Registration Defaults have been cured or (2) the date on which all the Notes and Exchange Notes otherwise become freely transferable by Holders other than affiliates of the Co-Issuers without further registration under the Securities Act.

The Company will pay such Additional Interest on regular Interest Payment Dates (as defined in the Indenture) in the same manner as other interest is paid on the Notes. Such Additional Interest will be in addition to any other payable from time to time with respect to the Notes. All Additional Interest will be paid by the Co-Issuers on the next scheduled interest payment date to DTC or its nominee by wire transfer of immediately available funds or by federal funds check and to holders of certificated Notes by wire transfer to the accounts specified by them or by mailing checks to their registered addresses if no such accounts have been specified.

Notwithstanding the foregoing, (1) the amount of Additional Interest payable shall not increase more than by the foregoing amounts because more than one Registration Default has occurred and is pending and (2) a Holder of Notes or Exchange Notes who is not entitled to the benefits of the Shelf Registration Statement (i.e., such Holder has not elected to include information) shall not be entitled to Additional Interest with respect to a Registration Default that pertains to the Shelf Registration Statement.

(b) So long as Notes remain outstanding, the Co-Issuers shall notify the Trustee within five Business Days after each and every date on which an event occurs in respect of which Additional Interest is required to be paid. Any amounts of Additional Interest due pursuant to clauses (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be payable in cash semi-annually

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on each Interest Payment Date (each a “Damages Payment Date”), commencing with the first such date occurring after any such Additional Interest commence to accrue, to Holders to whom regular interest is payable on such Damages Payment Date with respect to Notes that are Registrable Securities. The amount of Additional Interest for Registrable Notes will be determined by multiplying the applicable rate of Additional Interest by the aggregate principal amount of all such Registrable Notes outstanding on the Damages Payment Date following such Registration Default in the case of the first such payment of Additional Interest with respect to a Registration Default (and thereafter at the next succeeding Damages Payment Date until the cure of such Registration Default), multiplied by a fraction, the numerator of which is the number of days such Additional Interest rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months and, in the case of a partial month, the actual number of days elapsed), and the denominator of which is 360.

Section 5. Registration Procedures.

In connection with the filing of any Registration Statement pursuant to Section 2 or 3 hereof, the Co-Issuers shall effect such registrations to permit the sale of the securities covered thereby in accordance with the intended method or methods of disposition thereof, and pursuant thereto and in connection with any Registration Statement filed by the Co-Issuers hereunder, the Co-Issuers shall:

(a) Prepare and file with the Commission the Registration Statement or Registration Statements prescribed by Section 2 or 3 hereof, and use their reasonable best efforts to cause each such Registration Statement to become effective and remain effective as provided herein; provided, however, that if (1) such filing is pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period relating thereto, before filing any Registration Statement or Prospectus or any amendments or supplements thereto, the Co-Issuers shall furnish to and afford the Holders of the Registrable Notes covered by such Registration Statement or each such Participating Broker-Dealer, as the case may be, their counsel (if such counsel is known to the Co-Issuers) and the managing underwriters, if any, a reasonable opportunity to review copies of all such documents (including copies of any documents to be incorporated by reference therein and all exhibits thereto) proposed to be filed (in each case at least five Business Days prior to such filing or such later date as is reasonable under the circumstances). The Co-Issuers shall not file any Registration Statement or Prospectus or any amendments or supplements thereto if the Holders of a majority in aggregate principal amount of the Registrable Notes covered by such Registration Statement, or any such Participating Broker-Dealer, as the case may be, their counsel, or the managing underwriters, if any, shall reasonably object on a timely basis.

(b) Prepare and file with the Commission such amendments and post-effective amendments to each Shelf Registration Statement or Exchange Offer Registration Statement, as the case may be, as may be necessary to keep such Registration Statement continuously effective for the Effectiveness Period or the Applicable Period, as the case may be, subject to any Delay Periods; cause the related Prospectus to be supplemented by any Prospectus supplement required by applicable law, and as so supplemented to be filed pursuant to Rule 424 (or any similar

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provisions then in force) promulgated under the Securities Act; and comply with the provisions of the Securities Act and the Exchange Act applicable to it with respect to the disposition of all Registrable Notes covered by such Registration Statement as so amended or in such Prospectus as so supplemented and with respect to the subsequent resale of any securities being sold by a Participating Broker-Dealer covered by any such Prospectus, in each case, in accordance with the intended methods of distribution set forth in such Registration Statement or Prospectus, as so amended.

(c) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period relating thereto from whom the Co-Issuers have received written notice that such Broker-Dealer will be a Participating Broker-Dealer in the applicable Exchange Offer, notify the selling Holders of Registrable Notes, or each such Participating Broker-Dealer, as the case may be, their counsel and the managing underwriters, if any, as promptly as possible, and, if requested by any such Person, confirm such notice in writing, (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective under the Securities Act (including in such notice a written statement that any Holder may, upon request, obtain, at the sole expense of the Co-Issuers, one conformed copy of such Registration Statement or post-effective amendment including financial statements and schedules, documents incorporated or deemed to be incorporated by reference and exhibits), (ii) of the issuance by the Commission of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any preliminary prospectus or the initiation of any proceedings for that purpose, (iii) if at any time when a Prospectus is required by the Securities Act to be delivered in connection with sales of the Registrable Notes or resales of Exchange Notes by Participating Broker-Dealers the representations and warranties of the Co-Issuers contained in any agreement (including any underwriting agreement) contemplated by Section 5(m)(i) hereof cease to be true and correct in all material respects, (iv) of the receipt by the Co-Issuers of any notification with respect to the suspension of the qualification or exemption from qualification of a Registration Statement or any of the Registrable Notes or the Exchange Notes for offer or sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose, (v) of the happening of any event, the existence of any condition or any information becoming known to the Co-Issuers that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in or amendments or supplements to such Registration Statement, Prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and (vi) of the Co-Issuers’ determination that a post-effective amendment to a Registration Statement would be appropriate.

(d) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is

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required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, use their reasonable best efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Registrable Notes or the Exchange Notes, as the case may be, for sale in any jurisdiction, and, if any such order is issued, to use their reasonable best efforts to obtain the withdrawal of any such order at the earliest practicable moment.

(e) If (1) a Shelf Registration is filed pursuant to Section 3 hereof or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period and if reasonably requested by the managing underwriter or underwriters (if any), the Holders of a majority in aggregate principal amount of the Registrable Notes covered by such Registration Statement or any Participating Broker-Dealer, as the case may be, (i) promptly incorporate in such Registration Statement or Prospectus a prospectus supplement or post-effective amendment such information as the managing underwriter or underwriters (if any), such Holders or any Participating Broker-Dealer, as the case may be (based upon advice of counsel), determines is reasonably necessary to be included therein and (ii) make all required filings of such prospectus supplement or such post-effective amendment as soon as practicable after the Co-Issuers have received notification of the matters to be incorporated in such prospectus supplement or post-effective amendment; provided, however, that the Co-Issuers shall not be required to take any action hereunder that would, in the written opinion of counsel to the Co-Issuers, violate applicable laws.

(f) If (1) a Shelf Registration is filed pursuant to Section 3 hereof or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, furnish to each selling Holder of Registrable Notes or each such Participating Broker-Dealer, as the case may be, who so requests, their counsel and each managing underwriter, if any, at the sole expense of the Co-Issuers, one conformed copy of the Registration Statement or Registration Statements and each post-effective amendment thereto, including financial statements and schedules, and, if requested, all documents incorporated or deemed to be incorporated therein by reference and all exhibits.

(g) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, deliver to each selling Holder of Registrable Notes or each such Participating Broker-Dealer, as the case may be, their respective counsel, and the underwriters, if any, at the sole expense of the Co-Issuers, as many copies of the Prospectus or Prospectuses (including each form of preliminary prospectus) and each amendment or supplement thereto and any documents incorporated by reference therein as such Persons may reasonably request; and, subject to the last paragraph of this Section 5, the Co-Issuers hereby consent to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders of Registrable Notes or each such Participating Broker-Dealer, as the case may be, and the underwriters or agents, if any, and dealers (if any), in connection with the offering and sale of the Registrable Notes covered by, or the sale by Participating Broker-Dealers of the Exchange Notes pursuant to, such Prospectus and any amendment or supplement thereto.

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(h) Prior to any public offering of Registrable Notes or Exchange Notes or any delivery of a Prospectus contained in the Exchange Offer Registration Statement by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, use their reasonable best efforts to register or qualify, and to cooperate with the selling Holders of Registrable Notes or each such Participating Broker-Dealer, as the case may be, the managing underwriter or underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Notes or Exchange Notes, as the case may be, for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any selling Holder, Participating Broker-Dealer, or the managing underwriter or underwriters reasonably request; provided, however, that where Exchange Notes or Registrable Notes are offered other than through an underwritten offering, the Co-Issuers agree to use their reasonable best efforts to cause the Co-Issuers’ counsel to perform Blue Sky investigations and file registrations and qualifications required to be filed pursuant to this Section 5(h); keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective and do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of such Exchange Notes or Registrable Notes covered by the applicable Registration Statement; provided, however, that the Co-Issuers shall not be required to (A) qualify generally to do business in any jurisdiction where they are not then so qualified, (B) take any action that would subject them to general service of process in any such jurisdiction where they are not then so subject or (C) subject themselves to taxation in excess of a nominal dollar amount in any such jurisdiction where they are not then so subject.

(i) If a Shelf Registration is filed pursuant to Section 3 hereof, cooperate with the selling Holders of Registrable Notes and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Notes to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with The Depository Trust Company and enable such Registrable Notes to be in such denominations and registered in such names as the managing underwriter or underwriters, if any, or selling Holders may request at least five Business Days prior to any sale of such Registrable Notes or Exchange Notes.

(j) Use their reasonable best efforts to cause the Registrable Notes or Exchange Notes covered by any Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be reasonably necessary to enable the seller or sellers thereof or the underwriter or underwriters, if any, to consummate the disposition of such Registrable Notes or Exchange Notes, except as may be required solely as a consequence of the nature of such selling Holder’s business, in which case the Co-Issuers will cooperate in all reasonable respects with the filing of such Registration Statement and the granting of such approvals.

(k) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks

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to sell Exchange Notes during the Applicable Period, upon the occurrence of any event contemplated by Section 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable prepare and (subject to Section 5(a) and the penultimate paragraph of this Section 5) file with the Commission, at the sole expense of the Co-Issuers, a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Notes being sold thereunder or to the purchasers of the Exchange Notes to whom such Prospectus will be delivered by a Participating Broker-Dealer, any such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(l) Prior to the effective date of the first Registration Statement relating to the Registrable Notes, (i) provide the Trustee with certificates for the Registrable Notes in a form eligible for deposit with The Depository Trust Company and (ii) provide CUSIP numbers for the Registrable Notes.

(m) In connection with any underwritten offering of Registrable Notes pursuant to a Shelf Registration, enter into an underwriting agreement as is customary in underwritten offerings of debt securities similar to the Notes and take all such other actions as are reasonably requested by the managing underwriter or underwriters in order to expedite or facilitate the registration or the disposition of such Registrable Notes and, in such connection, (i) make such representations and warranties to, and covenants with, the underwriters with respect to the business of the Co-Issuers and their subsidiaries, as then conducted (including any acquired business, properties or entity, if applicable), and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, as are customarily made by issuers to underwriters in underwritten offerings of debt securities similar to the Notes, and confirm the same in writing if and when requested; (ii) use their reasonable best efforts to obtain the written opinions of counsel to the Co-Issuers and written updates thereof in form, scope and substance reasonably satisfactory to the managing underwriter or underwriters, addressed to the underwriters covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by the managing underwriter or underwriters; (iii) use their reasonable best efforts to obtain “cold comfort” letters and updates thereof in form, scope and substance reasonably satisfactory to the managing underwriter or underwriters from the independent certified public accountants of the Co-Issuers (and, if necessary, any other independent certified public accountants of any subsidiary of the Co-Issuers or of any business acquired by the Co-Issuers for which financial statements and financial data are, or are required to be, included or incorporated by reference in the Registration Statement), addressed to each of the underwriters, such letters to be in customary form and covering matters of the type customarily covered in “cold comfort” letters in connection with underwritten offerings; and (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures no less favorable than those set forth in Section 7 hereof (or such other provisions and procedures acceptable to Holders of a majority in aggregate principal amount of Registrable Notes covered by such Registration Statement and the managing underwriter or underwriters or agents) with respect to all parties to be indemnified pursuant to said Section; provided that the Co-Issuers

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shall not be required to provide indemnification to any underwriter selected in accordance with the provisions of Section 9 hereof with respect to information relating to such underwriter furnished in writing to the Co-Issuers by or on behalf of such underwriter expressly for inclusion in such Registration Statement. The above shall be done at each closing under such underwriting agreement, or as and to the extent required thereunder.

(n) If (1) a Shelf Registration is filed pursuant to Section 3 hereof or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, make available for inspection by any selling Holder of such Registrable Notes being sold or each such Participating Broker-Dealer, as the case may be, any underwriter participating in any such disposition of Registrable Notes, if any, and any attorney, accountant or other agent retained by any such selling Holder or each such Participating Broker-Dealer, as the case may be, or underwriter (collectively, the “Inspectors”), at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and instruments of the Co-Issuers and their subsidiaries (collectively, the “Records”) as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of the Co-Issuers and their subsidiaries to supply all information reasonably requested by any such Inspector in connection with such Registration Statement and Prospectus. Each Inspector shall agree in writing that it will keep the Records confidential and that it will not disclose, or use in connection with any market transactions in violation of any applicable securities laws, any Records that the Co-Issuers determine, in good faith, to be confidential and that any one of them notifies the Inspectors in writing are confidential unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such Registration Statement or Prospectus, (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, (iii) disclosure of such information is necessary or advisable in the opinion of counsel for an Inspector in connection with any action, claim, suit or proceeding, directly or indirectly, involving or potentially involving such Inspector and arising out of, based upon, relating to, or involving this Agreement or the Note Purchase Agreement, or any transactions contemplated hereby or thereby or arising hereunder or thereunder, or (iv) the information in such Records has been made generally available to the public; provided, however, that (i) each Inspector shall agree to use reasonable best efforts to provide notice to the Co-Issuers of the potential disclosure of any information by such Inspector pursuant to clause (i), (ii) or (iii) of this sentence to permit the Co-Issuers to obtain a protective order (or waive the provisions of this paragraph (n)) and (ii) each such Inspector shall take such actions as are reasonably necessary to protect the confidentiality of such information (if practicable) to the extent such action is otherwise not inconsistent with, an impairment of or in derogation of the rights and interests of the Holder or any Inspector.

(o) Provide an indenture trustee for the Registrable Notes or the Exchange Notes, as the case may be, and cause the Indenture or the trust indenture provided for in Section 2(a) hereof to be qualified under the TIA not later than the effective date of the Exchange Offer or the first Registration Statement relating to the Registrable Notes; and in connection therewith, cooperate with the trustee under any such indenture and the Holders of the Registrable Notes or Exchange Notes, as applicable, to effect such changes to such indenture as may be required for such indenture to be so qualified in accordance with the terms of the TIA; and execute, and use

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their reasonable best efforts to cause such trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the Commission to enable such indenture to be so qualified in a timely manner.

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

(q) If the Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Registrable Notes by Holders to the Co-Issuers (or to such other Person as directed by the Co-Issuers) in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be, mark, or cause to be marked, on such Registrable Notes that such Registrable Notes are being cancelled in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be; provided that in no event shall such Registrable Notes be marked as paid or otherwise satisfied.

(r) Cooperate with each seller of Registrable Notes covered by any Registration Statement and each underwriter, if any, participating in the disposition of such Registrable Notes and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc. (the “NASD”).

(s) Use their reasonable best efforts to take all other steps reasonably necessary or advisable to effect the registration of the Exchange Notes and/or Registrable Notes covered by a Registration Statement contemplated hereby.

The Co-Issuers may require each Holder of Registrable Notes or Exchange Notes as to which any registration is being effected to furnish to the Co-Issuers such information regarding such Holder and the distribution of such Registrable Notes or Exchange Notes as the Co-Issuers may, from time to time, reasonably request. The Co-Issuers may exclude from such registration the Registrable Notes of any Holder so long as such Holder fails to furnish such information within a reasonable time after receiving such request and in the event of such an exclusion, the Co-Issuers shall have no further obligation under this Agreement (including, without limitation, the obligations under Section 4) with respect to such Holder or any subsequent Holder of such Registrable Notes. Each Holder as to which any Shelf Registration is being effected agrees to furnish promptly to the Co-Issuers all information required to be disclosed in order to make any information previously furnished to the Co-Issuers by such Holder not materially misleading.

If any such Registration Statement refers to any Holder by name or otherwise as the holder of any securities of the Co-Issuers, then such Holder shall have the right to require (i) the insertion therein of language, in form and substance reasonably satisfactory to such Holder, to

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the effect that the holding by such Holder of such securities is not to be construed as a recommendation by such Holder of the investment quality of the securities covered thereby and that such holding does not imply that such Holder will assist in meeting any future financial requirements of the Co-Issuers, or (ii) in the event that such reference to such Holder by name or otherwise is not required by the Securities Act or any similar federal statute then in force, the deletion of the reference to such Holder in any amendment or supplement to the applicable Registration Statement filed or prepared subsequent to the time that such reference ceases to be required.

Each Holder of Registrable Notes and each Participating Broker-Dealer agrees by acquisition of such Registrable Notes or Exchange Notes that, upon actual receipt of any notice from the Company (x) of the happening of any event of the kind described in Section 5(c)(ii), 5(c)(iii), 5(c)(iv), or 5(c)(v) hereof, or (y) that the Board of Directors of the Company (the “Board of Directors”) has resolved that a significant financing, acquisition, disposition, merger or other material transaction of any Co-Issuer would be materially adversely affected, then the Co-Issuers may delay the filing or the effectiveness of the Exchange Offer Registration Statement or the Shelf Registration Statement (if not then filed or effective, as applicable) and shall not be required to maintain the effectiveness thereof or amend or supplement the Exchange Offer Registration Statement or the Shelf Registration, in all cases, for a period (a “Delay Period”) expiring upon (i) in the case of the immediately preceding clause (x), such Holder’s or Participating Broker-Dealer’s receipt of the copies of the supplemented or amended Prospectus contemplated by Section 5(k) hereof or until it is advised in writing (the “Advice”) by the Company that the use of the applicable Prospectus may be resumed, and has received copies of any amendments or supplements thereto or (ii) in the case of the immediately preceding clause (y), the date which is the earlier of (A) the date on which such significant financing, acquisition, disposition, merger or other material transaction ceases to interfere with the Co-Issuers’ obligations to file or maintain the effectiveness of any such Registration Statement pursuant to this Agreement or (B) 60 days after the Company notifies the Holders of such good faith determination. There shall not be more than 60 days of Delay Periods during any 12-month period. Each of the Effectiveness Period and the Applicable Period, if applicable, shall be extended by the number of days during any Delay Period. Any Delay Period will not alter the obligations of the Co-Issuers to pay Additional Interest under the circumstances set forth in Section 4 hereof.

In the event of any Delay Period pursuant to clause (y) of the preceding paragraph, notice shall be given as soon as practicable after the Board of Directors makes such a determination of the need for a Delay Period and shall state, to the extent practicable, an estimate of the duration of such Delay Period and shall advise the recipient thereof of the agreement of such Holder provided in the next succeeding sentence. Each Holder, by his acceptance of any Registrable Note, agrees that during any Delay Period, each Holder will discontinue disposition of such Notes or Exchange Notes covered by such Registration Statement or Prospectus or Exchange Notes to be sold by such Holder or Participating Broker-Dealer, as the case may be.

Section 6. Registration Expenses.

All fees and expenses incident to the performance of or compliance with this Agreement by the Co-Issuers (other than any underwriting discounts or commissions and transfer taxes)

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shall be borne by the Co-Issuers, whether or not the Exchange Offer Registration Statement or the Shelf Registration is filed or becomes effective or the Exchange Offer is consummated, including, without limitation, (i) all registration and filing fees (including, without limitation, (A) fees with respect to filings required to be made with the NASD in connection with an underwritten offering and (B) fees and expenses of compliance with state securities or Blue Sky laws (including, without limitation, reasonable fees and disbursements of counsel in connection with Blue Sky qualifications of the Registrable Notes or Exchange Notes and determination of the eligibility of the Registrable Notes or Exchange Notes for investment under the laws of such jurisdictions (x) where the holders of Registrable Notes are located, in the case of an Exchange Offer, or (y) as provided in Section 5(h) hereof, in the case of a Shelf Registration or in the case of Exchange Notes to be sold by a Participating Broker-Dealer during the Applicable Period)), (ii) printing expenses, including, without limitation, expenses of printing certificates for Registrable Notes or Exchange Notes in a form eligible for deposit with The Depository Trust Company and of printing prospectuses if the printing of prospectuses is requested by the managing underwriter or underwriters, if any, or by the Holders of a majority in aggregate principal amount of the Registrable Notes included in any Registration Statement or in respect of Exchange Notes to be sold by any Participating Broker-Dealer during the Applicable Period, as the case may be, (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Co-Issuers and reasonable fees and disbursements of one special counsel for all of the Holders of Registrable Notes (which shall be reasonably acceptable to the Co-Issuers) (exclusive of any counsel retained pursuant to Section 7 hereof), (v) fees and disbursements of all independent certified public accountants referred to in Section 5(m)(iii) hereof (including, without limitation, the expenses of any special audit and “cold comfort” letters required by or incident to such performance), (vi) Securities Act liability insurance, if the Co-Issuers desire such insurance, (vii) fees and expenses of all other Persons retained by the Co-Issuers, (viii) internal expenses of the Co-Issuers (including, without limitation, all salaries and expenses of officers and employees of the Co-Issuers performing legal or accounting duties), (ix) the expense of any annual audit, (x) the fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange, and the obtaining of a rating of the securities, in each case, if applicable, and (xi) the expenses relating to printing, word processing and distributing all Registration Statements, underwriting agreements, indentures and any other documents necessary in order to comply with this Agreement. Notwithstanding the foregoing or anything to the contrary, each Holder shall pay all underwriting discounts and commissions of any underwriters with respect to any Registrable Notes sold by or on behalf of it.

Section 7. Indemnification.

(a) The Co-Issuers agrees to indemnify and hold harmless, to the extent permitted by law, each Holder of Registrable Notes and each Participating Broker-Dealer selling Exchange Notes during the Applicable Period, each Person, if any, who controls any such Person within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act, the agents, employees, officers and directors of each Holder and each such Participating Broker-Dealer and the agents, employees, officers and directors of any such controlling Person (each, a “Participant”) from and against any and all losses, liabilities, claims, damages and expenses (including, but not limited to, reasonable attorneys’ fees and any and all reasonable out-of-pocket expenses actually incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all reasonable amounts paid in

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settlement of any claim or litigation (in the manner set forth in clause (c) below)) (collectively, “Losses”) to which they or any of them may become subject under the Securities Act, the Exchange Act or otherwise insofar as such Losses (or actions in respect thereof) are caused by, arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) or Prospectus (as amended or supplemented if the Co-Issuers shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by, arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the case of the Prospectus, in the light of the circumstances under which they were made, not misleading, provided that (i) the foregoing indemnity shall not be available to any Participant insofar as such Losses are caused, arise out of or are based upon any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information relating to such Participant furnished to the Co-Issuers in writing by or on behalf of such Participant expressly for use therein, and (ii) that the foregoing indemnity with respect to any Prospectus shall not inure to the benefit of any Participant from whom the Person asserting such Losses purchased Registrable Notes if (x) it is established in the related proceeding that such Participant failed to send or give a copy of the Prospectus (as amended or supplemented if such amendment or supplement was furnished to such Participant prior to the written confirmation of such sale) to such Person with or prior to the written confirmation of such sale, if required by applicable law, and (y) the untrue statement or omission or alleged untrue statement or omission was completely corrected in the Prospectus (as amended or supplemented if amended or supplemented as aforesaid) and such Prospectus does not contain any other untrue statement or omission or alleged untrue statement or omission that was the subject matter of the related proceeding. This indemnity agreement will be in addition to any liability that the Co-Issuers may otherwise have, including, but not limited to, liability under this Agreement.

(b) Each Participant agrees, severally and not jointly, to indemnify and hold harmless (in the same manner and to the same extent set forth in subsection 7(a)) the Co-Issuers, each Person, if any, who controls the Co-Issuers within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act, and each of their agents, employees, officers and directors and the agents, employees, officers and directors of any such controlling Person from and against any Losses to which they or any of them may become subject under the Securities Act, the Exchange Act or otherwise insofar as such Losses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) or Prospectus (as amended or supplemented if the Co-Issuers shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by, arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the case of the Prospectus, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that any such Loss arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information relating to such Participant furnished in writing to the Co-Issuers by or on behalf of such Participant expressly for use therein.

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(c) Promptly after receipt by an indemnified party under subsection 7(a) or 7(b) above of notice of the commencement of any action, suit or proceeding (collectively, an “action”), such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify each party against whom indemnification is to be sought in writing of the commencement of such action (but the failure so to notify an indemnifying party shall not relieve such indemnifying party from any liability that it may have under this Section 7 except to the extent that it has been prejudiced in any material respect by such failure). In case any such action is brought against any indemnified party, and it notifies an indemnifying party of the commencement of such action, the indemnifying party will be entitled to participate in such action, and to the extent it may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense of such action with counsel satisfactory to such indemnified party. Notwithstanding the foregoing, the indemnified party or parties shall have the right to employ its or their own counsel in any such action, but the reasonable fees and expenses of such counsel shall be at the expense of such indemnified party or parties unless (i) the employment of such counsel shall have been authorized in writing by the indemnifying parties in connection with the defense of such action, (ii) the indemnifying parties shall not have employed counsel to take charge of the defense of such action within a reasonable time after notice of commencement of the action, or (iii) the named parties to such action (including any impleaded parties) include such indemnified party and the indemnifying party or parties (or such indemnifying parties have assumed the defense of such action), and such indemnified party or parties shall have reasonably concluded, that counsel selected by the indemnifying party has a conflict of interest in representing both the indemnifying party and the indemnified party (in which case the indemnifying parties shall not have the right to direct the defense of such action on behalf of the indemnified party or parties), in any of which events such reasonable fees and expenses of counsel shall be borne by the indemnifying parties. In no event shall the indemnifying party be liable for the fees and expenses of more than one counsel (together with appropriate local counsel) at any time for all indemnified parties in connection with any one action or separate but substantially similar or related actions arising in the same jurisdiction out of the same general allegations or circumstances. Any such separate firm for the Participants shall be designated in writing by Participants who sold a majority in interest of Registrable Notes sold by all such Participants and shall be reasonably acceptable to the Co-Issuers and any such separate firm for the Co-Issuers, their affiliates, officers, directors, representatives, employees and agents and such control Person of the Co-Issuers shall be designated in writing by the Co-Issuers and shall be reasonably acceptable to the Holders. An indemnifying party shall not be liable for any settlement of any claim or action effected without its written consent, which consent may not be unreasonably withheld. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding 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 includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding.

(d) In order to provide for contribution in circumstances in which the indemnification provided for in this Section 7 is for any reason held to be unavailable from the indemnifying party, or is insufficient to hold harmless a party indemnified under this Section 7, each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such aggregate Losses (i) in such proportion as is appropriate to reflect the relative

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benefits received by each indemnifying party, on the one hand, and each indemnified party, on the other hand, from the sale of the Notes to the Purchaser or the Initial Purchasers, as the case may be, or the resale of the Registrable Notes by such Holder, as applicable, or (ii) if such allocation 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 each indemnified party, on the one hand, and each indemnifying party, on the other hand, in connection with the statements or omissions that resulted in such Losses, as well as any other relevant equitable considerations. The relative benefits received by the Co-Issuers, on the one hand, and each Participant, on the other hand, shall be deemed to be in the same proportion as (x) the total proceeds from the sale of the Notes to the Initial Purchaser (net of discounts and commissions but before deducting expenses) received by the Co-Issuers are to (y) the total net profit received by such Participant in connection with the sale of the Registrable Notes. 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 Co-Issuers or such Participant and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission or alleged statement or omission.

(e) The parties agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to above. Notwithstanding the provisions of this Section 7, (i) in no case shall any Participant be required to contribute any amount in excess of the amount by which the net profit received by such Participant in connection with the sale of the Registrable Notes exceeds the amount of any damages that such Participant has otherwise been required to pay by reason of any 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. Any party entitled to contribution will, promptly after receipt of notice of commencement of any action against such party in respect of which a claim for contribution may be made against another party or parties under this Section 7, notify such party or parties from whom contribution may be sought, but the omission to so notify such party or parties shall not relieve the party or parties from whom contribution may be sought from any obligation it or they may have under this Section 7 or otherwise, except to the extent that it has been prejudiced in any material respect by such failure; provided, however, that no additional notice shall be required with respect to any action for which notice has been given under this Section 7 for purposes of indemnification. Anything in this section to the contrary notwithstanding, no party shall be liable for contribution with respect to any action or claim settled without its written consent, provided, however, that such written consent was not unreasonably withheld.

Section 8. Rules 144 and 144A.

For so long as any Registrable Notes remain outstanding, the Co-Issuers covenant that they will file the reports required, if any, to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the Commission thereunder in a timely manner in accordance with the requirements of the Securities Act and the Exchange Act and, if at any time the Co-Issuers are not required to file such reports, they will, upon the request of any

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Holder or beneficial owner of Registrable Notes, make available such information necessary to permit sales pursuant to Rule 144A under the Securities Act. The Co-Issuers further covenant that for so long as any Registrable Notes remain outstanding they will take such further action as any Holder of Registrable Notes may reasonably request from time to time to enable such Holder to sell Registrable Notes without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144(k) and Rule 144A under the Securities Act, as such Rules may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the Commission.

Section 9. Underwritten Registrations.

If any of the Registrable Notes covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will manage the offering will be selected by the Holders of a majority in aggregate principal amount of such Registrable Notes included in such offering and shall be reasonably acceptable to the Co-Issuers.

No Holder of Registrable Notes may participate in any underwritten registration hereunder if such Holder does not (a) agree to sell such Holder’s Registrable Notes on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) complete and execute all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements.

Section 10. Miscellaneous.

(a) No Inconsistent Agreements. The Co-Issuers have not, as of the date hereof, and shall not have, after the date of this Agreement, entered into any agreement with respect to any of their securities that is inconsistent with the rights granted to the Holders of Registrable Notes in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not conflict with and are not inconsistent with, in any material respect, the rights granted to the holders of any of the Co-Issuers’ other issued and outstanding securities under any such agreements. The Co-Issuers have not entered and will not enter into any agreement with respect to any of their securities which will grant to any Person piggy-back registration rights with respect to any Registration Statement.

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

(c) 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 pursuant to a written agreement duly signed and delivered by (I) the Co-Issuers and (II)(A) the Holders of not less than a majority in aggregate principal amount of the then outstanding Registrable Notes and (B) in circumstances that would adversely affect the Participating Broker-Dealers, the Participating Broker-Dealers holding not less than a

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majority in aggregate principal amount of the Exchange Notes held by all Participating Broker-Dealers; provided, however, that Section 7 and this Section 10(c) may not be amended, modified or supplemented except pursuant to a written agreement duly signed and delivered by the Co-Issuers and each Holder and each Participating Broker-Dealer (including any Person who was a Holder or Participating Broker-Dealer of Registrable Notes or Exchange Notes, as the case may be, disposed of pursuant to any Registration Statement) affected by any such amendment, modification, supplement or waiver. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Notes whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders of Registrable Notes may be given by Holders of at least a majority in aggregate principal amount of the Registrable Notes being sold pursuant to such Registration Statement.

(d) Notices. All notices and other communications (including, without limitation, any notices or other communications to the Trustee) provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, next-day air courier or telecopier:

(i) if to a Holder of the Registrable Notes or any Participating Broker-Dealer, at the most current address of such Holder or Participating Broker-Dealer, as the case may be, set forth on the records of the registrar under the Indenture.

(ii) if to the Co-Issuers, at the address as follows:

Forbes Energy Services LLC

Forbes Energy Capital Inc.

3000 South Business Highway 281

Alice, Texas 78332

Telephone: (361) 396-1898

Facsimile: (361) 396-1876

Attention: Mel Cooper, Chief Financial Officer

(iii) if to the Initial Purchaser, at the address as follows:

Jefferies & Company, Inc.

520 Madison Avenue, 12th Floor

New York, New York 10022

Facsimile: (212) 284-2280

Attention: General Counsel

All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged by the recipient’s telecopier machine, if telecopied; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery.

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

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(e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto, the Holders and the Participating Broker-Dealers; provided, however, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign holds Registrable Notes.

(f) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

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

(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE TRANSACTIONS MAY BE INSTITUTED IN THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA LOCATED IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR THE COURTS OF THE STATE OF NEW YORK IN EACH CASE LOCATED IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK, AND EACH PARTY IRREVOCABLY SUBMITS TO THE JURISDICTION (EXCEPT FOR PROCEEDINGS INSTITUTED IN REGARD TO THE ENFORCEMENT OF A JUDGMENT OF ANY SUCH COURT, AS TO WHICH SUCH JURISDICTION IS NON-EXCLUSIVE) OF SUCH COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING.

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

(j) Securities Held by the Co-Issuers or Their Affiliates. Whenever the consent or approval of Holders of a specified percentage of Registrable Notes is required hereunder, Registrable Notes held by the Co-Issuers or any of their affiliates (as such term is defined in Rule 405 under the Securities Act) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage.

(k) Third-Party Beneficiaries. Holders and beneficial owners of Registrable Notes and Participating Broker-Dealers are intended third-party beneficiaries of this Agreement, and this Agreement may be enforced by such Persons. No other Person is intended to be, or shall be construed as, a third-party beneficiary of this Agreement.

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(l) Attorneys’ Fees. As between the parties to this Agreement, in any action or proceeding brought to enforce any provision of this Agreement, or where any provision hereof is validly asserted as a defense, the successful party shall be entitled to recover reasonable attorneys’ fees actually incurred in addition to its costs and expenses and any other available remedy.

