10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2006

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

Commission file number: 001-7940

GOODRICH PETROLEUM CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	76-0466193
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
808 Travis, Suite 1320 Houston, Texas	77002
(Address of principal executive offices)	(Zip Code)

(713) 780-9494 (Registrant’s telephone number)

Title of each class Name of exchange on which registered

Securities Registered Pursuant to Section 12 (b) of the Act:

Common Stock, par value $0.20 per share New York Stock Exchange

Securities Registered Pursuant to Section 12 (g) of the Act:

Series A and B Preferred Stock, $1.00 par value NASDAQ Capital Market

None

Indicate by check mark if the Registrant is a well-known seasoned issuer (as defined in Rule 405 of the Securities Act). Yes ¨        No x

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

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. Yes x        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 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, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨             Accelerated filer x             Non-accelerated filer ¨

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

The aggregate market value of Common Stock, par value $0.20 per share (Common Stock), held by non-affiliates (based upon the closing sales price on the New York Stock Exchange National Market on June 30, 2006) the last business day of the registrant’s most recently completed second fiscal quarter was approximately $348 million. The number of shares of the registrant’s common stock outstanding as of March 9, 2007 was 28,288,838.

Documents Incorporated By Reference:

Portions of Goodrich Petroleum Corporation’s definitive Proxy Statement are incorporated by reference in Part III of this Form 10-K.

GOODRICH PETROLEUM CORPORATION

ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED

December 31, 2006

TABLE OF CONTENTS

	Page
PART I
Items 1. and 2. Business and Properties	3
Item 1A. Risk Factors	12
Item 1B. Unresolved Staff Comments	19
Item 3. Legal Proceedings	19
Item 4. Submission of Matters to a Vote of Security Holders	19
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	20
Item 6. Selected Financial Data	21
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 7A. Quantitative and Qualitative Disclosures about Market Risk	35
Item 8. Financial Statements and Supplementary Data	36
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	36
Item 9A. Controls and Procedures	36
Item 9B. Other Information	37
PART III
Item 10. Director and Executive Officers of Registrant, and Corporate Governance	38
Item 11. Executive Compensation	40
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	40
Item 13. Certain Relationships and Related Transactions, and Director Independence	40
Item 14. Principal Accounting Fees and Services	40
PART IV
Item 15. Exhibits and Financial Statement Schedules	41

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PART I

Items 1 and 2.    Business and Properties.

General

Goodrich Petroleum Corporation and subsidiaries (“we” or “the Company”) is an independent oil and gas company engaged in the exploration, exploitation, development and production of oil and natural gas properties primarily in the Cotton Valley Trend of East Texas and Northwest Louisiana and in the transition zone of South Louisiana. We own working interests in 233 active oil and gas wells located in 25 fields in three states. At December 31, 2006, Goodrich had estimated proved reserves of approximately 187.0 Bcf of natural gas and 3.2 MMBbls of oil and condensate, or an aggregate of 206.2 Bcfe with a pre-tax present value of future net cash flows, discounted at 10% of $214.2 million and an after-tax present value of discounted future net cash flows of $200.3 million, which is also referred to as the standardized measure of discounted future net cash flows. See Note 13 “Oil and Gas Producing Activities (Unaudited)” “Oil and Natural Gas Reserves” to our consolidated financial statements for a reconciliation to the standardized measure of discounted future net cash flows.

Our principal executive offices are located at 808 Travis Street, Suite 1320, Houston, Texas 77002.

Business Strategy

Our business strategy is to provide long term growth in net asset value per share, through the growth and expansion of our oil and gas reserves and production. We focus on adding reserve value through the development of our relatively low risk development drilling program in the Cotton Valley Trend. We continue to aggressively pursue the acquisition and evaluation of prospective acreage, oil and gas drilling opportunities and potential property acquisitions.

Several of the key elements of our business strategy are the following:

• Exploit and Develop Existing Property Base.    We seek to maximize the value of our existing assets by developing and exploiting our properties with the lowest risk and the highest production and reserve growth potential. We intend to concentrate on developing our multi-year inventory of drilling locations in the Cotton Valley Trend. Our Cotton Valley Trend inventory is currently estimated to include over 1,900 possible future drilling locations, based generally on 40 acre spacing. We are continually performing field studies of our existing properties and reevaluating the possibility of additional exploration and development opportunities on these properties utilizing advanced technologies available at present.

• Expand Acreage Position in the Cotton Valley Trend.    We have increased our acreage position from approximately 129,000 gross acres at December 31, 2005, to 163,200 gross acres as of December 31, 2006. We concentrate our efforts in areas where we can apply our technical expertise and where we have significant operational control or experience. To leverage our extensive regional knowledge base, we seek to acquire leasehold acreage with significant drilling potential in the Cotton Valley Trend and other areas, which exhibit similar characteristics to our existing properties.

• Focus on Low Operating Costs.    We continually seek ways to minimize lease operating expenses. We will continue to seek to control costs to the greatest extent possible by controlling our operations. We announced in January 2007, that we had entered into an agreement to sell substantially all of our properties in South Louisiana. See Note 12 “Acquisitions and Divestitures” to our consolidated financial statements. These properties have higher operating costs per Mcfe than our other properties. Upon closing of the sale, we expect our ongoing operating costs per Mcfe to decrease due to the lower cost nature of our Cotton Valley Trend operations.

• Maintain an Active Hedging Program.    We actively manage our exposure to commodity price fluctuations by hedging meaningful portions of our expected production through the use of derivatives, typically fixed price swaps and costless collars. The level of our hedging activity and the duration of the

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instruments employed depend upon our view of market conditions, available hedge prices and our operating strategy. For the first quarter of 2007, we currently have an average of 10,000 MMbtu per day of gas hedged at an average price of $7.77 per MMbtu and 400 Bbls per day of oil hedged at an average price of $53.35 per Bbl. Additionally, we have 25,000 MMbtu per day collared in the first quarter of 2007, and 30,000 MMbtu per day collared in the second, third and fourth quarters of 2007, at average floor and ceiling prices respectively, of $7.80-$12.42 and $7.67-$12.67. Subsequent to year end, we have entered into a series of physical sales contracts which will result in us selling approximately 18,500 MMbtu of gas per day in calendar year 2008 for an average price of $7.95 per MMbtu before transportation charges.

Oil and Gas Operations and Properties

Cotton Valley Trend

Overview.    As of December 31, 2006, approximately 84% of our proved oil and gas reserves were in the Cotton Valley Trend of East Texas and Northwest Louisiana. We spent approximately 78% of our 2006 capital expenditures of $269.4 million in the Cotton Valley Trend. As of year-end, we have acquired or farmed in leases totaling approximately 163,200 gross (102,000 net) acres and are continually attempting to acquire additional acreage in the area. As of February 15, 2007, we have acquired an additional 16,800 gross (8,000 net) acres, bringing the total currently to 180,000 gross (110,000 net) acres. Company operated acreage comprised 117,000 acres (with an average working interest of approximately 81%) and non-operated acreage comprised 46,000 gross acres (with an average working interest of approximately 40%). As of the year end, we have drilled and/or completed 156 Cotton Valley Trend wells with a success rate in excess of 99%. Our current Cotton Valley Trend drilling activities are located in six primary leasehold areas in East Texas and Northwest Louisiana as further described below:

Dirgin-Beckville.    The Dirgin-Beckville area is located in Rusk and Panola Counties in Texas. As of year end, we had acquired leases totaling approximately 12,600 gross (11,400 net) acres with an average working interest of approximately 99%. As of December 31, 2006, we had successfully completed 52 Cotton Valley Trend wells in the Dirgin-Beckville area.

North Minden.    The North Minden area is located in Rusk County, Texas. As of year end, we had acquired leases totaling approximately 32,800 gross (27,400 net) acres with a working interest of approximately 93%. As of December 31, 2006, we had successfully drilled 60 Cotton Valley Trend wells in the North Minden area.

South Henderson.    The South Henderson area is located in Rusk County, Texas. As of year end, we had acquired leases totaling approximately 13,800 gross (11,100 net) acres with an average working interest of approximately 80%. As of December 31, 2006, we had successfully completed 7 Cotton Valley Trend wells in the South Henderson area.

Bethany-Longstreet.    The Bethany-Longstreet field is located in Caddo and DeSoto Parishes in Northwest Louisiana. As of December 31, 2006, we had successfully drilled 14 Cotton Valley Trend wells in the field. Our initiative in this area began in the third quarter of 2003, when we obtained, via farmout, exploration rights to approximately 21,300 gross (14,900 net) acres in the field. We have an average 70% working interest in the Bethany-Longstreet field.

Angelina River.    The Angelina River area is located in Angelina, Nacogdoches, and Cherokee Counties, Texas. We had acquired approximately 51,800 gross (22,800 net) acres in the area as of December 31, 2006. As of February 15, 2007, we had acquired an additional 16,800 gross (8,400 net) acres, bringing the total to 68,600 gross (31,200 net) acres. We own an average 50% working interest in the acreage. We currently are the operator of 22,600 gross acres, while owning a 40% non-operated interest in 44,200 gross acres. At year end, we had successfully drilled and logged 6 wells and recompleted three additional wells in the field.

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Other Cotton Valley Trend.    We also own 30,900 gross (14,400 net) acres in four separate areas of the Cotton Valley Trend in Harrison, Smith and Upshur Counties, Texas, and Bienville Parish, Louisiana, with an average working interest of approximately 65%. We have successfully drilled and logged 13 wells, with one well in Harrison County, Texas unsuccessful.

Production and Reserves.    For the wells completed to date in the Cotton Valley Trend, the average initial gross production rate per well was approximately 1,700 Mcfe per day. This average initial gross production rate is approximately 200 Mcfe per day higher than that calculated on a similar basis at the end of 2005. Initial production from the Cotton Valley Trend wells commenced in June 2004 and for the quarter ended December 31, 2006, gross production from the initial and subsequently drilled wells averaged approximately 54,500 Mcfe per day. Net production averaged 33,100 Mcfe per day for the fourth quarter of 2006.

South Louisiana

In January 2007, we entered into an agreement to sell substantially all of our South Louisiana properties to a private company with an anticipated closing date of late March, 2007. The St. Gabriel, Bayou Bouillon, and Plumb Bob fields will not be included in the sale and we continue to own and operate our interests in these fields. See Note 12 “Acquisitions and Divestitures” to our consolidated financial statements.

Overview.    As of December 31, 2006, approximately 15% of our proved oil and natural gas reserves were in the transition zone of South Louisiana. This region refers to the geographic area that covers the onshore and in-land waters of South Louisiana lying in the southern half of Louisiana, which is one of the most prolific oil and natural gas producing sedimentary basins. Our production in this region during 2006, came predominately from the following areas:

Burrwood and West Delta 83 Fields.    The Burrwood/West Delta 83 fields, located in Plaquemines Parish, Louisiana, were discovered in 1955 by Chevron. At December 31, 2006, we had an interest in 77 active wells in the fields, with 21 producing at that time. By July, 2006, we had restored all of our production from the fields to pre-hurricane Katrina levels. We had an average 55% working interest in the production and a 65% working interest in the leasehold in the fields.

Lafitte Field.    The Lafitte field is located in Jefferson Parish, Louisiana and was discovered in 1935 by Texaco. At December 31, 2006, we owned a non-operated, 49% working interest and had interests in 30 active producing wells in the Lafitte field.

Second Bayou Field.    The Second Bayou field is located in Cameron Parish, Louisiana and was discovered in 1955 by the Sun Texas Company. As of December 31, 2006, we served as the operator of eight active wells, all of which had been restored to production levels experienced prior to Hurricane Rita. At December 31, 2006, we had an average working interest of approximately 31% in 411 gross acres.

St.Gabriel Field.    This field was not part of the sale of properties. The St. Gabriel field is located in Ascension and Iberville Parishes in southern Louisiana and was originally discovered by Shell Oil Company in 1939. In July 2004, we announced that we had acquired a 70% working interest in 3-D seismic permits and oil and gas lease options enabling us to acquire an approximate 30 square mile 3-D seismic survey over the field. We commenced shooting the 3-D seismic survey in July 2004 and data acquisition was completed in September 2004. As of December 31, 2006, we had successfully drilled one well in the field.

Other Fields.    As of December 31, 2006, we maintained ownership interests in acreage and/or wells in several additional fields in Louisiana, including the (i) Lake Raccourci field, located in Terrebonne Parish, (ii) Pecan Lake field, located in Cameron Parish, (iii) Plumb Bob field, located in St. Martin Parish, and (iv) Bayou Bouillon field in St. Martin Parish, the first two of which are part of the sale properties.

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Other Properties

As of December 31, 2006, we maintain ownership interests in acreage and/or wells in several additional fields including the (i) Mary Blevins field, located in Smith County, Texas, (ii) Midway field, located in San Patricio County, Texas, (iii) Mott Slough field, located in Wharton County, Texas and (iv) the Garfield Unit, located in Kalkaska County, Michigan.

Oil and Natural Gas Reserves

The following tables set forth summary information with respect to our proved reserves as of December 31, 2006 and 2005, as estimated by us by compiling reserve information derived from the evaluations performed by Netherland, Sewell & Associates, Inc. (“NSA”), our independent reserve engineers. See Note 13 “Oil and Gas Producing Activities (unaudited)” to our consolidated financial statements for additional information.

	Oil	Gas	Total	PV10 Value (1)
	(MBbls)	(MMcf)	(MMcfe)	(000s)
December 31, 2006
Proved Developed	1,862	76,679	87,852	$	208,490
Proved Undeveloped	1,339	110,333	118,365		5,697
Total Proved	3,201	187,012	206,217		214,187
Discounted Future Income Taxes					(13,906	)
Standardized Measure of Discounted Future Net Cash Flows (1)				$	200,281
December 31, 2005
Proved Developed	1,796	56,700	67,474	$	328,058
Proved Undeveloped	3,177	86,263	105,325		259,618
Total Proved	4,973	142,963	172,799		587,676
Discounted Future Income Taxes					(177,056	)
Standardized Measure of Discounted Future Net Cash Flows (1)				$	410,620

(1) The PV10 Value represents the discounted future net cash flows attributable to our proved oil and gas reserves before income tax, discounted at 10%. PV10 may be considered a non-GAAP measure as defined by the SEC. We believe that the presentation of the PV10 Value is relevant and useful to our investors because it presents the discounted future net cash flows attributable to our proved reserves prior to taking into account future corporate income taxes and our current tax structure. We further believe investors and creditors utilize our PV10 as a basis for comparison of the relative size and value of our reserves to other companies. The standardized measure of discounted future net cash flows represents the present value of future cash flows attributable to our proved oil and natural gas reserves after estimated future income tax, discounted at 10%. Neither PV10 Value nor standardized measure of discounted future net cash flows reflects the impact of hedging transactions.

Reserve engineering is a subjective process of estimating underground accumulations of crude oil, condensate and natural gas that cannot be measured in an exact manner, and the accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. The quantities of oil and natural gas that are ultimately recovered, production and operating costs, the amount and timing of future development expenditures and future oil and natural gas sales prices may differ from those assumed in these estimates. Therefore, the pre-tax PV10 Value amounts shown above should not be construed as the current market value of the oil and natural gas reserves attributable to our properties.

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In accordance with the guidelines of the SEC, the engineers’ estimates of future net revenues from our properties and the pre-tax PV10 Value thereof are made using oil and natural gas sales prices in effect as of the dates of such estimates and are held constant throughout the life of the properties, except where such guidelines permit alternate treatment, including the use of fixed and determinable contractual price escalations. The prices as of December 31, 2006 and 2005, used in such estimates averaged $5.64 and $10.54 per Mcf, respectively, of natural gas and $57.75 and $58.80 per Bbl, respectively, of crude oil/condensate. These prices do not include the impact of hedging transactions.

Productive Wells

The following table sets forth the number of active well bores in which we maintain ownership interests as of December 31, 2006:

	Oil		Gas		Total
	Gross (2)	Net (3)	Gross (2)	Net (3)	Gross (2)	Net (3)
Louisiana (1)	59.00	28.60	26.00	14.52	85.00	43.12
Michigan	—	—	1.00	0.01	1.00	0.01
Texas	4.00	2.59	143.00	125.05	147.00	127.64
Total Productive Wells	63.00	31.19	170.00	139.58	233.00	170.77

(1) In late March 2007, we expect to close the sale of substantially all of our South Louisiana properties to a private company. After adjusting for the sale in late March 2007, we will maintain ownership interests in a total of 20.00 gross (13.23 net) wells, of which 1.00 gross (0.70 net) wells produced oil and 19.00 gross (12.53 net) wells produced natural gas, in Louisiana.

(2) Does not include royalty or overriding royalty interests.

(3) Net working interest.

Productive wells consist of producing wells and wells capable of production, including gas wells awaiting pipeline connections. A gross well is a well in which we maintain an ownership interest, while a net well is deemed to exist when the sum of the fractional working interests owned by us equals one. Wells that are completed in more than one producing horizon are counted as one well. Of the gross wells reported above, 33 wells had multiple completions.

Acreage

The following table summarizes our gross and net developed and undeveloped acreage under lease as of December 31, 2006. Acreage in which our interest is limited to a royalty or overriding royalty interest is excluded from the table.

	Developed		Undeveloped		Total
	Gross	Net	Gross	Net	Gross	Net
Louisiana (1)	31,974	17,252	40,008	20,104	71,982	37,356
Michigan	1,920	19	—	—	1,920	19
Texas	43,037	38,933	76,760	39,418	119,797	78,351
Total	76,931	56,204	116,768	59,522	193,699	115,726

(1) In late March, 2007, we expect to close the sale of substantially all of our South Louisiana properties to a private company. After adjusting for the sale as of late March, 2007, we will have under lease in Louisiana a total of 44,300 gross (24,000 net) acres, of which 7,800 gross (5,200 net) acres are classified as developed and 36,500 gross (18,800 net) acres are classified as undeveloped.

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Undeveloped acreage is considered to be those lease acres on which wells have not been drilled or completed to the extent that would permit the production of commercial quantities of natural gas or oil, regardless of whether or not such acreage contains proved reserves. As is customary in the oil and gas industry, we can retain our interest in undeveloped acreage by drilling activity that establishes commercial production sufficient to maintain the leases or by payment of delay rentals during the remaining primary term of such a lease. The natural gas and oil leases in which we have an interest are for varying primary terms; however, most of our developed lease acreage is beyond the primary term and is held so long as natural gas or oil is produced.

Operator Activities

We operate a majority in value of our producing properties, and will generally seek to become the operator of record on properties we drill or acquire in the future.

Drilling Activities

The following table sets forth our drilling activities for the last three years. As denoted in the following table, “Gross” wells refer to wells in which a working interest is owned, while a “Net” well is deemed to exist when the sum of the fractional working interests we own in gross wells equals one.

	Year Ended December 31,
	2006		2005		2004
	Gross	Net	Gross	Net	Gross	Net
Development Wells:
Productive	99.00	75.89	57.00	51.72	15.00	12.44
Non-Productive	1.00	1.00	1.00	0.42	2.00	0.89
Total	100.00	76.89	58.00	52.14	17.00	13.33
Exploratory Wells:
Productive	4.00	1.60	5.00	3.00	3.00	2.55
Non-Productive	1.00	0.56	1.00	0.49	—	—
Total	5.00	2.16	6.00	3.49	3.00	2.55
Total Wells:
Productive	103.00	77.49	62.00	54.72	18.00	14.99
Non-Productive	2.00	1.56	2.00	0.91	2.00	0.89
Total	105.00	79.05	64.00	55.63	20.00	15.88

At December 31, 2006, we had 16 development wells (12.4 net) and one exploratory well that were in the process of being drilled and/or completed.

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Net Production, Unit Prices and Costs

The following table presents certain information with respect to natural gas and oil production attributable to our interests in all of our fields, the revenue derived from the sale of such production, average sales prices received and average production costs during each of the years in the three-year period ended December 31, 2006.

	2006		2005		2004
Net Production:
Natural gas (MMcf)		13,001		6,237		4,818
Oil and Condensate (MBbls)		474		408		475
Total (MMcfe)		15,843		8,686		7,669
Average Net Daily Production:
Natural gas (Mcf)		35,620		17,087		13,163
Oil and Condensate (Bbls)		1,298		1,118		1,299
Natural gas equivalents (Mcfe)		43,406		23,797		20,957
Revenues (in thousands) (1):
Natural gas	$	86,621	$	53,746	$	29,485
Oil and condensate (Bbl)	$	27,075	$	14,641	$	15,376
Total	$	113,696	$	68,387	$	44,861
Average Realized Sales Price Per Unit (1):
Natural gas (Mcf)	$	6.66		8.62		6.12
Oil and condensate (Bbl)	$	57.12		29.91		32.35
Average realized price (Mcfe)	$	7.18		7.88		5.85
Other Data:
Lease operating expense (per Mcfe)	$	1.38	$	1.14	$	0.97
Production taxes (per Mcfe)	$	0.38	$	0.47	$	0.40
DD&A (per Mcfe)	$	3.32	$	2.94	$	1.51
Exploration (per Mcfe)	$	0.95	$	0.79	$	0.58

(1) Revenues and Average Realized Sales Price Per Unit amounts shown are net of the effect of settled derivatives for oil and condensate in 2006, 2005 and 2004, and for natural gas in 2004 only.

For a discussion of comparative changes in our production volumes, revenues and operating expenses for the three years ended December 31, 2006, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Results of Operations”.

Oil and Gas Marketing and Major Customers

Marketing.    Essentially all of our natural gas production is sold under spot or market-sensitive contracts to various gas purchasers on short-term contracts. Our condensate and crude oil production is sold to various purchasers under short-term rollover agreements based on current market prices.

Customers.    Due to the nature of the industry, we sell our oil and natural gas production to a limited number of purchasers and, accordingly, amounts receivable from such purchasers could be significant. Revenues from these sources as a percent of oil and gas revenues for the periods presented were as follows:

	Year Ended December 31,
	2006		2005		2004
Louis Dreyfus Corporation	35	%	34	%	45	%
Shell Trading	15	%	18	%	5	%
Tristar Producer Services	—		13	%	—
Chevron Texaco	—		—		15	%

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Competition

The oil and gas industry is highly competitive. Major and independent oil and gas companies, drilling and production acquisition programs and individual producers and operators are active bidders for desirable oil and gas properties, as well as the equipment and labor required to operate those properties. Many competitors have financial resources substantially greater than ours, and staffs and facilities substantially larger than us. The availability of a ready market for our oil and gas production will depend in part on the cost and availability of alternative fuels, the level of consumer demand, the extent of domestic production of oil and gas, the extent of importation of foreign oil and gas, the cost of and proximity to pipelines and other transportation facilities, regulations by state and federal authorities and the cost of complying with applicable environmental regulations.

Employees

At March 9, 2007, we had 84 full-time employees in our two administrative offices and two field offices, none of whom is represented by any labor union. In late March, 2007, we expect to close the sale of substantially all of our South Louisiana properties to a private company. Following the sale, we expect to have 74 full-time employees and one field office. We regularly use the services of independent consultants and contractors to perform various professional services, particularly in the areas of construction, design, well-site supervision, permitting and environmental assessment. Independent contractors usually perform field and on-site production operation services for us, including gauging, maintenance, dispatching, inspection and well testing.

Available Information

Our website address is www.goodrichpetroleum.com. We make available, free of charge through the Investor Relations portion of this website, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the 1934 Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Reports of beneficial ownership filed pursuant to Section 16(a) of the 1934 Act are also available on our website. Information contained on our website is not part of this report.

Regulations

The availability of a ready market for any natural gas and oil production depends upon numerous factors beyond our control. These factors include regulation of natural gas and oil production, federal and state regulations governing environmental quality and pollution control, state limits on allowable rates of production by a well or proration unit, the amount of natural gas and oil available for sale, the availability of adequate pipeline and other transportation and processing facilities and the marketing of competitive fuels. For example, a productive natural gas well may be “shut-in” because of an oversupply of natural gas or the lack of an available natural gas pipeline in the areas in which we may conduct operations. State and federal regulations generally are intended to prevent waste of natural gas and oil, protect rights to produce natural gas and oil between owners in a common reservoir, control the amount of natural gas and oil produced by assigning allowable rates of production and control contamination of the environment. Pipelines are subject to the jurisdiction of various federal, state and local agencies as well.

Environmental Matters

Our operations are subject to stringent and complex federal, state and local laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. These laws and regulations may require the acquisition of various permits before drilling commences, restrict the type, quantities and concentration of various substances that can be released into the environment in connection with drilling and production activities, limit or prohibit drilling activities on certain lands lying within wilderness, wetlands and other protected areas and require remedial measures to mitigate pollution from former and ongoing operations. Failure to comply with these laws and regulations may result in the issuance of administrative, civil and criminal penalties, the assessment of remedial obligations, and the imposition of injunctions to force future compliance.

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The trend in environmental regulation has been to place more restrictions and limitations on activities that may affect the environment, and thus, any changes in environmental laws and regulations that result in more stringent and costly waste handling, storage, transport, disposal or remediation requirements could have a material adverse effect on our business. While we believe that we are in substantial compliance with current applicable federal and state environmental laws and regulations and that continued compliance with existing requirements will not have a material adverse impact on our operations or financial condition, there is no assurance that this trend will continue in the future.

The Comprehensive Environmental Response, Compensation and Liability Act, as amended (“CERCLA”), also known as the “Superfund” law, and analogous state laws impose strict, joint and several liabilities on certain classes of persons that are considered to have contributed to the release of a “hazardous substance” into the environment. These persons include the owner or operator of the disposal site or the sites where the release occurred, and those that disposed or arranged for the disposal of hazardous substances released at the site. Persons who are responsible for releases under CERCLA may be subject to joint and several liabilities for remediation costs at the site, and may also be liable for natural resource damages. Additionally, it is not uncommon for neighboring landowners and other third parties to file tort claims for personal injury and property damage allegedly caused by hazardous substances released into the environment. We generate materials in the course of our operations that are regulated as hazardous substances. We also may incur liability under the Resource Conservation and Recovery Act, as amended (“RCRA”), which imposes requirements related to the handling and disposal of solid and hazardous wastes. The U.S. Environmental Protection Agency (“EPA”) and various state agencies have limited the approved methods of disposal for certain hazardous and no hazardous wastes. While there exists an exclusion from the definition of hazardous wastes for certain materials generated in the exploration, development or production of oil and gas, we generate petroleum product wastes and ordinary industrial wastes that may be regulated as solid and hazardous wastes.

The Federal Water Pollution Control Act (“Clean Water Act”), and analogous state laws, impose restrictions and strict controls with respect to the discharge of pollutants, including spills and leaks of oil and other substances, into waters of the United States. The discharge of pollutants into regulated waters is prohibited, except in accordance with the terms of a permit issued by EPA or an analogous state agency. Federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance with discharge permits or other requirements of the Clean Water Act and analogous state laws and regulations. In addition, the Oil Pollution Act of 1990 (“OPA”) imposes a variety of requirements related to the prevention of oil spills into navigable waters. OPA subjects owners of facilities to strict, joint and several liabilities for specified oil removal costs and certain other damages arising from a spill. We believe our operations are in substantial compliance with the Clean Water Act and OPA requirements.

The Federal Clean Air Act, and comparable state laws, regulates emissions of various air pollutants through air emissions permitting programs and the imposition of other requirements. In addition, EPA has developed, and continues to develop, stringent regulations governing emissions of toxic air pollutants at specified sources. Federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance with air permits or other requirements of the federal Clean Air Act and associated state laws and regulations. We believe our operations are in substantial compliance with applicable air permitting and control technology requirements.