(m) Remedies. The Co-Issuers acknowledge and agree that any failure by the Co-Issuers to comply with their respective obligations under this Agreement may result in material irreparable injury to the Initial Purchasers, the Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers, the Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Co-Issuers’ obligations under this Agreement. The Co-Issuers further agree to waive the defense in any action for specific performance that a remedy at law would be adequate. Without limiting the effect of the foregoing, the parties agree that the sole monetary damages payable for a violation of the terms of this Agreement with respect to which Additional Interest are provided, shall be such Additional Interest.

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

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

FORBES ENERGY SERVICES LLC, as a Co-Issuer
By:	/s/ John E. Crisp
Name:	John E. Crisp
Title:	President and Chief Executive Officer
FORBES ENERGY CAPITAL INC., as a Co-Issuer
By:	/s/ John E. Crisp
Name:	John E. Crisp
Title:	President and Chief Executive Officer
C.C. FORBES, LLC, as Guarantor
By:	/s/ John E. Crisp
Name:	John E. Crisp
Title:	Executive Vice President and Chief Operating Officer
TX ENERGY SERVICES, LLC, as Guarantor
By:	/s/ John E. Crisp
Name:	John E. Crisp
Title:	President, Chief Executive Officer and Secretary
SUPERIOR TUBING TESTERS, LLC, as Guarantor
By:	/s/ John E. Crisp
Name:	John E. Crisp
Title:	Executive Vice President

JEFFERIES & COMPANY, INC.,
as Initial Purchaser
By:	/s/ Craig Zaph
Name:	Craig Zaph
Title:	Managing Director

EX-10.1

Exhibit 10.1

CREDIT AGREEMENT

TX ENERGY SERVICES, LLC,

C.C. FORBES, LLC

and

SUPERIOR TUBING TESTERS, LLC,

as Borrowers

and

FORBES ENERGY SERVICES LLC,

a Guarantor

CITIBANK, N.A.,

as Lender

$20,000,000 Revolving Credit Facility

April 10, 2008

TABLE OF CONTENTS

		Page
ARTICLE I - Definitions and References		4
Section 1.1.	Defined Terms	4
Section 1.2.	Exhibits and Schedules; Additional Definitions	26
Section 1.3.	Terms Generally; References and Titles	26
Section 1.4.	Calculations and Determinations	27
Section 1.5.	Joint Preparation; Construction of Indemnities and Releases.	27
ARTICLE II - The Loans and Letters of Credit		27
Section 2.1.	Commitments to Lend; Note	27
Section 2.2.	Requests for New Loans	28
Section 2.3.	Continuations and Conversions of Existing Loans	28
Section 2.4.	Use of Proceeds	29
Section 2.5.	Interest Rates and Fees; Payment Dates; Retroactive Adjustments of Applicable Interest Rates.	29
Section 2.6.	Optional Prepayments	30
Section 2.7.	Repayment of Loans	30
Section 2.8.	Letters of Credit	31
Section 2.9.	Requesting Letters of Credit	32
Section 2.10.	Reimbursement and Participations	32
Section 2.11.	Letter of Credit Fees	33
Section 2.12.	No Duty to Inquire	33
Section 2.13.	LC Collateral	34
ARTICLE III - Payments to Lender		35
Section 3.1.	General Procedures	35
Section 3.2.	Capital Reimbursement	36
Section 3.3.	Increased Cost of Libor Loans	36
Section 3.4.	Availability	37
Section 3.5.	Funding Losses	37
Section 3.6.	Reimbursable Taxes	37
Section 3.7.	Taxes	38
Section 3.8.	Time Limited	39
ARTICLE IV - Conditions Precedent to Lending		39
Section 4.1.	Documents to be Delivered	39
Section 4.2.	Additional Conditions Precedent	41
ARTICLE V - Representations and Warranties		42
Section 5.1.	No Default	42
Section 5.2.	Organization and Good Standing	42
Section 5.3.	Authorization	42
Section 5.4.	No Conflicts or Consents	42

i

Section 5.5.	Enforceable Obligations	42
Section 5.6.	Initial Financial Statements	43
Section 5.7.	Other Obligations and Restrictions	43
Section 5.8.	Full Disclosure	43
Section 5.9.	Litigation	43
Section 5.10.	Labor Disputes and Acts of God	43
Section 5.11.	ERISA Plans and Liabilities	44
Section 5.12.	Environmental and Other Laws	44
Section 5.13.	Names and Places of Business	44
Section 5.14.	Subsidiaries.	45
Section 5.15.	Government Regulation	45
Section 5.16.	Insider	45
Section 5.17.	Solvency	45
Section 5.18.	Title to Properties; Intellectual Property	45
Section 5.19.	Taxes	46
ARTICLE VI - Affirmative Covenants		46
Section 6.1.	Payment and Performance	46
Section 6.2.	Books, Financial Statements and Reports	46
Section 6.3.	Other Information and Inspections	48
Section 6.4.	Notice of Material Events and Change of Address	48
Section 6.5.	Maintenance of Properties	49
Section 6.6.	Maintenance of Existence and Qualifications.	49
Section 6.7.	Payment of Trade Liabilities, Taxes, etc	49
Section 6.8.	Insurance	50
Section 6.9.	Performance on Borrower’s Behalf.	50
Section 6.10.	Interest	50
Section 6.11.	Compliance with Agreements and Law	50
Section 6.12.	Environmental Matters; Environmental Reviews	50
Section 6.13.	Evidence of Compliance	51
Section 6.14.	Bank Accounts; Offset	51
Section 6.15.	Guaranties of Parent’s or New Parent’s Subsidiaries	52
Section 6.16.	Deposit Relationship	52
ARTICLE VII - Negative Covenants		52
Section 7.1.	Indebtedness	52
Section 7.2.	Limitation on Liens	53
Section 7.3.	Contingent Liabilities	53
Section 7.4.	Fundamental Changes	53
Section 7.5.	Limitation on Dispositions of Property	54
Section 7.6.	Transfer of Ownership	55
Section 7.7.	Limitation on Dividends and Redemptions	55
Section 7.8.	Limitation on Investments and New Businesses	55
Section 7.9.	Limitation on Credit Extensions	55
Section 7.10.	Transactions with Affiliates	55
Section 7.11.	Prohibited Contracts	56
Section 7.12.	Subordinated Indebtedness	56

ii

ARTICLE VIII - Financial Covenants		56
Section 8.1.	Definitions	56
Section 8.2.	Financial Tests	57
ARTICLE IX - Events of Default and Remedies		58
Section 9.1.	Events of Default	58
Section 9.2.	Remedies	61
Section 9.3.	Application of Proceeds After Acceleration	61
ARTICLE X		61
Section 10.1.	Waivers and Amendments; Acknowledgments	61
Section 10.2.	Survival of Agreements; Cumulative Nature	62
Section 10.3.	Notices; Effectiveness; Electronic Communication.	63
Section 10.4.	Expenses; Indemnity; Damage Waiver	64
Section 10.5.	Successors and Assigns; Joint and Several Liability	65
Section 10.6.	Confidentiality	66
Section 10.7.	Governing Law; Submission to Process	66
Section 10.8.	Limitation on Interest	67
Section 10.9.	Termination; Limited Survival	68
Section 10.10.	Severability	68
Section 10.11.	Counterparts; Integration; Effectiveness	68
Section 10.12.	Waiver of Jury Trial, Punitive Damages, etc.	69
Section 10.13.	USA PATRIOT Act Notice	69
Section 10.14.	Limitation on Guarantor Liability	69
Section 10.15.	Partial Releases of Collateral	70

iii

CREDIT AGREEMENT

THIS CREDIT AGREEMENT is made as of April 10, 2008, by and among TX ENERGY SERVICES, LLC, a Delaware limited liability company (“TX Energy”), C.C. FORBES, LLC, a Delaware limited liability company (“C.C. Forbes”), and SUPERIOR TUBING TESTERS, LLC, a Delaware limited liability company (“Superior”) (“TX Energy”, C.C. Forbes and Superior collectively, the “Borrowers”, and individually, a “Borrower”), FORBES ENERGY SERVICES LLC, a Delaware limited liability company (the “Parent”) as a Guarantor, and CITIBANK, N.A., a national association (“Lender”).

W I T N E S S E T H:

In consideration of the mutual covenants and agreements contained herein in consideration of the loans which may hereafter be made by Lender and the Letters of Credit which may be made available by Lender to Borrowers, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:

ARTICLE I - Definitions and References

Section 1.1. Defined Terms. As used in this Agreement, each of the following terms has the meaning given to such term in this Section 1.1 or in the sections and subsections referred to below:

“Accounts” means all present and future rights of a Person to payment for goods sold or leased or for services rendered (except those evidenced by instruments or chattel paper), whether now existing or hereafter arising and wherever arising and whether or not earned by performance, and “Account Debtor” means the Person which is obligated on any Account.

“Adjusted Base Rate” means, on any day, the Base Rate for such day plus the Applicable Margin for such day, provided that the Adjusted Base Rate charged by any Person shall never exceed the Highest Lawful Rate.

“Adjusted Libor Rate” means, for any Libor Loan for any day during any Interest Period therefor, the rate per annum equal to the sum of (a) the Applicable Margin for such day plus (b) the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by Lender to be equal to the quotient obtained by dividing (i) the Libor Rate for such Libor Loan for such Interest Period by (ii) 1 minus the Reserve Requirement for such Libor Loan for such Interest Period, provided that no Adjusted Libor Rate charged by any Person shall ever exceed the Highest Lawful Rate. The Adjusted Libor Rate for any Libor Loan shall change whenever the Applicable Margin or the Reserve Requirement changes.

“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common Control with the Person specified. As used herein, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise and “controlled” has the meaning correlative thereto.

CREDIT AGREEMENT – Page 4

“Agreement” means this Credit Agreement.

“Applicable Margin” shall mean, on any day the applicable per annum percentage set forth at the appropriate intersection in the table shown below, based on the Leverage Ratio on the last day of the most recent Fiscal Quarter of Parent or any New Parent, whichever is then the ultimate parent company, and its Consolidated Subsidiaries:

Applicable Margin

Pricing Level	Leverage Ratio	Libor Loans	Base Rate Loans
1	³3.50:1	2.25%	1.25%
2	³3.5:1 but <3.50:1	2.00%	1.00%
3	<3.00:1	1.75%	.75%

The Applicable Margin shall be established as of the last day of each Fiscal Quarter of Parent or any New Parent, whichever is then the ultimate parent company, (each, a “Determination Date”). Any change in the Applicable Margin following each Determination Date shall be determined based upon the information and computations set forth in the financial statements and Compliance Certificate furnished to Lender pursuant to Section 6.2(b), subject to review and approval of such computations by Lender. Each change in the Applicable Margin shall be effective as of the first day of the calendar mouth following each Determination Date, and shall remain in effect until the date that is the first day of the calendar month following the next Determination Date for which a change in the Applicable Margin occurs; provided, however, if Parent or any New Parent, whichever is then the ultimate parent company, shall fail to deliver any required financial statements or Compliance Certificate within the time period required by Section 6.2(b), the Applicable Margin shall be the highest percentage amount as set forth in the above table until the appropriate financial statements and related Compliance Certificate are so delivered. The Applicable Rate in effect from the date hereof through the date on which the next Compliance Certificate is delivered or to be delivered pursuant to Section 6.2(b) shall be determined based upon Pricing Level 3.

“Base Rate” means the higher of (a) the variable per annum rate of interest so designated from time to time by Lender as its “prime rate”, and (b) the Federal Funds Rate plus one-half percent (0.5%) per annum. The “prime rate” is a reference rate and does not necessarily represent the lowest or best rate being charged to any customer. Changes in the Base Rate resulting from changes in the “prime rate” shall take place immediately without notice or demand of any kind.

“Base Rate Loan” means a Loan that bears interest at the Adjusted Base Rate.

“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

5

“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 after the passage of time. The terms “Beneficially Owns” and “Beneficially Owned” have a corresponding meaning.

“Borrower” and “Borrowers” have the meanings set forth in the introductory paragraph hereto.

“Borrowing” means a borrowing of new Loans of a single Type (and, in the case of Libor Loans, with the same Interest Period) pursuant to Section 2.2 or a Continuation or Conversion of existing Loans into a single Type (and, in the case of Libor Loans, with the same Interest Period) pursuant to Section 2.3.

“Borrowing Base” means, at any particular time eighty percent (80%) of Eligible Accounts; provided, however, that (a) only Collateral for which Borrower’s representations and warranties under this Agreement and the other Loan Documents are true and correct at the time of calculation shall be included in the aggregate Borrowing Base, (b) if Lender at any time determines a method of valuation of Eligible Accounts overstates the actual fair market value thereof at the time, upon notice to Borrower, Lender may recalculate those values to fair market value, and (c) in no event shall the Borrowing Base ever exceed the Maximum Credit Amount.

“Borrowing Base Certificate” means a certificate substantially in the form attached hereto as Exhibit E, appropriately completed, together with a reasonably detailed aged schedule of all Accounts as of the date specified in such certificate, listing face amounts and dates of invoices of each such Account and the name and address of each Account Debtor obligated on such Account (and, upon reasonable advance request of Lender, copies of invoices, credit reports, export credit insurance, letters of credit and any other matters and information relating to the Eligible Accounts).

“Borrowing Base Deficiency” has the meaning given to such term in Section 2.7(c).

“Borrowing Notice” means a written or telephonic request, or a written confirmation, made by Borrower which meets the requirements of Section 2.2.

“Business Day” means a day, other than a Saturday or Sunday, on which commercial banks are open for business with the public in Houston, Texas. Any Business Day in any way relating to Libor Loans (such as the day on which an Interest Period begins or ends) must also be a day on which, in the judgment of Lender, significant transactions in dollars are carried out in the interbank eurocurrency market.

“Capital” means Forbes Energy Capital Inc., a Delaware corporation.

“Capital Expenditures” means all expenditures and liabilities incurred for the acquisition of any fixed assets or improvements, replacements, substitutions, or additions thereto which have a useful life of more than one year, including the direct or indirect acquisition of such assets by way of increased product or service charges, offset items or otherwise the principal portion of payments with respect to Capital Lease Obligations.

6

“Capital Lease” means a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP.

“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 prepared in accordance with GAAP, and the stated maturity 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.

“Cash Equivalents” means Investments in:

(a) marketable obligations, maturing within twelve months after acquisition thereof, issued or unconditionally guaranteed by the United States of America or an instrumentality or agency thereof and entitled to the full faith and credit of the United States of America;

(b) demand deposits, and time deposits (including certificates of deposit) maturing within twelve months from the date of deposit thereof, with any office of Lender;

(c) repurchase obligations with a term of not more than seven days for underlying securities of the types described in subsection (a) above entered into with any commercial bank meeting the specifications of subsection (b) above;

(d) open market commercial paper, maturing within 270 days after acquisition thereof, which are rated at least P-1 by Moody’s or A-1 by S & P; and

(e) money market or other mutual funds (i) that are rated AA or better by S&P or (ii) substantially all of the assets of which comprise securities of the types described in subsections (a) through (d) above.

“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority.

“Change of Control” means the occurrence of any of the following events:

(a) 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 properties or assets of either (a) any New Parent and its Subsidiaries taken as a whole or (b) the Parent and its Subsidiaries taken as a whole, in either case, to any “person” (as that term is used in Section 13(d) of the Exchange Act) other than the Permitted Holders;

(b) the adoption of a plan relating to the liquidation or dissolution of any New Parent or the Parent, whichever is then the ultimate parent company;

(c) the consummation of any transaction (including, without limitation, any merger or consolidation), the result of which is that any Person, other than a Permitted Holder, becomes the

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Beneficial Owner, directly or indirectly, of more than 35% of the Voting Stock of any New Parent or the Parent, whichever is then the ultimate parent company, measured by voting power rather than number of shares;

(d) the consummation of the first transaction (including, without limitation, any merger or consolidation) the result of which is that a Person other than a Permitted Holder becomes the Beneficial Owner, directly or indirectly, of more of the Voting Stock of any New Parent or the Parent, whichever is then the ultimate parent company, (measured by voting power rather than number of shares) than is at the time Beneficially Owned by the Permitted Holders in the aggregate; or

(e) after an initial public offering of any New Parent or the Parent, the first day on which a majority of the members of the Board of Directors of such New Parent of the Parent, as the case may be, are not Continuing Directors.

For the avoidance of doubt, a Change of Control will not be deemed to have occurred solely as a result of the formation of and the transfer of ownership of any Equity Interests of the Parent or any New Parent to any New Parent; provided that none of the events set forth in paragraphs (a) through (e) above have occurred.

“Closing Date” means the date on which all of the conditions precedent set forth in Section 4.1 shall have been satisfied or waived.

“Collateral” means all property of any kind which is subject to a Lien in favor of Lender or which, under the terms of any Security Document, is purported to be subject to such a Lien, in each case that secures the Secured Obligations.

“Commitment Fee Rate” means twenty five one-hundredths of one percent (0.25%).

“Commitment Period” means the period from and including the Closing Date until the Maturity Date (or, if earlier, the day on which the obligations of Lender to make Loans hereunder and the obligations of Lender to issue Letters of Credit hereunder have been terminated or the Note first becomes due and payable in full).

“Consolidated” refers to the consolidation of any Person, in accordance with GAAP, with its properly consolidated subsidiaries. References herein to a Person’s Consolidated financial statements, financial position, financial condition, liabilities or the like refer to the consolidated financial statements, financial position, financial condition, liabilities or the like of such Person and its properly consolidated subsidiaries.

“Continuation” shall refer to the continuation pursuant to Section 2.3 hereof of a Libor Loan as a Libor Loan from one Interest Period to the next Interest Period.

“Continuation/Conversion Notice” means a written or telephonic request, or a written confirmation, made by Borrower which meets the requirements of Section 2.3.

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“Continuing Directors” means, as of any date of determination, any member of the Board of Directors of any New Parent or the Parent, whichever is then the ultimate parent company, who:

(1) was a member of such Board of Directors of the Parent on the Closing Date or was a member of any such New Parent’s Board of Directors on the date such New Parent was required to become a party to this Agreement; or

(2) was nominated for election or appointed or elected to the Board of Directors of any such New Parent or the Parent, whichever is then the ultimate parent company, with the approval of a majority of the Continuing Directors who were members of the Board of Directors of such New Parent or the Parent at the time of such nomination or election.

“Conversion” shall refer to a conversion pursuant to Section 2.3 or ARTICLE III of one Type of Loan into another Type of Loan.

“Default” means any Event of Default and any default, event or condition which would, with the giving of any requisite notices and the passage of any requisite periods of time to permit the curing of such default, event or condition, constitute an Event of Default.

“Default Rate” means, at the time in question (a) with respect to any Base Rate Loan, the rate per annum equal to two percent (2%) above the Adjusted Base Rate then in effect for such Loan and (b) with respect to any Libor Loan, the rate per annum equal to two percent (2%) above the Adjusted Libor Rate then in effect for such Loan, provided in each case that no Default Rate charged by any Person shall ever exceed the Highest Lawful Rate.

“Determination Date” has the meaning given to such term in the definition of Applicable Margin.

“Disclosure Schedule” means Schedule 1 hereto.

“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction) of any property by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.

“Dividend” means (a) any dividend or other distribution made by a Restricted Person on or in respect of any Equity Interests in such Restricted Person or any other Restricted Person, or (b) any payment made by a Restricted Person to purchase, redeem, acquire or retire any Equity Interest in such Restricted Person or any other Restricted Person.

“Eligible Accounts” means all Accounts of Borrower except the following:

(a) any Account which arises out of a sale to an Account Debtor which is an Affiliate of Borrower.

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(b) any Account which has not yet been invoiced or any Account the goods giving rise to which have not been delivered or the services giving rise to which have not been performed, or which otherwise does not represent a completed sale or performance.

(c) any Account balances due or unpaid more than 120 days after its original invoice date or which has an original due date which is more than 120 days after its original invoice date.

(d) any Account owed by an Account Debtor which has asserted any defense or contested any liability with respect to such Account, or any Account which otherwise is or may become subject to any right of set off by the Account Debtor thereof provided that to the extent the Account exceeds the amount of the right of set off, the positive balance shall be included as an Eligible Account.

(e) any Account owed by an Account Debtor more than 50% (in dollar amount) of whose Accounts are not Eligible Accounts on account of clause (c) above.

(f) any Account owed by an Account Debtor which has commenced a voluntary case under the bankruptcy or insolvency laws of any jurisdiction, or made an assignment for the benefit of creditors, or against which a decree or order for relief has been entered by a court in an involuntary case under any bankruptcy or insolvency laws of any jurisdiction, or against which any other petition or other application for relief under any bankruptcy or insolvency laws of any jurisdiction has been filed, or which has suspended business or consented to or suffered a receiver, trustee, liquidator or custodian to be appointed for it or for all or a significant portion of its assets or affairs of which Borrower has knowledge.

(g) any Account which arises out of a sale made or services performed outside of the United States or which is owed by an Account Debtor located outside the United States unless (i) supported by an irrevocable letter of credit satisfactory to Lender (as to form, substance and issuer or a domestic confirming bank) that has been delivered to Lender and is directly drawable by Lender or (ii) is insured by foreign export credit insurance from a reputable, third party insurance company reasonably satisfactory to Lender.

(h) any Account the sale for which is on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval, consignment or any other repurchase or return basis or otherwise contingent on or subject to the fulfillment of any condition.

(i) any Account the Account Debtor of which is the United States or any department, agency or instrumentality thereof unless Borrower duly assigns its rights to payment of such Account to Lender pursuant to the Assignment of Claims Act of 1940, as amended.

(j) any Account to the extent but only to the extent that, but for this clause (j), the Eligible Accounts owed by any Account Debtor and its Affiliates would exceed 25% of the outstanding aggregate principal balance of all Eligible Accounts, in which event the principal balance of the Accounts of such Account Debtor and its Affiliates in excess of 25% shall be not be Eligible Accounts unless approved by Lender in its sole discretion.

(k) any Account owed by an Account Debtor which is also an employee or sales agent or independent contractor directly related to Borrower or any of its Affiliates.

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(l) any Account subject to a Lien other than a Permitted Lien.

(m) any Account to the extent not valid, binding and enforceable against the Account Debtor thereof in accordance with its terms.

(n) any Account to the extent not subject to an enforceable and duly perfected first priority Lien (subject to the Permitted Liens) in favor of Lender.

“Environmental Laws” means any and all Laws relating to the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment including ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes.

“Equity Interests” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statutes or statute, together with all rules and regulations promulgated with respect thereto.

“ERISA Affiliate” means each Restricted Person and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control that, together with such Restricted Person, are treated as a single employer under Section 414 of the Internal Revenue Code.

“ERISA Plan” means any employee pension benefit plan subject to Title IV of ERISA maintained by any ERISA Affiliate with respect to which any Restricted Person has a fixed or contingent liability.

“Event of Default” has the meaning given to such term in Section 9.1.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Excluded Taxes” means (a) taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located or in which its Lending Office is located and (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which Borrower is located.

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“Facility Usage” means, at the time in question, the aggregate principal amount of outstanding Loans and existing LC Obligations at such time.

“Federal Funds Rate” means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of one percent) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of Dallas on the Business Day next succeeding such day, provided that (a) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if such rate is not so published for any day, the Federal Funds Rate for such day shall be the average rate quoted to Lender on such day on such transactions as determined by Lender.

“Fiscal Quarter” means a three-month period ending on March 31, June 30, September 30 or December 31 of any year.

“Fiscal Year” means a twelve-month period ending on December 31 of any year.

“GAAP” means those generally accepted accounting principles and practices which are recognized as such by the Financial Accounting Standards Board (or any generally recognized successor) and which, in the case of Restricted Persons and their Consolidated Subsidiaries, are applied for all periods after the date hereof in a manner consistent with the manner in which such principles and practices were applied to the Initial Financial Statements. If any change in any accounting principle or practice is required by the Financial Accounting Standards Board (or any such successor) in order for such principle or practice to continue as a generally accepted accounting principle or practice, all reports and financial statements required hereunder with respect to any Restricted Person or with respect to any Restricted Person and its Consolidated Subsidiaries may be prepared in accordance with such change, but all calculations and determinations to be made hereunder may be made in accordance with such change only after notice of such change is given to Lender. Notwithstanding the foregoing, for periods as of or prior to December 31, 2007, Borrower’s annual financial statements were prepared on a combined basis.

“Governmental Authority” means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

“Guarantor” means any Person who has guaranteed some or all of the Obligations pursuant to a guaranty listed on the Security Schedule or any other Person who has guaranteed some or all of the Obligations and who has been accepted by Lender as a Guarantor or any Subsidiary of Borrower which now or hereafter executes and delivers a guaranty to Lender pursuant to Section 6.15.

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“Hazardous Materials” means any substances regulated under any Environmental Law, whether as pollutants, contaminants, or chemicals, or as industrial, toxic or hazardous substances or wastes, or otherwise.

“Hedging Obligations” means, with respect to any specified Person, the obligations of such Person under:

(a) interest rate swap agreements (whether from fixed to floating or from floating to fixed), interest rate cap agreements and interest rate collar agreements;

(b) other agreements or arrangements designed to manage interest rates or interest rate risk; and

(c) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates or commodity prices.

“Highest Lawful Rate” means the maximum nonusurious rate of interest that Lender is permitted under applicable Law to contract for, take, charge, or receive with respect to such Obligations. All determinations herein of the Highest Lawful Rate, or of any interest rate determined by reference to the Highest Lawful Rate, shall be made separately for Lender as appropriate to assure that the Loan Documents are not construed to obligate any Person to pay interest to Lender at a rate in excess of the Highest Lawful Rate applicable to Lender.

“Indebtedness” of any Person means Liabilities in any of the following categories (without duplication):

(o) Liabilities for borrowed money;

(p) Liabilities constituting an obligation to pay the deferred purchase price of property or services;

(q) Liabilities evidenced by a bond, debenture, note or similar instrument;

(r) Liabilities which (i) would under GAAP be shown on such Person’s balance sheet as a liability, and (ii) are payable more than one (1) year from the date of creation or incurrence thereof (other than reserves for taxes and reserves for contingent obligations);

(s) Liabilities constituting principal under Capital Leases Obligations;

(t) Liabilities arising under conditional sales or other title retention agreements relating to property purchased by such Person;

(u) Liabilities owing under direct or indirect guaranties of Indebtedness of any other Person or otherwise constituting obligations to purchase or acquire or to otherwise protect or insure a creditor against loss in respect of Indebtedness of any other Person (such as obligations under working capital maintenance agreements, agreements to keep-well, or agreements to purchase Indebtedness, assets, goods, securities or services), but excluding endorsements in the ordinary course of business of negotiable instruments in the course of collection;

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(v) Liabilities (for example, repurchase agreements, mandatorily redeemable preferred stock and sale/leaseback agreements) consisting of an obligation to purchase or redeem securities or other property of such Person, if such Liabilities arise out of or in connection with the sale or issuance of the same or similar securities or property;

(w) Liabilities with respect to letters of credit or applications or reimbursement agreements therefor;

(x) Liabilities with respect to banker’s acceptances;

(y) Liabilities with respect to other obligations to deliver goods or services in consideration of advance payments therefor; or

(z) Liabilities arising under the Hedging Obligations.

provided, however, that the “Indebtedness” of any Person shall not include Liabilities that were incurred by such Person on ordinary trade terms to vendors, suppliers, or other Persons providing goods and services for use by such Person in the ordinary course of its business, unless and until such Liabilities are outstanding more than 90 days past the original invoice or billing due date therefor.

“Indenture” means that certain Indenture dated as of February 12, 2008 among Parent, Capital, Borrower and Indenture Trustee.

“Indenture Trustee” means Wells Fargo Bank, National Association.

“Independent Director” means a member of the Board of Directors of any New Parent or the Parent, whichever is then the ultimate parent company, who qualifies as “independent” within the meaning of the listing requirements of either the New York Stock Exchange or Nasdaq Stock Market.

“Initial Financial Statements” means the audited annual combined financial statements of Borrower dated as of and for the period ending on December 31, 2007.

“Intercreditor Agreement” means that certain Intercreditor and Subordination Agreement dated as of the date hereof between Lender and Indenture Trustee, as collateral agent for the holders of the Senior Secured Notes.

“Interest Payment Date” means (a) with respect to each Base Rate Loan, the last day of each calendar quarter, and (b) with respect to each Libor Loan, the last day of the Interest Period that is applicable thereto; provided that the last day of each calendar month shall also be an Interest Payment Date for each such Loan so long as any Event of Default exists under Section 9.1(a) or (b).

“Interest Period” means, with respect to each Libor Loan, the period specified in the Borrowing Notice or Continuation/Conversion Notice applicable to such Libor Loan, beginning on and including the date specified in such Borrowing Notice or Continuation/ Conversion Notice (which must be a Business Day), and ending three (3) months thereafter, as Borrower

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may elect in such notice; provided that: (a) any Interest Period which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day; (b) any Interest Period which begins on the last Business Day in a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day in a calendar month; and (c) notwithstanding the foregoing, any Interest Period which would otherwise end after the last day of the Commitment Period shall end on the last day of the Commitment Period (or, if the last day of the Commitment Period is not a Business Day, on the next preceding Business Day).

“Internal Revenue Code” means the United States Internal Revenue Code of 1986, as amended from time to time and any successor statute or statutes, together with all rules and regulations promulgated with respect thereto.

“Investment” means any investment, made directly or indirectly, in any Person, whether by purchase, acquisition of Equity Interests of another Person, Indebtedness or other obligations or by loan, advance, capital contribution or otherwise and whether made in cash, by the transfer of property, or by any other means.

“Law” means any statute, law, regulation, ordinance, rule, treaty, judgment, order, decree, permit, concession, franchise, license, agreement or other governmental restriction of the United States or any state or political subdivision thereof or of any foreign country or any department, province or other political subdivision thereof. Any reference to a Law includes any amendment or modification to such Law, and all regulations, rulings, and other Laws promulgated under such Law.

“LC Application” means any application for a Letter of Credit hereafter made by Borrower to Lender.

“LC Collateral” has the meaning given to such term in Section 2.13(a).

“LC Conditions” has the meaning given to such term in Section 2.8.

“LC Documents” means the Continuing Agreement For Letters of Credit, Application for Standby Letters of Credit and any other agreements, certificates, documents, instruments and writings at any time delivered or executed in connection with a Letter of Credit.

“LC Obligations” means, at the time in question, the sum of all Matured LC Obligations plus the maximum amounts which Lender might then or thereafter be called upon to advance under all Letters of Credit then outstanding.

“LC Sublimit” means $3,000,000.

“Lender” means Citibank, N.A., a national association and the successor of Lender as holder of the Note.

“Lender Schedule” means Schedule 4 hereto.

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“Lending Office” means the office or offices of Lender described as such in Schedule 4 or such other office as Lender may from time to time specify to Borrower.

“Letter of Credit” means any letter of credit issued by Lender hereunder at the application of Borrower.

“Letter of Credit Termination Date” means the date which is seven (7) days prior to the Maturity Date or if such day is not a Business Day, the next preceding Business Day.

“Liabilities” means, as to any Person, all indebtedness, liabilities and obligations of such Person, whether matured or unmatured, liquidated or unliquidated, primary or secondary, direct or indirect, absolute, fixed or contingent, and whether or not required to be considered pursuant to GAAP.

“Libor Loan” means a Loan that bears interest at the Adjusted Libor Rate.

“Libor Rate” means, for any Libor Loan within a Borrowing and with respect to the related Interest Period therefor, (a) the interest rate per annum (carried out to the fifth decimal place) equal to the rate determined by Lender to be the offered rate that appears on the page of the Telerate Screen that displays an average British Bankers Association Interest Settlement Rate (such page currently being Telerate Successor Page 3750) for deposits in U.S. dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or (b) in the event the rate referenced in the preceding subsection (a) does not appear on such page or service or such page or service shall cease to be available, the rate per annum (carried out to the fifth decimal place) equal to the rate determined by Lender to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in U.S. dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or (c) in the event the rates referenced in the preceding subsections (a) and (b) are not available, the rate per annum determined by Lender as the rate of interest at which deposits in U.S. dollars (for delivery on the first day of such Interest Period) in same day funds in the approximate amount of the applicable Libor Loan and with a term equivalent to such Interest Period would be offered by its London branch to major banks in the offshore U.S. dollar market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period.

“Lien” means, with respect to any property or assets, any right or interest therein of a creditor to secure Liabilities owed to it or any other arrangement with such creditor which provides for the payment of such Liabilities out of such property or assets or which allows such creditor to have such Liabilities satisfied out of such property or assets prior to the general creditors of any owner thereof, including any lien, mortgage, security interest, pledge, deposit, production payment, rights of a vendor under any title retention or conditional sale agreement or lease substantially equivalent thereto, tax lien, mechanic’s or materialman’s lien, or any other charge or encumbrance for security purposes, whether arising by Law or agreement or otherwise, but excluding any right of offset which arises without agreement in the ordinary course of

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business. “Lien” also means any filed financing statement, any registration of a pledge (such as with an issuer of uncertificated securities), or any other arrangement or action which would serve to perfect a Lien described in the preceding sentence, regardless of whether such financing statement is filed, such registration is made, or such arrangement or action is undertaken before or after such Lien exists.

“Loan Documents” means this Agreement, the Note, the Security Documents, the Letters of Credit, the LC Applications, and all other agreements, certificates, documents, instruments and writings at any time delivered in connection herewith or therewith (exclusive of term sheets and commitment letters).

“Loans” has the meaning given to such term in Section 2.1.

“Material Adverse Change” means a material and adverse change, from the state of affairs presented in the Initial Financial Statements or as represented or warranted in any Loan Document, to (a) the Consolidated financial condition of Parent or any New Parent, whichever is then the ultimate parent company, and its Consolidated Subsidiaries (b) the Consolidated business, assets, operations, properties or prospects, considered as a whole of Parent or any New Parent, whichever is then the ultimate parent company, (c) Borrowers’ and the Guarantors’ ability, taken as a whole, to timely pay the Obligations, or (d) the enforceability of the material terms of any material Loan Documents against the Restricted Persons.

“Matured LC Obligations” means all amounts paid by Lender on drafts or demands for payment drawn or made under or purported to be made under any Letter of Credit and all other amounts due and owing to Lender under any LC Application for any Letter of Credit, to the extent the same have not been repaid to Lender (with the proceeds of Loans or otherwise).

“Maturity Date” means 12:00 o’clock Noon, Houston, Texas time on April 10, 2012, or such earlier date and time on which the Commitment terminates as provided in this Agreement.