State statutes and regulations require permits for drilling operations, drilling bonds and reports concerning operations. In addition, there are state statutes, rules and regulations governing conservation matters, including the unitization or pooling of oil and gas properties, establishment of maximum rates of production from oil and gas wells and the spacing, plugging and abandonment of such wells. Such statutes and regulations may limit the rate at which oil and gas could otherwise be produced from our properties and may restrict the number of wells that may be drilled on a particular lease or in a particular field.

Management believes that we are in substantial compliance with current applicable federal and state environmental laws and regulations and that continued compliance with existing requirements will not have a material adverse impact on our operations or financial condition.

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Item 1A.    Risk Factors

Our financial and operating results are subject to a number of factors, many of which are not within our control. These factors include the following:

Our actual production, revenues and expenditures related to our reserves are likely to differ from our estimates of proved reserves. We may experience production that is less than estimated and drilling costs that are greater than estimated in our reserve report. These differences may be material.

The proved oil and gas reserve information included in this report are estimates. These estimates are based on reports prepared by our independent reserve engineers NSA and were calculated using oil and gas prices as of December 31, 2006. These prices will change and may be lower at the time of production than those prices that prevailed at the end of 2006. Reservoir engineering is a subjective process of estimating underground accumulations of oil and gas that cannot be measured in an exact manner. Estimates of economically recoverable oil and gas reserves and of future net cash flows necessarily depend upon a number of variable factors and assumptions, including:

• historical production from the area compared with production from other similar producing areas;

• the assumed effects of regulations by governmental agencies

• assumptions concerning future oil and gas prices; and

• assumptions concerning future operating costs, severance and excise taxes, development costs and workover and remedial costs.

Because all reserve estimates are to some degree subjective, each of the following items may differ materially from those assumed in estimating proved reserves:

• the quantities of oil and gas that are ultimately recovered;

• the production and operating costs incurred;

• the amount and timing of future development expenditures; and

• future oil and gas sales prices.

Furthermore, different reserve engineers may make different estimates of reserves and cash flows based on the same available data. Our actual production, revenues and expenditures with respect to reserves will likely be different from estimates and the differences may be material. The discounted future net cash flows included in this document should not be considered as the current market value of the estimated oil and gas reserves attributable to our properties. As required by the SEC, the standardized measure of discounted future net cash flows from proved reserves are generally based on prices and costs as of the date of the estimate, while actual future prices and costs may be materially higher or lower. Actual future net cash flows also will be affected by factors such as:

• the amount and timing of actual production;

• supply and demand for oil and gas;

• increases or decreases in consumption; and

• changes in governmental regulations or taxation.

In addition, the 10% discount factor, which is required by the SEC to be used to calculate discounted future net cash flows for reporting purposes, and which we use in calculating our pre-tax PV10 Value, is not necessarily the most appropriate discount factor based on interest rates in effect from time to time and risks associated with us or the oil and gas industry in general.

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Our future revenues are dependent on the ability to successfully complete drilling activity.

Drilling and exploration are the main methods we utilize to replace our reserves. However, drilling and exploration operations may not result in any increases in reserves for various reasons. Exploration activities involve numerous risks, including the risk that no commercially productive oil or gas reservoirs will be discovered. In addition, the future cost and timing of drilling, completing and producing wells is often uncertain. Furthermore, drilling operations may be curtailed, delayed or canceled as a result of a variety of factors, including:

• lack of acceptable prospective acreage;

• inadequate capital resources;

• unexpected drilling conditions; pressure or irregularities in formations; equipment failures or accidents;

• adverse weather conditions, including hurricanes;

• unavailability or high cost of drilling rigs, equipment or labor;

• reductions in oil and gas prices;

• limitations in the market for oil and gas;

• title problems;

• compliance with governmental regulations; and

• mechanical difficulties.

Our decisions to purchase, explore, develop and exploit prospects or properties depend in part on data obtained through geophysical and geological analyses, production data and engineering studies, the results of which are often uncertain.

In addition, we recently completed drilling our first horizontal well in the Cotton Valley Trend, which is the first well we have drilled in the Cotton Valley Trend utilizing this technique. We have only limited experience drilling horizontal wells and there can be no assurance that this method of drilling will be as effective (or effective at all) as we currently expect it to be.

In addition, higher oil and gas prices generally increase the demand for drilling rigs, equipment and crews and can lead to shortages of, and increasing costs for, such drilling equipment, services and personnel. Such shortages could restrict our ability to drill the wells and conduct the operations which we currently have planned. Any delay in the drilling of new wells or significant increase in drilling costs could adversely affect our ability to increase our reserves and production and reduce our revenues.

Natural gas and oil prices are volatile, and low prices have had in the past and could have in the future a material adverse impact on our business.

Our success will depend on the market prices of oil and natural gas. These market prices tend to fluctuate significantly in response to factors beyond our control. The prices we receive for our crude oil production are based on global market conditions. The general pace of global economic growth, the continued instability in the Middle East and other oil and gas producing regions and actions of the Organization of Petroleum Exporting Countries, or OPEC, and its maintenance of production constraints, as well as other economic, political, and environmental factors will continue to affect world supply and prices. Domestic natural gas prices fluctuate significantly in response to numerous factors including U.S. economic conditions, weather patterns, other factors affecting demand such as substitute fuels, the impact of drilling levels on crude oil and natural gas supply, and the environmental and access issues that limit future drilling activities for the industry.

13

Average oil and natural gas prices fluctuated substantially during the three year period ended December 31, 2006. Based on recent history of our industry, fluctuations during the past several years in the demand and supply of crude oil and natural gas have contributed to, and are likely to continue to contribute to, price volatility. Crude oil and natural gas prices are extremely volatile. Any actual or anticipated reduction in crude oil and natural gas prices would depress the level of exploration, drilling and production activity. We expect that commodity prices will continue to fluctuate significantly in the future. The following table includes high and low for 2006, year-end and current prices; natural gas (price per one million British thermal units or Mmbtu) and crude oil (West Texas Intermediate or WTI):

	Henry Hub Per Mmbtu
January 3, 2006 (high)	$	9.87
September 29, 2006 (low)		3.63
December 29, 2006		5.50
March 9, 2007		7.06
	WTI Per barrel
July 14, 2006 (high)	$	77.03
November 17, 2006 (low)		55.81
December 29, 2006		61.06
March 9, 2007		60.05

Changes in commodity prices significantly affect our capital resources, liquidity and expected operating results. Price changes directly affect revenues and can indirectly impact expected production by changing the amount of funds available to us to reinvest in exploration and development activities. Reductions in oil and natural gas prices not only reduce revenues and profits, but could also reduce the quantities of reserves that are commercially recoverable. Significant declines in prices could result in non-cash charges to earnings due to impairment. We use derivative financial instruments to hedge a portion of our exposure to changing commodity prices and we have hedged a targeted portion of our anticipated production for 2007.

Our use of oil and gas price hedging contracts may limit future revenues from price increases and result in significant fluctuations in our net income.

We use hedging transactions with respect to a portion of our oil and natural gas production to achieve more predictable cash flow and to reduce our exposure to price fluctuations. While the use of hedging transactions limits the downside risk of price declines, their use may also limit future revenues from price increases.

Our results of operations may be negatively impacted by our financial derivative instruments and fixed price forward sales contracts in the future and these instruments may limit any benefit we would receive from increases in the prices for oil and natural gas. For the year ended December 31, 2006, we realized a loss on settled financial derivatives of $2.1 million. For the years ended December 31, 2005 and 2004, we realized a loss on settled financial derivatives of $18.0 million and $6.2 million, respectively.

For the year ended December 31, 2006, we recognized in earnings an unrealized gain on derivative instruments not qualifying for hedge accounting in the amount of $40.2 million. For financial reporting purposes, this unrealized gain was combined with a $2.1 million realized loss in 2006 resulting in a total unrealized and realized gain on derivative instruments not qualifying for hedge accounting in the amount of $38.1 million for 2006. This gain was recognized because the natural gas hedges were deemed ineffective for 2006, and all previously effective oil hedges were deemed ineffective for the fourth quarter of 2006.

For the year ended December 31, 2005, we recognized in earnings an unrealized loss on derivative instruments not qualifying for hedge accounting in the amount of $27.0 million. For financial reporting purposes, this unrealized loss was combined with a $10.7 million realized loss in 2005 resulting in a total unrealized and

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realized loss on derivative instruments not qualifying for hedge accounting in the amount of $37.7 million in 2005. For the year ended December 31, 2004, we recognized in earnings an unrealized gain on derivative instruments in the amount of $2.3 million. This loss and gain were recognized because the natural gas hedges were deemed to be ineffective for 2005, and for the fourth quarter of 2004, and accordingly, the changes in fair value of such hedges could no longer be reflected in other comprehensive income, a component of stockholders’ equity.

To the extent that the hedges are not deemed to be effective in the future, we will likewise be exposed to volatility in earnings resulting from changes in the fair value of our hedges. See Note 8 “Hedging Activities” to our consolidated financial statements for further discussion.

Delays in development or production curtailment affecting our material properties may adversely affect our financial position and results of operations.

The size of our operations and our capital expenditure budget limits the number of wells that we can develop in any given year. Complications in the development of any single material well may result in a material adverse affect on our financial condition and results of operations. In addition, a relatively small number of wells contribute a substantial portion of our production. If we were to experience operational problems resulting in the curtailment of production in any of these wells, our total production levels would be adversely affected, which would have a material adverse affect on our financial condition and results of operations.

Because our operations require significant capital expenditures, we may not have the funds available to replace reserves, maintain production or maintain interests in our properties.

We must make a substantial amount of capital expenditures for the acquisition, exploration and development of oil and natural gas reserves. Historically, we have paid for these expenditures with cash from operating activities, proceeds from debt and equity financings and asset sales. Our revenues or cash flows could be reduced because of lower oil and natural gas prices or for other reasons. If our revenues or cash flows decrease, we may not have the funds available to replace reserves or maintain production at current levels. If this occurs, our production will decline over time. Other sources of financing may not be available to us if our cash flows from operations are not sufficient to fund our capital expenditure requirements. Where we are not the majority owner or operator of an oil and gas property, such as the Lafitte field, we may have no control over the timing or amount of capital expenditures associated with the particular property. If we cannot fund such capital expenditures, our interests in some properties may be reduced or forfeited.

We may have difficulty financing our planned growth.

We have experienced and expect to continue to experience substantial capital expenditure and working capital needs, particularly as a result of our drilling program. In the future, we expect that we will require additional financing, in addition to cash generated from operations, to fund planned growth. We cannot be certain that additional financing will be available on acceptable terms or at all. In the event additional capital resources are unavailable, we may curtail drilling, development and other activities or be forced to sell some of our assets on an untimely or unfavorable basis.

If we are not able to replace reserves, we may not be able to sustain production at present levels.

Our future success depends largely upon our ability to find, develop or acquire additional oil and gas reserves that are economically recoverable. Unless we replace the reserves we produce through successful development, exploration or acquisition activities, our proved reserves will decline over time. In addition, approximately 57% of our total estimated proved reserves by volume at December 31, 2006, were undeveloped. By their nature, estimates of undeveloped reserves are less certain. Recovery of such reserves will require significant capital expenditures and successful drilling operations. We may not be able to successfully find and produce reserves economically in the future. In addition, we may not be able to acquire proved reserves at acceptable costs.

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We may incur substantial impairment writedowns.

If management’s estimates of the recoverable reserves on a property are revised downward or if oil and natural gas prices decline, we may be required to record additional non-cash impairment writedowns in the future, which would result in a negative impact to our financial position. We review our proved oil and gas properties for impairment on a depletable unit basis when circumstances suggest there is a need for such a review. To determine if a depletable unit is impaired, we compare the carrying value of the depletable unit to the undiscounted future net cash flows by applying management’s estimates of future oil and natural gas prices to the estimated future production of oil and gas reserves over the economic life of the property. Future net cash flows are based upon our independent reservoir engineers’ estimates of proved reserves. In addition, other factors such as probable and possible reserves are taken into consideration when justified by economic conditions. For each property determined to be impaired, we recognize an impairment loss equal to the difference between the estimated fair value and the carrying value of the property on a depletable unit basis.

Fair value is estimated to be the present value of expected future net cash flows. Any impairment charge incurred is recorded in accumulated depreciation, depletion, impairment and amortization to reduce our recorded basis in the asset. Each part of this calculation is subject to a large degree of judgment, including the determination of the depletable units’ estimated reserves, future cash flows and fair value. For the years ended December 31, 2006, and 2005, we recorded impairments of $24.8 million and $0.3 million, respectively. We did not record an impairment loss for the year ended December 31, 2004.

Management’s assumptions used in calculating oil and gas reserves or regarding the future cash flows or fair value of our properties are subject to change in the future. Any change could cause impairment expense to be recorded, impacting our net income or loss and our basis in the related asset. Any change in reserves directly impacts our estimate of future cash flows from the property, as well as the property’s fair value. Additionally, as management's views related to future prices change, the change will affect the estimate of future net cash flows and the fair value estimates. Changes in either of these amounts will directly impact the calculation of impairment.

A majority of our production, revenue and cash flow from operating activities are derived from assets that are concentrated in a geographic area.

Approximately 84% of our estimated proved reserves at December 31, 2006, and a similar percentage of our production during 2006 were associated with our Cotton Valley Trend. We have under contract to sell substantially all of our South Louisiana properties to a private company, with an anticipated closing date in late March 2007. See Note 12 “Acquisitions and Divestitures” to our consolidated financial statements. Accordingly, if the level of production from the remaining properties substantially declines, it could have a material adverse effect on our overall production level and our revenue.

The oil and gas business involves many uncertainties, economic risks and operating risks that can prevent us from realizing profits and can cause substantial losses.