“Maximum Credit Amount” means the amount of $20,000,000.

“Moody’s” means Moody’s Investors Service, Inc., or its successor.

“New Parent” means any one or more new parent companies formed by the owners of the Equity Interests of the Parent which holds directly or indirectly 100% the Equity Interests of the Parent.

“Note” has the meaning given to such term in Section 2.1.

“Obligations” means all Liabilities from time to time owing by any Restricted Person to Lender under or pursuant to any of the Loan Documents, including all LC Obligations. “Obligation” means any part of the Obligations.

“Operating Lease” means any lease (other than a lease constituting a Capital Lease Obligation) of real or personal property.

“Other Taxes” has the meaning assigned to such term in Section 3.7(b).

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“Parent” means Forbes Energy Services LLC, a Delaware limited liability company.

“Participant” has the meaning assigned to such term in Section 10.5(b).

“Permitted Affiliate Lease” means a lease for any premises or buildings occupied by a Restricted Person on the issue date of the final offering circular dated February 7, 2008 relating to the Senior Secured Notes (the “Final Offering Circular”) that has been entered into with an Affiliate of such a Restricted Person, the terms of which are fully and accurately summarized in all material respects under the caption “Transactions with Related Persons” in the Final Offering Circular, and any amendment, extension or other modification thereto; provided that any such amendment, extension or modification (a) is on terms that are no less favorable to such Restricted Person than those that would have been obtained in a comparable transaction by the Restricted Person with an unrelated Person or, if there is no such comparable transaction, on terms that are fair and reasonable to the Restricted Person, and reflect an arms’-length negotiation as determined by Independent Directors of such Restricted Person or Parent or New Parent, whichever is then the ultimate parent company and (b) is not, in the good faith determination of such Independent Directors materially worse for the Restricted Person.

“Permitted Affiliate Store Transactions” means purchases from or returns to the oil field supply store owned by Alice Environmental Services, LP by any Restricted Person, as such transactions are described under “Transactions with Related Persons” in the Final Offering Circular, in each case on terms that are no less favorable to any such Restricted Person than those that would have been obtained in a comparable transaction by any such Restricted Person or, if there is no such comparable transaction, on terms that are fair and reasonable to any such Restricted Person and reflect an arms’-length negotiation as determined by the Independent Directors of such Restricted Person or its Parent or any New Parent, whichever is then the ultimate parent company.

“Permitted Business” means any business that is the same as or similar, reasonably related, complimentary or incidental to the business in which the Restricted Persons are engaged on the Closing Date.

“Permitted Holder” means (a) John E. Crisp, Charles C. Forbes and Janet L. Forbes and (b) any Affiliate or family member of a Person set forth in clause (a) of this definition.

“Permitted Investments” means:

(aa) Cash Equivalents;

(bb) property used in the ordinary course of business of the Restricted Persons;

(cc) current assets arising from the sale or lease of goods and services in the ordinary course of business by the Restricted Persons or from sales permitted under Section 7.5;

(dd) Investments by Borrower in any wholly owned Subsidiary which is a Guarantor;

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(ee) the acquisition and holding of Accounts owing to any Restricted Person if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary terms;

(ff) the endorsement of negotiable instruments held for collection in the ordinary course of business;

(gg) making lease, utility and other similar deposits in the ordinary course of business;

(hh) Investments by Parent or any New Parent in the Equity Interests of its Subsidiaries;

(ii) additional Investments by the Restricted Persons in the Equity Interests of Subsidiaries acquired or created after the date hereof;

(jj) Investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent Accounts and disputes with, customers and suppliers, in each case in the ordinary course of business;

(kk) loans and advances made by any Restricted Person in the ordinary course of business to its directors, officers and employees for expenses (including moving expenses related to transfer) incidental to carrying on the business of the Restricted Persons or advances not to exceed $500,000 at any one time outstanding;

(ll) loans made by Restricted Persons to directors, officers and employees the proceeds of which are used by such directors, officers and employees to purchase Equity Interests of any Restricted Person (and extensions, renewals, modifications or replacements of the foregoing to the extent the principal amount thereof is not increased), provided that the aggregate amount of loans made pursuant to this clause (l) shall be approved by Lender in its sole discretion;

(mm) the Investments existing on the date hereof specified in Section 7.8 of the Disclosure Schedule;

(nn) advances and extensions of trade credit in the ordinary course of business;

(oo) other Investments in an aggregate amount not to exceed Five Million Dollars ($5,000,000);

(pp) guarantees constituting, or guarantees of, Indebtedness permitted by this Agreement, including guarantees of Senior Secured Notes;

(qq) any investment resulting from the acquisition of assets or Equity Interests solely in exchange for the issuance of Equity Interests of Parent or any New Parent, whichever is then the ultimate parent company;

(rr) Investments resulting from the receipt of non-cash consideration from a sale of assets not precluded under the Loan Documents; and

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(ss) Investments represented by Hedging Obligations.

“Permitted Liens” means:

(tt) statutory Liens for taxes, assessments or other governmental charges or levies which are not yet delinquent or which are being contested in good faith by appropriate action and for which adequate accruals have been maintained in accordance with GAAP;

(uu) landlords’, operators’, carriers’, warehousemen’s, repairmen’s, mechanics’, materialmen’s, or other like Liens which do not secure Indebtedness, in each case only to the extent arising in the ordinary course of business and only to the extent securing obligations which are not delinquent or which are being contested in good faith by appropriate proceedings and for which adequate accruals have been maintained in accordance with GAAP;

(vv) minor defects and irregularities in title to any property, so long as such defects and irregularities neither secure Indebtedness nor materially impair the value of such property or the use of such property for the purposes for which such property is held;

(ww) deposits of cash or securities to secure the performance of bids, trade contracts (other than Indebtedness), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;

(xx) Liens under the Security Documents;

(yy) Liens securing the Senior Secured Notes and obligations under related documentation, which Liens have been relegated to a second priority position pursuant to the Intercreditor Agreement or as to which Lender elects not to take a security interest;

(zz) with respect only to property subject to any particular Security Document, Liens burdening such property which are expressly allowed by such Security Document;

(aaa) judgment and attachment Liens not giving rise to an Event of Default, provided that any appropriate legal proceedings that may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceeding may be initiated shall not have expired no action to enforce such Lien has been commenced; and such Liens are covered by a bond or insurance reasonably acceptable to Lender;

(bbb) Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights and remedies and burdening only deposit accounts or other funds maintained with a creditor depository institution, provided that no such deposit account is a dedicated cash collateral account or is subject to restrictions against access by the depositor and no such deposit account is intended by Borrower or any of its Subsidiaries to provide collateral to the depository institution;

(ccc) conventional provisions contained in any contracts or agreements affecting properties under which Borrower or any of its Subsidiaries is required immediately before the expiration, termination or abandonment of a particular property to reassign to such Person’s predecessor in title all or a portion of such Person’s rights, titles and interests in and to all or portion of such property;

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(ddd) pledges or deposits in connection with workers’ compensation, unemployment insurance and other social security legislations;

(eee) Liens under joint operating agreements, pooling or unitization agreements or similar contractual arrangements arising in the ordinary course of the business of Borrower or its Subsidiaries to secure amounts owing under such agreements and contracts, which amounts are not more than 90 days past due or are being contested in good faith by appropriate proceedings, if such reserve as may be required by GAAP shall have been made therefor;

(fff) (i) Liens on fixed or capital assets acquired, constructed or improved by Borrower; provided, that (A) such Liens secure Indebtedness permitted under Section 7.1(f), (B) such Liens and the Indebtedness secured thereby are incurred substantially simultaneously with the acquisition, construction or improvement of such fixed or capital assets or within 180 days thereafter, (C) such Liens do not at any time encumber any property other than the property financed by such Indebtedness and (D) the amount of Indebtedness secured thereby is not more than 100% of the purchase price, and (ii) Liens in the nature of precautionary financing statements filed against leased property by lessors holding Capital Lease Obligations included in Indebtedness permitted under Section 7.1;

(ggg) Liens in favor of the Parent or any New Parent, whichever is then the ultimate parent company, or their Subsidiaries;

(hhh) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with the Parent or any New Parent, whichever is then the ultimate parent company, or their Subsidiaries; 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 Parent or any New Parent, whichever is then the ultimate parent company, or their Subsidiaries;

(iii) Liens on property (including Equity Interests) existing at the time of acquisition of the property by the Parent or any New Parent, whichever is then the ultimate parent company, or their Subsidiaries; provided that such Liens were in existence prior to, such acquisition, and not incurred in contemplation of, such acquisition;

(jjj) Liens to secure Indebtedness, the incurrence of which is 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, construction, installation or improvement of property, plant or equipment used in the business of the Parent or any New Parent, whichever is then the ultimate parent company, or their Subsidiaries in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to renew, refund, refinance, replace, defease or discharge any Indebtedness incurred pursuant to this clause (q), not to exceed $10,000,000 million at any time outstanding, covering only the assets constructed or acquired with or financed by such Indebtedness;

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(kkk) 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 such Person;

(lll) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other assets relating to such letters of credit and products and proceeds thereof;

(mmm) Liens upon specific items of inventory or other goods and proceeds of the Parent or any New Parent, whichever is then the ultimate parent company, or their Subsidiaries to secure obligations in respect of bankers’ acceptances issued or created for the account of any such Person to facilitate the purchase, shipment or storage of such inventory or other goods in the ordinary course of business;

(nnn) Liens securing Hedging Obligations;

(ooo) Liens arising from precautionary UCC financing statements in connection with operating leases or consignment of goods; and

(ppp) Liens incurred in the ordinary course of business of the Parent or any New Parent, whichever is then the ultimate parent company, or their Subsidiaries with respect to obligations that do not exceed $10,000,000 million at any one time outstanding.

“Permitted Refinancing Indebtedness” means any Indebtedness of the Parent or any New Parent, whichever is then the ultimate parent company, or their Subsidiaries issued in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge other Indebtedness of Parent or any New Parent, whichever is then the ultimate parent company, or its Subsidiaries (other than intercompany Indebtedness), as the case may be; provided that:

(qqq) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness extended, renewed, refunded, refinanced, replaced, defeased or discharged (plus all accrued interest on the Indebtedness and the amount of all fees and expenses, including premiums, incurred in connection therewith);

(rrr) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged;

(sss) if the Indebtedness being extended, renewed, refunded, refinanced, replaced, defeased or discharged is subordinated in right of payment to the Senior Secured Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Senior Secured Notes on terms at least as favorable, taken as a whole, to the holders of Senior Secured Notes as those contained in the documentation governing the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged; and

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(ttt) such Indebtedness is incurred either by Parent or any New Parent, whichever is then the ultimate parent company, or its Subsidiary which is the obligor on the Indebtedness being extended, renewed, refunded, refinanced, replaced, defeased or discharged.

“Permitted Tax Distributions” means:

(uuu) with respect to each tax year or portion thereof that the Parent or any New Parent, whichever is then the ultimate parent company, qualifies (or any predecessor in interest qualified) to be treated as a partnership not taxable as a corporation, a grantor trust, a disregarded entity, an “S” corporation or a qualified subchapter “S” subsidiary for U.S. federal income tax purposes or subject to treatment on a comparable basis for purposes of state, local or foreign tax law (a “Flow Through Entity”), the distribution by the Parent or any New Parent to the holders of its Equity Interests of an amount equal to the product of (x) the amount of aggregate net taxable income of the Parent or any New Parent allocated to the holders of its Equity Interests for such period and (y) the Presumed Tax Rate for such period; provided that to the extent that the aggregate net taxable income of the Parent or any New Parent for a taxable year actually reported to the holders of the Equity Interests is less than the aggregate net taxable income assumed in calculating such amounts for a taxable year, the holders of such Equity Interests can return an amount equal to the product of such shortfall and the Presumed Tax Rate used in such calculations, or an amount equal to such product shall be deducted from the next scheduled Permitted Tax Distributions payable to such holders for later years; and

(vvv) if the Parent or any New Parent is not a Flow Through Entity, the payment of the combined federal, state and local income taxes that would be paid by such entity if it were a separate Delaware corporation filing separate federal, state and local income tax returns with respect to its taxable income for such period (or, to the extent applicable because there are corporate subsidiaries, if it were the common parent of an affiliated group filing consolidated or combined returns with respect to the taxable income of such entity, the Parent or any New Parent, whichever is then the ultimate parent company, and their consolidated corporate subsidiaries for such period).

For purposes of such computation, it will be assumed that any net operating loss carryforwards or other carryforwards or tax attributes, such as alternative minimum tax carryforwards, that arise in any period will be available to offset taxable income payable in later years (regardless of any change in status as a Flow Through Entity). Notwithstanding anything to the contrary, for purposes of clause (b) above, the applicable taxable income or taxes shall not include taxable income or taxes resulting from any change in the status from a Flow Through Entity to an entity taxable as a corporation.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“Presumed Tax Rate” means 39.6% or, if there is a change in applicable federal, state or local tax rates, such other rate as the chief financial officer of the Parent or any New Parent,

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whichever is then the ultimate parent company, certifies in writing to the Lender to be a reasonable approximation of the highest, net marginal federal, state and local income taxation rates payable by the holders of Equity Interests of the Parent or any New Parent, as applicable, or with respect to the aggregate net taxable income.

“Regulation D” means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect.

“Reserve Requirement” means, at any time, the maximum rate at which reserves (including any marginal, special, supplemental, or emergency reserves) are required to be maintained under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) by member banks of the Federal Reserve System against “Eurocurrency liabilities” (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves required to be maintained by such member banks with respect to (a) any category of liabilities which includes deposits by reference to which the Adjusted Libor Rate is to be determined, or (b) any category of extensions of credit or other assets which include Libor Loans.

“Responsible Officer” means, with respect to Borrower, the Chief Executive Officer, President or Chief Financial Officer of Borrower, and with respect to any other Restricted Person, if such Restricted Person is a limited liability company, a Manager of such Restricted Person, and if such Restricted Person is a corporation, the President or Chief Financial Officer of such Restricted Person.

“Restricted Person” means any of Borrower, each Subsidiary of Parent or New Parent, if applicable, and each Guarantor.

“S & P” means Standard & Poor’s Ratings Services (a division of The McGraw Hill Companies), or its successor.

“SEC” means the U.S. Securities and Exchange Commission or any successor commission or agency.

“Secured Obligations” means all Obligations.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC thereunder.

“Security Documents” means all security agreements, deeds of trust, mortgages, chattel mortgages, pledges, guaranties, financing statements, continuation statements, extension agreements and other agreements or instruments now, heretofore, or hereafter delivered by any Restricted Person to Lender in connection with this Agreement or any transaction contemplated hereby to secure or guarantee the payment of any part of the Obligations or the performance of any Restricted Person’s other duties and obligations under the Loan Documents.

“Security Schedule” means Schedule 2 hereto.

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“Senior Secured Notes” means the 11% Senior Secured Notes initially issued pursuant to that Indenture and any exchange notes issued pursuant thereto.

“Senior Secured Notes Offering” means the private placement of $205,000,000 of the Senior Secured Notes (or such other amount as Borrower, Lender and an initial purchaser of the Senior Secured Notes may agree).

“Subordinated Indebtedness” means any secured or unsecured Indebtedness of Parent or Borrower which expressly contains in the instruments evidencing such Indebtedness or in the indenture or other similar instrument under which it is issued (which indenture or other similar instrument shall be binding on all holders of such Indebtedness) subordination provisions (in form and substance satisfactory to Lender in its sole discretion) substantially to the effect that the holder agrees that the Indebtedness evidenced by such instrument, and any renewals or extensions thereof, shall at all times and in all respects be subordinate and junior in right of payment to the Obligations.

“Subsidiary” means, with respect to any Person, any corporation, association, partnership, limited liability company, joint venture, or other business or corporate entity, enterprise or organization which is directly or indirectly (through one or more intermediaries) owned more than fifty percent (50%) by such Person or which shares of interests having ordinary voting power (other than Equity Interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned by such Person.

“Taxes” has the meaning given to such term in Section 3.7(a).

“Termination Event” means (a) the occurrence with respect to any ERISA Plan of (i) a reportable event described in Section 4043(c)(5) or (6) of ERISA or (ii) any other reportable event described in Section 4043(c) of ERISA other than a reportable event not subject to the provision for 30-day notice to the Pension Benefit Guaranty Corporation pursuant to a waiver by such corporation under Section 4043(a) or 4043(b)(4) of ERISA, or (b) the withdrawal of any ERISA Affiliate from an ERISA Plan during a plan year in which it was a “substantial employer” as defined in Section 4001(a)(2) of ERISA, or (c) the filing of a notice of intent to terminate any ERISA Plan or the treatment of any ERISA Plan amendment as a termination under Section 4041(c) of ERISA, or (d) the institution of proceedings to terminate any ERISA Plan by the Pension Benefit Guaranty Corporation under Section 4042 of ERISA, or (e) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any ERISA Plan.

“Threshold Amount” means $500,000.

“Tribunal” means any government, any arbitration panel, any court or any governmental department, commission, board, bureau, agency or instrumentality of the United States of America or any state, province, commonwealth, nation, territory, possession, county, parish, town, township, village or municipality, whether now or hereafter constituted or existing.

“Type” means, with respect to any Loans, the characterization of such Loans as either Base Rate Loans or Libor Loans.

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“UCC” means the Uniform Commercial Code in effect in the State of New York from time to time.

“Voting Stock” of any specified Person as of any date means the Equity Interests of such Person that is at the time entitled to vote in the election of the directors, managers or trustees, as applicable of such Person or that is convertible into such voting Equity Interests.

“Weighted Average Life to Maturity “ means, when applied to any Indebtedness at any date, the number of years obtained by dividing:

(www) 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, in respect of the Indebtedness, 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

(xxx) the then outstanding principal amount of such Indebtedness.

Section 1.2. Exhibits and Schedules; Additional Definitions. All Exhibits and Schedules attached to this Agreement are a part hereof for all purposes. Reference is hereby made to the Security Schedule for the meaning of certain terms defined therein and used but not defined herein, which definitions are incorporated herein by reference.

Section 1.3. Terms Generally; References and Titles. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, (e) any reference to any law or regulation herein shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time and (f) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. References to any document, instrument, or agreement (a) shall include all exhibits, schedules, and other attachments thereto, and (b) shall include all documents, instruments, or agreements issued or executed in replacement thereof. Titles appearing at the beginning of any subdivisions are for convenience only and do not constitute any part of such subdivisions and shall be disregarded in construing the language contained in such subdivisions. The phrases “this section” and “this subsection” and similar phrases refer

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only to the sections or subsections hereof in which such phrases occur. The word “or” is not exclusive. Accounting terms have the meanings assigned to them by GAAP, as applied by the accounting entity to which they refer. References to “days” shall mean calendar days, unless the term “Business Day” is used. Unless otherwise specified, references herein to any particular Person also refer to its successors and permitted assigns.

Section 1.4. Calculations and Determinations. All calculations under the Loan Documents of interest chargeable with respect to Libor Loans and of fees shall be made on the basis of actual days elapsed (including the first day but excluding the last) and a year of 360 days. All other calculations of interest made under the Loan Documents shall be made on the basis of actual days elapsed (including the first day but excluding the last) and a year of 360 days. Each determination by Lender of amounts to be paid under ARTICLE III or any matters which are to be determined hereunder by Lender (such as any Libor Rate, Adjusted Libor Rate, Business Day or Interest Period) shall, in the absence of manifest error, be conclusive and binding. Unless otherwise expressly provided herein or unless Lender otherwise consents all financial statements and reports furnished to Lender hereunder for periods ending after the date hereof shall be prepared and all financial computations and determinations pursuant hereto shall be made in accordance with GAAP with respect to Parent or any New Parent, whichever is then the ultimate parent company, and its Subsidiaries on a Consolidated basis.

Section 1.5. Joint Preparation; Construction of Indemnities and Releases. This Agreement and the other Loan Documents have been reviewed and negotiated by sophisticated parties with access to legal counsel and no rule of construction shall apply hereto or thereto which would require or allow any Loan Document to be construed against any party because of its role in drafting such Loan Document. All indemnification and release provisions of this Agreement shall be construed broadly (and not narrowly) in favor of the Persons receiving indemnification or being released.

ARTICLE II - The Loans and Letters of Credit

Section 2.1. Commitments to Lend; Note. Subject to the terms and conditions hereof, Lender agrees to make loans to Borrower (herein called “Loans”) upon Borrower’s request from time to time during the Commitment Period, provided that (i) subject to Section 3.3, Section 3.4, and Section 3.6, Loans of the same Type and as part of the same Borrowing, and (ii) after giving effect to such Loans, the Facility Usage does not exceed either the Borrowing Base then in effect or the Maximum Credit Amount taking into account all payments and reductions required by Section 2.7. The obligation of Borrower to repay to Lender the aggregate amount of all Loans made by Lender, together with interest accruing in connection therewith, shall be evidenced by a single promissory note (herein called “Note”) made by Borrower payable to the order of Lender in the form of Exhibit A with appropriate insertions. Subject to the terms and conditions hereof, Borrower may borrow, repay and reborrow hereunder. If at any time the outstanding Loans exceeds either the Facility Usage or the Maximum Credit Amount as shown on any Borrowing Base Certificate or as indicated by Lender’s own records, Borrower shall, on the date of the delivery of such Borrowing Base Certificate to Lender or on the date of notice from Lender as to Lender’s records, prepay on the Note such amount as may be necessary to eliminate such excess, plus all accrued but unpaid

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interest thereon. The amount of principal owing on the Note at any given time shall be the aggregate principal amount of all Loans theretofore made by Lender minus all payments of principal theretofore received by Lender on the Note. Interest on the Note shall accrue and be due and payable as provided herein. The Note shall be due and payable as provided herein, and shall be due and payable in full on the Maturity Date. The sums advanced under the Note shall be used for general corporate purposes, working capital and issuance of Letters of Credit.

Section 2.2. Requests for New Loans. Borrower must give to Lender written notice of any requested Borrowing of new Loans to be advanced by Lender. Each such notice constitutes a “Borrowing Notice” hereunder and must:

(a) specify (i) the aggregate amount of any such Borrowing of new Base Rate Loans and the date on which such Base Rate Loans are to be advanced, or (ii) the aggregate amount of any such Borrowing of new Libor Loans, the date on which such Libor Loans are to be advanced (which shall be the first day of the Interest Period which is to apply thereto), and the length of the applicable Interest Period; and

(b) be received by Lender not later than 12:00 o’clock Noon, Houston, Texas time, on (i) the day on which any such Base Rate Loans are to be made, or (ii) the third Business Day preceding the day on which any such Libor Loans are to be made.

Each such written request or confirmation must be made in the form and substance of the “Borrowing Notice” attached hereto as Exhibit B, duly completed.

Section 2.3. Continuations and Conversions of Existing Loans. Borrower may make the following elections with respect to Loans already outstanding: to convert Base Rate Loans to Libor Loans, to convert Libor Loans to Base Rate Loans on the last day of the Interest Period applicable thereto, and to continue Libor Loans beyond the expiration of such Interest Period by designating a new Interest Period to take effect at the time of such expiration. In making such elections, Borrower may combine existing Loans made pursuant to separate Borrowings into one new Borrowing or divide existing Loans made pursuant to one Borrowing into separate new Borrowings, provided that Borrower may have no more than five (5) Borrowings of Libor Loans outstanding at any time. To make any such election, Borrower must give to Lender written notice (or telephonic notice promptly confirmed in writing) of any such Conversion or Continuation of existing Loans, with a separate notice given for each new Borrowing. Each such notice constitutes a “Continuation/Conversion Notice” hereunder and must:

(a) specify the existing Loans which are to be Continued or Converted;

(b) specify (i) the aggregate amount of any Borrowing of Base Rate Loans into which such existing Loans are to be continued or converted and the date on which such Continuation or Conversion is to occur, or (ii) the aggregate amount of any Borrowing of Libor Loans into which such existing Loans are to be continued or converted, the date on which such Continuation or Conversion is to occur (which shall be the first day of the Interest Period which is to apply to such Libor Loans), and the length of the applicable Interest Period; and

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(c) be received by Lender not later than 12 o’clock Noon, Houston, Texas time, on (i) the day on which any such Continuation or Conversion to Base Rate Loans is to occur, or (ii) the third Business Day preceding the day on which any such Continuation or Conversion to Libor Loans is to occur.

Each such written request or confirmation must be made in the form and substance of the “Continuation/Conversion Notice” attached hereto as Exhibit C, duly completed. Each such telephonic request shall be deemed a representation, warranty, acknowledgment and agreement by Borrower as to the matters which are required to be set out in such written confirmation. Each Continuation/Conversion Notice shall be irrevocable and binding on Borrower. During the continuance of any Default, Borrower may not make any election to convert existing Loans into Libor Loans or continue existing Loans as Libor Loans. If (due to the existence of a Default or for any other reason) Borrower fails to timely and properly give any Continuation/Conversion Notice with respect to a Borrowing of existing Libor Loans at least three days prior to the end of the Interest Period applicable thereto, such Libor Loans shall automatically be converted into Base Rate Loans at the end of such Interest Period. No new funds shall be repaid by Borrower or advanced by Lender in connection with any Continuation or Conversion of existing Loans pursuant to this section, and no such Continuation or Conversion shall be deemed to be a new advance of funds for any purpose; such Continuations and Conversions merely constitute a change in the interest rate applicable to already outstanding Loans.

Section 2.4. Use of Proceeds. Borrower shall use all Loans in accordance with the uses specified in Section 2.1, to refinance Matured LC Obligations, and provide working capital for its operations and for other general business purposes. Borrower shall use all Letters of Credit, including uses on behalf of other Restricted Persons, for its general corporate purposes. In no event shall the funds from any Loan or any Letter of Credit be used directly or indirectly by any Person for personal, family, household or agricultural purposes or for the purpose, whether immediate, incidental or ultimate, of purchasing, acquiring or carrying any “margin stock” (as such term is defined in Regulation U promulgated by the Board of Governors of the Federal Reserve System) or to extend credit to others directly or indirectly for the purpose of purchasing or carrying any such margin stock. Borrower represents and warrants that Borrower is not engaged principally, or as one of Borrower’s important activities, in the business of extending credit to others for the purpose of purchasing or carrying such margin stock.

Section 2.5. Interest Rates and Fees; Payment Dates; Retroactive Adjustments of Applicable Interest Rates.

(a) Interest Rates. Subject to subsection (b) below, (i) each Base Rate Loan shall bear interest on each day outstanding at the Adjusted Base Rate in effect on such day, and (ii) each Libor Loan shall bear interest on each day during the related Interest Period at the related Adjusted Libor Rate in effect on such day.

(b) Default Rate. If an Event of Default shall have occurred and be continuing under Section 9.1(a), Section 9.1(b), Section 9.1(j)(i), Section 9.1(j)(iii) or Section 9.1(j)(iv), all outstanding Loans shall bear interest at the applicable Default Rate. In addition, if an Event of Default shall have occurred and be continuing (other than under Section 9.1(a), Section 9.1(b),

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Section 9.1(j)(i), Section 9.1(j)(iii) or Section 9.1(j)(iv)), Lender may, by notice to Borrower, elect to have the outstanding Loans bear interest at the applicable Default Rate, whereupon such Loans shall bear interest at the applicable Default Rate until the earlier of (i) the first date thereafter upon which there shall be no Event of Default continuing and (ii) the date upon which Lender shall have rescinded such notice.

(c) Commitment Fees. In consideration of Lender’s commitment to make Loans, Borrower will pay to Lender a commitment fee determined on a daily basis by applying the Commitment Fee Rate to the unused portion of the Maximum Credit Amount on each day during the Commitment Period, determined for each such day by deducting from the amount of the Maximum Credit Amount at the end of such day the Facility Usage. This commitment fee shall be due and payable in arrears on the last day of each Fiscal Quarter and at the end of the Commitment Period.

(d) Payment Dates. On each Interest Payment Date relating to Base Rate Loans, Borrower shall pay to Lender all unpaid interest which has accrued on the Base Rate Loans to but not including such Interest Payment Date. On each Interest Payment Date relating to a Libor Loan, Borrower shall pay to Lender all unpaid interest which has accrued on such Libor Loan to but not including such Interest Payment Date.

(e) Retroactive Adjustments of Applicable Interest Rates. If, as a result of any restatement of or other adjustment to the financial statements of Parent or any New Parent, whichever is then the ultimate parent company, and its Consolidated Subsidiaries or for any other reason, Borrower or Lender determines that (i) the Leverage Ratio as calculated by Parent or any New Parent, whichever is then the ultimate parent company, as of any applicable date was inaccurate and (ii) a proper calculation of the Leverage Ratio would have resulted in higher pricing for such period, Borrower shall immediately and retroactively be obligated to pay to Lender promptly on demand by Lender (or, after the occurrence of an actual or deemed entry of an order for relief with respect to Borrower under the Bankruptcy Code of the United States, automatically and without further action by Lender), an amount equal to the excess of the amount of interest and fees that should have been paid for such period over the amount of interest and fees actually paid for such period. This subsection shall not limit the rights of Lender under this Section 2.5 or Section 2.10(a) or under ARTICLE IX. Borrower’s obligations under this subsection shall survive the termination of this Agreement and the other Loan Documents and the repayment of all other Obligations hereunder.

Section 2.6. Optional Prepayments. Borrower may, (a) upon one Business Days’ notice to Lender with respect to any Base Rate Loan and (b) upon three (3) Business Days’ notice to Lender with respect to any Libor Loan, from time to time and without premium or penalty pay amounts outstanding under the Loans, in whole or in part, provided (i) that the aggregate amounts of all partial payments of principal on the Loans equals $250,000 or any higher integral multiple of $250,000, and (ii) that if Borrower pays any Libor Loan on any day other than the last day of the Interest Period applicable thereto, it shall pay to Lender any amounts due under Section 3.5. Each payment of principal under this section shall be accompanied by all interest then accrued and unpaid on the principal so paid. Any principal or interest paid pursuant to this section shall be in addition to, and not in lieu of, all payments otherwise required to be paid under the Loan Documents at the time of such payment.

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Section 2.7. Repayment of Loans.

(a) Borrower shall repay the unpaid principal amount of all Loans on the Maturity Date.

(b) If at any time the Facility Usage exceeds the Maximum Credit Amount (whether due to a reduction in the Maximum Credit Amount in accordance with this Agreement, or otherwise), Borrower shall immediately upon demand pay the principal of the Loans (and after all Loans are repaid in full, provide LC Collateral in accordance with Section 2.13(a)) in an amount at least equal to such excess.

(c) If at any time the Facility Usage is less than the Maximum Credit Amount but in excess of the Borrowing Base (such excess being herein called a “Borrowing Base Deficiency”), Borrower shall, within five (5) Business Days after Lender gives notice of such fact to Borrower, give notice to Lender electing to pay the principal of the Loans (and, if the Facility Usage exceeds the Borrowing Base after all Loans are repaid in full, provide LC Collateral in accordance with Section 2.13(a)) in an aggregate amount sufficient to eliminate such Borrowing Base Deficiency (or, if the Facility Usage exceeds the Borrowing Base after the Loans have been paid in full, pay to Lender LC Collateral as required under Section 2.13(a)), such payment to be made in full on or before the thirtieth day after such notice by Lender to Borrower of such Borrowing Base Deficiency. Each payment of principal under this subsection shall be accompanied by all interest then accrued and unpaid on the principal so prepaid. Any principal or interest prepaid pursuant to this subsection shall be in addition to, and not in lieu of, all payments otherwise required to be paid under the Loan Documents at the time of such payment.

Section 2.8. Letters of Credit. Subject to the terms and conditions hereof, Borrower may at any time during the Commitment Period request Lender to issue, increase the amount of or otherwise amend or extend, one or more Letters of Credit, provided that, after taking such Letter of Credit into account:

(a) the Facility Usage does not exceed the Borrowing Base at such time;

(b) the aggregate amount of LC Obligations at such time does not exceed the LC Sublimit;

(c) the expiration date of such Letter of Credit (as extended, if applicable) is prior to the Letter of Credit Termination Date;

(d) such Letter of Credit is to be used for general business purposes of a Restricted Person;

(e) such Letter of Credit is not directly or indirectly used to assure payment of or otherwise support any Indebtedness of any Person other than Indebtedness of any Restricted Person;

(f) the issuance of such Letter of Credit will be in compliance with all applicable governmental restrictions, policies, and guidelines and will not subject Lender to any cost which is not reimbursable under ARTICLE III;

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(g) the form and terms of such Letter of Credit are acceptable to Lender in the reasonable exercise of its discretion; and

(h) all other conditions in this Agreement to the issuance of such Letter of Credit have been satisfied.

Lender will honor any such request if the foregoing conditions (a) through (h) (the “LC Conditions”) have been met as of the date of issuance of such Letter of Credit. Lender may choose to honor any such request for any other Letter of Credit but has no obligation to do so and may refuse to issue any other requested Letter of Credit for any reason which Lender in its sole discretion deems relevant.

Section 2.9. Requesting Letters of Credit. Borrower must make written application for any Letter of Credit or amendment or extension of any Letter of Credit at least five (5) Business Days (or such shorter period as Lender may in its discretion from time to time agree) before the date on which Borrower desires for Lender to issue such Letter of Credit. By making any such written application (unless otherwise expressly stated therein) Borrower shall be deemed to have represented and warranted that the LC Conditions described in Section 2.8 will be met as of the date of issuance of such Letter of Credit. Each such written application for a Letter of Credit must be made in writing in the form customarily used by Lender, the terms and provisions of which are hereby incorporated herein by reference (or in such other form as may mutually be agreed upon by Lender and Borrower). After the LC Conditions for a Letter of Credit have been met as described in Section 2.8 (or if Lender otherwise desires to issue such Letter of Credit earlier), Lender will issue such Letter of Credit at Lender’s office in Houston, Texas. If any provisions of any LC Application conflict with any provisions of this Agreement, the provisions of this Agreement shall govern and control. Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with Borrower’s instructions or other irregularity, Borrower will immediately notify Lender.

Section 2.10. Reimbursement and Participations.