Our oil and gas operations are subject to the economic risks typically associated with exploration, development and production activities, including the necessity of significant expenditures to locate and acquire properties and to drill exploratory wells. In conducting exploration and development activities, the presence of unanticipated pressure or irregularities in formations, miscalculations or accidents may cause our exploration, development and production activities to be unsuccessful. This could result in a total loss of our investment in a particular property. If exploration efforts are unsuccessful in establishing proved reserves and exploration activities cease, the amounts accumulated as unproved costs would be charged against earnings as impairments. In addition, the cost and timing of drilling, completing and operating wells is often uncertain.

The nature of the oil and gas business involves certain operating hazards such as well blowouts, cratering, explosions, uncontrollable flows of oil, gas or well fluids, fires, formations with abnormal pressures, pollution, releases of toxic gas and other environmental hazards and risks. Any of these operating hazards could result in

16

substantial losses to us. As a result, substantial liabilities to third parties or governmental entities may be incurred. The payment of these amounts could reduce or eliminate the funds available for exploration, development or acquisitions. These reductions in funds could result in a loss of our properties. Additionally, some of our oil and gas operations are located in areas that are subject to weather disturbances such as hurricanes. Some of these disturbances can be severe enough to cause substantial damage to facilities and possibly interrupt production. In accordance with customary industry practices, we maintain insurance against some, but not all, of such risks and losses. The occurrence of an event that is not fully covered by insurance could have a material adverse effect on our financial position and results of operations.

Our debt instruments impose restrictions on us that may affect our ability to successfully operate our business.

Our senior credit facility contains customary restrictions, including covenants limiting our ability to incur additional debt, grant liens, make investments, consolidate, merge or acquire other businesses, sell assets, pay dividends and other distributions and enter into transactions with affiliates. We also are required to meet specified financial ratios under the terms of our credit facility. As of December 31, 2006, we were in compliance with all the financial covenants of our credit facility. These restrictions may make it difficult for us to successfully execute our business strategy or to compete in our industry with companies not similarly restricted.

We may be unable to identify liabilities associated with the properties that we acquire or obtain protection from sellers against them.

The acquisition of properties requires us to assess a number of factors, including recoverable reserves, development and operating costs and potential environmental and other liabilities. Such assessments are inexact and inherently uncertain. In connection with the assessments, we perform a review of the subject properties, but such a review will not reveal all existing or potential problems. In the course of our due diligence, we may not inspect every well, platform or pipeline. We cannot necessarily observe structural and environmental problems, such as pipeline corrosion, when an inspection is made. We may not be able to obtain contractual indemnities from the seller for liabilities that we created. We may be required to assume the risk of the physical condition of the properties in addition to the risk that the properties may not perform in accordance with our expectations. The incurrence of an unexpected liability could have a material adverse effect on our financial position and results of operations.

We are subject to complex laws and regulations, including environmental regulations that can adversely affect the cost, manner or feasibility of doing business.

Development, production and sale of natural gas and oil in the U.S. are subject to extensive laws and regulations, including environmental laws and regulations. We may be required to make large expenditures to comply with environmental and other governmental regulations. Matters subject to regulation include:

• discharge permits for drilling operations;

• bonds for ownership, development and production of oil and gas properties;

• reports concerning operations; and

• taxation.

In addition, our operations are subject to stringent federal, state and local environmental laws and regulations governing the discharge of materials into the environment and environmental protection. Governmental authorities enforce compliance with these laws and regulations and the permits issued under them, oftentimes requiring difficult and costly actions. Failure to comply with these laws, regulations and permits may result in the assessment of administrative, civil and criminal penalties, the imposition of remedial obligations, and the issuance of injunctions limiting or prohibiting some or all of our operations. There is inherent risk of

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incurring significant environmental costs and liabilities in our business. Joint and several strict liabilities may be incurred in connection with discharges or releases of petroleum hydrocarbons and wastes on, under or from our properties and from facilities where our wastes have been taken for disposal. Private parties affected by such discharges or releases may also have the right to pursue legal actions to enforce compliance as well as seek damages for personal injury or property damage. In addition, changes in environmental laws and regulations occur frequently, and any such changes that result in more stringent and costly requirements could have a material adverse effect on our business.

Competition in the oil and gas industry is intense, and we are smaller and have a more limited operating history than some of our competitors.

We compete with major and independent oil and natural gas companies for property acquisitions. We also compete for the equipment and labor required to operate and to develop these properties. Some of our competitors have substantially greater financial and other resources than us. In addition, larger competitors may be able to absorb the burden of any changes in federal, state and local laws and regulations more easily than we can, which would adversely affect our competitive position. These competitors may be able to pay more for oil and natural gas properties and may be able to define, evaluate, bid for and acquire a greater number of properties than we can. Our ability to acquire additional properties and develop new and existing properties in the future will depend on our ability to conduct operations, to evaluate and select suitable properties and to consummate transactions in this highly competitive environment.

Our success depends on our management team and other key personnel, the loss of any of whom could disrupt our business operations.

Our success will depend on our ability to retain and attract experienced engineers, geoscientists and other professional staff. We depend to a large extent on the efforts, technical expertise and continued employment of these personnel and members of our management team. If a significant number of them resign or become unable to continue in their present role and if they are not adequately replaced, our business operations could be adversely affected.

Some of our operations are exposed to the additional risk of tropical weather disturbances.

Some of our production and reserves were located in South Louisiana as of December 31, 2006. Operations in this area are subject to tropical weather disturbances. Some of these disturbances can be severe enough to cause substantial damage to facilities and possibly interrupt production. For example, Hurricanes Katrina and Rita in August and September of 2005, respectively, impacted our South Louisiana operations. In January 2007, we announced the sale of substantially all of our properties in South Louisiana to a private company. See Note 12 “Acquisitions and Divestitures” to our consolidated financial statements. If the sale closes as expected, our exposure to tropical weather disturbances will be significantly reduced by the end of the first quarter 2007.

Losses could occur for uninsured risks or in amounts in excess of existing insurance coverage. We cannot assure you that we will be able to maintain adequate insurance in the future at rates we consider reasonable or that any particular types of coverage will be available. An event that is not fully covered by insurance could have a material adverse effect on our financial position and results of operations. Hurricane Katrina and Rita damage costs in excess of our insurance coverage resulted in a $1.7 million loss for 2006. The loss is included in “Lease Operating Expenses” on our consolidated financial statements. In 2007, we expect to receive $2.5 million from our insurance provider for Hurricane Katrina damage costs. The receivable is included in “Accounts Receivable—Trade and other, net” on our consolidated financial statements.

We have previously identified a material weakness in our internal controls over financial reporting and cannot assure you that we will not again identify a material weakness in the future.

As previously reported in our quarterly report on Form 10-Q for the quarter ended March 31, 2006, a material weakness was identified in our internal control over financial reporting with respect to recording the fair

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value of all outstanding derivatives. The Public Company Accounting Oversight Board’s Auditing Standard No. 2 defines a material weakness as a significant deficiency, or combination of significant 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.

In order to remediate the material weakness, we implemented changes in our internal control over financial reporting during the quarter ended June 30, 2006. Specifically, we now automatically receive a mark to market valuation from our existing counterparties for all outstanding derivatives. For any new contracts entered into with a new counterparty, we will concurrently request this automatic distribution. We also added another layer of review for the fair value calculation prior to review by the Chief Financial Officer.

Our management believes that these additional policies and procedures have enhanced our internal control over financial reporting relating to the determination and review of fair value calculations on outstanding derivatives. Our management also believes that, as a result of these measures described above, the material weakness was remediated and that our internal control over financial reporting is effective as of June 30, 2006, September 30, 2006, and December 31, 2006.

Terrorist attacks or similar hostilities may adversely impact our results of operations.

The impact that future terrorist attacks or regional hostilities (particularly in the Middle East) may have on the energy industry in general, and on us in particular, is unknown. Uncertainty surrounding military strikes or a sustained military campaign may affect our operations in unpredictable ways, including disruptions of fuel supplies and markets, particularly oil, and the possibility that infrastructure facilities, including pipelines, production facilities, processing plants and refineries, could be direct targets of, or indirect casualties of, an act of terror or war. Moreover, we have incurred additional costs since the terrorist attacks of September 11, 2001 to safeguard certain of our assets and we may be required to incur significant additional costs in the future.

The terrorist attacks on September 11, 2001, and the changes in the insurance markets attributable to such attacks have made certain types of insurance more difficult for us to obtain. There can be no assurance that insurance will be available to us without significant additional costs. Instability in the financial markets as a result of terrorism or war could also affect our ability to raise capital.

Item 1B.    Unresolved Staff Comments

None.

Item 3.    Legal Proceedings

In the third quarter of 2004, we recognized a non-recurring gain in the amount of $2.1 million, reflecting the proceeds of a successful litigation judgment. We commenced the litigation as plaintiff in February 2000 against the operator of a South Louisiana property which was jointly acquired by us and the defendant in September 1999. The judgment provided for recovery of our damages and a portion of our attorneys’ fees as well as interest calculated on our damages.

We are party to additional lawsuits arising in the normal course of business. We intend to defend these actions vigorously and believe, based on currently available information, that adverse results or judgments from such actions, if any, will not be material to our financial position or results of operations.

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

Market Price of Our Common Stock

Our common stock is traded on the New York Stock Exchange under the symbol “GDP”.

At March 9, 2007, the number of holders of record of our common stock without determination of the number of individual participants in security positions was 1,521 with 28,288,838 shares outstanding. High and low sales prices for our common stock for each quarter during the calendar years 2006 and 2005 are as follows:

	2006				2005
	High		Low		High		Low
March 31	$	29.60	$	23.58	$	25.39	$	14.61
June 30		28.95		22.59		23.36		14.74
September 30		35.95		26.34		24.80		19.00
December 31		44.57		25.21		26.29		19.25

Dividends

We have neither declared nor paid any cash dividends on our common stock and do not anticipate declaring any dividends in the foreseeable future. We expect to retain our cash for the operation and expansion of our business, including exploration, development and production activities. In addition, our senior bank credit facility contains restrictions on the payment of dividends to the holders of common stock. For additional information, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Issuer Repurchases of Equity Securities

We made no repurchases of our common stock for the year ended December 31, 2006.

For information on securities authorized for issuance under our equity compensation plans, see Item 12—“Security Ownership of Certain Beneficial Owners and Management.”

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Item 6.    Selected Financial Data

The following table sets forth our selected financial data and other operating information. The selected consolidated financial data in the table are derived from our consolidated financial statements. This data should be read in conjunction with the consolidated financial statements, related notes and other financial information included herein.

Statement of Operations Data:

	Year Ended December 31,
	2006			2005			2004			2003			2002
	(In thousands, except per share data)
Revenues
Oil and gas revenues	$	113,696		$	68,387		$	44,861		$	31,663		$	18,502
Other		2,458			1,016			151			477			131
		116,154			69,403			45,012			32,140			18,633
Operating Expenses
Lease operating expense		21,877			9,931			7,402			6,099			7,523
Production taxes		5,993			4,053			3,105			2,288			1,642
Transportation		4,013			558			—			—			—
Depletion, depreciation and amortization		52,642			25,563			11,562			8,996			7,023
Exploration		15,058			6,867			4,426			2,249			1,019
Impairment of oil and gas properties		24,790			340			—			335			342
General and administrative		17,223			8,622			5,821			5,314			4,468
(Gain) loss on sale of assets		(23	)		(235	)		(50	)		66			(2,941	)
Other		1,709			512			—			—			—
		143,282			56,211			32,266			25,347			19,076
Operating income (loss)		(27,128	)		13,192			12,746			6,793			(443	)
Other income (expense):
Interest expense		(7,845	)		(2,359	)		(1,110	)		(1,051	)		(985	)
Gain (loss) on derivatives not qualifying for hedge accounting		38,128			(37,680	)		2,317			—			—
Loss on early extinguishment of debt		(612	)		—			—			—			—
Gain on litigation judgment		—			—			2,118			—			—
		29,671			(40,039	)		3,325			(1,051	)		(985	)
Income (loss) from continuing operations before income taxes		2,543			(26,847	)		16,071			5,742			(1,428	)
Income tax (expense) benefit		(904	)		9,397			1,707			(2,016	)		496
Income (loss) from continuing operations		1,639			(17,450	)		17,778			3,726			(932	)
Discontinued operations including gain on sale, net of income taxes		—			—			749			196			(19	)
Income (loss) before cumulative effect of change in accounting principle		1,639			(17,450	)		18,527			3,922			(951	)
Cumulative effect of change in accounting principle, net of income taxes		—			—			—			(205	)		—
Net income (loss)		1,639			(17,450	)		18,527			3,717			(951	)
Preferred stock dividends		6,016			755			633			633			640
Preferred stock redemption premium		1,545			—			—			—			—
Net income (loss) applicable to common stock	$	(5,922	)	$	(18,205	)	$	17,894		$	3,084		$	(1,591	)
Net income (loss) per common share from continuing operations
Basic	$	(0.24	)	$	(0.75	)	$	0.91		$	0.21		$	(0.05	)
Diluted	$	(0.24	)	$	(0.75	)	$	0.87		$	0.18		$	(0.05	)
Weighted average number of common shares outstanding:
Basic		24,948			23,333			19,552			18,064			17,908
Diluted		25,412			23,333			20,347			20,482			17,908

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	December 31,
	2006		2005		2004		2003		2002
Balance Sheet Data:
Total assets	$	479,264	$	296,526	$	127,977	$	89,182	$	78,567
Total long–term debt		201,500		30,000		27,000		20,000		18,500
Stockholders’ equity		205,133		181,589		65,307		48,059		44,607

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

Forward-Looking Statements

Certain statements in this report, including statements of the future plans, objectives, and expected performance of the Company, are forward-looking statements that are dependent upon certain events, risks and uncertainties that may be outside the Company’s control, and which could cause actual results to differ materially from those anticipated. Some of these include, but are not limited to:

• planned capital expenditures,

• future drilling activity,

• our financial condition,

• business strategy,

• the market prices of oil and gas,

• economic and competitive conditions,

• legislative and regulatory changes and

• financial market conditions.

There are numerous uncertainties inherent in estimating quantities of proved oil and gas reserves and in projecting future rates of production and the timing of development expenditures. The total amount or timing of actual future production may vary significantly from reserve and production estimates. The drilling of exploratory wells can involve significant risks, including those related to timing, success rates and cost overruns. Lease and rig availability, complex geology and other factors can affect these risks. Although from time to time we make use of futures contracts, swaps, costless collars and fixed-price physical contracts to mitigate risk, fluctuations in oil and gas prices, or a prolonged continuation of low prices may substantially adversely affect the Company’s financial position, results of operations and cash flows.

Overview

We are an independent oil and gas company engaged in the exploration, exploitation, development and production of oil and natural gas properties primarily in the Cotton Valley Trend of East Texas and Northwest Louisiana. We operate as one segment as each of our operating areas have similar economic characteristics and each meet the criteria for aggregation as defined in the Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 131, “Disclosures about Segments of an Enterprise and Related Information”.

We seek to increase shareholder value by growing our oil and gas reserves, production revenues and operating cash flow. In our opinion, on a long term basis, growth in oil and gas reserves and production, on a cost-effective basis, are the most important indicators of performance success for an independent oil and gas company.

Management strives to increase our oil and gas reserves, production and cash flow through exploration and exploitation activities. We develop an annual capital expenditure budget which is reviewed and approved by our

22

board of directors on a quarterly basis and revised throughout the year as circumstances warrant. We take into consideration our projected operating cash flow and externally available sources of financing, such as bank debt, when establishing our capital expenditure budget.

We place primary emphasis on our internally generated operating cash flow in managing our business. For this purpose, operating cash flow is defined as cash flow from operating activities as reflected in our Statement of Cash Flows. Management considers operating cash flow a more important indicator of our financial success than other traditional performance measures such as net income.

Our revenues and operating cash flow are dependent on the successful development of our inventory of capital projects, the volume and timing of our production, as well as commodity prices for oil and gas. Such pricing factors are largely beyond our control, however, we employ commodity hedging techniques in an attempt to minimize the volatility of short term commodity price fluctuations on our earnings and operating cash flow.

Cotton Valley Trend: Expanding Acreage Position and Active Development Drilling Program

Our relatively low risk development drilling program in the Cotton Valley Trend is primarily centered in and around Rusk, Panola, Angelina, Nacogdoches, Cherokee, Harrison, Smith and Upshur Counties, Texas and DeSoto, Caddo and Bienville Parishes, Louisiana. We continue to build our acreage position in the Cotton Valley trend and now hold approximately 180,000 gross acres as of February 15, 2007. As of year end, we have drilled and/or logged a cumulative total of 156 Cotton Valley wells with a success rate slightly in excess of 99%. Our net production volumes from our Cotton Valley Trend wells aggregated approximately 29,964 Mcfe per day in 2006, or approximately 69% of our total oil and gas production in the period.

Acquisition of Remaining Interests in Dirgin-Beckville Area of Cotton Valley Trend

In early December 2006, we acquired a 14.5% working interest in 22 wells and approximately 3,300 gross (500 net) acres within the Dirgin-Beckville field in the Cotton Valley Trend from a private company for $6.1 million. With the additional interest we now own an approximate 99% working interest in 52 wells and 12,600 gross acres in this field.

Farmout on 21,200 acres in Northwest Louisiana

In November 2006, we announced a definitive farmout agreement covering 21,200 gross acres in 33 sections (16,000 net acres), in the Alabama Bend field of Bienville Parish, Louisiana. The Company has farmed in the right to explore for natural gas and oil at no upfront cost. The Company will own a 100% working interest in the initial well drilled in each of the 33 sections and the Farmor shall have the right to participate up to 50% for future wells drilled. To maintain the rights of the entire acreage block, we must commence drilling operations on one well every 90 days from completion date of the previous well.

Acquisition of Acreage in Angelina River Play in Nacogdoches and Angelina Counties, Texas

On February 7, 2007, we announced the acquisition of drilling and development rights in approximately 16,800 gross acres (8,380 net acres) in the Angelina River play, on trend with our existing acreage in Nacogdoches and Angelina Counties, Texas. We acquired a 60% working interest in the acreage and will operate the joint venture. The acquisition was completed in two separate transactions. In the initial transaction, we acquired a 40% interest for $2.0 million from a private company. We also agreed to carry the private company for a 20% interest in the drilling of five wells. In the second transaction, we are purchasing the remaining 20% interest in the acreage in a like-kind exchange for our 30% interest in the Mary Blevins field in Smith County, Texas.

South Louisiana Operations: 2007 Sale of Assets

On January 12, 2007, the Company and Malloy Energy Company, LLC (“Malloy Energy”) entered into a Purchase and Sale Agreement with a private company for the sale of substantially all of the company’s oil and

23

gas properties in South Louisiana. The total sales price for the Company’s interest in the oil and gas properties was approximately $100 million, effective July 1, 2006. The total sales price for Malloy Energy’s interests in these properties was approximately $30 million. See Note 11 “Related Party Transactions” to our consolidated financial statements for additional information regarding Malloy Energy. Both the Company and Malloy Energy’s total consideration will be reduced by an amount equal to its proportionate share of the greater of $20 million or normal closing adjustments. We expect the adjusted sales price for the Company’s interest to be approximately $80 million. The effective date of the transaction was July 1, 2006 and the closing date of the Purchase and Sale Agreement is targeted for late March, 2007. Had we completed this transaction at the end of 2006, our proved reserves would have been reduced by approximately 31,700 MMcfe. Average daily production for these properties for the fiscal year-ending December 31, 2006, was approximately 12,790 Mcfe or about 30% of the Company’s total production for 2006. This sale will allow us to focus the majority of our efforts on the development of our Cotton Valley Trend acreage, as well as reduce operating costs going forward.

Overview of 2006 Results

2006 Financial and operating highlights include:

• We increased production 82% over 2005. Production averaged 43.4 MMcfe/d compared to 23.8 MMcfe/d in 2005.

• Our 2006 oil and gas revenues totaled $113.7 million compared to $68.4 million in 2005, a 66 percent increase.

• Net cash provided by operating activities increased $19.6 million from 2005, to $65.1 million.

• Estimated proved reserves grew 19 percent to approximately 206.2 Bcfe (approximately 187.0 Bcf of natural gas and 3.2 MMBbls of oil and condensate), with a pre-tax present value of future net cash flows, discounted at 10%, of $214.2 million and an after-tax present value of discounted future net cash flows of $200.3 million.

• Capital expenditures totaled $269.4 million in 2006, versus $164.6 million in 2005.

• As operator, we successfully drilled, completed and placed in production 101 wells during calendar year 2006.

• We issued $175.0 million in 3.25% convertible senior notes due 2026, completely paying off our Second Lien Term Loan and substantially reducing our bank revolver debt.

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Summary Operating Information:	Year Ended December 31,											Year Ended December 31,
	2006			2005			Variance					2005			2004			Variance
	(in thousands, except for price data)
Revenues:
Natural Gas	$	86,621		$	53,746		$	32,875		61	%	$	53,746		$	31,315		$	22,431		72	%
Oil and condensate		30,619			21,884			8,735		40	%		21,884			19,714			2,170		11	%
Effect of settled derivatives—gas		—			—			—		—			—			(1,830	)		1,830		100	%
Effect of settled derivatives—oil		(3,544	)		(7,243	)		3,699		51	%		(7,243	)		(4,338	)		(2,905	)	(67	)%
Natural gas, oil and condensate		113,696			68,387			45,309		66	%		68,387			44,861			23,526		52	%
Operating revenues		116,154			69,403			46,751		67	%		69,403			45,012			24,391		54	%
Operating expenses		143,282			56,211			87,071		155	%		56,211			32,266			23,945		74	%
Operating income		(27,128	)		13,192			40,320		306	%		13,192			12,746			446		3	%
Net Income (loss) applicable to common stock	$	(5,922	)	$	(18,205	)	$	12,283		67	%	$	(18,205	)	$	17,894		$	(36,099	)	(202	)%
Net Production:
Natural gas (MMcf)		13,001			6,237			6,764		108	%		6,237			4,818			1,419		29	%
Oil and gas condensate (MBbls)		474			408			66		16	%		408			475			(67	)	(14	)%
Total (Mmcfe)		15,843			8,686			7,157		82	%		8,686			7,669			1,107		13	%
Average daily production (Mmcfe/d)		43,406			23,797			19,609		82	%		23,797			20,954			2,843		14	%
Average Realized Sales price Per Unit:
Natural gas (per Mcf) unhedged	$	6.66		$	8.62		$	(1.96	)	(23	)%	$	8.62		$	6.50		$	2.12		33	%
Effect of settled derivatives (per Mcf)		—			—			—		—			—			(0.38	)		0.38		(100	)%
Average realized price (per Mcf)		6.66			8.62			(1.96	)	(23	)%		8.62			6.12			2.50		41	%
Oil and condensate (per Bbl) unhedged		64.60			57.64			6.96		12	%		57.64			41.48			16.16		39	%
Effect of settled derivatives (per Bbl)		(7.48	)		(27.73	)		20.25		73	%		(27.73	)		(9.13	)		(18.60	)	(204	)%
Average realized price (per Bbl)		57.12			29.91			27.21		91	%		29.91			32.35			2.44		8	%
Average realized price (per Mcfe)	$	7.18		$	7.88		$	(0.70	)	(9	)%	$	7.88		$	5.85		$	2.03		35	%

Results of Operations

Operating Income

Year ended December 31, 2006 compared to year ended December 31, 2005

Operating revenues increased 67% or $46.8 million to a total of $116.2 million in 2006 compared to 2005. The increase resulted from an 82% increase in production volumes. The drilling, completion and placing into production of 101 operated wells in the Cotton Valley Trend led to natural gas production more than doubling in 2006. Oil production was returned to mid 2005 levels as production was restored from hurricane shut-ins. Partially offsetting increases from production gains, the average realized price for natural gas fell in 2006 by 23% to $6.66 per Mcf. Realized oil prices were strong in 2006, increasing 91% to $57.12 per Bbl.

Year ended December 31, 2005 compared to year ended December 31, 2004

Operating revenues increased 54% or $24.4 million in 2005 compared to 2004. This increase resulted from a 13% increase in oil and gas production volumes, due to a substantial increase in Cotton Valley Trend production, as well as higher average oil and gas prices. Partially offsetting this increase was a decline in South Louisiana production, due to natural decline and the effects of shut-ins due to the hurricanes in the third and fourth quarters of 2005.

	Year Ended December 31,									Year Ended December 31,
Operating Expenses per Mcfe	2006		2005		Variance					2005		2004		Variance
Lease operating expense	$	1.38	$	1.14	$	0.24		21	%	$	1.14	$	0.97	0.17	17	%
Production taxes		0.38		0.47		(0.09	)	(19	)%		0.47		0.40	0.07	18	%
Transportation		0.25		0.06		0.19		317	%		0.06		—	0.06	—
Depreciation, depletion and Amortization		3.32		2.94		0.38		13	%		2.94		1.51	1.43	95	%
Exploration		0.95		0.79		0.16		20	%		0.79		0.58	0.21	37	%
Impairment of oil and gas properties		1.56		0.04		1.52		—			0.04		—	0.04	—
General and administrative		1.09		0.99		0.10		10	%		0.99		0.76	0.23	30	%

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Operating Expenses

Year ended December 31, 2006 compared to year ended December 31, 2005

Lease operating expense (LOE) was $21.9 million for 2006 compared to $9.9 million for 2005. Given the rapid pace of our development program in the Cotton Valley Trend in 2006, we experienced significant increases in two major components of LOE, salt water disposal costs ($4.1 million) and compressor rental expense ($2.9 million). With the planned installation of our low pressure gathering system in this region, along with the sale of the South Louisiana properties, we expect to see a decline in the per unit LOE charges in 2007. Additionally, Hurricanes Katrina and Rita damage costs in excess of our insurance coverage resulted in a $1.7 million net expense for 2006. This net expenditure over insurance reimbursement represents a $0.10 increase in the LOE per Mcfe. Higher workover activity also contributed to a higher cost per Mcfe in 2006. The majority of this activity occurred during the fourth quarter.

Production taxes were $6.0 million for 2006 versus $4.1 million in 2005. The reduction in production taxes per Mcfe resulted from rebates approved by the State of Texas of $1.3 million. These severance tax rebates relate to a number of our wells which have been approved as high cost tight gas sand wells, allowing us to pay a lower severance tax rate for up to 10 years following certification by the state.

Transportation expense was $4.0 million for 2006 compared to $0.6 million for 2005. The significant increase in transportation expense was due to the requirement for longer transportation segments in our Cotton Valley Trend properties versus our properties in South Louisiana. As our volumes from the Cotton Valley Trend expanded over 181% during 2006, our transportation expense increased accordingly.

Depletion, depreciation and amortization expense (“DD&A”) was $52.6 million for the year ended December 31, 2006, versus $25.6 million for the year ended December 31, 2005, with the increase due to higher production volumes and higher DD&A rates. The higher rates are a result of an increase in capitalized development costs.

Exploration expense for the year ended December 31, 2006, was $15.1 million versus $6.9 million for the year ended December 31, 2005. In 2006, we recorded $7.9 million in dry hole costs for the Bayou Boullion exploratory well. Leasehold amortization was $5.5 million, versus $3.3 million in 2005.