(a) Reimbursement by Borrower. Each Matured LC Obligation shall constitute a loan by Lender to Borrower. Borrower promises to pay to Lender, or to Lender’s order, on demand, the full amount of each Matured LC Obligation, together with interest thereon (i) at the rate applicable to Base Rate Loans to and including the first Business Day after such demand is made by Lender and (ii) at the Default Rate applicable to Base Rate Loans on each day thereafter. The obligation of Borrower to reimburse Lender for each Matured LC Obligation shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement (including any LC Application) under all circumstances, including the following: (i) any lack of validity or enforceability of such Letter of Credit or any other agreement or instrument relating thereto; (ii) the existence of any claim, counterclaim, set-off, defense or other right that Borrower may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), Lender or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction; (iii) any draft, demand, certificate or

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other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit; (iv) any payment by Lender under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or (v) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing. Without limiting the generality of the foregoing, it is expressly agreed that the absolute and unconditional nature of Borrower’s obligations under this section to reimburse Lender for each drawing under a Letter of Credit will not be excused by the gross negligence or willful misconduct of Lender. However, the foregoing shall not be construed to excuse Lender from liability to Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by Borrower to the extent permitted by applicable Law) suffered by Borrower that are caused by Lender’s gross negligence or willful misconduct in determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof.

(b) Letter of Credit Advances. If the beneficiary of any Letter of Credit makes a draft or other demand for payment thereunder then Borrower may, during the interval between the making thereof and the honoring thereof by Lender, request Lender to make Loans to Borrower in the amount of such draft or demand, which Loans shall be made concurrently with Lender’s payment of such draft or demand and shall be immediately used by Lender to repay the amount of the resulting Matured LC Obligation. Such a request by Borrower shall be made in compliance with all of the provisions hereof, provided that for the purposes of the first sentence of Section 2.1(a), the amount of such Loans shall be considered, but the amount of the Matured LC Obligation to be concurrently paid by such Loans shall not be considered.

(c) Calculations. A written advice setting forth in reasonable detail the amounts owing under this section, submitted by Lender to Borrower from time to time, shall be conclusive, absent manifest error, as to the amounts thereof.

Section 2.11. Letter of Credit Fees. In consideration of Lender’s issuance of any Letter of Credit, Borrower agrees to pay to Lender a letter of credit issuance fee at a rate equal to Lender’s letter of credit fee rate then in effect (which shall be increased by one percent (1%) per annum during any period in which interest on the Loans accrues at the Default Rate). Such fee shall be paid to Lender the last day of each quarter.

Section 2.12. No Duty to Inquire.

(a) Drafts and Demands. Lender is authorized and instructed to accept and pay drafts and demands for payment under any Letter of Credit without requiring, and without responsibility for, any determination as to the existence of any event giving rise to said draft, either at the time of acceptance or payment or thereafter. Lender is under no duty to determine the proper identity of anyone presenting such a draft or making such a demand (whether by tested telex or otherwise) as the officer, representative or agent of any beneficiary under any Letter of Credit, and payment by Lender to any such beneficiary when requested by any such purported officer, representative or agent is hereby authorized and approved. Borrower releases Lender from, and agrees to hold Lender harmless and indemnified against, any liability or claim

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in connection with or arising out of the subject matter of this section, which indemnity shall apply whether or not any such liability or claim is in any way or to any extent caused, in whole or in part, by any negligent act or omission of any kind by Lender, provided only that Lender shall not be released from or entitled to indemnification for that portion, if any, of any liability or claim which is proximately caused by or results from its own individual gross negligence or willful misconduct, as determined in a final judgment.

(b) Extension of Maturity. If the maturity of any Letter of Credit is extended by its terms or by Law or governmental action, if any extension of the maturity or time for presentation of drafts or any other modification of the terms of any Letter of Credit is made at the request of any Restricted Person, or if the amount of any Letter of Credit is increased at the request of any Restricted Person, this Agreement shall be binding upon all Restricted Persons with respect to such Letter of Credit as so extended, increased or otherwise modified, with respect to drafts and property covered thereby, and with respect to any action taken by Lender or Lender’s correspondents in accordance with such extension, increase or other modification.

(c) Transferees of Letters of Credit. If any Letter of Credit provides that it is transferable, Lender shall have no duty to determine the proper identity of anyone appearing as transferee of such Letter of Credit, nor shall Lender be charged with responsibility of any nature or character for the validity or correctness of any transfer or successive transfers, and payment by Lender to any purported transferee or transferees as determined by Lender is hereby authorized and approved, and Borrower releases Lender from, and agrees to hold Lender harmless and indemnified against, any liability or claim in connection with or arising out of the foregoing, which indemnity shall apply whether or not any such liability or claim is in any way or to any extent caused, in whole or in part, by any negligent act or omission of any kind by Lender, provided only that Lender shall not be released from or entitled to indemnification for that portion, if any, of any liability or claim which is proximately caused by or results from its own individual gross negligence or willful misconduct, as determined in a final judgment.

Section 2.13. LC Collateral.

(a) LC Obligations in Excess of Borrowing Base. If, after the making of all mandatory prepayments required under Section 2.7, the outstanding LC Obligations will exceed the Borrowing Base, then in addition to prepayment of the entire principal balance of the Loans required under Section 2.7. Borrower will immediately pay to Lender an amount equal to such excess. Lender will hold such amount as security for the remaining LC Obligations (all such amounts held as security for LC Obligations being herein collectively called “LC Collateral”) and the other Obligations, and such collateral may be applied from time to time to any Matured LC Obligations or other Obligations which are due and payable. Neither this subsection nor the following subsection shall, however, limit or impair any rights which Lender may have under any other document or agreement relating to any Letter of Credit, LC Collateral or LC Obligation, including any LC Application, or any rights which Lender may have to otherwise apply any payments by Borrower and any LC Collateral under Section 3.1.

(b) Acceleration of LC Obligations. If the Obligations or any part thereof become immediately due and payable pursuant to Section 9.1 then, unless Lender otherwise specifically elects to the contrary (which election may thereafter be retracted by Lender at any time), all LC

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Obligations shall become immediately due and payable without regard to whether or not actual drawings or payments on the Letters of Credit have occurred, and Borrower shall be obligated to pay to Lender immediately an amount equal to the aggregate LC Obligations which are then outstanding, which amount shall be held by Lender as LC Collateral securing the remaining LC Obligations and the other Obligations, and such LC Collateral may be applied from time to time to any Matured LC Obligations or any other Obligations which are due and payable.

(c) Investment of LC Collateral. Pending application thereof, all LC Collateral shall be invested by Lender in such Investments described in clause (d) of the definition of Cash Equivalents as Lender may choose in its sole discretion. All interest on (and other proceeds of) such Cash equivalents (other than Investments) shall be reinvested or applied to Matured LC Obligations or other Obligations which are due and payable. When all Obligations have been satisfied in full, including all LC Obligations, all Letters of Credit have expired or been terminated, and all of Borrower’s reimbursement obligations in connection therewith have been satisfied in full, Lender shall release any remaining LC Collateral. Borrower hereby assigns and grants to Lender a continuing security interest in all LC Collateral paid by it to Lender, all Investments purchased with such LC Collateral, and all proceeds thereof to secure its Matured LC Obligations and its Obligations under this Agreement, the Note, and the other Loan Documents, and Borrower agrees that such LC Collateral, Investments and proceeds shall be subject to all of the terms and conditions of the Security Documents. Borrower further agrees that Lender shall have all of the rights and remedies of a secured party under the UCC as adopted in the State of New York with respect to such security interest and that an Event of Default under this Agreement shall constitute a default for purposes of such security interest.

(d) Payment of LC Collateral. When Borrower is required to provide LC Collateral for any reason and fails to do so on the day when required, Lender may without prior notice to Borrower or any other Restricted Person provide such LC Collateral (whether by application of proceeds of other Collateral, by transfers from other accounts maintained with Lender, or otherwise) using any available funds of Borrower or any other Restricted Person also liable to make such payments, and Lender will give notice thereof to Borrower or such other Restricted Person, as the case may be, promptly after such application or transfer; provided, however, the failure to give such notice shall not affect the validity of such application or transfer. Any such amounts which are required to be provided as LC Collateral and which are not provided on the date required shall, for purposes of each Security Document, be considered past due Obligations owing hereunder, and Lender is hereby authorized to exercise its respective rights under each Security Document to obtain such amounts.

ARTICLE III - Payments to Lender

Section 3.1. General Procedures. Borrower will make each payment which it owes under the Loan Documents to Lender, in lawful money of the United States of America, without set-off, deduction or counterclaim, and in immediately available funds. Each such payment must be received by Lender not later than 12 o’clock Noon, Houston, Texas time, on the date such payment becomes due and payable. Any payment received by Lender after such time will be deemed to have been made on the next following Business Day. Should any such payment become due and payable on a day other than a Business Day, the maturity of such

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payment shall be extended to the next succeeding Business Day, and, in the case of a payment of principal or past due interest, interest shall accrue and be payable thereon for the period of such extension as provided in the Loan Document under which such payment is due. Each payment under a Loan Document shall be due and payable at the place set forth for Lender on the Lender Schedule. When Lender collects or receives money on account of the Obligations, Lender shall distribute all money so collected or received, and Lender shall apply all such money so distributed, as follows (except as otherwise provided in Section 9.3):

(a) first, for the payment of all Obligations which are then due (and if such money is insufficient to pay all such Obligations, first to any reimbursements due to Lender under Section 10.4 and then to the partial payment of all other Obligations then due in proportion to the amounts thereof, or as Lender shall otherwise agree);

(b) then for the prepayment of amounts owing under the Loan Documents (other than principal of the Loans) if so specified by Borrower;

(c) then for the prepayment of principal of the Loans, together with accrued and unpaid interest on the principal so prepaid; and

(d) last, for the payment or prepayment of any other Obligations.

All payments applied to principal or interest on the Note shall be applied first to any interest then due and payable, then to principal then due and payable, and last to any prepayment of principal and interest in compliance with Section 2.6 and Section 2.7.

Section 3.2. Capital Reimbursement. If either (a) the introduction or implementation of or the compliance with or any change in or in the interpretation of any Law, or (b) the introduction or implementation of or the compliance with any request, directive or guideline from any central bank or other Governmental Authority (whether or not having the force of Law) affects or would affect the amount of capital required or expected to be maintained by Lender or any corporation controlling Lender, then, upon demand by Lender, Borrower will pay to Lender, from time to time as specified by Lender, such additional amount or amounts which Lender shall determine to be appropriate to compensate Lender or any corporation controlling Lender in light of such circumstances, to the extent that Lender reasonably determines that the amount of any such capital would be increased or the rate of return on any such capital would be reduced by or in whole or in part based on the existence of the face amount of Lender’s Loans or commitments under this Agreement.

Section 3.3. Increased Cost of Libor Loans. If any applicable Law (whether now in effect or hereinafter enacted or promulgated, including Regulation D) or any interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof (whether or not having the force of Law):

(a) shall change the basis of taxation of payments to Lender of any principal, interest, or other amounts attributable to any Libor Loan or otherwise due under this Agreement in respect of any Libor Loan (other than taxes imposed on the overall net income of Lender or the Lending Office of Lender by any jurisdiction in which Lender or the Lending Office is located); or

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(b) shall change, impose, modify, apply or deem applicable any reserve, special deposit or similar requirements in respect of any Libor Loan (excluding those for which Lender is fully compensated pursuant to adjustments made in the definition of Libor Rate) or against assets of, deposits with or for the account of, or credit extended by, Lender; or

(c) shall impose on Lender or the interbank eurocurrency deposit market any other condition affecting any Libor Loan, the result of which is to increase the cost to Lender of funding or maintaining any Libor Loan or to reduce the amount of any sum receivable by Lender in respect of any Libor Loan by an amount deemed by Lender to be material,

then Lender shall promptly notify Borrower in writing of the happening of such event and of the amount required to compensate Lender for such event (on an after-tax basis, taking into account any taxes on such compensation), whereupon (i) Borrower shall pay such amount to Lender and (ii) Borrower may elect, by giving to Lender not less than three Business Days’ notice, to convert all (but not less than all) of any such Libor Loans into Base Rate Loans.

Section 3.4. Availability. If (a) any change in applicable Laws, or in the interpretation or administration thereof of or in any jurisdiction whatsoever, domestic or foreign, shall make it unlawful or impracticable for Lender to fund or maintain Libor Loans, or shall materially restrict the authority of Lender to purchase or take offshore deposits of dollars (i.e., “eurodollars”), or (b) Lender determines that matching deposits appropriate to fund or maintain any Libor Loan are not available to it, or (c) Lender determines that the formula for calculating the Libor Rate does not fairly reflect the cost to Lender of making or maintaining loans based on such rate, then, upon notice by Lender to Borrower, Borrower’s right to elect Libor Loans from Lender shall be suspended to the extent and for the duration of such illegality, impracticability or restriction and all Libor Loans of Lender which are then outstanding or are then the subject of any Borrowing Notice and which cannot lawfully or practicably be maintained or funded shall immediately become or remain, or shall be funded as, Base Rate Loans of Lender. Borrower agrees to indemnify Lender and hold it harmless against all reasonable costs, expenses, claims, penalties, liabilities and damages which may result from any such change in Law, interpretation or administration. Such indemnification shall be on an after-tax basis, taking into account any taxes imposed on the amounts paid as indemnity.

Section 3.5. Funding Losses. In addition to its other obligations hereunder, Borrower will indemnify Lender against, and reimburse Lender on demand for, any loss or expense incurred or sustained by Lender (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by a Lender to fund or maintain Libor Loans), as a result of (a) any payment or prepayment (whether authorized or required hereunder or otherwise) of all or a portion of a Libor Loan on a day other than the day on which the applicable Interest Period ends, (b) any payment or prepayment, whether required hereunder or otherwise, of a Loan made after the delivery, but before the effective date, of a Continuation/Conversion Notice, if such payment or prepayment prevents such Continuation/Conversion Notice from becoming fully effective, (c) the failure of any Loan to be made or of any Continuation/Conversion Notice to become effective due to any condition precedent not being satisfied or due to any other action or inaction of any Restricted Person, or (d) any Conversion (whether authorized or required hereunder or otherwise) of all or any portion of any Libor Loan into a Base Rate Loan or into a different Libor Loan on a day other than the day on which the applicable Interest Period ends. Such indemnification shall be on an after-tax basis, taking into account any taxes imposed on the amounts paid as indemnity.

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Section 3.6. Reimbursable Taxes. Borrower covenants and agrees that:

(a) Borrower will indemnify Lender against and reimburse Lender for all present and future income, stamp and other taxes, levies, costs and charges whatsoever imposed, assessed, levied or collected on or in respect of this Agreement or any Libor Loans (whether or not legally or correctly imposed, assessed, levied or collected), excluding, however, any taxes imposed on or measured by the overall gross or net income of Lender, franchise or margin tax or the Lending Office of Lender by any jurisdiction in which Lender or the Lending Office is located (all such non-excluded taxes, levies, costs and charges being collectively called “Reimbursable Taxes” in this section). Such indemnification shall be on an after-tax basis, taking into account any taxes imposed on the amounts paid as indemnity.

(b) All payments on account of the principal of, and interest on, Lender’s Loans and Note, and all other amounts payable by Borrower to Lender hereunder, shall be made in full without set-off or counterclaim and shall be made free and clear of and without deductions or withholdings of any nature by reason of any Reimbursable Taxes, all of which will be for the account of Borrower. In the event of Borrower being compelled by Law to make any such deduction or withholding from any payment to Lender, Borrower shall pay on the due date of such payment, by way of additional interest, such additional amounts as are needed to cause the amount receivable by Lender after such deduction or withholding to equal the amount which would have been receivable in the absence of such deduction or withholding. If Borrower should make any deduction or withholding as aforesaid, Borrower shall within 60 days thereafter forward to Lender an official receipt or other official document evidencing payment of such deduction or withholding.

(c) If Borrower is ever required to pay any Reimbursable Tax with respect to any Libor Loan, Borrower may elect, by giving to Lender not less than three Business Days’ notice, to convert all (but not less than all) of any such Libor Loan into a Base Rate Loan, but such election shall not diminish Borrower’s obligation to pay all Reimbursable Taxes.

(d) Notwithstanding the foregoing provisions of this section, Borrower shall be entitled, to the extent it is required to do so by Law, to deduct or withhold (and not to make any indemnification or reimbursement for) income or other similar taxes imposed by the United States of America (other than any portion thereof attributable to a change in federal income tax Laws effected after the date hereof) from interest, fees or other amounts payable hereunder for the account of Lender.

Section 3.7. Taxes.

(a) Any and all payments by Borrower to or for the account of Lender hereunder or under any other Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of Lender, taxes imposed on its gross or net income, and franchise or margin taxes imposed on it, by the jurisdiction under the Laws of

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which Lender is organized or any political subdivision thereof (all such non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings, and liabilities being hereinafter referred to as “Taxes”). If Borrower shall be required by Law to deduct any Taxes from or in respect of any sum payable under this Agreement or any other Loan Document to Lender, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this section) Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) Borrower shall make such deductions, and (iii) Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable Law.

(b) In addition, Borrower agrees to pay any and all present or future stamp or documentary taxes and any other excise or property taxes or charges or similar levies which arise from any payment made under this Agreement or any other Loan Document or from the execution or delivery of, or otherwise with respect to, this Agreement or any other Loan Document (hereinafter referred to as “Other Taxes”).

(c) Borrower agrees to indemnify Lender for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this section) paid by Lender (as the case may be) and any liability (including penalties, interest, and expenses) arising therefrom or with respect thereto.

(d) Without prejudice to the survival of any other agreement of Borrower hereunder, the agreements and obligations of Borrower contained in this section shall survive the termination of the Commitment Period and the payment in full of the Note.

Section 3.8. Time Limited. Notwithstanding anything to the contrary contained in Sections 3.2, 3.4 and 3.5, no Borrower shall be required to reimburse or pay any costs or expenses to Lender as required by such sections which have accrued more than 120 days prior to Lender’s giving notice to Borrowers that Lender has suffered or incurred such costs or expenses.

ARTICLE IV - Conditions Precedent to Lending

Section 4.1. Documents to be Delivered. Lender has no obligation to make its first Loan or to issue the first Letter of Credit, unless Lender shall have received all of the following, duly executed and delivered (as appropriate) and in form, substance and date satisfactory to Lender:

(a) This Agreement and any other documents that Lender is to execute in connection herewith.

(b) The Note.

(c) Each Security Document described in the Security Schedule.

(d) The Intercreditor Agreement.

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(e) Certain certificates of Borrower including:

(i) A Certificate of a Responsible Officer of Borrower, which shall contain the names and signatures of the officers of Borrower authorized to execute Loan Documents and which shall certify to the truth, correctness and completeness of the following exhibits attached thereto: (1) a copy of resolutions duly adopted by the Board of Directors of Borrower and in full force and effect at the time this Agreement is entered into, authorizing the execution of this Agreement and the other Loan Documents delivered or to be delivered in connection herewith and the consummation of the transactions contemplated herein and therein, (2) a copy of the charter documents of Borrower and all amendments thereto, certified by the appropriate official of Borrower’s state of organization, and (3) a copy of any bylaws of Borrower;

(ii) A “Compliance Certificate” of a Responsible Officer of Borrower, of even date with such Loan or such Letter of Credit, in which such Responsible Officer certifies to the satisfaction of the conditions set out in subsections (a), (b), (c) and (e) of Section 4.2;

(iii) A “Perfection Certificate” in the form of Exhibit F; and

(iv) A Borrowing Base Certificate.

(f) Certificate (or certificates) of the due formation, valid existence and good standing of Borrower in its state of organization, issued by the appropriate authorities of such jurisdiction, and certificates of Borrower’s good standing and due qualification to do business, issued by appropriate officials in any states in which Borrower owns property subject to Security Documents.

(g) Documents similar to those specified in subsections (e)(i) and (f) of this section with respect to each Guarantor and the execution by it of its guaranty of Borrower’s Obligations.

(h) A favorable opinion of Winstead PC, Parent’s, Borrowers’ and Guarantors’ counsel.

(i) The Initial Financial Statements.

(j) A certificate by a Responsible Officer of Borrower, certifying the Initial Financial Statements delivered pursuant to clause (i) above are correct and complete in all material respects as of the date hereof.

(k) Certificates or binders evidencing Restricted Persons’ insurance in effect on the date hereof.

(l) A certificate by a Responsible Officer of parent certifying that the Senior Secured Notes Offering has occurred.

(m) Payment of all commitment, facility, agency and other fees required to be paid to Lender pursuant to any Loan Documents or any commitment agreement heretofore entered into.

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(n) Borrower shall have delivered to Lender a certificate certifying that the documents attached thereto are true and correct copies of all material agreements then existing between a Restricted Person and another Restricted Person or between a Restricted Person and any Affiliate of any Restricted Person, including all waivers, supplements or amendments thereto, in each case, in the form existing on the Closing Date, and the terms thereof shall be reasonably satisfactory to Lender in form and substance.

(o) Borrower shall have paid all fees required to be paid on or before the Closing Date to Lender pursuant to any Loan Document or any commitment agreement heretofore entered into.

(p) All documents and instruments which Lender has then reasonably requested, in addition to those described in this Section 4.1. All such additional documents and instruments shall be reasonably satisfactory to Lender in form, substance and date.

Section 4.2. Additional Conditions Precedent. Lender has no obligation to make any Loan (including its first) or issue any Letter of Credit (including its first), unless the following conditions precedent have been satisfied:

(a) All representations and warranties made by any Restricted Person in any Loan Document shall be true and correct in all material respects on and as of the date of such Loan or the date of issuance of such Letter of Credit as if such representations and warranties had been made as of the date of such Loan or the date of issuance of such Letter of Credit, except to the extent that such representation or warranty was made as of a specific date or updated, modified or supplemented as of a subsequent date with the consent of Lender, in which cases such representations and warranties shall have been true and correct in all material respects on and of such earlier date.

(b) No Default shall exist at the date of such Loan or the date of issuance of such Letter of Credit.

(c) Each Restricted Person shall have performed and complied with all agreements and conditions required in the Loan Documents to be performed or complied with by it on or prior to the date of such Loan or the date of issuance of such Letter of Credit.

(d) The making of such Loan or the issuance of such Letter of Credit shall not be prohibited by any Law and shall not subject Lender to any penalty or other onerous condition under or pursuant to any such Law.

(e) No Material Adverse Change shall have occurred to, and no event or circumstance shall have occurred that could reasonably be expected to cause a Material Adverse Change to, Borrower’s combined financial condition or businesses since the date of the Initial Financial Statements.

(f) Lender shall have received all documents and instruments which Lender has then requested, in addition to those described in Section 4.1 (including opinions of legal counsel for Restricted Persons; corporate documents and records; documents evidencing governmental authorizations, consents, approvals, licenses and exemptions; and certificates of public officials

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and of officers and representatives of Borrower and other Persons), as to (i) the accuracy and validity of or compliance with all representations, warranties and covenants made by any Restricted Person in this Agreement and the other Loan Documents, (ii) the satisfaction of all conditions contained herein or therein, and (iii) all other matters pertaining hereto and thereto. All such additional documents and instruments shall be satisfactory to Lender in form, substance and date.

ARTICLE V - Representations and Warranties

To confirm Lender’s understanding concerning Restricted Persons and Restricted Persons’ businesses, properties and obligations and to induce Lender to enter into this Agreement and to extend credit hereunder, each of Parent and Borrower represent and warrant to Lender that:

Section 5.1. No Default. No Restricted Person is in default in the performance of any of its covenants and agreements contained in any Loan Document. No event has occurred and is continuing which constitutes a Default.

Section 5.2. Organization and Good Standing. Each Restricted Person is duly organized or formed, validly existing and in good standing under the Laws of its jurisdiction of organization or formation, having all requisite corporate or similar powers required to carry on its business and enter into and carry out the transactions contemplated hereby. Each Restricted Person is duly qualified, in good standing, and authorized to do business in all other jurisdictions wherein the character of the properties owned or held by it or the nature of the business transacted by it makes such qualification necessary except where the failure to so qualify would not reasonably be expected to cause a Material Adverse Change. If applicable, each Restricted Person has taken all actions and procedures customarily taken in order to enter, for the purpose of conducting business or owning property, each jurisdiction outside the United States wherein the character of the properties owned or held by it or the nature of the business transacted by it makes such actions and procedures desirable.

Section 5.3. Authorization. Each Restricted Person has duly taken all action necessary to authorize the execution and delivery by it of the Loan Documents to which it is a party and to authorize the consummation of the transactions contemplated thereby and the performance of its obligations thereunder. Borrower is duly authorized to borrow funds hereunder.

Section 5.4. No Conflicts or Consents. The execution and delivery by the various Restricted Persons of the Loan Documents to which each is a party, the performance by each of its obligations under such Loan Documents, and the consummation of the transactions contemplated by the various Loan Documents, do not and will not (a) conflict with, violate or result in a breach of any provision of (i) any Law, (ii) the organizational documents of any Restricted Person, or (iii) any material agreement, judgment, license, order or permit applicable to or binding upon any Restricted Person, (b) result in the acceleration of any Indebtedness owed by any Restricted Person, or (c) result in or require the creation of any Lien upon any assets or properties of any Restricted Person except as expressly contemplated or permitted in the Loan Documents. Except (i) as expressly contemplated in the Loan Documents and (ii) such as have

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been obtained or made and are in full force and effect, no permit, consent, approval, authorization or order of, and no notice to or filing with, any Tribunal or third party is required on the part of or in respect of a Restricted Person in connection with the execution, delivery or performance by any Restricted Person of any Loan Document or to consummate any transactions contemplated by the Loan Documents.

Section 5.5. Enforceable Obligations. This Agreement is, and the other Loan Documents when duly executed and delivered will be, legal, valid and binding obligations of each Restricted Person which is a party hereto or thereto, enforceable against such Restricted Person in accordance with their respective terms except as such enforcement may be limited by bankruptcy, insolvency, moratorium, fraudulent transfer, fraudulent conveyance or similar Laws of general application relating to the enforcement of creditors’ rights.

Section 5.6. Initial Financial Statements. Borrower has heretofore delivered to Lender copies of the Initial Financial Statements which are complete and correct in all material respects. The Initial Financial Statements fairly present Borrower’s combined financial position at the respective dates thereof and the combined results of operations and combined cash flows for the periods then ended. Since the date of the Initial Financial Statements no Material Adverse Change has occurred, except as reflected in Section 5.6 of the Disclosure Schedule. All Initial Financial Statements were prepared in accordance with GAAP.

Section 5.7. Other Obligations and Restrictions. No Restricted Person has any outstanding Liabilities of any kind (including contingent obligations, tax assessments, and unusual forward or long-term commitments) which are, in the aggregate, material to Borrower or material with respect to Borrower’s Consolidated financial condition and not shown in the Initial Financial Statements or disclosed in Section 5.7 of the Disclosure Schedule or otherwise permitted under Section 7.1. Except as shown in the Initial Financial Statements or disclosed in Section 5.7 of the Disclosure Schedule, no Restricted Person is subject to or restricted by any franchise, contract, deed, charter restriction, or other instrument or restriction which could reasonably be expected to cause a Material Adverse Change.

Section 5.8. Full Disclosure. No certificate, statement or other information delivered herewith or heretofore by any Restricted Person to Lender in connection with the negotiation of this Agreement or in connection with any transaction contemplated hereby when taken together with all other disclosures made in or in connection with the Loan Documents contains any untrue statement of a material fact or omits to state any material fact known to any Restricted Person (other than industry-wide risks normally associated with the types of businesses conducted by Restricted Persons) necessary to make the statements contained herein or therein collectively not misleading as of the date made or deemed made. There is no fact known to any Restricted Person (other than industry-wide risks normally associated with the types of businesses conducted by Restricted Persons) that has not been disclosed to Lender in writing which could cause a Material Adverse Change.

Section 5.9. Litigation. Except as disclosed in the Initial Financial Statements or in Section 5.9 of the Disclosure Schedule: (a) there are no actions, suits or legal, equitable, arbitrative or administrative proceedings pending before a Tribunal, or to the knowledge of any Restricted Person threatened, against any Restricted Person or affecting any

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Collateral before any Tribunal which could cause a Material Adverse Change, and (b) there are no outstanding judgments, injunctions, writs, rulings or orders by any such Tribunal against any Restricted Person or any Restricted Person’s stockholders, partners, members, directors or officers or affecting any Collateral or any of its material assets or property which could cause a Material Adverse Change.

Section 5.10. Labor Disputes and Acts of God. Except as disclosed in Section 5.10 of the Disclosure Schedule, neither the business nor the properties of any Restricted Person has been affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance), which could cause a Material Adverse Change.

Section 5.11. ERISA Plans and Liabilities. All currently existing ERISA Plans are listed in Section 5.11 of the Disclosure Schedule. Except as disclosed in the Initial Financial Statements or in Section 5.11 of the Disclosure Schedule, no Termination Event has occurred with respect to any ERISA Plan and, with respect to each ERISA Plan, all ERISA Affiliates are in compliance with ERISA in all material respects. No ERISA Affiliate is required to contribute to, or has any other absolute or contingent liability in respect of, any “multiemployer plan” as defined in Section 4001 of ERISA. Except as set forth in Section 5.11 of the Disclosure Schedule: (a) no “accumulated funding deficiency” (as defined in Section 412(a) of the Internal Revenue Code) exists with respect to any ERISA Plan, whether or not waived by the Secretary of the Treasury or his delegate, and (b) the current value of each ERISA Plan’s benefits does not exceed the current value of such ERISA Plan’s assets available for the payment of such benefits by more than the Threshold Amount.

Section 5.12. Environmental and Other Laws. Except as disclosed in Section 5.12 of the Disclosure Schedule: (a) Restricted Persons are conducting their businesses in material compliance with all applicable Laws, including Environmental Laws, and have and are in compliance with all licenses and permits required under any such Laws; (b) none of the operations or properties of any Restricted Person is the subject of federal, state or local investigation evaluating whether any material remedial action is needed to respond to a release of any Hazardous Materials into the environment or to the improper storage or disposal (including storage or disposal at offsite locations) of any Hazardous Materials; (c) no Restricted Person (and to the best knowledge of Borrower, no other Person) has filed any notice under any Law indicating that any Restricted Person is responsible for the improper release into the environment, or the improper storage or disposal, of any material amount of any Hazardous Materials or that any Hazardous Materials have been improperly released, or are improperly stored or disposed of, upon any property of any Restricted Person; (d) no Restricted Person has transported or arranged for the transportation of any Hazardous Material to any location which is (i) listed on the National Priorities List under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, listed for possible inclusion on such National Priorities List by the Environmental Protection Agency in its Comprehensive Environmental Response, Compensation and Liability Information System List, or listed on any similar state list or (ii) the subject of federal, state or local enforcement actions or other investigations which may lead to claims against any Restricted Person for clean-up costs, remedial work, damages to natural resources or for personal injury claims (whether under Environmental Laws or otherwise); and (e) no Restricted Person otherwise has any known

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material contingent liability under any Environmental Laws or in connection with the release into the environment, or the storage or disposal, of any Hazardous Materials. Each Restricted Person undertook, at the time of its acquisition of each of its material properties, all appropriate inquiry into the previous ownership and uses of the Property and any potential environmental liabilities associated therewith.

Section 5.13. Names and Places of Business. No Restricted Person has, during the five (5) years preceding the Closing Date, been known by, or used any other trade or fictitious name, except as disclosed in Section 5.13 of the Disclosure Schedule or been organized in a jurisdiction other than its jurisdiction of organization as of the date hereof.

Section 5.14. Subsidiaries. As of the Closing Date, (i) Parent does not have any Subsidiary except those listed in Section 5.14 of the Disclosure Schedule or disclosed to Lender in writing and (ii) no Restricted Person has any equity investments in any other Person except those listed in Section 5.14 of the Disclosure Schedule and Permitted Investments. Parent owns, directly or indirectly, the Equity Interests in each of its Subsidiaries which is indicated in Section 5.14 of the Disclosure Schedule or as disclosed to Lender in writing.

Section 5.15. Government Regulation. Neither Borrower nor any other Restricted Person owing Obligations is (a) an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended, or (b) subject to regulation under the Federal Power Act, as amended, or any other Law which regulates the incurring by such Person of Indebtedness, including Laws relating to common contract carriers or the sale of electricity, gas, steam, water or other public utility services.

Section 5.16. Insider. No Restricted Person, nor any Person having “control” (as that term is defined in 12 U.S.C. § 375b(9) or in regulations promulgated pursuant thereto) of any Restricted Person, is a “director” or an “executive officer” or “principal shareholder” (as those terms are defined in 12 U.S.C. § 375b(8) or (9) or in regulations promulgated pursuant thereto) of Lender, of a bank holding company of which Lender is a Subsidiary or of any Subsidiary of a bank holding company of which Lender is a Subsidiary.

Section 5.17. Solvency. Upon giving effect to the making of the Loans, the execution and delivery of the Loan Documents by Borrower and each Guarantor and the consummation of the transactions contemplated hereby, (a) Borrower and each Guarantor will not be insolvent (as such term is defined in the United States Bankruptcy Code, Title 11 U.S.C., as amended (the “Code”), and with all terms used in this Section that are defined in the Code having the meanings ascribed to those terms in the text and interpretive case law applicable to the Code), (b) the sum of Borrower’s and each Guarantor’s respective debts, including absolute and contingent liabilities, the Obligations or guarantees thereof, shall not exceed the value of such Restricted Person’s respective assets, at a fair valuation, and (c) Borrower’s and each Guarantor’s capital is not unreasonably small for the business in which such Restricted Person is engaged and intends to be engaged. Neither Borrower nor any Restricted Person has incurred (whether under the Loan Documents or otherwise), nor does any Restricted Person intend to incur or believe that it will incur, debts which will be beyond its ability to pay as such debts mature.

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Section 5.18. Title to Properties; Intellectual Property. Each Restricted Person has good and defensible title to all of the Collateral and to all of its material properties and assets, free and clear of all Liens, encumbrances, or adverse claims other than Permitted Liens and in each case free and clear of all impediments to the use of such properties and assets in such Restricted Person’s business. Each Restricted Person possesses all licenses or otherwise has valid rights to use all patents, copyrights, trademarks and trade names, and other intellectual property (or otherwise possesses the right to use such intellectual property without violation of the rights of any other Person) which are necessary to carry out its business as presently conducted and as presently proposed to be conducted hereafter, and no Restricted Person is in violation in any material respect of the terms under which it possesses such intellectual property or the right to use such intellectual property.

Section 5.19. Taxes. Borrower has filed all United States Federal information returns and each Restricted Person has filed all other material tax returns that are required to be filed by it and have paid all Taxes due pursuant to such returns or pursuant to any assessment received by any Restricted Person and all other penalties or charges. The charges, accruals and revenues on the books of each Restricted Person in respect of Taxes are, in the opinion of Borrower, adequate. No Restricted Person has given or been requested to give a waiver of the statute of limitations relating to the payment of any federal or other Taxes. Borrower and Parent are Flow Through Entities not subject to income taxes at the entity level.

ARTICLE VI - Affirmative Covenants

To conform with the terms and conditions under which Lender is willing to have credit outstanding to Borrower, and to induce Lender to enter into this Agreement and extend credit hereunder, each of Parent and Borrower warrants, covenants and agrees that until the full and final payment of the Obligations and the termination of this Agreement (as determined without regard to unasserted indemnity claims), unless Lender has previously agreed otherwise:

Section 6.1. Payment and Performance. Each Restricted Person will pay all amounts due under the Loan Documents, to which it is a party, in accordance with the terms thereof and will observe, perform and comply with every covenant, term and condition set forth in the Loan Documents to which it is a party. Parent will cause each other Restricted Person to observe, perform and comply with every such term, covenant and condition in any Loan Document.

Section 6.2. Books, Financial Statements and Reports. Each Restricted Person will at all times maintain full and accurate books of account and records. Parent or any New Parent, whichever is then the ultimate parent company, will maintain and will cause each Subsidiary (including Borrowers) to maintain a standard system of accounting, will maintain its Fiscal Year, and will furnish or cause to be furnished the following statements and reports to Lender at Parent’s or New Parent’s expense:

(a) Within 90 days after the end of each Fiscal Year, complete Consolidated and consolidating financial statements of Parent or New Parent, whichever is then the ultimate parent company, and its Consolidated Subsidiaries together with all notes thereto, prepared in

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reasonable detail in accordance with GAAP, together with an unqualified opinion, based on an audit using generally accepted auditing standards, by PricewaterhouseCoopers or other independent certified public accounting firm of recognized standing selected by Borrower and acceptable to Lender, stating that such Consolidated financial statements have been so prepared. These financial statements shall contain a Consolidated and consolidating balance sheet as of the end of such Fiscal Year and Consolidated and consolidating statements of earnings, of cash flows, and of changes in owners’ equity for such Fiscal Year, each setting forth in comparative form the corresponding figures for the preceding Fiscal Year. In addition, concurrent with the delivery of such financial statements, Parent or New Parent, whichever is then the ultimate parent company, will furnish an opinion by such accountants independently assessing Parent’s or New Parent’s, whichever is then the ultimate parent company, internal controls over financial reporting in accordance with Item 308 of SEC Regulation S-K, PCAOB Auditing Standard No. 2, and Section 404 of the Sarbanes-Oxley Act of 2002 expressing a conclusion that contains no statement that there is a material weakness in such internal controls, except for such material weaknesses as to which Lender does not object; provided however, for the Fiscal Year ending 2008 the material weaknesses set forth on Section 6.2 of the Disclosure Schedule shall be permitted.

(b) As soon as available, and in any event within forty five (45) days after the end of each Fiscal Quarter, Consolidated and consolidating balance sheet as of the end of such Fiscal Quarter and Consolidated and consolidating statements of earnings and cash flows for such Fiscal Quarter and for the period beginning on the first day of the then current Fiscal Year to the end of such Fiscal Quarter of Parent or any New Parent, whichever is then the ultimate parent company, and its Consolidated Subsidiaries, all in reasonable detail and prepared in accordance with GAAP, subject to changes resulting from normal year-end adjustments and the absence of footnotes. In addition, Parent will, together with each such set of financial statements and each set of financial statements furnished under subsection (a) of this section, furnish a certificate in the form of Exhibit D (herein called the “Compliance Certificate”) signed by a Responsible Officer of Borrower and Parent or any New Parent, whichever is then the ultimate parent company, stating that such financial statements are accurate and complete in all material respects (subject to normal year-end adjustments and the absence of footnotes), stating that he/she has reviewed the Loan Documents, containing calculations showing compliance (or non-compliance) at the end of such Fiscal Quarter with the requirements of Section 8.2 and stating that no Default exists at the end of such Fiscal Quarter or at the time of such certificate or specifying the nature and period of existence of any such Default.

(c) As soon as available, and in any event within thirty (30) days after the end of each month, a Borrowing Base Certificate signed by a Responsible Officer of Borrower and Parent or any New Parent, whichever is then the ultimate parent company together with an accounts receivable aging report, each in form and detail reasonably satisfactory to Lender.

(d) The following reports that are filed with the SEC:

(i) All quarterly and annual reports that are filed with the SEC on Forms 10-Q and 10-K, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that describes the financial condition and results of operations of Parent or any New Parent, whichever is then the ultimate parent company, and its Consolidated Subsidiaries, as the case may be; and

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(ii) All current reports that would be required to be filed with the SEC on Form 8-K if Parent or any New Parent, whichever is then the ultimate parent company, were required to file such reports.

in each case, within the time periods specified in the SEC’s rules and regulations, provided, that (1) it is understood that Parent or any New Parent, whichever is then the ultimate parent company, will furnish to the Lender an Annual Report on Form 10-K for the year ended December 31, 2007, by April 15, 2008, but such annual report need only include the financial statements, Notes related thereto and a “Management’s Discussion and Analysis of Financial Condition and Results of Operation” in accordance with the rules and regulations of the SEC applicable to such report, in all material respects; and (2) if a New Parent is formed, such New Parent may become the reporting company contemplated hereby, provided that such election would comply with the applicable rules and regulations of the SEC. To the extent financial statements included in any such 10-Q or 10-K satisfy the requirements of (a) or (b) above they will be regarded as complying with such subparagraphs, as well as, this subparagraph (d).

(e) Annual Collateral Audit. Upon the request of Lender therefor, the Restricted Persons, at their expense, shall furnish to Lender as soon as available, and in any event within the later of (i) ninety (90) days after the end of each Fiscal Year of the Restricted Persons or (ii) sixty (60) days after Lender’s selection of an independent firm, an annual audit of a representative portion of the Collateral prepared by an independent firm selected by Lender, which audit shall be in form and detail reasonably satisfactory to Lender.

Section 6.3. Other Information and Inspections. Each Restricted Person will furnish to Lender any information which Lender may from time to time request concerning any provision of the Loan Documents, any Collateral, or any matter in connection with Restricted Persons’ businesses, properties, prospects, financial condition and operations, including all evidence which Lender from time to time reasonably requests in writing as to the accuracy and validity of or compliance with all representations, warranties and covenants made by any Restricted Person in the Loan Documents, the satisfaction of all conditions contained therein, and all other matters pertaining thereto. Prior to a Default or Event of Default and no more often than twice annually, each Restricted Person will permit representatives appointed by Lender (including independent accountants, auditors, agents, attorneys, appraisers and any other Persons) to visit and inspect during normal business hours any of such Restricted Person’s property, including its books of account, other books and records, and any facilities or other business assets, and to make extra copies therefrom and photocopies and photographs thereof, and to write down and record any information such representatives obtain, and each Restricted Person shall permit Lender or its representatives to investigate and verify the accuracy of the information furnished to Lender in connection with the Loan Documents and to discuss all such matters with its officers, employees and representatives subject to the provisions of Section 10.6.

Section 6.4. Notice of Material Events and Change of Address. Borrower will promptly, after becoming aware thereof, notify Lender in writing, stating that such notice is being given pursuant to this Agreement, of:

(a) the occurrence of any Material Adverse Change;

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(b) the occurrence of any Default;

(c) the acceleration of the maturity of any Indebtedness owed by any Restricted Person or of any default by any Restricted Person under any indenture, mortgage, agreement, contract or other instrument to which any of them is a party or by which any of them or any of their properties is bound which could reasonably be expected to cause a Material Adverse Change;

(d) the occurrence of any Termination Event;

(e) any claim under any Environmental Law adverse to a Restricted Person or of potential liability with respect to such claim, or any other adverse claim asserted against any Restricted Person or with respect to any Restricted Person’s properties taken as a whole which could reasonably be expected to cause a Material Adverse Change;

(f) the filing of any suit or proceeding against any Restricted Person; and

(g) any material change of accounting policies or financial reporting practices by any Restricted Person.

Upon the occurrence of any of the foregoing, Restricted Persons will take all necessary or appropriate steps to remedy promptly any such Material Adverse Change, Default, acceleration, default, or Termination Event, to protect against any such adverse claim, to defend any such suit or proceeding, and to resolve all controversies on account of any of the foregoing. Borrower will also notify Lender in writing at least fifteen (15) Business Days prior to the date that any Restricted Person changes its name or the location of its chief executive office or its location under the UCC.

Section 6.5. Maintenance of Properties. Each Restricted Person will maintain, preserve, protect, and keep all Collateral and all other property used or useful in the conduct of its business in good condition (ordinary wear and tear excepted) in accordance with prudent industry standards, and in material compliance with all applicable Laws, in conformity with all applicable contracts, servitudes, leases and agreements, and will from time to time make all repairs, renewals and replacements needed to enable the business and operations carried on in connection therewith to be promptly and advantageously conducted at all times; provided that no Restricted Person shall be required to do so if such Collateral or other property is worthless, obsolete, worn out, surplus or no longer useful to the conduct of the business and affairs of such Borrower or is being replaced by other property.

Section 6.6. Maintenance of Existence and Qualifications. Each Restricted Person will maintain and preserve its existence and its rights and franchises in full force and effect and will qualify to do business in all states or jurisdictions where required by applicable Law, except where the failure so to qualify would not cause a Material Adverse Change or where a Restricted Person merges, consolidates or otherwise combines with another Restricted Person.

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Section 6.7. Payment of Trade Liabilities, Taxes, etc. Each Restricted Person will (a) timely file all required tax returns including any extensions; (b) timely pay all taxes, assessments, and other governmental charges or levies imposed upon it or upon its income, profits or property before the same become delinquent; (c) within ninety (90) days past the original invoice billing due date therefor, or, if earlier, when due in accordance with its terms, pay and discharge all Liabilities owed by it on ordinary trade terms to vendors, suppliers and other Persons providing goods and services used by it in the ordinary course of its business; (d) pay and discharge before the same becomes delinquent all other Liabilities now or hereafter owed by it, other than royalty payments suspended in the ordinary course of business; and (e) maintain appropriate accruals for all of the foregoing in accordance with GAAP. Each Restricted Person may, however, delay paying or discharging any of the foregoing so long as it is in good faith contesting the validity thereof by appropriate proceedings, if necessary, and has set aside on its books adequate accruals therefore which are required by GAAP.

Section 6.8. Insurance. Borrower will maintain with financially sound and reputable insurance companies not Affiliates of Borrower, insurance with respect to its properties and business against loss or damage of the kinds believed in the good faith judgment of Borrower to be customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts as believed in the good faith judgment of Borrower to be customarily carried under similar circumstances by such other Persons and providing (a) for payment of losses to Lender as its interests may appear, (b) that such policies may not be canceled or reduced or affected in any material manner for any reason without thirty (30) days prior notice to Lender, and (c) for any other matters specified in any applicable Security Document or which Lender may reasonably require. The current insurance carriers and levels of coverage are deemed to satisfy the requirements above.

Section 6.9. Performance on Borrower’s Behalf. If any Restricted Person fails to pay any taxes, insurance premiums, expenses, attorneys’ fees or other amounts it is required to pay under any Loan Document, Lender may pay the same. Borrower shall immediately reimburse Lender for any such payments and each amount paid by Lender shall constitute an Obligation owed hereunder which is due and payable on the date such amount is paid by Lender.

Section 6.10. Interest. Borrower hereby promises to Lender to pay interest at the Default Rate applicable to Base Rate Loans on all Obligations (including Obligations to pay fees or to reimburse or indemnify Lender but excluding principal of, and interest on, any Loan, and any Matured LC Obligation, interest on which is covered by Section 2.5 and Section 2.10(a)) which Borrower has in this Agreement promised to pay to Lender or such Lender Party and which are not paid when due. Such interest shall accrue from the date such Obligations become due until they are paid.

Section 6.11. Compliance with Agreements and Law. Each Restricted Person will perform all material obligations it is required to perform under the terms of the Indenture, each other indenture, mortgage, deed of trust, security agreement, lease, franchise, agreement, contract or other instrument or obligation to which it is a party or by which it or any of its properties is bound unless such obligation is being contested in good faith. Each Restricted Person will conduct its business and affairs in compliance with all Laws applicable thereto. Each

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Restricted Person will cause all licenses and permits reasonably necessary for the conduct of its business and the ownership and operation of its property used in the conduct of its business to be at all times maintained in good standing and in full force and effect.

Section 6.12. Environmental Matters; Environmental Reviews.

(a) Each Restricted Person will comply in all material respects with all Environmental Laws now or hereafter applicable to such Restricted Person, as well as all contractual obligations and agreements with respect to environmental remediation or other environmental matters, and shall obtain, at or prior to the time required by applicable Environmental Laws, all environmental, health and safety permits, licenses and other authorizations necessary for its operations and will maintain such authorizations in full force and effect so as not to cause a Material Adverse Change. No Restricted Person will do anything or permit anything to be done which will subject any of its properties to any remedial obligations, which could reasonably be expected to cause a Material Adverse Change, under, or result in noncompliance, which could reasonably be expected to cause a Material Adverse Change, with applicable permits and licenses issued under, any applicable Environmental Laws, assuming disclosure to the applicable governmental authorities of all relevant facts, conditions and circumstances. Upon Lender’s reasonable request, Borrower will provide at its own expense an environmental inspection of any of the Restricted Persons’ material real properties and audit of their environmental compliance procedures and practices, in each case from an engineering or consulting firm approved by Lender.

(b) Borrower will promptly furnish to Lender copies of all written notices of violation, orders, claims, citations, complaints, penalty assessments, suits or other proceedings which could reasonably be expected to cause a Material Adverse Change and are received by any Restricted Person, or of which Borrower otherwise has notice, pending or threatened against any Restricted Person by any Governmental Authority with respect to any alleged violation of or non-compliance with any Environmental Laws or any permits, licenses or authorizations that could reasonably be expected to cause a Material Adverse Change and arise in connection with any Restricted Person’s ownership or use of its properties or the operation of its business.

(c) Borrower will promptly furnish to Lender all requests for information, notices of claim, demand letters, and other notifications, received by Borrower that could reasonably be expected to cause a Material Adverse Change and are in connection with any Restricted Person’s ownership or use of its properties or the conduct of its business, relating to potential responsibility with respect to any investigation or clean-up of Hazardous Material at any location.

Section 6.13. Evidence of Compliance. Each Restricted Person will furnish to Lender at such Restricted Person’s or Borrower’s expense all evidence which Lender from time to time reasonably requests in writing as to the accuracy and validity of or compliance with all representations, warranties and covenants made by any Restricted Person in the Loan Documents, the satisfaction of all conditions contained therein, and all other matters pertaining thereto.

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Section 6.14. Bank Accounts; Offset. To secure the repayment of the Obligations Borrower hereby grants to Lender a security interest, a lien, and a right of offset, each of which shall be in addition to all other interests, liens, and rights of Lender at common Law, under the Loan Documents, or otherwise, and each of which shall be upon and against (a) any and all moneys, securities or other property (and the proceeds therefrom) of Borrower now or hereafter held or received by or in transit to Lender from or for the account of Borrower, whether for safekeeping, custody, pledge, transmission, collection or otherwise, (b) any and all deposits (general or special, time or demand, provisional or final) of Borrower with Lender, and (c) any other credits and claims of Borrower at any time existing against Lender, including claims under certificates of deposit. At any time and from time to time after the occurrence of any Default, Lender is hereby authorized to foreclose upon, or to offset against the Obligations then due and payable (in either case without notice to Borrower), any and all items hereinabove referred to. The remedies of foreclosure and offset are separate and cumulative, and either may be exercised independently of the other without regard to procedures or restrictions applicable to the other.

Section 6.15. Guaranties of Parent’s or New Parent’s Subsidiaries. Parent or New Parent shall cause each Subsidiary (other than Borrower) of Parent or New Parent now existing or created, acquired or coming into existence after the date hereof, promptly upon request by Lender, execute and deliver to Lender an absolute and unconditional guaranty of the timely repayment of the Obligations and the due and punctual performance of the obligations of Borrower hereunder, which guaranty shall be satisfactory to Lender in form and substance. Borrower will cause each of Parent’s or New Parent’s Subsidiaries to deliver to Lender written evidence satisfactory to Lender and its counsel that such Subsidiary has taken all company action necessary to duly approve and authorize its execution, delivery and performance of this Agreement and any other documents which it is required to execute.

Section 6.16. Deposit Relationship. Restricted Persons shall at all times utilize and maintain Lender as Restricted Persons’ primary depository and treasury management services provider for their operational, business deposit accounts.

ARTICLE VII - Negative Covenants

To conform with the terms and conditions under which Lender is willing to have credit outstanding to Borrower, and to induce Lender to enter into this Agreement and make the Loans, each of Parent and Borrower warrants, covenants and agrees that until the full and final payment of the Obligations and the termination of this Agreement (as determined without regard to unasserted indemnity claims), unless Lender has previously agreed otherwise:

Section 7.1. Indebtedness. No Restricted Person will in any manner owe or be liable for Indebtedness except:

(a) the Obligations.

(b) obligations under Operating Leases entered into in the ordinary course of such Restricted Person’s business in arm’s length transactions at competitive market rates under competitive terms and conditions in all respects.

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(c) unsecured Indebtedness among Borrower and the Guarantors arising in the ordinary course of business.

(d) the obligations under the Indenture or the Senior Secured Notes.

(e) Indebtedness outstanding under the instruments and agreements described in Section 7.1 of the Disclosure Schedule.

(f) In any Fiscal Year (i) purchase money Indebtedness or Capitalized Lease Obligations provided that the original principal amount of any such Indebtedness or Capital Lease Obligation shall not be in excess of the purchase price of the asset acquired thereby and such Indebtedness shall be secured only by the acquired asset and (ii) Indebtedness from a Person other than Lender on an unsecured basis; provided, however any such Indebtedness created, assumed or incurred under clauses (i) and (ii) above shall not exceed an aggregate principal amount equal to the Threshold Amount at any time outstanding.

(g) unsecured Indebtedness in respect of financing for the payment of premiums for any Restricted Person’s insurance; provided, that such unsecured Indebtedness is on terms that are not more restrictive than this Agreement.

(h) Guarantees of Restricted Persons in respect of Indebtedness otherwise permitted under this Section 7.1.

(i) any refinancings, renewals or extensions of Indebtedness permitted under subsections (b) through (i) above or any Indebtedness listed on Section 7.1 of the Disclosure Schedule; provided that the amount of such Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension except by an amount equal to a reasonable premium or other reasonable amount paid, and fees and expenses reasonably incurred, in connection with such refinancing and by an amount equal to any existing commitments utilized thereunder.

(j) Indebtedness incurred by Restricted Persons in respect of any bid, performance or surety bond (excluding appeal bonds) incurred in the ordinary course of business.

(k) Indebtedness otherwise permitted under the Indenture.

Section 7.2. Limitation on Liens. Except for Permitted Liens, no Restricted Person will create, assume or permit to exist any Lien upon any of the properties or assets which it now owns or hereafter acquires.

Section 7.3. Contingent Liabilities. No Restricted Person will directly or indirectly make, create, incur, assume, permit to exist, increase, renew or extend any guaranty of any Indebtedness of any other Person, excluding, however, (a) any guaranty of Indebtedness owed to Lender, (b) the continuation of any guaranties reflected on the Initial Financial Statements or listed in Section 7.3 of the Disclosure Schedule or (c) any guaranty of Indebtedness permitted under Section 7.1.

Section 7.4. Fundamental Changes. No Restricted Person shall directly or indirectly:

(a) merge, dissolve, liquidate, consolidate with or into another Person, or Dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except that any Restricted Person may merge or consolidate with, or dissolve or liquidate into another Restricted Person, provided that such other Restricted Person shall be the continuing or surviving Person; and

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(b) issue any Equity Interests which (i) may be classified in whole or part as Indebtedness or (ii) require mandatory distributions or mandatory redemption prior to ninety one (91) days after the Maturity Date. No Subsidiary will issue any additional Equity Interests, except a direct Subsidiary of a Restricted Person may issue additional Equity Interests to such Restricted Person or to Borrower, Parent or any New Parent so long as (i) such Subsidiary is a wholly-owned Subsidiary of Borrower, Parent or any New Parent after giving effect thereto, and (ii) such Equity Interests shall be pledged to Lender pursuant to Security Documents reasonably acceptable to Lender.

Section 7.5. Limitation on Dispositions of Property. No Restricted Person will Dispose of any of its material assets or properties or any material interest therein, or Dispose of any notes payable to it, accounts receivable or future income, except, to the extent not otherwise forbidden under the Security Documents or:

(a) equipment which is worthless, obsolete, worn out or surplus or which is replaced by equipment of equal suitability and value;

(b) inventory which is sold in the ordinary course of business;

(c) the abandonment or other Disposition of intellectual property that is, in the reasonable judgment of Lender, no longer economically practicable to maintain or useful in the conduct of business of the Restricted Persons, taken as a whole;

(d) Dispositions of equipment so long as (i) at least seventy-five (75%) of the purchase price for such asset shall be paid solely in cash or Cash Equivalents, (ii) no Default or Event of Default shall exist prior to or after giving effect to such sale, and (iii) within 365 days of receipt of such net cash proceeds the net cash proceeds of such sale shall have been applied (1) to prepay the Obligations and other Indebtedness under any credit facility permitted under Section 7.1, and if the Indebtedness repaid is revolving credit Indebtedness, such Restricted Person will be required to correspondingly reduce commitments with respect thereto, (2) to acquire (including by merger or consolidation) all or substantially all of the assets of, or Equity Interests of, another Permitted Business, provided, after giving effect to any such acquisition of Equity Interests, the Permitted Business becomes a Guarantor, (3) to make Capital Expenditures, or (4) to acquire other assets that are not classified as current assets under GAAP and are used or useful in a Permitted Business; provided,, that any trade in or exchange of assets shall not be deemed to violate this Section 7.5(d);

(e) leases of real or personal property in the ordinary course of business;

(f) mergers or consolidations permitted under Section 7.4; and

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(g) Investments in compliance with Section 7.8;

provided, however, that any Disposition pursuant to subsections (a), (b), (c), (d) and (e) above shall be for fair market value.

Section 7.6. Transfer of Ownership. No Restricted Person will permit any transfer, pledge or other change in the ownership of its Equity Interests, except for (a) such pledges to Lender, to a Collateral Agent for the Senior Secured Notes and other non-consensual Permitted Liens arising by operation of Law, (b) mergers, dissolutions, liquidations or consolidations permitted under Section 7.4 and (c) changes in ownership not constituting a Change of Control.

Section 7.7. Limitation on Dividends and Redemptions. No Restricted Person will declare or make directly or indirectly any Dividend other than Dividends by a Restricted Person payable only to another Restricted Person or payable only in such Restricted Person’s Equity Interests, so long as the direct or indirect percentage interest in any of the Subsidiaries of Parent or any New Parent, whichever is then the ultimate parent company, is not thereby reduced.

Section 7.8. Limitation on Investments and New Businesses. No Restricted Person will (a) except as otherwise expressly permitted under Section 7.10, make any expenditure or commitment or incur any obligation or enter into or engage in any transaction except in the ordinary course of business, (b) engage directly or indirectly in any business or conduct any operations except in connection with or incidental to its present businesses and operations as presently conducted, or (c) make any acquisitions of or capital contributions to or other Investments in any Person or property, other than Permitted Investments.

Section 7.9. Limitation on Credit Extensions. Except for Permitted Investments, no Restricted Person will extend credit, make advances or make loans other than (a) normal extensions of credit to customers buying goods and services in the ordinary course of business, which extensions shall not be for periods longer than those (i) historically granted by Borrower or (ii) granted by similar businesses operated in a commercially reasonable and prudent manner, (b) loans to Borrower or to any Guarantor and (c) loans to employees of any Restricted Person, so long as the aggregate amount of such loans to any single employee does not exceed $100,000 and the aggregate amount of all such loans made by all Restricted Persons does not exceed the Threshold Amount.

Section 7.10. Transactions with Affiliates. No Restricted Person will enter into any transaction of any kind with any Affiliate of any Restricted Person, whether or not in the ordinary course of business, other than terms that are no less favorable to such Restricted Person than those that would have been obtained in a comparable transaction by such Restricted Person, with an unrelated Person, or, if there are no such comparable transactions, on terms that are fair and reasonable to such Restricted Person and reflected an arm’s length negotiation as determined by the Independent Directors., provided that the foregoing restriction shall not apply to (a) transactions between or among Borrower and any Guarantor or between and among any Guarantors, (b) Dividends permitted by Section 7.7, (c) Permitted Investments, (d) the reasonable and customary director, officer and employee compensation (including bonuses) and

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other benefits (including retirement, health, stock option and other benefit plans) and indemnification arrangements, (e) the payment of reasonable directors’ fees, (f) loans or advances to employees in the ordinary course of business not to exceed $500,000 in the aggregate at any one time outstanding, (g) registration of rights or similar agreements with officers, directors or significant shareholders of Parent or any New Parent, (h) Permitted Tax Distributions, (i) Permitted Affiliate Leases, (j) Permitted Affiliated Store Transactions, (k) any issuance of Equity Interests of any Parent or any New Parent, whichever is then the ultimate parent company, to Affiliates of such Parent or any New Parent and (l) transactions with a Person that is an Affiliate of a Restricted Person solely because such Restricted Person, as the case may be, owns directly or indirectly, an Equity Interest in, or controls, such Person.

Section 7.11. Prohibited Contracts. Except as expressly provided for in the Loan Documents, no Restricted Person will, directly or indirectly, enter into, create, or otherwise allow to exist any contractual restriction or other consensual restriction on the ability of any Subsidiary of Parent to: (a) pay dividends or make other distributions to Parent, (b) to redeem Equity Interests held in it by Parent, (c) to repay loans and other indebtedness owing by it to Parent or any New Parent, or (d) to transfer any of its assets to Parent or any New Parent. No Restricted Person will amend or permit any amendment to any contract or lease which releases, qualifies, limits, makes contingent or otherwise detrimentally affects the rights and benefits of Lender under or acquired pursuant to any Security Documents. No ERISA Affiliate will incur any obligation to contribute to any “multiemployer plan” as defined in Section 4001 of ERISA.

Section 7.12. Subordinated Indebtedness. No Restricted Person shall make any payments of principal of or interest on Subordinated Indebtedness, if any, prior to the satisfaction in full of the Obligations and the termination of this Agreement and the other Loan Documents.

ARTICLE VIII - Financial Covenants

Section 8.1. Definitions. For purposes of this ARTICLE VIII and elsewhere in this Agreement, the following terms shall have the respective meanings given to them below:

“Consolidated Current Liabilities” means, as of any date, the total liabilities of Parent or any New Parent, whichever is then the ultimate parent company, and its Consolidated Subsidiaries that would be reflected on a balance sheet of Parent or any New Parent, whichever is then the ultimate parent company, and its Consolidated Subsidiaries as “current liabilities” in accordance with GAAP.

“Consolidated EBITDA” means, for any period, on a Consolidated basis for Parent or any New Parent, whichever is then the ultimate parent company, and its Consolidated Subsidiaries, an amount equal to Consolidated Net Income for such period plus the following to the extent deducted in calculating such Consolidated Net Income: (i) (a) Consolidated Interest Expense for such period, (b) the provision for Taxes payable by Parent or any New Parent, whichever is then the ultimate parent company, and its Consolidated Subsidiaries for such period and (c) the amount of depreciation and amortization expense deducted for such period and minus (ii) all non-cash items increasing Consolidated Net Income for such period.

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“Consolidated Interest Expense” means, for any period, the total Consolidated interest expense on Consolidated Senior Funded Debt (and if applicable, any subordinated funded debt) of Parent or any New Parent, whichever is then the ultimate parent company, and its Consolidated Subsidiaries for such period.

“Consolidated Net Income” means, for any period, the net earnings (or loss) after Taxes of Parent and its Consolidated Subsidiaries for such period determined in accordance with GAAP.

“Consolidated Net Worth” means, as of any date, Consolidated Total Assets minus Consolidated Total Liabilities.

“Consolidated Senior Funded Debt” means, for any period, the sum of the following (without duplication): (a) all Indebtedness of Parent or any New Parent, whichever is then the ultimate parent company, and its Consolidated Subsidiaries as of such date other than Consolidated Current Liabilities, (b) all Indebtedness which would be classified as “long-term indebtedness” on a Consolidated balance sheet of Parent or any New Parent, whichever is then the ultimate parent company, and its Consolidated Subsidiaries prepared as of such date in accordance with GAAP, (c) all Indebtedness outstanding under a revolving credit or similar agreement providing for borrowings over a period of more than one year and (d) the present value (discounted at the implicit rate, if known, or 10% per annum otherwise) of all obligations in respect of Capital Lease Obligations of Parent or any New Parent, whichever is then the ultimate parent company, and its Consolidated Subsidiaries.

“Consolidated Total Assets” means, as of any date, the assets of Parent or any New Parent, whichever is then the ultimate parent company, and its Consolidated Subsidiaries that would be reflected on a Consolidated balance sheet of Parent or any New Parent, whichever is then the ultimate parent company, and its Consolidated Subsidiaries as “assets” in accordance with GAAP.

“Consolidated Total Liabilities” means, for any period, all amounts (excluding deferred Taxes) which, in conformity with GAAP, would be included as liabilities on a Consolidated balance sheet of Parent or any New Parent, whichever is then the ultimate parent company, and its Consolidated Subsidiaries.

“Leverage Ratio” means, at the time of determination, the ratio of (a) Consolidated Senior Funded Debt to (b) Consolidated EBITDA for the twelve (12) month period ended at the time of determination for Parent or any New Parent, whichever is then the ultimate parent company.

“Senior Funded Debt to Net Worth Ratio” means, at the time of determination, the ratio of (a) Consolidated Senior Funded Debt to (b) Consolidated Net Worth for Parent or any New Parent, whichever is then the ultimate parent company.

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Section 8.2. Financial Tests. Borrower covenants that, so long as Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, it shall not:

(a) Interest Coverage Ratio. Permit, as of the last day of each Fiscal Quarter, the ratio of (i) Consolidated EBITDA for Parent or any New Parent, whichever is then the ultimate parent company, and its Consolidated Subsidiaries for the twelve (12) month period ending on such date to (ii) Consolidated Interest Expense for Parent or any New Parent, whichever is then the ultimate parent company, and its Consolidated Subsidiaries for such twelve (12) month period, to be less than 1.50 to 1.00.

(b) Minimum Net Worth. Permit, (i) for the Fiscal Year ended on December 31, 2008, Consolidated Net Worth for Parent or any New Parent, whichever is then the ultimate parent company, and its Consolidated Subsidiaries to be less than $63,413,340.30 and (ii) for each Fiscal Year ended after December 31, 2008, Consolidated Net Worth for Parent or any New Parent, whichever is then the ultimate parent company, and its Consolidated Subsidiaries to be less than $63,413,340.30 plus an amount (if positive) equal to fifty percent (50%) of Consolidated Net Income for Parent or any New Parent, whichever is then the ultimate parent company, and its Consolidated Subsidiaries for such Fiscal Year.

(c) Senior Funded Debt to Net Worth Ratio. Permit the Senior Funded Debt to Net Worth Ratio for Parent or any New Parent, whichever is then the ultimate parent company, and its Consolidated Subsidiaries to be less than (i) for each Fiscal Quarter after the Closing Date to the Fiscal Quarter ended September 30, 2008, 2.50 to 1.00, and (ii) commencing on the Fiscal Quarter ended December 31, 2008 and for each Fiscal Quarter thereafter, 2.00 to 1.00; or

(d) Leverage Ratio. Permit, as of the last day of each Fiscal Quarter, the Leverage Ratio for Parent or any New Parent, whichever is then the ultimate parent company, and its Consolidated Subsidiaries to be more than 5.50 to 1.00.

ARTICLE IX - Events of Default and Remedies

Section 9.1. Events of Default. Each of the following events constitutes an Event of Default under this Agreement:

(a) Any Restricted Person fails to pay any principal component of any Obligation when due and payable, whether at a date for the payment of a fixed installment or as a contingent or other payment becomes due and payable or as a result of acceleration or otherwise, within three (3) Business Days after the same becomes due;

(b) Any Restricted Person fails to pay any Obligation (other than the Obligations in subsection (a) above) when due and payable, whether at a date for the payment of a fixed installment or as a contingent or other payment becomes due and payable or as a result of acceleration or otherwise, within five (5) Business Days after the same becomes due;

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(c) Any “default” or “event of default” occurs under any Loan Document which defines either such term, and the same is not remedied within the applicable period of grace (if any) provided in such Loan Document;

(d) Any Restricted Person fails to duly observe, perform or comply with any covenant, agreement or provision of Section 6.4 or ARTICLE VII;

(e) Any Restricted Person fails (other than as referred to in subsections (a), (b), (c) or (d) above) to duly observe, perform or comply with any covenant, agreement, condition or provision of any Loan Document to which it is a party, and such failure remains unremedied for a period of thirty (30) days after notice of such failure is given by Lender to Borrower;

(f) Any representation or warranty previously, presently or hereafter made in writing by or on behalf of any Restricted Person in connection with any Loan Document shall prove to have been false or incorrect in any material respect on any date on or as of which made, or any Loan Document at any time ceases to be valid, binding and enforceable as warranted in Section 5.5 for any reason other than its release or subordination by Lender;

(g) Any Restricted Person fails to duly observe, perform, comply with or otherwise satisfy any agreement with any Person or any term or condition of any instrument, if such agreement or instrument is materially significant to Borrower or to Borrower and its Subsidiaries on a Consolidated basis or materially significant to any Guarantor, and such failure is not remedied within the applicable period of grace (if any) provided in such agreement or instrument, except where such failure is being contested in good faith;

(h) Any Restricted Person (i) fails to pay any portion, when such portion is due, of any of its Indebtedness in excess of the Threshold Amount, or (ii) breaches or defaults in the performance of any agreement or instrument by which any such Indebtedness is issued, evidenced, governed, or secured, and any such failure, breach or default continues beyond any applicable period of grace provided therefor;

(i) Either (i) any “accumulated funding deficiency” (as defined in Section 412(a) of the Internal Revenue Code) in excess of the Threshold Amount exists with respect to any ERISA Plan, whether or not waived by the Secretary of the Treasury or his delegate, or (ii) any Termination Event occurs with respect to any ERISA Plan and the then current value of such ERISA Plan’s benefit liabilities exceeds the then current value of such ERISA Plan’s assets available for the payment of such benefit liabilities by more than $100,000 (or in the case of a Termination Event involving the withdrawal of a substantial employer, the withdrawing employer’s proportionate share of such excess exceeds such amount);

(j) Any Restricted Person:

(i) suffers the entry against it of a judgment, decree or order for relief by a Tribunal of competent jurisdiction in an involuntary proceeding commenced under any applicable bankruptcy, insolvency or other similar Law of any jurisdiction now or hereafter in effect, including the federal Bankruptcy Code, as from time to time amended, or has any such proceeding commenced against it which remains undismissed for a period of sixty (60) days; or

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(ii) commences a voluntary case under any applicable bankruptcy, insolvency or similar Law now or hereafter in effect, including the federal Bankruptcy Code, as from time to time amended; or applies for or consents to the entry of an order for relief in an involuntary case under any such Law; or makes a general assignment for the benefit of creditors; or is generally not paying (or admits in writing its inability to pay) its debts as such debts become due; or takes corporate or other action authorizing any of the foregoing; or

(iii) suffers the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of all or a substantial part of its assets or of any part of the Collateral in a proceeding brought against or initiated by it, and such appointment or taking possession is neither made ineffective nor discharged within sixty (60) days after the making thereof, or such appointment or taking possession is at any time consented to, requested by, or acquiesced to by it; or

(iv) suffers the entry against it of one or more final judgments or orders for the payment of money in an aggregate amount (as to all such judgments or orders) in excess of the Threshold Amount (not covered by insurance satisfactory to Lender in its discretion), unless the same is discharged within sixty (60) days after the date of entry thereof or an appeal or appropriate proceeding for review thereof is taken within such period and a stay of execution pending such appeal is obtained; or

(v) suffers a writ or warrant of attachment or any similar process to be issued by any Tribunal against all or any substantial part of its assets or any part of the Collateral, and such writ or warrant of attachment or any similar process is not stayed or released within sixty (60) days after the entry or levy thereof or after any stay is vacated or set aside;

(k) Any Change of Control occurs; or

(l) Any Material Adverse Change occurs.