We recorded an impairment expense of $24.8 million in the year ended December 31, 2006, all of it being determined in conjunction with the receipt of the independent engineer’s final report on reserves as of that date. Of the total expense of $24.8 million, $14.9 million related primarily to two South Louisiana fields (St. Gabriel at $13.0 million and Plumb Bob at $1.9 million), $8.4 million related to two fields in East Texas which were not a part of the Company’s primary Cotton Valley Trend acreage position, and the remaining $1.5 million was spread among several minor properties. In the St. Gabriel field, although significant reserves were initially estimated to be present and recoverable when the Gueymard #1 well was drilled in the first quarter of 2006, mechanical problems experienced during completion operations resulted in the initial production from this well being delayed until December 2006. Once on production, and following receipt of the year end reserve report, we determined that the ultimate reserves attributed to this well were insufficient to justify the expenses associated with the drilling and completion of the well, therefore the impairment was taken at that date.

General and administrative (“G&A”) expenses increased to $17.2 million for the year ended December 31, 2006, from $8.6 million for the year ended December 31, 2005. Stock-based compensation, which consists of the amortization of restricted stock awards and expense associated with our stock option plan, increased to $6.0 million for the year ended December 31, 2006, compared to $1.4 million in 2005. We adopted SFAS 123R on January 1, 2006. SFAS 123R requires new, modified and unvested share-based payment transactions with employees to be measured at fair value and recognized as compensation expense over the requisite service period. See Note 2 “Stock-Based Compensation” to our consolidated financial statements for additional information.

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Year ended December 31, 2005 compared to year ended December 31, 2004

Lease operating expense was $9.9 million for the year ended December 31, 2005 versus $7.4 million for the year ended December 31, 2004, with the increase due to an increase in production volumes as well as an increase in hurricane related operating expenses in South Louisiana.

Production taxes were $4.1 million for the year ended December 31, 2005 compared to $3.1 million for the year ended December 31, 2004, due to an increase in production volumes and product prices.

DD&A was $25.6 million for the year ended December 31, 2005, versus $11.6 million for the year ended December 31, 2004, with the increase due to higher production volumes and higher DD&A rates. The higher rates are a result of an increase in capitalized development costs.

Exploration expense for the year ended December 31, 2005 was $6.9 million versus $4.4 million for the year ended December 31, 2004, primarily due to increased dry hole costs from an exploratory well drilled in East Baton Rouge Parish, Louisiana, and higher non-producing leasehold amortization expense associated with the expansion of our Cotton Valley Trend acreage position.

We recorded an impairment expense of $0.3 million in the recorded value of one property for the year ended December 31, 2005, due to sooner than anticipated depletion of reserves.

G&A increased to $8.6 million for the year ended December 31, 2005, from $5.8 million for the year ended December 31, 2004. This increase was primarily due to higher compensation related costs due to an approximate 25% increase in the number of employees in 2005 and professional fees related to the implementation of the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. Stock-based compensation, which consists of the amortization of restricted stock awards, increased to $1.1 million for the year ended December 31, 2005, compared to $0.6 million for the comparable period in 2004 due to the vesting of awards previously granted.

	Year Ended December 31,
	2006			2005			2004
	(in thousands)
Other income (expense):
Interest Expense	$	(7,845	)	$	(2,359	)	$	(1,110	)
Gain (loss) on derivatives not qualifying for hedge accounting		38,128			(37,680	)		2,317
Loss on early extinguishment of debt		(612	)		—			—
Gain on litigation judgement		—			—			2,118
Income from discontinued operations		—			—			749
Income tax (expense) benefit		(904	)		9,397			1,707
Average total borrowings	$	99,542		$	30,417		$	22,958
Weighted average interest rate		7.5	%		7.0	%		3.8	%

Other Income (Expense)

Year ended December 31, 2006 compared to December 31, 2005

Interest expense was $7.8 million for 2006, compared to $2.4 million for 2005, with the increase primarily attributable to a higher level of average borrowings in 2006.

Gain on derivatives not qualifying for hedge accounting relates to our ineffective gas hedges for the entire year and for our ineffective oil hedges for the fourth quarter, and amounted to $38.1 million for the year ended December 31, 2006, compared to a loss of $37.7 million for the year ended December 31, 2005. The gain in 2006 includes an unrealized gain of $40.2 million in the mark to market value of our ineffective gas and oil hedges and a realized loss of $2.1 million for the effect of settled derivatives on our ineffective gas and oil hedges. Our natural gas hedges were ineffective again in 2006, and certain oil hedges were deemed ineffective in the fourth

27

quarter of 2006 thereby rendering all of our commodity derivatives ineffective. For these ineffective hedges, we are required to reflect the changes in the fair value of the hedges in earnings rather than in accumulated other comprehensive loss, a component of stockholders’ equity. As applied to our hedging program, there must be a high degree of correlation between the actual prices received and the hedge prices in order to justify treatment as cash flow hedges pursuant to SFAS 133. We perform historical correlation analyses of the actual and hedged prices over an extended period of time. In the fourth quarter of 2006, we determined that certain of our oil hedges which had previously been effective, fell short of the effectiveness guidelines to be accounted for as cash flow hedges. To the extent that our hedges are deemed to be ineffective in the future, we will be exposed to volatility in earnings resulting from changes in the fair value of our hedges.

We fully paid off our Second Lien Term loan in early December 2006 with the proceeds of the 3.25% convertible senior notes offering. In the fourth quarter of 2006, we wrote off remaining deferred loan financing costs of $0.6 million which resulted from the initial funding of this loan and a subsequent amendment.

Income tax expense of $0.9 million which was non-cash, represents 35.5% of the pre-tax income in 2006. Income tax benefit of $9.4 million in 2005 represents 35% of pre-tax loss in 2005. In 2004, a revision in the deferred tax valuation allowance of $7.3 million was recorded based on the anticipated reversal of temporary differences in 2004. The net deferred tax asset as of December 31, 2006, is expected to be realized based upon expected utilization of tax net operating loss carryforwards and the projected reversal of temporary differences.

Year ended December 31, 2005 compared to year ended December 31 2004

Interest expense was $2.4 million for the year ended December 31, 2005, compared to $1.1 million for the year ended December 31, 2004, with the increase primarily attributable to a higher level of average borrowings in 2005 and a higher total interest rate.

Loss on derivatives not qualifying for hedge accounting relates to our ineffective gas hedges and amounted to $37.7 million for the year ended December 31, 2005, compared to a gain of $2.3 million for the year ended December 31, 2004. The loss in 2005 includes a realized loss of $10.7 million for the effect of settled derivatives on our ineffective gas hedges and an unrealized loss of $27.0 million for the changes in fair value of our ineffective gas hedges. Since our natural gas hedges were deemed ineffective, beginning in the fourth quarter of 2004, we have been required to reflect the changes in the fair value of our natural gas hedges in earnings rather than in accumulated other comprehensive loss, a component of stockholders’ equity. In the fourth quarter of 2004, we initially determined that our gas hedges fell short of the effectiveness guidelines to be accounted for as cash flow hedges and, likewise, made the same determination in each of the four quarters of 2005.

Gain on litigation judgment of $2.1 million for the year ended December 31, 2004, resulted from the final judgment ordered by the trial judge in our favor our litigation against the operator of the Lafitte field. See Item 3. “Legal Proceedings.”

Income taxes from continuing operations were benefits of $9.4 million and $1.7 million for the years ended December 31, 2005 and 2004, respectively, representing 35% of the pre-tax loss in 2005, and the $7.3 million revision of the deferred tax valuation allowance in 2004.

Income from discontinued operations, net of income taxes, was $0.7 million for the year ended December 31, 2004, consisted largely of the pre-tax gain realized on the sale of our operated interests in the Marholl and Sean Andrew fields, along with our non-operated interests in the Ackerly field, all of which were located in West Texas.

Liquidity and Capital Resources

Our principal requirements for capital are to fund our exploration and development activities and to satisfy our contractual obligations. These obligations include the repayment of debt and any amounts owing during the period relating to our hedging positions. Our uses of capital include the following:

• Drilling and completing new natural gas and oil wells;

• Constructing and installing new production infrastructure;

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• Acquiring and maintaining our lease position, specifically in the Cotton Valley Trend;

• Plugging and abandoning depleted or uneconomic wells.

Our capital budget for 2007 is $275 million. We continue to evaluate our capital budget throughout the year.

Future commitments

The table below provides estimates of the timing of future payments that we are obligated to make based on agreements in place at December 31, 2006. See Note 4, “Long-Term Debt” and Note 10, “Commitments and Contingencies” to our consolidated financial statements for additional information.

Payments due by Period

	Note	Total		2007		2008		2009		2010		2011		After 2011
	(in thousands)
Contractual Obligations
Long term debt (1)	4	$	201,500	$	—	$	—	$	—	$	26,500	$	175,000		—
Operating leases for office space	10		1,992		701		710		491		48		42		—
Drilling rig commitments	10		80,247		45,983		24,956		9,308		—		—		—
Transportation contracts	10		2,159		758		540		540		321		—		—
Total contractual obligations (2)		$	285,898	$	47,442	$	26,206	$	10,339	$	26,869	$	175,042	$	—

(1) The $175.0 million convertible senior notes have a provision at the end of years 5, 10 and 15, for the investors to demand payment on these dates; the first such date is December 1, 2011.

(2) This table does not include the estimated liability for dismantlement, abandonment and restoration costs of oil and gas properties of $9.6 million. The Company records a separate liability for the fair value of this asset retirement obligation. See Note 3, “Asset Retirement Obligation” to our consolidated financial statements.

Capital Resources

We intend to fund our capital expenditure program, contractual commitments, including settlement of derivative contracts and future acquisitions with cash flows from our operations, borrowings under our revolving bank credit facility and the proceeds from the 2007 sale of South Louisiana properties. In the future, we may also access public markets to issue additional debt and/or equity securities.

At December 31, 2006, we had $123.5 million of excess borrowing capacity under our revolving bank credit facility. Our primary sources of cash during 2006 were from funds generated from operations, bank borrowings and proceeds received from the issuance of $175.0 million of convertible notes in December 2006. Cash was used primarily to fund exploration and development expenditures. During 2006 we made aggregate cash payments of $7.3 million for interest. There were no payments made in 2006 for federal income taxes. The table below summarizes the sources of cash during 2006, 2005 and 2004:

	Year Ended December 31,									Year Ended December 31,
Cash flow statement information:	2006			2005			Variance			2005			2004			Variance
	(in thousands)
Net cash:
Provided by operating activities	$	65,133		$	45,562		$	19,571		$	45,562		$	41,028		$	4,534
Used in investing activities		(258,737	)		(163,571	)		(95,166	)		(163,571	)		(45,414	)		(118,157	)
Provided by financing activities		179,946			134,402			45,544			134,402			6,346			128,056
Increase (decrease) in cash and cash equivalents	$	(13,658	)	$	16,393		$	(30,051	)	$	16,393		$	1,960		$	14,433

At December 31, 2006, we had a working capital deficit of $22.2 million and long-term debt of $201.5 million. The working capital deficit was due to the typical timing difference between the expenditure of funds and accruals resulting from drilling and completion activities.

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Cash Flows

Year ended December 31, 2006 compared to year ended December 31, 2005

Operating activities.    Cash flow from operations is dependent upon our ability to increase production through development, exploration and acquisition activities and the price of oil and natural gas. Our cash flow from operations is also impacted by changes in working capital. Net cash provided by operating activities increased to $65.1 million, up 43% from $45.6 million in 2005. As previously mentioned, the 67% increase in operating revenues due to higher production volumes drove the increased cash flow in 2006. Operating cash flow amounts are net of changes in our current assets and current liabilities, which resulted in increases of $4.9 million and $13.2 million for the years ended December 31, 2006 and 2005, respectively.

Investing activities.    Net cash used in investing activities was $258.7 million for the year ended December 31, 2006, compared to $163.6 million for 2005. Of the $258.7 million, approximately $211.0 million was spent for drilling and completion activities in the Cotton Valley Trend, versus $139.9 million in 2005.

Financing activities.    Net cash provided by financing activities was $179.9 million in 2006 versus $134.4 million in 2005. The majority of our net financing cash flows came from the $175.0 million in convertible note proceeds, and the $29.0 million in convertible preferred proceeds received in 2006.

Year ended December 31, 2005 compared to year ended December 31, 2004

Operating activities.    Net cash provided by operating activities increased to $45.6 million, up 11% from $41.0 million in 2004. The increases in 2005 were a result of the increases in natural gas and crude oil prices and production levels in 2005 compared to 2004, partially offset by increases in lease operating expenses, exploration expenses and general and administrative expenses. Including the effect of settled derivatives, sales of oil and gas increased $12.4 million in 2005 compared to 2004, with realized crude oil and natural gas prices and production volumes both increasing 13% in 2005 compared to 2004. Operating cash flow amounts are net of changes in our current assets and current liabilities, which resulted in increases to our operating cash flow in the amounts of $13.2 million and $14.1 million, respectively, in the years ended December 31, 2005 and 2004, reflecting increased revenue and expenditure activity associated with our Cotton Valley Trend wells.

Investing activities.    Net cash used in investing activities was $163.6 million for the year ended December 31, 2005, compared to $45.4 million for the year ended December 31, 2004. For the year ended December 31, 2005, capital expenditures totaled $164.6 million primarily due to development on our Cotton Valley Trend wells, which accounted for 85% of the capital costs incurred in 2005. For the year ended December 31, 2004, capital expenditures totaled $47.5 million, as we incurred substantial drilling and leasehold acquisition costs in East Texas and Northwest Louisiana and participated in the drilling of two successful exploratory wells and one successful sidetrack well in the Burrwood/West Delta 83 field. Offsetting these capital expenditures were sales of non-core properties in West Texas and another minor property in the total amount of $2.1 million.

Financing activities.    Net cash provided by financing activities was $134.4 million for the year ended December 31, 2005, compared to $6.4 million for the year ended December 31, 2004. In May 2005, we completed a public offering of 3,710,000 shares of our common stock resulting in net proceeds of $53.1 million which was used to repay all then outstanding indebtedness to BNP under a senior credit facility. On December 21, 2005, we issued and sold 1,650,000 shares of our Series B Convertible Preferred Stock for net proceeds as well as bank borrowings of approximately $79.8 million through a private placement.

Our senior credit facility and term loan include certain financial covenants with which we were in compliance as of December 31, 2006. We do not anticipate a lack of borrowing capacity under our senior credit facility or term loan in the foreseeable future due to an inability to meet any such financial covenants nor a reduction in our borrowing base.

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3.25% Convertible Senior Notes

In early December 2006, we issued $125.0 million in convertible senior notes. The intial purchasers’ option was exercised in full and increased the principal amount to $175.0 million. The notes mature on December 1, 2026, unless earlier converted, redeemed or repurchased. The notes will be our senior unsecured obligations and will rank equally in right of payment to all of our other existing and future indebtedness. The notes accrue interest at a rate of 3.25% annually and paid semi-annually on June 1 and December 1 beginning June 1, 2007. Prior to December 1, 2011, the notes will not be redeemable. On or after December 11, 2011, we may redeem for cash all or a portion of the notes, and the investors may require us to repay the notes on each of December 11, 2011, 2016 and 2021. The notes are convertible into shares of our common stock at a rate equal to the sum of:

a) 15.1653 shares per $1,000 principal amount of notes (equal to a “base conversion price” of approximately $65.94 per share) plus,

b) an additional amount of shares per $1,000 of principal amount of notes equal to the incremental share factor (2.6762), multiplied by a fraction, the numerator of which is the applicable stock price less the “base conversion price“ and the denominator of which is the applicable stock price.

Share Lending Agreement

With the offering of the 3.25% convertible senior notes we agreed to lend an affiliate of Bear, Stearns & Co. (BSC) a total of 3,122,263 shares of our common stock. The shares of stock were lent to the affiliate of BSC under the Share Lending Agreement. Under this agreement, BSC is entitled to offer and sell such shares and use the sale to facilitate the establishment of a hedge position by investors in the notes. BSC will receive all proceeds from such common stock offerings and lending transactions under this agreement. We will not receive any of the proceeds from these transactions. BSC is obligated to return the shares to us in the event of certain circumstances, including the redemption of the notes or the conversion of shares pursuant to the terms of the 3.25% convertible notes offering.

The 3,122,263 shares of common stock outstanding as of December 31, 2006, under the Share Lending Agreement are required to be returned to the Company. The shares are treated in basic and diluted earnings per share as if they were already returned and retired. There is no impact of the shares of common stock lent under the Share Lending Agreement in the earnings per share calculation.

Senior Credit Facility

In 2005, we amended our existing credit agreement and entered into an amended and restated senior credit agreement (the “Senior Credit Facility”) and a second lien term loan (the “Term Loan”) that expanded our borrowing capabilities and extended our credit facility for an additional two years. Total lender commitments under the Senior Credit Facility were $200.0 million which matures on February 25, 2010. Revolving borrowings under the Senior Credit Facility are subject to periodic redeterminations of the borrowing base, which is currently established at $150.0 million, and is scheduled to be redetermined in late March 2007, based upon our 2006 year-end reserve report. With a portion of the net proceeds of the offering of 3.25% Convertible Senior Notes in December 2006, we fully repaid and extinguished the $50.0 million Term Loan and repaid $113.5 million of the Revolving borrowings under the Senior Credit Facility. Interest on revolving borrowings under the Senior Credit Facility accrues at a rate calculated, at our option, at either the bank base rate plus 0.00% to 0.50%, or LIBOR plus 1.25% to 2.00%, depending on borrowing base utilization.

The terms of the Senior Credit Facility require us to maintain certain covenants. Capitalized terms are defined in the credit agreement. The covenants include:

• Current Ratio of 1.0/1.0;

• Interest Coverage Ratio which is not less than 3.0/1.0 for the trailing four quarters, and

• Total Debt no greater than 3.5 times EBITDAX (1) for the trailing four quarters.

(1) EBITDAX is defined as Earnings before interest expense, income tax, DD&A and exploration expense.

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As of December 31, 2006, we were in compliance with all of the financial covenants of the credit agreement.

Series B Convertible Preferred Stock

Our Series B Convertible Preferred Stock (the “Series B Convertible Preferred Stock”) was initially issued on December 21, 2005, in a private placement of 1,650,000 shares for net proceeds of $79.8 million (after offering costs of $2.7 million). Each share of the Series B Convertible Preferred Stock has a liquidation preference of $50 per share, aggregating to $82.5 million, and bears a dividend of 5.375% per annum. Dividends are payable quarterly in arrears beginning March 15, 2006. If we fail to pay dividends on our Series B Convertible Preferred Stock on any six dividend payment dates, whether or not consecutive, the dividend rate per annum will be increased by 1.0% until we have paid all dividends on our Series B Convertible Preferred Stock for all dividend periods up to and including the dividend payment date on which the accumulated and unpaid dividends are paid in full.

Each share is convertible at the option of the holder into our common stock, par value $0.20 per share (the “Common Stock”) at any time at an initial conversion rate of 1.5946 shares of Common Stock per share, which is equivalent to an initial conversion price of approximately $31.36 per share of Common Stock. Upon conversion of the Series B Convertible Preferred Stock, we may choose to deliver the conversion value to holders in cash, shares of Common Stock, or a combination of cash and shares of Common Stock.

If a fundamental change occurs, holders may require us in specified circumstances to repurchase all or part of the Series B Convertible Preferred Stock. In addition, upon the occurrence of a fundamental change or specified corporate events, we will under certain circumstances increase the conversion rate by a number of additional shares of Common Stock. A “fundamental change” will be deemed to have occurred if any of the following occurs:

• We consolidate or merge with or into any person or convey, transfer, sell or otherwise dispose of or lease all or substantially all of our assets to any person, or any person consolidates with or merges into us or with us, in any such event pursuant to a transaction in which our outstanding voting shares are changed into or exchanged for cash, securities, or other property, or

• We are liquidated or dissolved or adopt a plan of liquidation or dissolution.

A “fundamental change” will not be deemed to have occurred if at least 90% of the consideration in the case of a merger or consolidation under the first clause above consists of common stock traded on a U.S. national securities exchange and the Series B Preferred Stock becomes convertible solely into such common stock.

On or after December 21, 2010, we may, at our option, cause the Series B Convertible Preferred Stock to be automatically converted into that number of shares of Common Stock that are issuable at the then-prevailing conversion rate, pursuant to the Company Conversion Option. We may exercise our conversion right only if, for 20 trading days within any period of 30 consecutive trading days ending on the trading day prior to the announcement of our exercise of the option, the closing price of the Common Stock equals or exceeds 130% of the then-prevailing conversion price of the Series B Convertible Preferred Stock. The Series B Convertible Preferred Stock is non-redeemable by us.

We used the net proceeds of the offering of Series B Convertible Preferred Stock to fully repay all outstanding indebtedness under our senior revolving credit facility. The remaining net proceeds of the offering were added to our working capital to fund 2006 capital expenditures and for other general corporate purposes.

On January 23, 2006, the initial purchasers of the Series B Convertible Preferred Stock exercised their over-allotment option to purchase an additional 600,000 shares at the same price per share, resulting in net proceeds of $29.0 million, which was used to fund our 2006 capital expenditure program.

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Summary of Critical Accounting Policies

The following summarizes several of our critical accounting policies. See a complete list in Note 1 “Description of Business and Significant Accounting Policies” to our consolidated financial statements.

Proved oil and natural gas reserves

Proved reserves are defined by the SEC as those volumes of crude oil, condensate, natural gas liquids and natural gas that geological and engineering data demonstrate with reasonable certainty are recoverable from known reservoirs under existing economic and operating conditions. Proved developed reserves are volumes expected to be recovered through existing wells with existing equipment and operating methods. Although our external engineers are knowledgeable of and follow the guidelines for reserves as established by the SEC, the estimation of reserves requires the engineers to make a significant number of assumptions based on professional judgment. Estimated reserves are often subject to future revision, certain of which could be substantial, based on the availability of additional information, including: reservoir performance, new geological and geophysical data, additional drilling, technological advancements, price changes and other economic factors. Changes in oil and natural gas prices can lead to a decision to start-up or shut-in production, which can lead to revisions to reserve quantities. Reserve revisions inherently lead to adjustments of depreciation rates utilized by us. We cannot predict the types of reserve revisions that will be required in future periods.

Successful efforts accounting

We utilize the successful efforts method to account for exploration and development expenditures. Unsuccessful exploration wells, as well as other exploration expenditures such as seismic costs, are expensed and can have a significant effect on operating results. Successful exploration drilling costs, all development capital expenditures and asset retirement costs are capitalized and systematically charged to expense using the units of production method based on proved developed oil and natural gas reserves as estimated by engineers. Certain costs related to fields or areas that are not fully developed are charged to expense using the units of production method based on total proved oil and natural gas reserves.

Impairment of properties

We continually monitor our long-lived assets recorded in oil and gas properties in the Consolidated Balance Sheets to ensure that they are fairly presented. We must evaluate our properties for potential impairment when circumstances indicate that the carrying value of an asset could exceed its fair value. Performing these evaluations requires a significant amount of judgment since the results are based on estimated future events. Such events include a projection of future oil and natural gas sales prices, an estimate of the ultimate amount of recoverable proved and probable oil and natural gas reserves that will be produced from a field, the timing of this future production, future costs to produce the oil and natural gas, and future inflation levels. The need to test a property for impairment can be based on several factors, including a significant reduction in sales prices for oil and/or natural gas, unfavorable adjustments to reserves, or other changes to contracts, environmental regulations or tax laws. We cannot predict the amount of impairment charges that may be recorded in the future.

Asset retirement obligations

We are required to make estimates of the future costs of the retirement obligations of our producing oil and gas properties. This requirement necessitates us to make estimates of our property abandonment costs that, in some cases, will not be incurred until a substantial number of years in the future. Such cost estimates could be subject to significant revisions in subsequent years due to changes in regulatory requirements, technological advances and other factors which may be difficult to predict.

Income taxes

We are subject to income and other related taxes in areas in which we operate. When recording income tax expense, certain estimates are required by management due to timing and the impact of future events on when

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income tax expenses and benefits are recognized by us. We periodically evaluate our tax operating loss and other carryforwards to determine whether a gross deferred tax asset, as well as a related valuation allowance, should be recognized in our financial statements. As of December 31, 2006, and in certain prior years, we have reported a net deferred tax asset on our Consolidated Balance Sheet, after deduction of the related valuation allowance, which has been determined on the basis of management’s estimation of the likelihood of realization of the gross deferred tax asset as a deduction against future taxable income.

Derivative Instruments

As discussed in Item 7A. “Quantitative and Qualitative Disclosures About Market Risk,” we periodically utilize derivative instruments to manage both our commodity price risk and interest rate risk. We consider the use of these instruments to be hedging activities. Pursuant to derivative accounting rules, we are required to use “mark to market” accounting to reflect the fair value of such derivative instruments on our Consolidated Balance Sheet. To the extent that we are able to demonstrate that our use of derivative instruments qualifies as hedging activities, the offsetting entry to the changes in fair value of these instruments is accounted for in Other Comprehensive Income (Loss). To the extent that such derivatives are deemed to be ineffective, the offsetting entry to the changes in fair value is reflected in earnings.

At the inception of each hedge, we document that the derivative will be highly effective in offsetting expected changes in cash flows from the item hedged. A hedge must be determined to be “highly effective” under accounting rules in order to qualify for hedge accounting treatment. This assessment, which is updated quarterly, includes an evaluation of the most recent historical correlation between the derivative and the item hedged. In this analysis, changes in monthly settlement prices on our oil and gas derivatives are compared with the change in physical daily indexed prices that we receive from the field purchasers for our oil and gas production designated for hedging. Should a hedge not be “highly effective”, it no longer qualifies for hedge accounting treatment and changes in fair value of the hedge are recognized in earnings.

Price volatility within a measured month is the primary factor affecting the analysis of effectiveness of our oil and natural gas swaps. Volatility can reduce the correlation between the hedge settlement price and the price received for physical deliveries. Secondary factors contributing to changes in pricing differentials include changes in the basis differential which is the difference in the locally indexed price received for daily physical deliveries of hedged quantities and the index price used in hedge settlement, and changes in grade and quality factors of the hedged oil and natural gas production which would further impact the price received for physical deliveries.

Not withstanding the determination that certain commodity swaps in 2005 and the fourth quarter of 2006, were not highly effective, management continues to believe that our oil and gas price hedge strategy has been effective in satisfying our financial objective of providing cash flow stability.

Our hedge agreements currently consist of (a) swaps, where we receive a fixed price and pay a floating price, based on NYMEX quoted prices; and (b) collars, where we receive the excess, if any, of the floor price over the reference price, based on NYMEX quoted prices, and pay the excess, if any, of the reference price over the ceiling price. The terms of our current hedge agreements are described in Note 8 “Hedging Activities” to our consolidated financial statements.

Share-Based Compensation Plans

For all new, modified and unvested share-based payment transactions with employees, we measure at fair value and recognize as compensation expense over the requisite period. The fair value of each option award is estimated using a Black-Scholes option valuation model that requires us to develop estimates for assumptions used in the model. The Black-Scholes valuation model uses the following assumptions: expected volatility, expected term of option, risk-free interest rate and dividend yield. Expected volatility estimates are developed by

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us based on historical volatility of our stock. We use historical data to estimate the expected term of the options. The risk-free interest rate for periods within the expected life of the option is based on the U.S. Treasury yield in effect at the grant date. Our common stock does not pay dividends; therefore the dividend yield is zero.

New Accounting Pronouncements

See Note 1 “Description of Business and Significant Accounting Policies” “New Accounting Pronouncements” to our consolidated financial statements.