Upon the occurrence of an Event of Default described in subsection (j)(i), (j)(ii) or (j)(iii) of this section with respect to any Restricted Person, all of the Obligations shall thereupon be immediately due and payable, without demand, presentment, notice of demand or of dishonor and nonpayment, protest, notice of protest, notice of intention to accelerate, declaration or notice of acceleration, or any other notice or declaration of any kind, all of which are hereby expressly waived by Borrower and each Restricted Person who at any time ratifies or approves this Agreement. Upon any such acceleration, any obligation of Lender to make any further Loans and any obligation of Lender to issue Letters of Credit hereunder shall be permanently terminated. During the continuance of any other Event of Default, Lender at any time and from time to time may, without notice to Borrower or any other Restricted Person, do either or both of the following: (1) terminate any obligation of Lender to make Loans hereunder, and any obligation of Lender to issue Letters of Credit hereunder, and (2) declare any or all of the Obligations immediately due and payable, and all such Obligations shall thereupon be immediately due and payable, without demand, presentment, notice of demand or of dishonor and nonpayment, protest, notice of protest, notice of intention to accelerate, declaration or notice

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of acceleration, or any other notice or declaration of any kind, all of which are hereby expressly waived by Borrower and each Restricted Person who at any time ratifies or approves this Agreement.

Section 9.2. Remedies. If any Default shall occur and be continuing, Lender may protect and enforce its rights under the Loan Documents by any appropriate proceedings, including proceedings for specific performance of any covenant or agreement contained in any Loan Document. All rights, remedies and powers conferred upon Lender under the Loan Documents shall be deemed cumulative and not exclusive of any other rights, remedies or powers available under the Loan Documents or at Law or in equity.

Section 9.3. Application of Proceeds After Acceleration. Except as otherwise provided in the Security Documents with respect to application of proceeds to any reimbursements due Lender thereunder, if Lender collects or receives money pursuant to the Loan Documents after the acceleration of the Obligations as provided in Section 9.1, Lender shall distribute all money so collected or received:

(a) first to any reimbursements due Lender hereunder; and

(b) then ratably to the payment of the Obligations, including LC Obligations (and among the outstanding Obligations in the manner provided in Section 3.1), until such Obligations are paid in full.

ARTICLE X

Section 10.1. Waivers and Amendments; Acknowledgments.

(a) Waivers and Amendments. No failure or delay (whether by course of conduct or otherwise) by Lender in exercising any right, power or remedy which Lender may have under any of the Loan Documents shall operate as a waiver thereof or of any other right, power or remedy, nor shall any single or partial exercise by Lender of any such right, power or remedy preclude any other or further exercise thereof or of any other right, power or remedy. No waiver of any provision of any Loan Document and no consent to any departure therefrom shall ever be effective unless it is in writing and signed as provided below in this section, and then such waiver or consent shall be effective only in the specific instances and for the purposes for which given and to the extent specified in such writing. No notice to or demand on any Restricted Person shall in any case of itself entitle any Restricted Person to any other or further notice or demand in similar or other circumstances. This Agreement and the other Loan Documents set forth the entire understanding between the parties hereto with respect to the transactions contemplated herein and therein and supersede all prior discussions and understandings with respect to the subject matter hereof and thereof, and no waiver, consent, release, modification or amendment of or supplement to this Agreement or the other Loan Documents shall be valid or effective against any party hereto unless the same is in writing and signed by, if such party is Borrower, by Borrower, and if such party is Lender, by Lender.

(b) Acknowledgments and Admissions. Borrower hereby represents, warrants, acknowledges and admits that it has been advised by counsel in the negotiation, execution and

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delivery of the Loan Documents to which it is a party, it has made an independent decision to enter into this Agreement and the other Loan Documents to which it is a party, without reliance on any representation, warranty, covenant or undertaking by Lender, whether written, oral or implicit, other than as expressly set out in this Agreement or in another Loan Document delivered on or after the date hereof, there are no representations, warranties, covenants, undertakings or agreements by Lender as to the Loan Documents except as expressly set out in this Agreement or in another Loan Document delivered on or after the date hereof, Lender has no fiduciary obligation toward Borrower with respect to any Loan Document or the transactions contemplated thereby, the relationship pursuant to the Loan Documents between Borrower and the other Restricted Persons, on one hand, and Lender, on the other hand, is and shall be solely that of debtor and creditor, respectively, no partnership or joint venture exists with respect to the Loan Documents between any Restricted Person and Lender, should an Event of Default or Default occur or exist, Lender will determine in its sole discretion and for its own reasons what remedies and actions it will or will not exercise or take at that time, without limiting any of the foregoing, Borrower is not relying upon any representation or covenant by Lender, or any representative thereof, and no such representation or covenant has been made, that Lender will, at the time of an Event of Default or Default, or at any other time, waive, negotiate, discuss, or take or refrain from taking any action permitted under the Loan Documents with respect to any such Event of Default or Default or any other provision of the Loan Documents, and all Lender has relied upon the truthfulness of the acknowledgments in this section in deciding to execute and deliver this Agreement and to become obligated hereunder.

(c) Joint Acknowledgment. THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

Section 10.2. Survival of Agreements; Cumulative Nature. All of Restricted Persons’ various representations, warranties, covenants and agreements in the Loan Documents shall survive the execution and delivery of this Agreement and the other Loan Documents and the performance hereof and thereof, including the making or granting of the Loans and the delivery of the Note and the other Loan Documents, and shall further survive until all of the Obligations are paid in full to Lender and all of Lender’ obligations to Borrower are terminated. All statements and agreements contained in any certificate or other instrument delivered by any Restricted Person to Lender under any Loan Document shall be deemed representations and warranties by Borrower or agreements and covenants of Borrower under this Agreement. The representations, warranties, indemnities, and covenants made by Restricted Persons in the Loan Documents, and the rights, powers, and privileges granted to Lender in the Loan Documents, are cumulative, and, except for expressly specified waivers and consents, no Loan Document shall be construed in the context of another to diminish, nullify, or otherwise reduce the benefit to Lender of any such representation, warranty, indemnity, covenant, right, power or privilege. In particular and without limitation, no exception set out in this Agreement

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to any representation, warranty, indemnity, or covenant herein contained shall apply to any similar representation, warranty, indemnity, or covenant contained in any other Loan Document, and each such similar representation, warranty, indemnity, or covenant shall be subject only to those exceptions which are expressly made applicable to it by the terms of the various Loan Documents.

Section 10.3. Notices; Effectiveness; Electronic Communication.

(a) Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in subsection (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile as follows and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:

(i) if to Borrower or any other Restricted Person, Lender; to the address, facsimile number, electronic mail address or telephone number specified for such person on the signature pages hereto;

(ii) if to Lender, to it at its address, facsimile number, electronic mail address or telephone number as specified on the Lender Schedule.

Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Notices delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in said subsection (b).

(b) Electronic Communications. Notices and other communications to Lender hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by Lender. Lender or Borrower or any other Restricted Person may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.

Unless Lender otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

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(c) Change of Address, Etc. Each of Borrower, any other Restricted Person and Lender may change its address, electronic mail address, facsimile or telephone number for notices and other communications hereunder by notice to the other parties hereto.

Section 10.4. Expenses; Indemnity; Damage Waiver.

(a) Costs and Expenses. Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by Lender and its Affiliates (including the reasonable fees, charges and disbursements of counsel for Lender), in connection with the credit facilities provided for herein, the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by Lender in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all out-of-pocket expenses incurred by Lender (including the fees, charges and disbursements of any counsel for Lender), in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section, or (B) in connection with the Loans made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.

(b) Indemnification by Borrower. Borrower shall indemnify Lender (and any sub-agent thereof), and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the reasonable fees, charges and disbursements of one counsel for Indemnitees), and shall indemnify and hold harmless each Indemnitee from all fees and time charges and disbursements for attorneys who may be employees of any Indemnitee, incurred by any Indemnitee or asserted against any Indemnitee by any third party or by Borrower or any other Restricted Person arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by Lender to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by Borrower or any of its Subsidiaries, or any environmental liability related in any way to Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by Borrower or Lender, and regardless of whether any Indemnitee is a party thereto. THE FOREGOING INDEMNIFICATION WILL APPLY WHETHER OR NOT SUCH LIABILITIES AND COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR THEORY OF STRICT LIABILITY OR

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CAUSED, IN WHOLE OR IN PART BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY INDEMNITEE, provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by Borrower or any other Restricted Person against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, if Borrower or such Restricted Person has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction.

(c) Waiver of Consequential Damages, Etc. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, NO PARTY HERETO SHALL ASSERT, AND HEREBY WAIVES, ANY CLAIM AGAINST ANY INDEMNITEE, ON ANY THEORY OF LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSED TO DIRECT OR ACTUAL DAMAGES) ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF, THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY, THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, ANY LOAN OR LETTER OF CREDIT OR THE USE OF THE PROCEEDS THEREOF. NO INDEMNITEE REFERRED TO IN SUBSECTION (b) ABOVE SHALL BE LIABLE FOR ANY DAMAGES ARISING FROM THE USE BY UNINTENDED RECIPIENTS OF ANY INFORMATION OR OTHER MATERIALS DISTRIBUTED BY IT THROUGH TELECOMMUNICATIONS, ELECTRONIC OR OTHER INFORMATION TRANSMISSION SYSTEMS IN CONNECTION WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

(d) Payments. All amounts due under this Section shall be payable not later than ten (10) days after demand therefor.

Section 10.5. Successors and Assigns; Joint and Several Liability.

(a) Successors and Assigns Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that neither Borrower nor any other Restricted Person may assign or otherwise transfer any of its rights or obligations hereunder to any Person, other than another Restricted Person, without the prior written consent of Lender

(b) Participations. Lender may at any time, without the consent of, or notice to, Borrower, sell participations to any Person (other than a natural person or Borrower or any of Borrower’s Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of Lender’s rights and/or obligations under this Agreement (including all or a portion of its commitment and/or the Loans owing to it); provided that (i) Lender’s obligations under this Agreement shall remain unchanged, (ii) Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) Borrower and Lender shall continue to deal solely and directly with Lender in connection with Lender’s rights and obligations under this Agreement.

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(c) Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

(d) Joint and Several Liability. All Obligations which are incurred by two or more Restricted Persons shall be their joint and several obligations and liabilities.

Section 10.6. Confidentiality. Lender agrees to keep confidential any Information (as defined below) received by it; provided that nothing herein shall prevent Lender from disclosing Information (a) to any Affiliate of Lender, or any officer, director, employee, agent, or advisor of Lender or Affiliate of Lender reasonably incidental to administration of the credit facilities provided herein, (b) to any other Person if reasonably incidental to the administration of the credit facility provided herein, (c) as required by any Law, (d) upon the order of any court or administrative agency, (e) upon the request or demand of any Tribunal, (f) that is or becomes available to the public or that is or becomes available to Lender other than as a result of a disclosure by Lender prohibited by this Agreement, (g) in connection with prosecuting or defending any litigation with any Restricted Person relating to this Agreement to which Lender or any of its Affiliates may be a party, (h) to the extent necessary in connection with the exercise of any right or remedy under this Agreement or any other Loan Document, and (i) subject to provisions substantially similar to those contained in this Section, to any actual or proposed participant or assignee. Notwithstanding anything to the contrary, Lender may disclose, without limitation of any kind, any Information with respect to the “tax treatment” and “tax structure” (in each case, within the meaning of Treasury Regulation Section 1.6011-4) of the transactions contemplated hereby and all materials of any kind (including opinions or other tax analyses) that are provided to Lender relating to such tax treatment and tax structure; provided that with respect to any document or similar item that in either case contains Information concerning the tax treatment or tax structure of the transaction as well as other information, this sentence shall only apply to such portions of the document or similar item that relate to the tax treatment or tax structure of the transactions contemplated hereby.

For purposes of this Section, “Information” means all information received from Borrower, Parent, any New Parent or any Subsidiary relating to Borrower, Parent, any New Parent or any Subsidiary, or any Affiliate of any of them, or any of their respective businesses, other than any such information that is available to Lender on a nonconfidential basis prior to disclosure by Borrower, Parent, any New Parent or any Subsidiary. In the case of information received from Borrower, Parent, any New Parent or any Subsidiary after the date hereof, Borrower shall use reasonable efforts to identify such information as confidential at the time of delivery thereof.

Section 10.7. Governing Law; Submission to Process.

(a) GOVERNING LAW. THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT (EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN A LOAN DOCUMENT) AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND

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INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

(b) SUBMISSION TO JURISDICTION. BORROWER AND EACH OTHER RESTRICTED PERSON IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST BORROWER OR ANY OTHER RESTRICTED PERSON OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

(c) WAIVER OF VENUE. LENDER, BORROWER AND EACH OTHER RESTRICTED PERSON IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

(d) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN Section 10.3. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

Section 10.8. Limitation on Interest. Lender, Restricted Persons and any other parties to the Loan Documents intend to contract in strict compliance with applicable usury Law from time to time in effect. In furtherance thereof, such Persons stipulate and agree that none of the terms and provisions contained in the Loan Documents shall ever be construed to

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create a contract to pay, for the use, forbearance or detention of money, interest in excess of the maximum amount of interest permitted to be charged by applicable Law from time to time in effect. Neither any Restricted Person nor any present or future guarantors, endorsers, or other Persons hereafter becoming liable for payment of any Obligation shall ever be liable for unearned interest thereon or shall ever be required to pay interest thereon in excess of the maximum amount that may be lawfully contracted for, charged, or received under applicable Law from time to time in effect, and the provisions of this section shall control over all other provisions of the Loan Documents which may be in conflict or apparent conflict herewith. Lender expressly disavows any intention to contract for, charge, or collect excessive unearned interest or finance charges in the event the maturity of any Obligation is accelerated. If (a) the maturity of any Obligation is accelerated for any reason, (b) any Obligation is prepaid and as a result any amounts held to constitute interest are determined to be in excess of the legal maximum, or (c) Lender or any other holder of any or all of the Obligations shall otherwise collect moneys which are determined to constitute interest which would otherwise increase the interest on any or all of the Obligations to an amount in excess of that permitted to be charged by applicable Law then in effect, then all sums determined to constitute interest in excess of such legal limit shall, without penalty, be promptly applied to reduce the then outstanding principal of the related Obligations or, at Lender’s or holder’s option, promptly returned to Borrower or the other payor thereof upon such determination. In determining whether or not the interest paid or payable, under any specific circumstance, exceeds the maximum amount permitted under applicable Law, Lender and Restricted Persons (and any other payors thereof) shall to the greatest extent permitted under applicable Law, (i) characterize any non-principal payment as an expense, fee or premium rather than as interest, (ii) exclude voluntary prepayments and the effects thereof, and (iii) amortize, prorate, allocate, and spread the total amount of interest throughout the entire contemplated term of the instruments evidencing the Obligations in accordance with the amounts outstanding from time to time thereunder and the maximum legal rate of interest from time to time in effect under applicable Law in order to lawfully contract for, charge, or receive the maximum amount of interest permitted under applicable Law.

Section 10.9. Termination; Limited Survival. In its sole and absolute discretion Borrower may at any time that no Obligations are owing (other than indemnity obligations and similar obligations that survive the termination of this Agreement for which no notice of a claim has been received by Borrower) elect in a written notice delivered to Lender to terminate this Agreement. Upon receipt by Lender of such a notice, if no such Obligations are then owing this Agreement and all other Loan Documents shall thereupon be terminated and the parties thereto released from all prospective obligations thereunder. Notwithstanding the foregoing or anything herein to the contrary, any waivers or admissions made by any Restricted Person in any Loan Document, any Obligations under Section 2.5(e) and Section 3.2 through Section 3.6, and any obligations which any Person may have to indemnify or compensate Lender shall survive any termination of this Agreement or any other Loan Document. At the request and expense of Borrower, Lender shall prepare and execute all necessary instruments to reflect and effect such termination of the Loan Documents.

Section 10.10. Severability. If any term or provision of any Loan Document shall be determined to be illegal or unenforceable all other terms and provisions of the Loan Documents shall nevertheless remain effective and shall be enforced to the fullest extent permitted by applicable Law.

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Section 10.11. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents, and any separate letter agreements with respect to fees payable to Lender, constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.1, this Agreement shall become effective when it shall have been executed by Lender and when Lender shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control; provided that the inclusion of supplemental rights or remedies in favor of the Lender in the documents listed on the Security Schedule shall not be deemed a conflict with this Agreement. Notwithstanding any other provision contained in this Agreement and any LC Document now or hereafter executed: (i) in the event of any conflict or inconsistency between the provisions of this Agreement and the provisions of any LC Document, the provisions of this Agreement shall control; (ii) the definition of “default,” “Default,” “event of default,” and “Event of Default” as used in any LC Document are hereby deleted in such LC Document and amended to be the same definition as “Event of Default” as defined in this Agreement; and (iii) with the exception of provisions contained in the LC Documents that specifically by their terms relate to Letters of Credit (to the extent they are not in conflict or inconsistent with the terms of this Agreement), none of the provisions in any of the LC Documents shall be used or enforced to expand, increase, or make more favorable to Lender, the representations, warranties, or covenants made by the Borrowers and/or the Guarantors, nor increase the remedies available to Lender. Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof.

Section 10.12. Waiver of Jury Trial, Punitive Damages, etc. EACH PARTY HERETO INCLUDING, WITHOUT LIMITATION, ANY RESTRICTED PERSON, HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, (A) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (X) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (Y) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

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Section 10.13. USA PATRIOT Act Notice. Lender that is subject to the Act (as hereinafter defined) and Lender hereby notifies Borrower that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 signed into law October 26, 2001) (the “Act”), it is required to obtain, verify and record information that identifies Borrower and each Guarantor, which information includes the name and address of Borrower and each Guarantor and other information that will allow Lender, as applicable, to identify Borrower and each Guarantor in accordance with the Act.

Section 10.14. Limitation on Guarantor Liability. Each Guarantor and the Lender hereby confirm that it is the intention of all such parties that any guaranty to be provided pursuant to the terms of this Agreement not constitute a fraudulent transfer or conveyance for the purposes of bankruptcy law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or sate law to the extent applicable to any guaranty granted pursuant to this Agreement. To effectuate the foregoing limitation, the parties hereto hereby irrevocably agree that the obligations of such Guarantor will be limited to the maximum amount that will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payment made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor as contemplated in this Agreement and the Loan Documents, result in the obligations of such Guarantor under its guaranty delivered to Lender pursuant to the terms of this Agreement not constituting a fraudulent transfer or conveyance.

Section 10.15. Partial Releases of Collateral. Collateral may be released from the Lien and security interest created by the Security Documents at any time and from time to time in accordance with the applicable provisions of the Indenture (except that any certificates or opinions delivered to Indenture Trustee or Collateral Agent shall also be delivered to Lender attention); provided, however, that, (a) Borrower can demonstrate to Lender that Borrower shall be in pro forma compliance with the financial covenants set forth in ARTICLE VIII of this Agreement prior to, and after the application of the release of such Collateral and (b) no Event of Default exists and is continuing at the time of such release.

[The remainder of this page is intentionally left blank]

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

BORROWER:
TX ENERGY SERVICES, LLC
By:	/s/ John E. Crisp
Name:	John E. Crisp
Title:	President, Chief Executive Officer and Secretary
Address:
P.O. Box 520
Alice, TX 78333
Attention: Chief Financial Officer
Telephone: 361-664-0549
Fax: 361-396-0564
C.C. FORBES, LLC
By:	/s/ John E. Crisp
Name:	John E. Crisp
Title:	Executive Vice President and Chief Operating Officer
Address:
P.O. Box 520
Alice, TX 78333
Attention: Chief Financial Officer
Telephone: 361-664-0549
Fax: 361-396-0564

CREDIT AGREEMENT – Signature Page

SUPERIOR TUBING TESTERS, LLC
By:	/s/ John E. Crisp
Name:	John E. Crisp
Title:	Executive Vice President

Address:

P.O. Box 520

Alice, TX 78333

Attention: Chief Financial Officer

Telephone: 361-664-0549

Fax: 361-396-0564

PARENT:

FORBES ENERGY SERVICES LLC

By:	/s/ John E. Crisp
Name:	John E. Crisp
Title:	President and Chief Executive Officer

Address:

P.O. Box 520

Alice, TX 78333

Attention: Chief Financial Officer

Telephone: 361-664-0549

Fax: 361-396-0564

CREDIT AGREEMENT – Signature Page

LENDER:
CITIBANK, N.A.
By:	/s/ John W. Stam
	John W. Stam, Vice President
Address:
One Briar Lake Plaza
2000 W. Sam Houston Pkwy South, Suite 600
Houston, Texas 77042
Attention: John W. Stam
Telephone: (713) 260-3069
Fax: (713) 954-2053

CREDIT AGREEMENT – Signature Page

EX-10.2

Exhibit 10.2

INTERCREDITOR AGREEMENT

dated as of

April 10, 2008

among

TX ENERGY SERVICES, LLC, C.C. FORBES, LLC

and SUPERIOR TUBING TESTERS, LLC,

as the Borrowers

FORBES ENERGY SERVICES LLC,

as the Company

certain Subsidiaries of the Company party hereto

CITIBANK, N.A.,

as First Priority Agent

and

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Second Priority Agent

THIS IS THE INTERCREDITOR AGREEMENT REFERRED TO IN (A) THE INDENTURE DATED AS OF FEBRUARY 12, 2008, AMONG FORBES ENERGY SERVICES LLC, CERTAIN OF ITS SUBSIDIARIES FROM TIME TO TIME PARTY THERETO, FORBES ENERGY CAPITAL INC. AND WELLS FARGO BANK, NATIONAL ASSOCIATION, AS TRUSTEE AND COLLATERAL AGENT, (B) THE CREDIT AGREEMENT DATED AS OF APRIL 10, 2008, AS AMENDED, SUPPLEMENTED, RESTATED OR OTHERWISE MODIFIED FROM TIME TO TIME, AMONG TX ENERGY SERVICES, LLC, C.C. FORBES, LLC AND SUPERIOR TUBING TESTERS LLC, CERTAIN SUBSIDIARIES OF FORBES ENERGY SERVICES LLC FROM TIME TO TIME PARTY THERETO, AND CITIBANK, N.A., (C) THE OTHER LOAN DOCUMENTS REFERRED TO IN SUCH CREDIT AGREEMENT AND (D) THE OTHER COLLATERAL AGREEMENTS REFERRED TO IN SUCH INDENTURE.

TABLE OF CONTENTS

		Page
ARTICLE I DEFINITIONS		2
SECTION 1.01.	Certain Defined Terms.	2
SECTION 1.02.	Other Defined Terms.	2
SECTION 1.03.	Terms Generally.	7
ARTICLE II LIEN PRIORITIES		8
SECTION 2.01.	Relative Priorities.	8
SECTION 2.02.	Prohibition on Contesting Liens.	8
SECTION 2.03.	No New Liens.	8
SECTION 2.04.	Similar Collateral.	9
ARTICLE III ENFORCEMENT OF RIGHTS; MATTERS RELATING TO COLLATERAL		9
SECTION 3.01.	Exercise of Rights and Remedies; Option to Purchase.	9
SECTION 3.02.	No Interference.	11
SECTION 3.03.	Rights as Unsecured Creditors.	13
SECTION 3.04.	Automatic Release of Second Priority Liens.	13
SECTION 3.05.	Automatic Release of First Priority Liens.	14
SECTION 3.06.	Insurance and Condemnation Awards.	14
SECTION 3.07.	Notification of Release of Collateral.	15
ARTICLE IV PAYMENTS		15
SECTION 4.01.	Application of Proceeds.	15
SECTION 4.02.	Payment Over.	15
SECTION 4.03.	Certain Agreements with Respect to Unenforceable Liens.	16
ARTICLE V BAILMENT FOR PERFECTION OF CERTAIN SECURITY INTERESTS		16
ARTICLE VI INSOLVENCY OR LIQUIDATION PROCEEDINGS		17
SECTION 6.01.	Finance and Sale Matters.	17
SECTION 6.02.	Relief from the Automatic Stay.	19
SECTION 6.03.	Reorganization Securities.	19
SECTION 6.04.	Post-Petition Interest.	19
SECTION 6.05.	Certain Waivers by the Second Priority Secured Parties.	20
SECTION 6.06.	Certain Voting Matters.	20
ARTICLE VII OTHER AGREEMENTS		20
SECTION 7.01.	Matters Relating to Debt Documents.	20
SECTION 7.02.	Effect of Refinancing of Indebtedness under First Priority Debt Documents.	21

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SECTION 7.03.	No Waiver by First Priority Secured Party.	21
SECTION 7.04.	Reinstatement.	22
SECTION 7.05.	Authorization of Collateral Agents.	22
SECTION 7.06.	Further Assurances.	22
ARTICLE VIII REPRESENTATIONS AND WARRANTIES		22
SECTION 8.01.	Representations and Warranties of Each Party.	22
SECTION 8.02.	Representations and Warranties of Each Collateral Agent.	23
ARTICLE IX NO RELIANCE; NO LIABILITY; OBLIGATIONS ABSOLUTE		23
SECTION 9.01.	No Reliance; Information.	23
SECTION 9.02.	No Warranties or Liability.	23
SECTION 9.03.	Obligations Absolute.	24
ARTICLE X MISCELLANEOUS		25
SECTION 10.01.	Notices.	25
SECTION 10.02.	Conflicts.	25
SECTION 10.03.	Effectiveness; Survival; Termination.	25
SECTION 10.04.	Severability.	26
SECTION 10.05.	Amendments; Waivers.	26
SECTION 10.06.	Postponement of Subrogation.	26
SECTION 10.07.	Applicable Law; Jurisdiction; Consent to Service of Process.	27
SECTION 10.08.	Waiver of Jury Trial.	27
SECTION 10.09.	Parties in Interest.	27
SECTION 10.10.	Specific Performance.	28
SECTION 10.11.	Headings.	28
SECTION 10.12.	Counterparts.	28
SECTION 10.13.	Provisions Solely to Define Relative Rights.	28

ii

INTERCREDITOR AGREEMENT dated as of April 10, 2008 (this “Agreement”) among TX ENERGY SERVICES, LLC, a Delaware limited liability company (“TX Energy”), C.C. FORBES, LLC, a Delaware limited liability company (“C.C. Forbes”), and SUPERIOR TUBING TESTERS, LLC, (“Superior”) (TX Energy, C.C. Forbes and Superior collectively, the “Borrowers” and individually a “Borrower”), FORBES ENERGY SERVICES LLC, a Delaware limited liability company (the “Company”), the Subsidiaries of the Company party hereto, CITIBANK, N.A., a national association, as the First Priority Secured Party (as defined below) (in such capacity, the “First Priority Agent”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, as collateral agent for the Second Priority Secured Parties (as defined below) (in such capacity, the “Second Priority Agent”).

PRELIMINARY STATEMENT

Reference is made to (a) the Credit Agreement dated as of April 10, 2008 (as amended, supplemented, restated or otherwise modified from time to time in accordance with the terms hereof, the “First Priority Debt Agreement”) among the Borrowers, the Company, certain of the Company’s subsidiaries, the lenders from time to time party thereto (the “First Priority Creditor”) and the First Priority Agent, (b) the Indenture dated as of February 12, 2008 (as amended, supplemented, restated or otherwise modified from time to time in accordance with the terms hereof, the “Second Priority Debt Agreement” and, together with the First Priority Debt Agreement, the “Debt Agreements”) among the Company, Forbes Energy Capital Inc., a Delaware corporation (“Co-Issuer”, and together with the Company, collectively the “Issuers”), certain of the Company’s subsidiaries, Wells Fargo Bank, National Association, as Trustee (in such capacity, the “Second Priority Trustee”) and the Second Priority Agent, (c) the First Lien Security Agreement dated as of April 10, 2008 (as amended, supplemented, restated or otherwise modified from time to time in accordance with the terms hereof, the “First Priority Security Agreement”) among the Borrowers, the Company and the First Priority Agent, (d) the Second Lien Security Agreement dated as of February 12, 2008 (as amended, supplemented, restated or otherwise modified from time to time in accordance with the terms hereof, the “Second Priority Security Agreement”) among the Issuers, certain of the Company’s subsidiaries and the Second Priority Agent, (e) the other Loan Documents as defined, and referred to, in the First Priority Debt Agreement and (f) the other Collateral Agreements as defined, and referred to, in the Second Priority Debt Agreement.

RECITALS

A. The First Priority Creditor has agreed to make loans and other extensions of credit to the Company pursuant to the First Priority Debt Agreement on the condition, among others, that the First Priority Claims (such term and each other capitalized term used but not defined in the preliminary statement or these recitals having the meaning given it in Article I) shall be secured by first priority Liens on, and security interests in, the Collateral.

B. The Second Priority Creditors have agreed to purchase and/or hold the Notes issued by the Issuers, from time to time pursuant to the Second Priority Debt Agreement on the condition, among others, that the Second Priority Claims shall be secured by second priority Liens on, and security interests in, the Collateral.

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C. The Debt Agreements require, among other things, that the parties thereto set forth in this Agreement, among other things, their respective rights, obligations and remedies with respect to the Collateral.

Accordingly, the parties hereto agree as follows:

ARTICLE I

Definitions

SECTION 1.01. Certain Defined Terms. Capitalized terms used in this Agreement and not otherwise defined herein shall, except to the extent the context otherwise requires, have the meanings set forth in the Second Priority Debt Agreement (as in effect on the date hereof) or the Second Priority Security Agreement (as in effect on the date hereof), as applicable.

SECTION 1.02. Other Defined Terms. As used in the Agreement, the following terms shall have the meanings specified below:

“Bankruptcy Code” shall mean Title 11 of the United States Code entitled “Bankruptcy,” as now and hereinafter in effect, or any successor statute.

“Bankruptcy Law” shall mean the Bankruptcy Code and any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law.

“Capital Stock” shall mean:

(1) in case of a corporation, corporate stock;

(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 or membership interests (whether general or limited); and

(4) any other interest or participation that confers on a person or entity the right to receive a share of the profits and losses of, or distributions of assets of, another person or entity that has issued such interest or participation.

“Collateral” shall mean, collectively, all “Collateral”, as defined in each of the First Priority Debt Agreement or any other First Priority Debt Document and the Second Priority Debt Agreement or any other Second Priority Debt Document.

“Collateral Agents” shall mean the First Priority Agent and the Second Priority Agent.

“Company” shall have the meaning assigned to such term in the preliminary statement to this Agreement.

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“Debt Agreements” shall have the meaning assigned to such term in the preliminary statement of this Agreement.

“Debt Documents” shall mean the First Priority Debt Documents and the Second Priority Debt Documents.

“DIP Financing” shall have the meaning assigned to such term in Section 6.01(a).

“DIP Financing Liens” shall have the meaning assigned to such term in Section 6.01(a).

“Discharge of First Priority Claims” shall mean, subject to Sections 7.02 and 7.04, (a) payment in full in cash of the principal of and interest (including interest accruing during the pendency of any Insolvency or Liquidation Proceeding, regardless of whether allowed or allowable in such Insolvency or Liquidation Proceeding) and premium, if any, on all Indebtedness then outstanding under the First Priority Debt Documents to the extent constituting First Priority Claims, (b) payment in full in cash of all other First Priority Claims that are then due and payable, (c) cancellation of or the entry into arrangements satisfactory to the First Priority Agent and the Issuing Bank with respect to all Letters of Credit issued and outstanding under the First Priority Debt Agreement and (d) termination or expiration of all commitments to lend and all obligations to issue or extend Letters of Credit under the First Priority Debt Agreement.

“Discharge of Second Priority Claims” shall mean, subject to Section 7.04, (a) payment in full in cash of the principal of and interest (including interest accruing during the pendency of any Insolvency or Liquidation Proceeding, regardless of whether allowed or allowable in such Insolvency or Liquidation Proceeding) and premium, if any, on all Indebtedness then outstanding under the Second Priority Debt Documents to the extent constituting Second Priority Claims, (b) payment in full of all First Priority Claims acquired by the Second Priority Agent and/or any of the Second Priority Secured Parties as contemplated by Section 10.06 hereof, and (c) payment in full in cash of all other Second Priority Claims that are then due and payable.

“Disposition” shall mean any sale, lease, exchange, transfer or other disposition. “Dispose” shall have a correlative meaning.

“First Priority Agent” shall have the meaning assigned to such term in the preamble to this Agreement.

“First Priority Claims” shall mean, when determined, (i) all Indebtedness under the First Priority Debt Agreement permitted pursuant to clause (i) of the definition of “Permitted Debt” in the Second Priority Debt Agreement, and all Obligations (other than principal) related to such Indebtedness and owing under the documents relating to such Indebtedness and (ii) all Hedging Obligations permitted under such First Priority Debt Agreement and secured by the First Priority Liens.

“First Priority Collateral” shall mean all “Collateral”, as defined in the First Priority Debt Agreement or any other First Priority Debt Document, and any other assets of any Grantor now or at any time hereafter subject to Liens which secure, but only to the extent securing, any First Priority Claims.

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“First Priority Creditor” shall have the meaning assigned to such term in the preliminary statement of this Agreement.

“First Priority Debt Agreement” shall have the meaning assigned to such term in the preliminary statement of this Agreement.

“First Priority Debt Documents” shall mean the “Loan Documents”, as defined in the First Priority Debt Agreement.

“First Priority Liens” shall mean all Liens on the First Priority Collateral to the extent such Liens secure the First Priority Claims, whether created under the First Priority Security Documents or acquired by possession, statute (including any judgment lien), operation of law, subrogation or otherwise.

“First Priority Mortgages” shall mean, collectively, each mortgage, deed of trust, leasehold mortgage, assignment of leases and rents, modifications and any other agreement, document or instrument pursuant to which a Lien on real property is granted by any Grantor to secure any First Priority Claims or under which rights or remedies with respect to any such Lien are governed.

“First Priority Secured Party” shall mean, at any time, (a) the First Priority Creditor, (b) the First Priority Agent, (c) each other Person to whom any of the First Priority Claims is owed (including any Affiliate of a First Priority Creditor to whom any First Priority Claims of the type described in clause (ii) of the definition thereof is owed) and (d) the successors and assigns of each of the foregoing.

“First Priority Security Agreement” shall have the meaning assigned to such term in the preliminary statement of this Agreement.

“First Priority Security Documents” shall mean the First Priority Debt Agreement, the First Priority Mortgages, the First Priority Security Agreement and any other agreement, document or instrument pursuant to which a Lien is granted by any Grantor to secure any First Priority Claims or under which rights or remedies with respect to any such Lien are governed.

“Grantors” shall mean each of the Borrowers, the Company, the Co-Issuer and each other Subsidiary of the Company or any New Parent that shall have created or purported to create any First Priority Lien or Second Priority Lien on all or any part of its assets to secure any First Priority Claims or any Second Priority Claims.

“Guarantors” shall mean, collectively, the Company, the Co-Issuer and any New Parent and each other Subsidiary of the Company or any New Parent (other than the Borrowers) that shall have guaranteed any First Priority Claims or any Second Priority Claims, whether by executing and delivering the applicable Debt Agreement, or a separate guaranty thereof, or a supplement thereto, or otherwise.

“Indebtedness” shall mean and includes all obligations that constitute “Indebtedness”, as defined in the First Priority Debt Agreement or the Second Priority Debt Agreement, as applicable.

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“Insolvency or Liquidation Proceeding” shall mean (a) any voluntary or involuntary proceeding under the Bankruptcy Code or any other Bankruptcy Law with respect to any Grantor, (b) any voluntary or involuntary appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Grantor or for a substantial part of the property or assets of any Grantor, (c) any voluntary or involuntary winding-up or liquidation of any Grantor, or (d) a general assignment for the benefit of creditors by any Grantor.

“Inventory” means, with respect to any Grantor, all of such Grantor’s now owned or hereafter acquired right, title, and interest with respect to inventory, including goods held for sale or lease or to be furnished under a contract of service, goods that are leased by such Grantor as lessor, goods that are furnished by such Grantor under a contract of service, and raw materials, work in process, or materials used or consumed in such Grantor’s business.

“Letter of Credit” shall have the meaning assigned to such term in the First Priority Debt Agreement.

“Lien” shall mean, 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, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction other than a precautionary financing statement not intended as a security agreement.

“Liquidation Sale” shall mean a so-called bulk sale, liquidation sale or “going out of business sale” conducted either by any Secured Party or a Grantor in respect to all or a substantial portion of such Grantor’s Collateral following the occurrence and during the continuance of an Event of Default under, and as defined in, either the First Priority Debt Documents or Second Priority Debt Documents.

“New First Priority Agent” shall have the meaning assigned to such term in Section 7.02.

“New First Priority Claims” shall have the meaning assigned to such term in Section 7.02.

“New First Priority Debt Documents” shall have the meaning assigned to such term in Section 7.02.

“Pledged or Controlled Collateral” shall have the meaning assigned to such term in Article V.

“Refinance” shall mean, in respect of any Indebtedness, to refinance, extend, renew, restructure (including by the amendment and restatement of any instrument or agreement evidencing such Indebtedness) or replace or to issue other Indebtedness in exchange or replacement for, such Indebtedness, in whole or in part. “Refinanced” and “Refinancing” shall have correlative meanings.

“Refinancing Notice” shall have the meaning assigned to such term in Section 7.02.

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“Release” shall have the meaning assigned to such term in Section 3.04.

“Second Priority Agent” shall have the meaning assigned to such term in the preamble to this Agreement.

“Second Priority Claims” shall mean the obligations of the Borrowers and the Guarantors under or with respect to (i) the Second Priority Debt Agreement, (ii) the promissory notes from time to time issued under the Second Priority Debt Agreement, (iii) any guaranty by a Guarantor of the Second Priority Debt Agreement or such promissory notes, or (iv) any other Second Priority Debt Document.

“Second Priority Collateral” shall mean all “Collateral”, as defined in any Second Priority Debt Document, and any other assets of any Grantor now or at any time hereafter subject to Liens which secure, but only to the extent securing, any Second Priority Claims.

“Second Priority Creditors” shall mean the “Holders”, as defined in the Second Priority Debt Agreement.

“Second Priority Debt Agreement” shall have the meaning assigned to such term in the preliminary statement of this Agreement.

“Second Priority Debt Documents” shall mean the “Indenture Documents”, as defined in the Second Priority Debt Agreement.

“Second Priority Liens” shall mean (i) the Liens on the Second Priority Collateral in favor of the Second Priority Secured Parties as set forth on Schedule 1 attached hereto and (ii) all other Liens on the Second Priority Collateral securing the Second Priority Claims, whether created under the Second Priority Security Documents or acquired by possession, statute (including any judgment lien), operation of law, subrogation or otherwise.

“Second Priority Mortgages” shall mean, collectively, each mortgage, deed of trust, leasehold mortgage, assignment of leases and rents, modifications and any other agreement, document or instrument pursuant to which any Lien on real property is granted by any Grantor to secure any Second Priority Claims or under which rights or remedies with respect to any such Lien are governed.

“Second Priority Permitted Actions” shall have the meaning assigned to such term in Section 3.01(a).

“Second Priority Secured Parties” shall mean, at any time, (a) the Second Priority Creditors, (b) the Second Priority Trustee, (c) the Second Priority Agent, (d) each other Person to whom any of the Second Priority Claims (including indemnification obligations) is owed and (e) the successors and assigns of each of the foregoing.

“Second Priority Security Agreement” shall have the meaning assigned to such term in the preliminary statement of this Agreement.

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“Second Priority Security Documents” shall mean the “Collateral Agreements”, as defined in the Second Priority Debt Agreement, including the Second Priority Mortgages and the Second Priority Security Agreement, and any other agreement, document or instrument pursuant to which a Lien is granted by any Grantor to secure any Second Priority Claims or under which rights or remedies with respect to any such Lien are governed.

“Secured Parties” shall mean, as the context may require, the First Priority Secured Party and/or the Second Priority Secured Parties.

“Security Documents” shall mean the First Priority Security Documents and the Second Priority Security Documents.

“Standstill Period” shall have the meaning assigned to such term in Section 3.02(a).

“Subsidiary” means:

(1) any corporation, association or other business entity (other than a partnership) of which more than 50% of the total voting power (without regard to the occurrence of any contingency) of Capital Stock is at the time owned or controlled, directly or through another Subsidiary, by the Company or any New Parent, or one or more of the other Subsidiaries of the Company or any New Parent (or a combination thereof); and

(2) any partnership (a) the sole general partner or the managing general partner of which is the Company or any New Parent, or a Subsidiary of the Company or any New Parent, (b) the only general partners of which are the Company, any New Parent or one or more Subsidiaries of the Company or any New Parent(or any combination thereof), or (c) as to which the Company, any New Parent and their Subsidiaries are entitled to receive more than 50% of the assets of such partnership upon its dissolution.

“Uniform Commercial Code” or “UCC” shall mean the Uniform Commercial Code (or any similar or equivalent legislation) as in effect from time to time in any applicable jurisdiction.

SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, supplemented or otherwise modified, (b) any reference herein (i) to any Person shall be construed to include such Person’s successors and assigns and (ii) to a Borrower or any other Grantor shall be construed to include such Borrower or such Grantor as debtor and debtor-in-possession and any receiver or trustee for such Borrower or any other Grantor, as the case may be, in any Insolvency or Liquidation Proceeding or Liquidation Sale, (c) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles or Sections shall be

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construed to refer to Articles or Sections of this Agreement and (e) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

ARTICLE II

Lien Priorities

SECTION 2.01. Relative Priorities. Notwithstanding the date, manner or order of grant, attachment or perfection of any Second Priority Lien or any First Priority Lien, and notwithstanding any provision of the UCC or any other applicable law or the provisions of any Security Document or any other Debt Document or any other circumstance whatsoever, each Collateral Agent, for itself and on behalf of the Secured Parties on whose behalf it acts in such capacity therefor, hereby agrees that, so long as the Discharge of First Priority Claims has not occurred, (i) any First Priority Lien on any Collateral now or hereafter held by or for the benefit of any First Priority Secured Party shall be senior in right, priority, operation, effect and all other respects to any and all Second Priority Liens on any Collateral and (ii) any Second Priority Lien on any Collateral now or hereafter held by or for the benefit of any Second Priority Secured Party shall be junior and subordinate in right, priority, operation, effect and all other respects to any and all First Priority Liens on any Collateral.

SECTION 2.02. Prohibition on Contesting Liens. Each Collateral Agent, for itself and on behalf of the other Secured Parties on whose behalf it acts in such capacity therefor, agrees that it will not, and hereby waives any right to, contest or support any other Person in contesting, in any proceeding (including any Insolvency or Liquidation Proceeding), the priority, validity or enforceability of any Second Priority Lien or any First Priority Lien, as the case may be; provided that nothing in this Agreement shall be construed to prevent or impair the rights of any Collateral Agent or any other Secured Party to enforce this Agreement to the extent provided hereby.

SECTION 2.03. No New Liens. The parties hereto agree that, so long as the Discharge of First Priority Claims has not occurred, none of the Grantors shall, nor shall any Grantor permit any of its Subsidiaries to, (i) grant or permit any additional Liens on any asset of a Grantor to secure any Second Priority Claim unless it has granted, or substantially concurrently therewith grants, a Lien on such asset of such Grantor to secure the First Priority Claims or (ii) grant or permit any additional Liens on any asset of a Grantor to secure any First Priority Claims unless it has granted, or substantially concurrently therewith grants, a Lien on such asset of a Grantor to secure the Second Priority Claims, with each such Lien to be subject to the provisions of this Agreement. To the extent that the provisions of the immediately preceding sentence are not complied with for any reason, without limiting any other right or remedy available to the First Priority Agent or the other First Priority Secured Party, the Second Priority Agent agrees, for itself and on behalf of the other Second Priority Secured Parties, that any amounts received by or distributed to any Second Priority Secured Party pursuant to or as a result of any Lien granted in contravention of this Section 2.03 shall be subject to Section 4.02.

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SECTION 2.04. Similar Collateral. The parties hereto acknowledge and agree that it is their intention that the First Priority Collateral and the Second Priority Collateral be identical. In furtherance of the foregoing, the parties hereto agree to cooperate in good faith in order to determine, upon any reasonable request by the First Priority Agent or the Second Priority Agent, the specific assets included in the First Priority Collateral and the Second Priority Collateral, the steps taken to perfect the First Priority Liens and the Second Priority Liens thereon and the identity of the respective parties obligated under the First Priority Debt Documents and the Second Priority Debt Documents in respect of the First Priority Claims and the Second Priority Claims, respectively.

ARTICLE III

Enforcement of Rights; Matters Relating to Collateral

SECTION 3.01. Exercise of Rights and Remedies; Option to Purchase. (a) So long as the Discharge of First Priority Claims has not occurred, whether or not any Insolvency or Liquidation Proceeding or Liquidation Sale has been commenced, the First Priority Agent and the other First Priority Secured Party shall have the exclusive right to enforce rights and exercise remedies (including any right of setoff) with respect to the Collateral (including making determinations regarding the release, Disposition or restrictions with respect to the Collateral), or to commence or seek to commence any action or proceeding with respect to such rights or remedies (including any foreclosure action or proceeding or any Insolvency or Liquidation Proceeding or Liquidation Sale), in each case, without any consultation with or the consent of the Second Priority Agent or any other Second Priority Secured Party; provided that, notwithstanding the foregoing, (i) in any Insolvency or Liquidation Proceeding, the Second Priority Agent may file a proof of claim or statement of interest with respect to the Second Priority Claims; (ii) the Second Priority Agent may take any action to preserve or protect the validity and enforceability of the Second Priority Liens, provided that no such action is (A) adverse to the First Priority Liens or the rights of the First Priority Agent or any other First Priority Secured Party to exercise remedies in respect thereof or (B) otherwise inconsistent with the terms of this Agreement, including the automatic release of Second Priority Liens provided in Section 3.04; (iii) the Second Priority Secured Parties may file any responsive or defensive pleadings in opposition to any motion, claim, adversary proceeding or other pleading made by any Person objecting to or otherwise seeking the disallowance of the claims of the Second Priority Secured Parties, including any claims secured by the Collateral or otherwise make any agreements or file any motions pertaining to the Second Priority Claims, in each case, to the extent not inconsistent with the terms of this Agreement; (iv) the Second Priority Secured Parties may exercise rights and remedies as unsecured creditors, as provided in Section 3.03; (v) if the First Priority Claims are accelerated, the Second Priority Secured Parties may accelerate the Second Priority Claims; and (vi) subject to Section 3.02, the Second Priority Agent and the other Second Priority Secured Parties may enforce any of their rights and exercise any of their remedies with respect to the Collateral after the termination of the Standstill Period (the actions described in this proviso being referred to herein as the “Second Priority Permitted Actions”). Except for the Second Priority Permitted Actions, unless and until the Discharge of First Priority Claims has occurred, the sole right of the Second Priority Agent and the other Second Priority Secured Parties with respect to the Collateral shall be to receive the proceeds of the Collateral, if any, remaining after the Discharge of First Priority Claims has occurred and in accordance with the Second Priority Debt Documents and applicable law.

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(b) In exercising rights and remedies with respect to the Collateral, the First Priority Agent and the other First Priority Secured Party may enforce the provisions of the First Priority Debt Documents and exercise remedies thereunder, all in such order and in such manner as they may determine in their sole discretion. Such exercise and enforcement shall include the rights of an agent appointed by them to Dispose of Collateral upon foreclosure, to incur expenses in connection with any such Disposition and to exercise all the rights and remedies of a secured creditor under the Uniform Commercial Code, the Bankruptcy Code or any other Bankruptcy Law. The First Priority Agent agrees to provide at least ten Business Days’ prior written notice to the Second Priority Agent of its intention to foreclose upon or Dispose of any Collateral; provided, however, that the failure to give any such notice shall not in any way limit its ability to foreclose upon or Dispose of any Collateral.

(c) The Second Priority Agent, for itself and on behalf of the other Second Priority Secured Parties, hereby acknowledges and agrees that no covenant, agreement or restriction contained in any Second Priority Security Document or any other Second Priority Debt Document shall be deemed to restrict in any way the rights and remedies of the First Priority Agent or the other First Priority Secured Party with respect to the Collateral as set forth in this Agreement and the other First Priority Debt Documents.

(d) Notwithstanding anything in this Agreement to the contrary, following the acceleration of the Indebtedness then outstanding under the First Priority Debt Agreement or the commencement of an Insolvency or Liquidation Proceeding, the Second Priority Secured Parties may (but shall not be obligated to), at their sole expense and effort, upon notice to the Borrowers and the First Priority Agent, require the First Priority Secured Party to transfer and assign to the Second Priority Secured Parties, without warranty or representation or recourse, all (but not less than all) of the First Priority Claims at par; provided that (x) such assignment shall not conflict with any law, rule or regulation or order of any court or other Governmental Authority having jurisdiction, and (y) the Second Priority Secured Parties shall have paid to the First Priority Agent, for the account of the First Priority Secured Party, in immediately available funds, an amount equal to 100% of the principal of such Indebtedness plus all accrued and unpaid interest thereon plus all accrued and unpaid fees plus all the other First Priority Claims then outstanding (which shall include, with respect to (i) the aggregate face amount of the Letters of Credit outstanding under the First Priority Debt Documents, posting cash collateral in an amount equal to 105% thereof, and (ii) each commodity or interest rate hedging, cap, collar, swap or other similar agreement that evidences any Hedging Obligations included in such First Priority Claims, 100% of the aggregate amount of such First Priority Claims, after giving effect to any netting arrangements, that the applicable Grantor would be required to pay if such commodity or interest rate hedging, cap, collar, swap or other similar agreements were terminated at such time, calculated using the market quotation method). In order to effectuate the foregoing, the First Priority Agent shall calculate, upon the written request of the Second Priority Agent from time to time, the amount in cash that would be necessary so to purchase the First Priority Claims. If the right set forth in this Section 3.01(d) is exercised, the parties shall endeavor to close promptly thereafter but in any event within ten Business Days of the request set forth in the first sentence of this Section 3.01(d). If one or more of the Second Priority Secured Parties exercises the right set forth in this Section 3.01(d), it shall be exercised pursuant to documentation mutually acceptable to each of the First Priority Agent and the Second Priority Agent.

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(e) In exercising rights and remedies with respect to the Collateral, the Second Priority Agent and the other Second Priority Secured Parties may enforce the provisions of the Second Priority Debt Documents and exercise remedies thereunder, all in such order and in such manner as they may determine in their sole discretion, in each case, to the extent that such enforcement or exercise is not otherwise prohibited by clauses (a) through (d) of this Section 3.01. Such exercise and enforcement shall, in each case, to the extent that such enforcement or exercise is not otherwise prohibited by clauses (a) through (d) of this Section 3.01, include the rights of an agent appointed by them to Dispose of Collateral upon foreclosure, to incur expenses in connection with any such Disposition and to exercise all the rights and remedies of a secured creditor under the Uniform Commercial Code, the Bankruptcy Code or any other Bankruptcy Law. The Second Priority Agent agrees to provide at least ten Business Days’ prior written notice to the First Priority Agent of its intention to foreclose upon or Dispose of any Collateral; provided, however, that the failure to give any such notice shall not in any way limit its ability to foreclose upon or Dispose of any Collateral to the extent that such foreclosure is not otherwise prohibited by clauses (a) through (d) of this Section 3.01.

SECTION 3.02. No Interference. The Second Priority Agent, for itself and on behalf of the other Second Priority Secured Parties, agrees that, whether or not any Insolvency or Liquidation Proceeding or Liquidation Sale has been commenced, the Second Priority Secured Parties:

(a) except for Second Priority Permitted Actions, will not, so long as the Discharge of First Priority Claims has not occurred, (A) enforce or exercise, or seek to enforce or exercise, any rights or remedies (including any right of setoff) with respect to any Collateral (including the enforcement of any right under any account control agreement, landlord waiver or bailee’s letter or any similar agreement or arrangement to which the Second Priority Agent or any other Second Priority Secured Party is a party) or (B) commence or join with any Person (other than the First Priority Agent) in commencing, or petition for or vote in favor of any resolution for, any action or proceeding with respect to such rights or remedies (including any foreclosure action); provided, however, that the Second Priority Agent may enforce or exercise any or all such rights and remedies, or commence, join with any Person in commencing, or petition for or vote in favor of any resolution for, any such action or proceeding, after a period of 180 days has elapsed since the date on which the Second Priority Agent has delivered to the First Priority Agent written notice of the occurrence of an Event of Default (as defined in the Second Priority Debt Documents) and its current intention to accelerate the Indebtedness then outstanding under the Second Priority Debt Agreement (the “Standstill Period”); provided further, however, that (1) notwithstanding the expiration of the Standstill Period or anything herein to the contrary, in no event shall the Second Priority Agent or any other Second Priority Secured Party enforce or exercise any rights or remedies with respect to any Collateral, or commence, join with any Person at any time in commencing, or petition for or vote in favor of any resolution for, any such action or proceeding, if the First Priority Agent or any other First Priority Secured Party shall have commenced, and shall be diligently pursuing (or shall have sought or requested relief from or modification of the automatic stay or any other stay in any Insolvency or Liquidation Proceeding to enable the commencement and pursuit thereof), the enforcement or exercise of any

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rights or remedies with respect to all or a material portion of the Collateral or any such action or proceeding (prompt written notice thereof to be given to the Second Priority Agent by the First Priority Agent) and (2) after the expiration of the Standstill Period, so long as neither the First Priority Agent nor the First Priority Secured Party has commenced any action to enforce their Lien on any material portion of the Collateral, in the event that and for so long as the Second Priority Secured Parties (or the Second Priority Agent on their behalf) have commenced any actions to enforce their Liens with respect to any material portion of the Collateral to the extent permitted hereunder and are diligently pursuing such actions, neither the First Priority Secured Party nor the First Priority Agent shall take any action of a similar nature with respect to such Collateral; provided that all other provisions of this Agreement (including the turnover provisions of Article IV) are complied with;

(b) will not contest, protest or object to any foreclosure action or proceeding brought by the First Priority Agent or any other First Priority Secured Party, or any other enforcement or exercise by any First Priority Secured Party of any rights or remedies relating to the Collateral under the First Priority Debt Documents or an Insolvency or Liquidation Proceeding or in connection with a Liquidation Sale or otherwise, so long as Second Priority Liens attach to the proceeds thereof subject to the relative priorities set forth in Section 2.01(a);

(c) subject to the rights of the Second Priority Secured Parties under Section 3.02(a), will not object to the forbearance by the First Priority Agent or any other First Priority Secured Party from commencing or pursuing any foreclosure action or proceeding or any other enforcement or exercise of any rights or remedies with respect to the Collateral;

(d) will not, so long as the Discharge of First Priority Claims has not occurred and except for Second Priority Permitted Actions, take or receive any Collateral, or any proceeds thereof or payment with respect thereto, in connection with the exercise of any right or enforcement of any remedy (including any right of setoff) with respect to any Collateral or in connection with any insurance policy award under a policy of insurance relating to any Collateral or any condemnation award (or deed in lieu of condemnation) relating to any Collateral;

(e) will not, except for Second Priority Permitted Actions, take any action that would, or could reasonably be expected to, hinder, in any manner, any exercise of remedies under the First Priority Debt Documents, including any Disposition of any Collateral, whether by foreclosure or otherwise;

(f) will not, except for Second Priority Permitted Actions, object to the manner in which the First Priority Agent or any other First Priority Secured Party may seek to enforce or collect the First Priority Claims or the First Priority Liens, regardless of whether any action or failure to act by or on behalf of the First Priority Agent or any other First Priority Secured Party is, or could be, adverse to the interests of the Second Priority Secured Parties, and will not assert, and hereby waive, to the fullest extent permitted by law, any right to demand, request, plead or otherwise assert or claim the benefit of any marshalling, appraisal, valuation or other similar right that may be available under applicable law with respect to the Collateral or any similar rights a junior secured creditor may have under applicable law; and

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(g) will not attempt, directly or indirectly, whether by judicial proceeding or otherwise, to challenge or question the validity or enforceability of any First Priority Claim or any First Priority Security Document, including this Agreement, or the validity or enforceability of the priorities, rights or obligations established by this Agreement.

SECTION 3.03. Rights as Unsecured Creditors. Except as provided in Sections 2.01, 2.02, 3.01 and 6.01, the Second Priority Agent and the other Second Priority Secured Parties may, in accordance with the terms of the Second Priority Debt Documents and applicable law, enforce rights and exercise remedies against any Grantor as unsecured creditors; provided that no such action is otherwise inconsistent with the terms of this Agreement. Without limiting the generality of the foregoing sentence, the Second Priority Secured Parties shall be entitled to prosecute litigation against any Grantor or any other Person liable in respect of the Second Priority Claims, notwithstanding whether any Standstill Period is then in effect, but shall be prohibited from taking any action to enforce any judgment until the lapse of any applicable Standstill Period. Nothing in this Agreement shall prohibit the receipt by the Second Priority Agent or any other Second Priority Secured Party of the required payments of principal, premium, interest, fees and other amounts due under the Second Priority Debt Documents so long as such receipt is not the direct or indirect result of the enforcement or exercise by the Second Priority Agent or any other Second Priority Secured Party of rights or remedies in contravention of this Agreement as a secured creditor (including any right of setoff) against Collateral or enforcement in contravention of this Agreement of any Second Priority Lien against Collateral (including any judgment lien resulting from the exercise of remedies available to an unsecured creditor).

SECTION 3.04. Automatic Release of Second Priority Liens.

(a) If, in connection with (i) any Disposition of any Collateral permitted under the terms of the First Priority Debt Documents or (ii) the enforcement or exercise of any rights or remedies with respect to the Collateral, including any Disposition of Collateral, the First Priority Agent, for itself and on behalf of the other First Priority Secured Party, (x) releases any of the First Priority Liens, or (y) releases any Guarantor (other than the Company or any New Parent) from its obligations under its guarantee of the First Priority Claims (in each case, a “Release”), other than any such Release granted following (and not as a condition to) the Discharge of First Priority Claims, then the Second Priority Liens on such Collateral, and the obligations of such Guarantor under its guarantee of the Second Priority Claims, shall be automatically, unconditionally and simultaneously released, and the Second Priority Agent shall, for itself and on behalf of the other Second Priority Secured Parties, promptly execute and deliver to the First Priority Agent, the relevant Grantor or such Guarantor such termination statements, releases and other documents as the First Priority Agent or the relevant Grantor or Guarantor may reasonably request to effectively confirm such Release.

(b) Until the Discharge of First Priority Claims occurs, the Second Priority Agent, for itself and on behalf of each other Second Priority Secured Party, hereby appoints the First Priority Agent, and any officer or agent of the First Priority Agent, with full power of substitution, as the attorney-in-fact of each Second Priority Secured Party for the purpose of carrying out the provisions of this Section 3.04 and taking any action and executing any instrument that the First Priority Agent may deem necessary or advisable to accomplish the purposes of this Section 3.04 (including any endorsements or other instruments of transfer or release), which appointment is irrevocable and coupled with an interest.

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SECTION 3.05. Automatic Release of First Priority Liens. If, in connection with the enforcement or exercise of any rights or remedies with respect to the Collateral after the expiration of the Standstill Period that is permitted in accordance with clause (2) of the second proviso to Section 3.02(a), including any Disposition of Collateral, the Second Priority Agent, for itself and on behalf of the other Second Priority Secured Parties, (x) releases any of the Second Priority Liens, or (y) releases any Guarantor from its obligations under its guarantee of the Second Priority Claims (in each case, a “Second Priority Release”), then the First Priority Liens on such Collateral, and the obligations of such Guarantor under its guarantee of the First Priority Claims, shall be automatically, unconditionally and simultaneously released, and the First Priority Agent shall, for itself and on behalf of the other First Priority Secured Party, promptly execute and deliver to the Second Priority Agent, the relevant Grantor or such Guarantor such termination statements, releases and other documents as the Second Priority Agent or the relevant Grantor or Guarantor may reasonably request to effectively confirm such release; provided that so long as the Discharge of First Priority Claims has not occurred, the proceeds of, or payments with respect to, any Second Priority Release that are received by the Second Priority Agent or any other Second Priority Secured Party, shall be segregated and held in trust and forthwith transferred or paid over to the First Priority Agent for the benefit of the First Priority Secured Party in accordance with Section 4.02; provided further, however, that the First Priority Lender shall not be obligated to release the First Priority Liens on any Collateral in connection with any sale or other Disposition of Collateral to a Second Priority Secured Party or an affiliate thereof or any other transaction other than a sale of such Collateral to a third Person with respect to which at least 75% of the consideration therefor consists of cash and cash equivalents.

SECTION 3.06. Insurance and Condemnation Awards. So long as the Discharge of First Priority Claims has not occurred, the First Priority Agent and the other First Priority Secured Party shall have the exclusive right, subject to the rights of the Grantors under the First Priority Debt Documents, to settle and adjust claims in respect of Collateral under policies of insurance covering Collateral and to approve any award granted in any condemnation or similar proceeding, or any deed in lieu of condemnation, in respect of the Collateral. All proceeds of any such policy and any such award, or any payments with respect to a deed in lieu of condemnation, shall (a) first, prior to the Discharge of First Priority Claims and subject to the rights of the Grantors under the First Priority Debt Documents, be paid to the First Priority Agent for the benefit of First Priority Secured Party pursuant to the terms of the First Priority Debt Documents, (b) second, after the Discharge of First Priority Claims and subject to the rights of the Grantors under the Second Priority Debt Documents, be paid to the Second Priority Agent for the benefit of the Second Priority Secured Parties pursuant to the terms of the Second Priority Debt Documents, and (c) third, be paid to the owner of the subject property or as a court of competent jurisdiction may otherwise direct. Until the Discharge of First Priority Claims has occurred, if the Second Priority Agent or any other Second Priority Secured Party shall, at any time, receive any proceeds of any such insurance policy or any such award or payment, it shall transfer and pay over such proceeds to the First Priority Agent in accordance with Section 4.02.

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SECTION 3.07. Notification of Release of Collateral. Each of the First Priority Agent and the Second Priority Agent shall give the other prompt written notice of the Disposition by it of, and Release by it of the Lien on, any Collateral. Such notice shall describe in reasonable detail the subject Collateral, the parties involved in such Disposition or Release, the place, time manner and method thereof, and the consideration, if any, received therefor; provided, however, that the failure to give any such notice shall not in and of itself in any way impair the effectiveness of any such Disposition or Release.

ARTICLE IV

Payments

SECTION 4.01. Application of Proceeds. Any Collateral or proceeds thereof received by any Secured Party in connection with any Disposition of, or collection on, such Collateral upon the enforcement or exercise of any right or remedy (including any right of setoff) will be applied as follows:

first, to the payment of costs and expenses of the applicable Secured Party in connection with such enforcement or exercise;

second, after all such costs and expenses have been paid in full in cash, to the payment of the First Priority Claims in accordance with the First Priority Debt Documents;

third, after all such costs and expenses have been paid in full in cash and the Discharge of First Priority Claims has occurred, to the payment of the Second Priority Claims, and

fourth, after all such costs and expenses have been paid in full in cash, the Discharge of First Priority Claims has occurred, and the Discharge of Second Priority Claims has occurred, any surplus Collateral or proceeds then remaining will be returned to the applicable Borrower, the applicable Guarantor or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct.

SECTION 4.02. Payment Over. So long as the Discharge of First Priority Claims has not occurred, any Collateral or any proceeds thereof (together with assets or proceeds subject to Liens referred to in the final sentence of Section 2.03) received by the Second Priority Agent or any other Second Priority Secured Party in connection with any Disposition of, or collection on, such Collateral upon the enforcement or the exercise of any right or remedy (including any right of setoff) with respect to the Collateral, or in connection with any insurance policy claim or any condemnation award (or deed in lieu of condemnation) with respect to the Collateral, shall be segregated and held in trust and forthwith transferred or paid over to the First Priority Agent for the benefit of the First Priority Secured Party in the same form as received, together with any necessary endorsements, or as a court of competent jurisdiction may otherwise direct. Until the Discharge of First Priority Claims occurs, the Second Priority Agent, for itself and on behalf of each other Second Priority Secured Party, hereby appoints the First Priority Agent, and any

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officer or agent of the First Priority Agent, with full power of substitution, the attorney-in-fact of each Second Priority Secured Party for the purpose of carrying out the provisions of this Section 4.02 and taking any action and executing any instrument that the First Priority Agent may deem necessary or advisable to accomplish the purposes of this Section 4.02, which appointment is irrevocable and coupled with an interest.

SECTION 4.03. Certain Agreements with Respect to Unenforceable Liens. Notwithstanding anything to the contrary contained herein, if in any Insolvency or Liquidation Proceeding a determination is made that any Lien encumbering any Collateral is not enforceable for any reason, then the Second Priority Agent and the Second Priority Secured Parties agree that, any distribution or recovery they may receive with respect to, or allocable to, the value of the assets constituting Collateral subject to an enforceable Lien in favor of the Second Priority Secured Parties or any proceeds thereof shall (for so long as the Discharge of First Priority Claims has not occurred) be segregated and held in trust and forthwith paid over to the First Priority Agent for the benefit of the First Priority Secured Party in the same form as received without recourse, representation or warranty (other than a representation of the Second Priority Agent that it has not otherwise sold, assigned, transferred or pledged any right, title or interest in and to such distribution or recovery) but with any necessary endorsements or as a court of competent jurisdiction may otherwise direct. Until the Discharge of First Priority Claims occurs, the Second Priority Agent, for itself and on behalf of each other Second Priority Secured Party, hereby appoints the First Priority Agent, and any officer or agent of the First Priority Agent, with full power of substitution, the attorney-in-fact of each Second Priority Secured Party for the limited purpose of carrying out the provisions of this Section 4.03 and taking any action and executing any instrument that the First Priority Agent may deem necessary or advisable to accomplish the purposes of this Section 4.03, which appointment is irrevocable and coupled with an interest.

ARTICLE V

Bailment for Perfection of Certain Security Interests

(a) The parties agree that if the First Priority Agent shall at any time hold a First Priority Lien on any Collateral that can be perfected or the priority of which can be enhanced by the possession or control of such Collateral or of any account in which such Collateral is held, and if such Collateral or any such account is in fact in the possession or under the control of the First Priority Agent, or of agents or bailees of the First Priority Agent (such Collateral being referred to herein as the “Pledged or Controlled Collateral”), the First Priority Agent shall, solely for the purpose of perfecting the Second Priority Liens granted under the Second Priority Debt Documents and subject to the terms and conditions of this Article V, also (i) hold and/or maintain control of such Pledged or Controlled Collateral as gratuitous bailee for and representative (as defined in Section 1-201(35) of the Uniform Commercial Code as in effect in the State of New York) of, or as agent for, the Second Priority Agent, (ii) with respect to any securities accounts included in the Collateral, have “control” (within the meaning of Section 8-106(d)(3) of the UCC) of such securities accounts on behalf of the Second Priority Agent and (iii) with respect to any deposit accounts included in the Collateral, act as agent for the Second Priority Agent and any assignee.

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(b) So long as the Discharge of First Priority Claims has not occurred, the First Priority Agent shall be entitled to deal with the Pledged or Controlled Collateral in accordance with the terms of this Agreement and the other First Priority Debt Documents as if the Second Priority Liens did not exist. The obligations and responsibilities of the First Priority Agent to the Second Priority Agent and the other Second Priority Secured Parties under this Article V shall be limited solely to holding or controlling the Pledged or Controlled Collateral as gratuitous bailee and representative (as defined in Section 1 201(35) of the Uniform Commercial Code as in effect in the State of New York) in accordance with this Article V. Without limiting the foregoing, the First Priority Agent shall have no obligation or responsibility to ensure that any Pledged or Controlled Collateral is genuine or owned by any of the Grantors. The First Priority Agent acting pursuant to this Article V shall not, by reason of this Agreement, any other Security Document or any other document, have a fiduciary relationship in respect of any other First Priority Secured Party, the Second Priority Agent or any other Second Priority Secured Party.

(c) Upon the Discharge of First Priority Claims, the First Priority Agent shall (i) transfer the possession and control of the Pledged or Controlled Collateral, together with any necessary endorsements but without recourse or warranty, to the Second Priority Agent, and (ii) if no Second Priority Claims are outstanding at such time, to the applicable Grantor, in each case so as to allow such Person to obtain possession and control of such Pledged or Controlled Collateral. In connection with any transfer under clause (i) of the immediately preceding sentence, the First Priority Agent agrees, at the expense of the Grantors, to take all actions in its power as shall be reasonably requested by the Second Priority Agent to permit the Second Priority Agent to obtain, for the benefit of the Second Priority Secured Parties, a first priority security interest in the Pledged or Controlled Collateral.

(d) After the Discharge of First Priority Claims and upon the Discharge of Second Priority Claims, the Second Priority Agent shall transfer the possession and control of the Pledged or Controlled Collateral, together with any necessary endorsements but without recourse or warranty, to the applicable Grantor, in each case so as to allow such Person to obtain possession and control of such Pledged or Controlled Collateral.

ARTICLE VI

Insolvency or Liquidation Proceedings

SECTION 6.01. Finance and Sale Matters. (a) Until the Discharge of First Priority Claims has occurred, the Second Priority Agent, for itself and on behalf of the other Second Priority Secured Parties, and subject to the provisions of Section 6.01(b), agrees that, in the event of any Insolvency or Liquidation Proceeding, the Second Priority Secured Parties:

(i) will not oppose or object to the use of any Collateral constituting cash collateral under Section 363 of the Bankruptcy Code, or any comparable provision of any other Bankruptcy Law, unless the First Priority Secured Party, or a representative authorized by the First Priority Secured Party, shall oppose or object to such use of cash collateral;

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(ii) will not oppose or object to any post-petition financing provided to any Grantor, whether provided by the First Priority Secured Party or any other Person, under Section 364 of the Bankruptcy Code, or any comparable provision of any other Bankruptcy Law (a “DIP Financing”), or the Liens securing any DIP Financing (“DIP Financing Liens”), unless the First Priority Secured Party, or a representative authorized by the First Priority Secured Party, shall then oppose or object to such DIP Financing, such DIP Financing Liens or such DIP Financing Liens are not senior to or rank pari passu with the First Priority Liens, and, to the extent that such DIP Financing Liens are not senior to, or rank pari passu with, the First Priority Liens on the Collateral, the Second Priority Agent will, for itself and on behalf of the other Second Priority Secured Parties, subordinate the Second Priority Liens on the Collateral to the First Priority Liens on the Collateral, if applicable, and the DIP Financing Liens on the terms of this Agreement; provided that, notwithstanding anything herein to the contrary, the Second Priority Secured Parties retain their rights under the Bankruptcy Code to make post-petition financing proposals and such proposals shall not be deemed to be an objection to any other DIP Financing proposals so long as (x) any court order approving such post-petition financing requires that the First Priority Claims be paid in full in cash as a condition to such post-petition financing, and (y) the First Priority Claims are paid in full in cash on the date of such post-petition financing, which date shall be no later than 10 days after the date on which such post-petition financing is approved by the court in which such Insolvency or Liquidation Proceeding is pending;

(iii) except to the extent permitted by Section 6.01(b), in connection with the use of cash collateral as described in clause (i) above or a DIP Financing, will not request adequate protection with respect to any such collateral or any other relief in connection with such use of cash collateral, DIP Financing or DIP Financing Liens; and

(iv) will not oppose or object to any Disposition of any Collateral free and clear of the Second Priority Liens or other claims under Section 363 of the Bankruptcy Code, or any comparable provision of any other Bankruptcy Law, if the First Priority Secured Party, or a representative authorized by the First Priority Secured Party, shall consent to such Disposition free and clear of First Priority Liens.

(b) The Second Priority Agent, for itself and on behalf of the other Second Priority Secured Parties, agrees that no Second Priority Secured Party shall contest, or support any other Person in contesting, (i) any request by the First Priority Agent or any other First Priority Secured Party for adequate protection in respect of any First Priority Claims or (ii) any objection, based on a claim of a lack of adequate protection with respect of any First Priority Claims, by the First Priority Agent or any other First Priority Secured Party to any motion, relief, action or proceeding. Notwithstanding the immediately preceding sentence, if, in connection with any DIP Financing or use of cash collateral, (A) any First Priority Secured Party seeks or requests adequate protection in the form of a Lien on additional collateral, the Second Priority Agent may, for itself and on behalf of the other Second Priority Secured Parties, seek or request adequate protection in the form of a Lien on such additional collateral, which Lien will be subordinated to the First Priority Liens and DIP Financing Liens on the same basis as the other Second Priority Liens are subordinated to the First Priority Liens under this Agreement or (B) any Second Priority Secured Party is granted adequate protection in the form of a Lien on

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additional collateral, the First Priority Agent shall, for itself and on behalf of the other First Priority Secured Party, be granted adequate protection in the form of a Lien on such additional collateral that is senior to such Second Priority Lien as security for the First Priority Claims.

(c) Notwithstanding the foregoing, the applicable provisions of Section 6.01(a) and (b) shall only be binding on the Second Priority Secured Parties with respect to any DIP Financing to the extent the principal amount of such DIP Financing, when taken together with the aggregate principal amount of the First Priority Claims (which, in each case, for the avoidance of doubt shall not include any First Priority Claims of the type described in clause (ii) of the definition thereof), does not exceed the sum of (i) the amount of Indebtedness at the time permitted to be outstanding pursuant to clause (i) of the definition of “Permitted Debt” in the Second Priority Debt Document, and (ii) $4,000,000.

SECTION 6.02. Relief from the Automatic Stay. The Second Priority Agent, for itself and on behalf of the other Second Priority Secured Parties, agrees that, so long as the Discharge of First Priority Claims has not occurred, no Second Priority Secured Party shall, without the prior written consent of the First Priority Agent, seek or request relief from or modification of the automatic stay or any other stay in any Insolvency or Liquidation Proceeding in respect of any part of the Collateral, any proceeds thereof or any Second Priority Lien on the Collateral.

SECTION 6.03. Reorganization Securities. If, in any Insolvency or Liquidation Proceeding, debt obligations of the reorganized debtor secured by Liens upon any property of the reorganized debtor are distributed, pursuant to a plan of reorganization or similar dispositive restructuring plan, on account of the First Priority Claims and the Second Priority Claims, then, to the extent the debt obligations distributed on account of the First Priority Claims, on account of the Second Priority Claims are secured by Liens upon the same assets or property, the provisions of this Agreement will survive the distribution of such debt obligations pursuant to such plan and will apply with like effect to the Liens securing such debt obligations.

SECTION 6.04. Post-Petition Interest. The Second Priority Agent, for itself and on behalf of the other Second Priority Secured Parties, agrees that no Second Priority Secured Party shall oppose or seek to challenge any claim by the First Priority Agent or any other First Priority Secured Party for allowance in any Insolvency or Liquidation Proceeding of First Priority Claims consisting of post-petition interest, fees or expenses to the extent of the value of the First Priority Liens (it being understood and agreed that such value shall be determined without regard to the existence of the Second Priority Liens on the Collateral).

(b) The First Priority Agent, for itself and on behalf of the other First Priority Secured Party, agrees that the Second Priority Agent or any other Second Priority Secured Party may make a claim for allowance in any Insolvency or Liquidation Proceeding of Second Priority Claims consisting of post-petition interest, fees or expenses to the extent of the value of the Second Priority Liens; provided, however, that if the First Priority Secured Party shall have made any such claim, such claim (A) shall have also have been approved or (B) shall have been approved prior to, or will be approved contemporaneous with, the approval of any such claim by any Second Priority Secured Party.

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SECTION 6.05. Certain Waivers by the Second Priority Secured Parties. The Second Priority Agent, for itself and on behalf of the other Second Priority Secured Parties, waives any claim any Second Priority Secured Party may hereafter have against any First Priority Secured Party arising out of (a) the election by any First Priority Secured Party of the application of Section 1111(b)(2) of the Bankruptcy Code, or any comparable provision of any other Bankruptcy Law, or (b) to the extent provided in Section 6.01(a), any use of cash collateral or financing arrangement, or any grant of a security interest in the Collateral, in any Insolvency or Liquidation Proceeding.

SECTION 6.06. Certain Voting Matters. Each of the First Priority Agent, on behalf of the First Priority Secured Party, and the Second Priority Agent, on behalf of the Second Priority Secured Parties, agrees that, without the written consent of the other, it will not seek to vote with the other as a single class in connection with any plan of reorganization in any Insolvency or Liquidation Proceeding. Except as provided in this Section 6.06, nothing in this Agreement is intended, or shall be construed, to limit the ability of the Second Priority Agent or the Second Priority Secured Parties to vote on any plan of reorganization that maintains the lien subordination provisions of this Agreement or of either the First Priority Secured Party or Second Priority Secured Parties, to contest any plan of reorganization that does not maintain the lien subordination provisions of this Agreement.

ARTICLE VII

Other Agreements

SECTION 7.01. Matters Relating to Debt Documents. (a) As to that portion of the Second Priority Collateral secured by Second Priority Mortgages as specified in Schedule 1, the First Priority Agent and the Second Priority Agent shall execute and record in the appropriate filing office a notice of subordination containing the following language (or language to similar effect):

“Reference is made to the Intercreditor Agreement dated as of April 10, 2008 (as amended, supplemented, restated or otherwise modified from time to time, the “Intercreditor Agreement”), among the Borrowers, the Company, the Subsidiaries of the Company from time to time party thereto, Citibank, N.A., as First Priority Agent (as defined therein), and Wells Fargo Bank, National Association, as Second Priority Agent (as defined therein). Notwithstanding anything herein to the contrary, the lien and security interest granted to the Collateral Agent, for the benefit of the Secured Parties, pursuant to this Agreement and the exercise of any right or remedy by the Collateral Agent and the other Secured Parties hereunder are subject to the provisions of the Intercreditor Agreement. In the event of any conflict or inconsistency between the provisions of the Intercreditor Agreement and the provisions of this Agreement, Article 12 of the Second Priority Debt Agreement, the Notes or the provisions of the Second Priority Security Documents, the provisions of the Intercreditor Agreement shall control.”

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(b) Each of the Borrowers, the Company and the Second Priority Agent agree that (i) should the Second Priority Debt Agreement be amended or supplemented pursuant to Section 9.02 thereof, the Borrowers and the Company agree to use their commercially reasonable efforts to ensure that such an amendment or supplement contains a legend with language comparable to that contained in Section 7.01(a) above, and (ii) should any of the Second Priority Security Documents be amended, restated or otherwise modified or should any of the Borrowers execute and deliver to the Second Priority Agent any other Second Priority Security Document, the same shall contain a legend with language comparable to that contained in Section 7.01(a) above.

SECTION 7.02. Effect of Refinancing of Indebtedness under First Priority Debt Documents. If, substantially contemporaneously with the Discharge of First Priority Claims, the Grantors Refinance Indebtedness outstanding under the First Priority Debt Documents and provided that (a) such Refinancing is permitted hereby and (b) the Borrowers give to the Second Priority Agent written notice (the “Refinancing Notice”) electing the application of the provisions of this Section 7.02 to such Refinancing Indebtedness, then (i) such Discharge of First Priority Claims shall automatically be deemed not to have occurred for all purposes of this Agreement, (ii) such Refinancing Indebtedness and all other obligations under the documents evidencing such Indebtedness (the “New First Priority Claims”) shall automatically be treated as First Priority Claims for all purposes of this Agreement, including for purposes of the Lien priorities and rights in respect of Collateral set forth herein, (iii) the Debt Agreement and the other documents evidencing such Refinancing Indebtedness (the “New First Priority Debt Documents”) shall automatically be treated as the First Priority Debt Agreement and the First Priority Debt Documents and, in the case of New First Priority Debt Documents that are security documents pursuant to which any Grantor has granted a Lien to secure any New First Priority Claim, as the First Priority Security Documents for all purposes of this Agreement, (iv) the collateral agent under the New First Priority Debt Documents (the “New First Priority Agent”) shall be deemed to be the First Priority Agent for all purposes of this Agreement and (v) the lenders under the New First Priority Debt Documents shall be deemed to be the First Priority Creditor for all purposes of this Agreement. Upon receipt of a Refinancing Notice, which notice shall include the identity of the New First Priority Agent, the Second Priority Agent shall promptly enter into such documents and agreements (including amendments or supplements to this Agreement) as the Borrowers or such New First Priority Agent may reasonably request in order to provide to the New First Priority Agent the rights and powers contemplated hereby, in each case consistent in all material respects with the terms of this Agreement. The Borrowers shall cause the agreement, document or instrument pursuant to which the New First Priority Agent is appointed to provide that the New First Priority Agent agrees to be bound by the terms of this Agreement. In furtherance of Section 2.03, if the New First Priority Claims are secured by assets of the Grantors that do not also secure the Second Priority Claims, the applicable Grantors shall promptly grant a Second Priority Lien on such assets to secure the Second Priority Claims.

SECTION 7.03. No Waiver by First Priority Secured Party. Other than with respect to the Second Priority Permitted Actions, nothing contained herein shall prohibit or in any way limit the First Priority Agent or any other First Priority Secured Party from opposing, challenging or objecting to, in any Insolvency or Liquidation Proceeding or otherwise, any action taken, or any claim made, by the Second Priority Agent or any other Second Priority Secured

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Party, including any request by the Second Priority Agent or any other Second Priority Secured Party for adequate protection or any exercise by the Second Priority Agent or any other Second Priority Secured Party of any of its rights and remedies under the Second Priority Debt Documents or otherwise. Reinstatement. If, in any Insolvency or Liquidation Proceeding or otherwise, all or part of any payment with respect to the First Priority Claims previously made shall be rescinded for any reason whatsoever, then the First Priority Claims shall be reinstated to the extent of the amount so rescinded and, if theretofore terminated, this Agreement shall be reinstated in full force and effect and such prior termination shall not diminish, release, discharge, impair or otherwise affect the Lien priorities and the relative rights and obligations of the First Priority Secured Party and the Second Priority Secured Parties provided for herein.

SECTION 7.05. Authorization of Collateral Agents. By accepting the benefits of this Agreement and the other First Priority Security Documents, each First Priority Secured Party hereby authorizes the First Priority Agent to enter into this Agreement and to act on its behalf as collateral agent hereunder and in connection herewith. By accepting the benefits of this Agreement and the other Second Priority Security Documents, each Second Priority Secured Party hereby authorizes the Second Priority Agent to enter into this Agreement and to act on its behalf as collateral agent hereunder and in connection herewith.

SECTION 7.06. Further Assurances. Each of the First Priority Agent, for itself and on behalf of the other First Priority Secured Party, and the Second Priority Agent, for itself and on behalf of the other Second Priority Secured Parties, and each Grantor party hereto, for itself and on behalf of its subsidiaries, agrees that it will execute, or will cause to be executed, any and all further documents, agreements and instruments, and take all such further actions, as may be required under any applicable law, or which the First Priority Agent or the Second Priority Agent may reasonably request, to effectuate the terms of this Agreement, including the relative Lien priorities provided for herein.

ARTICLE VIII

Representations and Warranties

SECTION 8.01. Representations and Warranties of Each Party. Each party hereto represents and warrants to the other parties hereto as follows:

(a) Such party is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite power and authority to execute and deliver this Agreement and perform its obligations hereunder.

(b) This Agreement has been duly executed and delivered by such party and constitutes a legal, valid and binding obligation of such party, enforceable in accordance with its terms except as such enforcement may be limited by bankruptcy, insolvency, moratorium, fraudulent transfer, fraudulent conveyance or similar laws of general application relating to the enforcement of creditors’ rights.

(c) The execution, delivery and performance by such party of this Agreement (i) do not require any consent or approval of, registration or filing with or any other action by

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any governmental authority (except as contemplated hereby) and (ii) will not violate any provision of law, statute, rule or regulation, or of the certificate or articles of incorporation or other constitutive documents or by-laws of such party or any order of any governmental authority or any provision of any indenture, agreement or other instrument applicable to or binding upon such party.

SECTION 8.02. Representations and Warranties of Each Collateral Agent. Each Collateral Agent represents and warrants to the other parties hereto that it has been authorized by the Secured Parties under and as defined in the First Priority Debt Agreement or the Second Priority Security Agreement, as applicable, to enter into this Agreement.

ARTICLE IX

No Reliance; No Liability; Obligations Absolute

SECTION 9.01. No Reliance; Information. The First Priority Secured Party and the Second Priority Secured Parties shall have no duty to disclose to any Second Priority Secured Party or to any First Priority Secured Party, respectively, any information relating to the Company, any New Parent or any of the Grantors, or any other circumstance bearing upon the risk of nonpayment of any of the First Priority Claims or the Second Priority Claims, as the case may be, that is known or becomes known to any of them or any of their Affiliates. In the event any First Priority Secured Party or any Second Priority Secured Party, in its sole discretion, undertakes at any time or from time to time to provide any such information to, respectively, any Second Priority Secured Party or any First Priority Secured Party, it shall be under no obligation (i) to make, and shall not make or be deemed to have made, any express or implied representation or warranty, including with respect to the accuracy, completeness, truthfulness or validity of the information so provided, (ii) to provide any additional information or to provide any such information on any subsequent occasion or (iii) to undertake any investigation.

SECTION 9.02. No Warranties or Liability. The First Priority Agent, for itself and on behalf of the other First Priority Secured Party, acknowledges and agrees that, except for the representations and warranties set forth in Article VIII, neither the Second Priority Agent nor any other Second Priority Secured Party has made any express or implied representation or warranty, including with respect to the execution, validity, legality, completeness, collectibility or enforceability of any of the Second Priority Debt Documents, the ownership of any Collateral or the perfection or priority of any Liens thereon. The Second Priority Agent, for itself and on behalf of the other Second Priority Secured Parties, acknowledges and agrees that, except for the representations and warranties set forth in Article VIII, neither the First Priority Agent nor any other First Priority Secured Party has made any express or implied representation or warranty, including with respect to the execution, validity, legality, completeness, collectibility or enforceability of any of the First Priority Debt Documents, the ownership of any Collateral or the perfection or priority of any Liens thereon.

(b) The Second Priority Agent and the other Second Priority Secured Parties shall have no express or implied duty to the First Priority Agent or any other First Priority Secured Party, and the First Priority Agent and the other First Priority Secured Party shall have no express or implied duty to the Second Priority Agent or any other Second Priority Secured

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Party, to act or refrain from acting in a manner which allows, or results in, the occurrence or continuance of a default or an event of default under any First Priority Debt Document and any Second Priority Debt Document (other than, in each case, this Agreement), regardless of any knowledge thereof which they may have or be charged with.

(c) The Second Priority Agent, for itself and on behalf of the other Second Priority Secured Parties, agrees no First Priority Secured Party shall have any liability to the Second Priority Agent or any other Second Priority Secured Party, and hereby waives any claim against any First Priority Secured Party, arising out of any and all actions which the First Priority Agent or the other First Priority Secured Party may take or permit or omit to take with respect to (i) the First Priority Debt Documents (other than this Agreement), (ii) the collection of the First Priority Claims or (iii) the maintenance of, the preservation of, the foreclosure upon or the Disposition of any Collateral.

SECTION 9.03. Obligations Absolute. The Lien priorities provided for herein and the respective rights, interests, agreements and obligations hereunder of the First Priority Agent and the other First Priority Secured Party and the Second Priority Agent and the other Second Priority Secured Parties shall remain in full force and effect irrespective of:

(a) any lack of validity or enforceability of any Debt Document;

(b) any change in the time, place or manner of payment of, or in any other term of (including, subject to the limitations set forth in Section 7.02, the Refinancing of), all or any portion of the First Priority Claims, it being specifically acknowledged that a portion of the First Priority Claims consists or may consist of Indebtedness that is revolving in nature, and the amount thereof that may be outstanding at any time or from time to time may be increased or reduced and subsequently reborrowed;

(c) any change in the time, place or manner of payment of, or, subject to the limitations set forth in Section 7.02, in any other term of, all or any portion of the First Priority Claims;

(d) any amendment, waiver or other modification, whether by course of conduct or otherwise, of any Debt Document;

(e) the securing of any First Priority Claims or Second Priority Claims with any additional collateral or guarantees, or any exchange, release, voiding, avoidance or non perfection of any security interest in any Collateral or any other collateral or any release of any guarantee securing any First Priority Claims or Second Priority Claims;

(f) the commencement of any Insolvency or Liquidation Proceeding or Liquidation Sale in respect of the Company, any New Parent or any other Grantor; or

(g) any other circumstances that otherwise might constitute a defense available to, or a discharge of, the Company, any New Parent or any other Grantor in respect of the First Priority Claims or this Agreement, or any of the Second Priority Secured Parties in respect of this Agreement.

INTERCREDITOR AGREEMENT – Page 24

ARTICLE X

Miscellaneous

SECTION 10.01. Notices. Notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by fax, as follows:

(a) if to the Borrowers, the Company, any New Parent or any other Grantor, to it, at P.O. Box 250, Alice, Texas 78333, Attention: Chief Financial Officer, Fax No. ((713) 481-8344);

(b) if to the First Priority Agent, to Citibank, N.A., 2000 West Sam Houston Pkwy S, 6th Floor, Houston, Texas 77042, Attention: John Stam (Fax No. (713) 954-2053); and

(c) if to the Second Priority Agent, to Wells Fargo Bank, National Association, Corporate Trust Services, 213 Court Street, Suite 703, Middletown, Connecticut 06457, Attention: Corporate Trust Services – Relationship Manager (Fax No.: (860) 704-6219).

All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by fax or on the date five Business Days after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such party as provided in this Section 10.01 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 10.01. As agreed to between the Company, any New Parent and any Collateral Agent from time to time, notices and other communications may also be delivered by e-mail to the e-mail address of a representative of the applicable Person provided from time to time by such Person.

The First Priority Lender and the Second Priority Agent agree to use diligent efforts to provide each other with copies of any notices of default or acceleration or similar notices which they give to the Borrower under the First Priority Debt Documents and Second Priority Debt Documents respectively; provided, however, that in the event that either of such parties fails to provide the other with such notice, such failure shall not affect their respective obligations hereunder or the effectiveness of any such notice.

SECTION 10.02. Conflicts. IN THE EVENT OF ANY CONFLICT OR INCONSISTENCY BETWEEN THE PROVISIONS OF THIS AGREEMENT, THE PROVISIONS OF THE FIRST PRIORITY DEBT DOCUMENTS, THE PROVISIONS OF THE FIRST PRIORITY SECURITY DOCUMENTS, ARTICLE 12 OF THE SECOND PRIORITY DEBT AGREEMENT, THE NOTES OR THE PROVISIONS OF THE SECOND PRIORITY SECURITY DOCUMENTS, THE PROVISIONS OF THIS AGREEMENT SHALL CONTROL.

SECTION 10.03. Effectiveness; Survival; Termination. This Agreement shall become effective when executed and delivered by the parties hereto. All covenants, agreements, representations and warranties made by any party in this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement. The terms of this Agreement shall survive, and shall continue in full force and

INTERCREDITOR AGREEMENT – Page 25

effect, in any Insolvency or Liquidation Proceeding. The Second Priority Agent, for itself and on behalf of the other Second Priority Secured Parties, hereby waives any and all rights the Second Priority Secured Parties may now or hereafter have under applicable law to revoke this Agreement or any of the provisions of this Agreement. This Agreement shall terminate and be of no further force and effect, (i) subject to compliance with its obligations to take certain actions upon Discharge of the Second Priority Claims pursuant to Article V and Section 3.01(d), with respect to the Second Priority Agent, the Second Priority Secured Parties and the Second Priority Claims, upon the later of (1) the date upon which the obligations under the Second Priority Debt Agreement terminate if there are no other Second Priority Claims outstanding on such date and (2) if there are other Second Priority Claims outstanding on such date, the date upon which such Second Priority Claims terminate and (ii) subject to Section 7.02 and compliance with its obligations to take certain actions upon Discharge of the First Priority Claims pursuant to Article V, with respect to the First Priority Agent, the First Priority Secured Party and the First Priority Claims, the date of Discharge of First Priority Claims, subject to the rights of the First Priority Secured Party under Section 7.04.

SECTION 10.04. Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. Amendments; Waivers. No failure or delay on the part of any party hereto in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the parties hereto are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section 10.05, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the First Priority Agent and the Second Priority Agent; provided that no such agreement shall amend, modify or otherwise affect the rights or obligations of any Grantor without such Person’s prior written consent.

SECTION 10.06. Postponement of Subrogation. The Second Priority Agent agrees that no payment or distribution to any First Priority Secured Party pursuant to the provisions of this Agreement shall entitle any Second Priority Secured Party to exercise any rights of subrogation in respect thereof until the Discharge of First Priority Claims shall have occurred. Following the Discharge of First Priority Claims, each First Priority Secured Party agrees to execute such documents, agreements, and instruments as any Second Priority Secured Party may reasonably request to evidence the transfer by subrogation to any such Person of an interest in the First Priority Claims resulting from payments or distributions to such First Priority Secured Party by such Person, so long as all costs and expenses (including all reasonable legal fees and disbursements) incurred in connection therewith by such First Priority Secured Party are paid by such Person upon request for payment thereof.

INTERCREDITOR AGREEMENT – Page 26

SECTION 10.07. Applicable Law; Jurisdiction; Consent to Service of Process. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.

(a) Each party hereto hereby irrevocably and unconditionally submits, for itself and its property, to the non-exclusive jurisdiction of any Supreme Court for New York County, New York or in The United States District Court for the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined only in such New York court or, to the extent permitted by law, in such Federal court. Each party hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(b) Each party hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any New York court or in any such Federal court. Each party hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 10.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

SECTION 10.08. Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.08.

SECTION 10.09. Parties in Interest. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, as well as the other First Priority Secured Party and Second Priority Secured Parties, all of whom are intended to be bound by, and to be third party beneficiaries of, this Agreement. No other Person shall have or be entitled to assert rights or benefits hereunder.

INTERCREDITOR AGREEMENT – Page 27

SECTION 10.10. Specific Performance. Each Collateral Agent may demand specific performance of this Agreement and, on behalf of itself and the respective other Secured Parties, hereby irrevocably waives any defense based on the adequacy of a remedy at law and any other defense that might be asserted to bar the remedy of specific performance in any action which may be brought by the respective Secured Parties.

SECTION 10.11. Headings. Article and Section headings used herein and the Table of Contents hereto are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

SECTION 10.12. Counterparts. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original but all of which when taken together shall constitute a single contract, and shall become effective as provided in Section 10.03. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.

SECTION 10.13. Provisions Solely to Define Relative Rights. The provisions of this Agreement are and are intended solely for the purpose of defining the relative rights of the First Priority Secured Party, on the one hand, and the Second Priority Secured Parties, on the other hand. None of the Borrowers, the Company, any New Parent, any other Grantor, any Guarantor or any other creditor thereof shall have any rights or obligations hereunder, except as expressly provided in this Agreement and none of the Borrowers, the Company, any New Parent, any other Grantor or any Guarantor may rely on the terms hereof. Nothing in this Agreement is intended to or shall impair the obligations of the Borrowers, the Company, any New Parent or any other Grantor or any Guarantor, which are absolute and unconditional, to pay the First Priority Claims and the Second Priority Claims as and when the same shall become due and payable in accordance with their terms.

(Signatures appear on following pages)

INTERCREDITOR AGREEMENT – Page 28

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers or other representatives as of the day and year first above written.

BORROWERS:
TX ENERGY SERVICES, LLC
By:	/s/ John E. Crisp
	John E. Crisp, President, Chief Executive Officer and Secretary
C.C. FORBES, LLC
By:	/s/ John E. Crisp
	John E. Crisp, Executive Vice President and Chief Operating Officer
SUPERIOR TUBING TESTERS, LLC
By:	/s/ John E. Crisp
	John E. Crisp, Executive Vice President
COMPANY:
FORBES ENERGY SERVICES LLC
By:	/s/ John E. Crisp
	John E. Crisp, President and Chief Executive Officer

(Signatures continue on following pages)

INTERCREDITOR AGREEMENT – SIGNATURE PAGE

GUARANTORS:
FORBES ENERGY CAPITAL INC.
By:	/s/ John E. Crisp
	John E. Crisp, President and Chief Executive Officer

(Signatures continue on following pages)

INTERCREDITOR AGREEMENT – SIGNATURE PAGE

FIRST PRIORITY AGENT:
CITIBANK, N.A., as First Priority Agent
By:	/s/ John W. Stam
	John W. Stam
	Vice President

(Signatures continue on following page)

INTERCREDITOR AGREEMENT – SIGNATURE PAGE

SECOND PRIORITY AGENT
WELLS FARGO BANK, NATIONAL ASSOCIATION, as Second Priority Agent
By:	/s/ Joseph P. O’Donnell
Name:	Joseph P. O’Donnell
Title:	Vice President

INTERCREDITOR AGREEMENT – SIGNATURE PAGE

Schedule 1

UCC-1 Filings

Debtor	Jurisdiction	File Number
TX Energy Services, LLC	Delaware	File No. 2008-0535391 filed on 2/13/2008 with the Delaware Department of State U.C.C. Filing Section
C.C. Forbes, LLC	Delaware	File No. 2008-0535458 filed on 2/13/2008 with the Delaware Department of State U.C.C. Filing Section
Superior Tubing Testers, LLC	Delaware	File No. 2008-0535466 filed on 2/13/2008 with the Delaware Department of State U.C.C. Filing Section
Forbes Energy Services LLC	Delaware	File No. 2008-0535474 filed on 2/13/2008 with the Delaware Department of State U.C.C. Filing Section

Mortgage Filings

Owner	Current Record Owner	Property Location	Recording Number
C.C. Forbes, LLC	C.C. Forbes, L.P.	4783 Business Hwy 281 South Alice, TX Jim Wells County, TX	Volume 1022, at page 634 of the Deed Records of Jim Wells County, Texas
C.C. Forbes, LLC	C.C. Forbes Company, L.P.	801 FM 3169 San Ygnacio, TX Zapata County, TX	Volume 814, at page 188 of the Deed Records of Zapata County, Texas

EX-21.1

EXHIBIT 21.1

SUBSIDIARIES OF THE COMPANY

1. Forbes Energy Services LLC, a Delaware limited liability company

2. C.C. Forbes, LLC, a Delaware limited liability company

3. TX Energy Services, LLC, a Delaware limited liability company

4. Superior Tubing Testers, LLC, a Delaware limited liability company

5. Forbes Energy International, LLC, a Delaware limited liability company

6. Forbes Energy Services México, S. de R.L. de C.V., a Mexican company

7. Forbes Energy Capital Inc., a Delaware corporation

EX-31.1

EXHIBIT 31.1

CERTIFICATION BY CHIEF EXECUTIVE OFFICER PURSUANT TO

RULE 13a-14(a) AND 15d-14(a) UNDER THE EXCHANGE ACT

I, John E. Crisp, certify that:

1. I have reviewed this Annual Report on Form 10-K of Forbes Energy Services Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting (as defined in Exchange Act Rules 13-15(f) and 15d-15(f)) that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ John E. Crisp

John E. Crisp

Chairman, Chief Executive Officer and President

(Principal Executive Officer)

Date: March 31, 2009

EX-31.2

EXHIBIT 31.2

CERTIFICATION BY CHIEF FINANCIAL OFFICER PURSUANT TO

RULE 13a-14(a) AND 15d-14(a) UNDER THE EXCHANGE ACT

I, L. Melvin Cooper, certify that:

1. I have reviewed this Annual Report on Form 10-K of Forbes Energy Services Ltd;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting (as defined in Exchange Act Rules 13-15(f) and 15d-15(f)) that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ L. Melvin Cooper

L. Melvin Cooper

Senior Vice President Chief Financial Officer and Assistant Secretary

(Principal Financial and Accounting Officer)

Date: March 31, 2009

EX-32.1

EXHIBIT 32.1

CERTIFICATION BY CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this Annual Report of Forbes Energy Services Ltd. filed on Form 10-K (the “Company”) for the year ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John E. Crisp, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly represents, in all material respects, the financial condition and results of operations of the Company.

/s/ John E. Crisp

John E. Crisp

Chairman, Chief Executive Officer and President

Date: March 31, 2009

EX-32.2

EXHIBIT 32.2

CERTIFICATION BY CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this Annual Report of Forbes Energy Services Ltd. filed on Form 10-K (the “Company”) for the year ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, L. Melvin Cooper, Senior Vice President, Chief Financial Officer and Assistant Secretary of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly represents, in all material respects, the financial condition and results of operations of the Company.

/s/ L. Melvin Cooper

L. Melvin Cooper

Senior Vice President, Chief Financial Officer and Assistant Secretary

Date: March 31, 2009