Off-Balance Sheet Arrangements

We do not currently utilize any off-balance sheet arrangements to enhance our liquidity and capital resource positions, or for any other purpose.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk.

Commodity Price Risk

Despite the measures taken by us to attempt to control price risk, we remain subject to price fluctuations for natural gas and crude oil sold in the spot market. Prices received for natural gas sold on the spot market are volatile due primarily to seasonality of demand and other factors beyond our control. Domestic crude oil and gas prices could have a material adverse effect on our financial position, results of operations and quantities of reserves recoverable on an economic basis.

We enter into futures contracts or other hedging agreements from time to time to manage the commodity price risk for a portion of our production. We consider these agreements to be hedging activities and, as such, monthly settlements on the contracts that qualify for hedge accounting are reflected in our crude oil and natural gas sales. Our strategy, which is administered by the Hedging Committee of the Board of Directors, and reviewed periodically by the entire Board of Directors, has been to generally hedge between 30% and 70% of our production. As of December 31, 2006, the commodity hedges we utilized were in the form of: (a) swaps, where we receive a fixed price and pay a floating price, based on NYMEX quoted prices; and (b) collars, where we receive the excess, if any, of the floor price over the reference price, based on NYMEX quoted prices, and pay the excess, if any, of the reference price over the ceiling price. See Note 8 “Hedging Activities” to our consolidated financial statements for additional information.

Our hedging contracts fall within our targeted range of 30% to 70% of our estimated net oil and gas production volumes for the applicable periods of 2006. The fair value of the crude oil and natural gas hedging contracts in place at December 31, 2006, resulted in an asset of $13.4 million. Based on oil and gas pricing in effect at December 31, 2006, a hypothetical 10% increase in oil and gas prices would have decreased the derivative asset to $11.9 million while a hypothetical 10% decrease in oil and gas prices would have increased the derivative asset to $14.9 million.

Interest Rate Risk

We have a variable-rate debt obligation that exposes us to the effects of changes in interest rates. To partially reduce our exposure to interest rate risk, from time to time we enter into interest rate swap agreements. At December 31, 2006, we had the following interest rate swaps in place with BNP (in millions).

Effective Date	Maturity Date	LIBOR Swap Rate	Notional Amount
02/27/06	02/26/07	4.08%	23.0
02/27/06	02/26/07	4.85%	17.0
02/27/07	02/26/09	4.86%	40.0

The fair value of the interest rate swap contracts in place at December 31, 2006, resulted in an asset of $0.2 million. Based on interest rates at December 31, 2006, a hypothetical 10% increase or decrease in interest rates would not have a material effect on the asset.

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Item 8.    Financial Statements and Supplementary Data

The information required here is included in the report as set forth in the “Index to Consolidated Financial Statements” on page 49.

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

None.

Item 9A.    Controls and Procedures

Disclosure Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures designed to ensure that material information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission and that any material information relating to us is recorded, processed, summarized and reported to our management including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. In designing and evaluating our disclosure controls and procedures, our management recognizes that controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving desired control objectives. In reaching a reasonable level of assurance, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC rule 13a-15(b), we have evaluated, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in rules 13a-15(c) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Our Chief Executive Officer and Chief Financial Officer, based upon their evaluation as of December 31, 2006, the end of the period covered in this report, concluded that our disclosure controls and procedures were effective.

Our management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2006, is set forth on page 50 of this Annual Report on Form 10-K and is incorporated by reference herein.

Our management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2006, has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Changes in Internal Control over Financial Reporting

The following changes in our internal control over financial reporting during our most recent fiscal quarter have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

As previously reported in our quarterly report on Form 10-Q for the quarter ended March 31, 2006, a material weakness was identified in our internal control over financial reporting with respect to recording the fair value of all outstanding derivatives. The Public Company Accounting Oversight Board’s Auditing Standard No. 2 defines a material weakness as a significant deficiency, or combination of significant 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.

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In order to remediate the material weakness, we implemented changes in our internal control over financial reporting during the quarters ended June 30, 2006, September 30, 2006, and December 31, 2006. Specifically, we now automatically receive a mark to market valuation from our existing counterparties for all outstanding derivatives. For any new contracts entered into with a new counterparty, we will concurrently request this automatic distribution. We also added another layer of review for the fair value calculation prior to review by the Chief Financial Officer.

Our management believes that these additional policies and procedures have enhanced our internal control over financial reporting relating to the determination and review of fair value calculations on outstanding derivatives. Our management also believes that, as a result of these measures described above, the material weakness was remediated and that our internal control over financial reporting is effective as of December 31, 2006, the end of the period covered in this report.

Item 9B.    Other Information.

None.

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PART III

Item 10.    Directors and Executive Officers of the Registrant and Corporate Governance

Our executive officers and directors and their ages and positions as of March 9, 2007, are as follows:

Name	Age	Position
Patrick E. Malloy, III	64	Chairman of the Board of Directors
Walter G. “Gil” Goodrich	48	Vice Chairman, Chief Executive Officer and Director
Robert C. Turnham, Jr.	49	President, Chief Operating Officer and Director
David R. Looney	50	Executive Vice President and Chief Financial Officer
Mark E. Ferchau	52	Executive Vice President
James B. Davis	44	Senior Vice President, Engineering and Operations
Henry Goodrich	76	Chairman—Emeritus and Director
Josiah T. Austin	60	Director
John T. Callaghan	52	Director
Geraldine A. Ferraro	71	Director
Michael J. Perdue	52	Director
Arthur A. Seeligson	48	Director
Gene Washington	60	Director
Steven A. Webster	55	Director

Patrick E. Malloy, III became Chairman of the Board of Directors in February 2003. He has been President and Chief Executive Officer of Malloy Enterprises, Inc., a real estate and investment holding company since 1973. In addition, Mr. Malloy served as a director of North Fork Bancorporation, Inc. (NYSE) from 1998 to 2002 and was Chairman of the Board of New York Bancorp, Inc. (NYSE) from 1991 to 1998. He joined the Company’s Board in May 2000.

Walter G. “Gil” Goodrich became Vice Chairman of the Board of Directors in February 2003. He has served as the Company’s Chief Executive Officer since August 1995. Mr. Goodrich was Goodrich Oil Company’s Vice President of Exploration from 1985 to 1989 and its President from 1989 to August 1995. He joined Goodrich Oil Company, which held interests in and served as operator of various properties owned by a predecessor of the Company, as an exploration geologist in 1980. Gil Goodrich is the son of Henry Goodrich. He has served as one of the Company’s directors since August 1995.

Robert C. Turnham, Jr. has served as the Company’s Chief Operating Officer since August 1995 and became President and Chief Operating Officer in February 2003. Mr. Turnham joined the Board of Directors of the Company in December 2006. He has held various positions in the oil and natural gas business since 1981. From 1981 to 1984, Mr. Turnham served as a financial analyst for Pennzoil. In 1984, he formed Turnham Interests, Inc. to pursue oil and natural gas investment opportunities. From 1993 to August 1995, he was a partner in and served as President of Liberty Production Company, an oil and natural gas exploration and production company.

David R. Looney joined us as Executive Vice President and Chief Financial Officer in May 2006, Mr. Looney has over twenty-five years of experience in the energy finance business, most recently as the Executive Vice President and Chief Financial Officer of Energy Partners, Ltd., a publicly traded E&P company, from March 2005 to April 2006 and Vice President, Finance and Treasurer of EOG Resources, Inc., one of the largest publicly traded E&P Companies in the U.S., from August 1999 to February 2005.

Mark E. Ferchau became Executive Vice President in April 2004. From February 2003 to April 2004, he served as our Senior Vice President, Engineering and Operations, after initially joining us as Vice President in September 2001. Mr. Ferchau previously worked in the divestment group of Forest Oil Corporation, an oil and gas exploration and production company, from December 2000 to September 2001 after the merger with

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Forcenergy Inc. Prior to the merger, he served as Production Manager for Forcenergy Inc., a publicly-held oil and gas exploration and production company, from October 1997 to December 2000. From July 1993 to October 1997, he held various positions including Vice President, Engineering of Convest Energy Corporation and Edisto Resources Corporation, which were publicly-held oil and gas exploration and development companies. From June 1982 to July 1993, Mr. Ferchau held various positions with Wagner & Brown, Ltd., a privately held oil and gas exploration and development company. Prior thereto, he held various positions with various independent oil and gas exploration and development companies and oilfield service companies.

James B. Davis became our Senior Vice President, Engineering and Operations, in January 2005. From February 2003 to December 2004, he served as our Vice President, Engineering and Operations, after initially joining us as Manager of Engineering and Operations in March 2002. Mr. Davis consulted as an independent drilling engineer from May 2001 to March 2002 and served as Senior Staff Drilling Engineer (and acting Drilling Manager during the Forest Oil acquisition) for Forcenergy Inc, responsible for daily drilling activities and engineering for GOM projects, from January 2000 to May 2001. In addition, Mr. Davis worked for Texaco E&P Inc., in various positions in production engineering and rig operations for fields throughout Southeast Louisiana and GOM projects from November 1987 to January 2000.

Henry Goodrich is the Chairman of the Board of Directors—Emeritus. Mr. Goodrich began his career as an exploration geologist with the Union Producing Company and McCord Oil Company in the 1950’s. From 1971 to 1975, Mr. Goodrich was President, Chief Executive Officer and a partner of McCord-Goodrich Oil Company. In 1975, Mr. Goodrich formed Goodrich Oil Company, which held interests in and served as operator of various properties owned by a predecessor of the Company. He was elected to our board in August 1995, and served as Chairman of the Board from March 1996 through February 2003. Mr. Goodrich is also a director of Pan American Life Insurance Company. Henry Goodrich is the father of Walter G. Goodrich.

Josiah T. Austin is the managing member of El Coronado Holdings, L.L.C., a privately owned investment holding company. He and his family own and operate agricultural properties in the state of Arizona and Sonora, Mexico through El Coronado Ranch & Cattle Company, L.L.C. and other entities. Mr. Austin previously served on the Board of Directors of Monterey Bay Bancorp of Watsonville, California, and is a prior board member of New York Bancorp, Inc., which merged with North Fork Bancorporation, Inc. (NYSE) in early 1998. He was elected to the Board of Directors of North Fork Bancorporation, Inc. in May 2004. He became one of our directors in August 2002.

John T. Callaghan is a partner with the firm of Callaghan Nawrocki LLP, an audit, tax and consulting firm with offices in Melville and Smithtown, New York. He is a Certified Public Accountant and a member of the Association of Certified Fraud Examiners. He was employed by a major accounting firm from 1979 until 1986, at which time he formed his present firm. Mr. Callaghan also serves as a director for Andrea Systems LLC. He was elected to our Board of Directors in June 2003.

Geraldine A. Ferraro is a Principal in the Government Relations Practice of Blank Rome, a national law firm. Prior to joining Blank Rome Government Relations, Ms. Ferraro was head of the Public Affairs Practice of The Global Consulting Group, a New York-based international investor relations and corporate communications firm, where she continues as a Senior Advisor. Ms. Ferraro served as a Member of Congress for three terms prior to accepting the Democratic nomination for vice-president in 1984. She is a Board member of the National Democratic Institute of International Affairs and a member of the Council on Foreign Relations and was formerly United States Ambassador to the United Nations Human Rights Commission. Ms. Ferraro has been affiliated with numerous public and private sector organizations, including serving as a director of the former New York Bancorp, Inc., a NYSE-listed company. She was elected to our Board of Directors in August 2003.

Michael J. Perdue is the President of First Community Bancorp, a publicly traded holding company and of Pacific Western Bank, a subsidiary of the holding company, based in San Diego, California. Prior to assuming his present position in October 2006, Mr. Perdue was President and Chief Executive Officer of Community Bancorp Inc., from July 2003. Prior to Community Bancorp Inc. Mr. Perdue was Executive Vice President of Entrepreneurial Corporate Group and President of its subsidiary, Entrepreneurial Capital Corporation. From

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September 1993 to April 1999, Mr. Perdue served in executive positions with Zions Bancorporation and FP Bancorp, Inc., as a result of FP Bancorp’s acquisition by Zions Bancorporation in May 1998. He has also held senior management positions with Ranpac, Inc., a real estate development company, and PacWest Bancorp. He was elected to our Board of Directors in January 2001.

Arthur A. Seeligson is currently engaged in the management of his personal investments in Houston, Texas. From 1991 to 1993, Mr. Seeligson was a Vice President, Energy Corporate Finance, at Schroder Wertheim & Company, Inc. From 1993 to 1995, Mr. Seeligson was a Principal, Corporate Finance, at Wasserstein, Perella & Co. He was primarily engaged in the management of his personal investments from 1995 through 1997. He was a managing director with the investment banking firm of Harris, Webb & Garrison from 1997 to June 2000. He has served as one of our directors since August 1995.

Gene Washington is the Director of Football Operations with the National Football League (NFL) in New York. He previously served as a professional sportscaster and as Assistant Athletic Director for Stanford University prior to assuming his present position with the NFL in 1994. Mr. Washington serves and has served on numerous corporate and civic boards, including serving as a director for Delia’s, a NYSE-listed company as well as a director of the former New York Bancorp, Inc., a NYSE-listed company. He was elected to our Board of Directors in June 2003.

Steven A. Webster is Co-Managing Partner of Avista Capital Partners, which makes private equity investments in energy, healthcare and media. From 2000 through June 2005, he was Chairman of Global Energy Partners, an affiliate of the Merchant Banking Division of Credit Suisse First Boston, which made private equity investments in the energy industry. He was Chairman and Chief Executive Officer of Falcon Drilling Company, a marine oil and gas drilling contractor from 1988 to 1997, and was President and Chief Executive Officer of its successor, R&B Falcon Corporation from 1998 to 1999. Mr. Webster is Chairman of the Board of Carrizo Oil & Gas, Inc., a NASDAQ traded oil and gas exploration company and Basic Energy Services, a NYSE traded oil service company. He serves on the board of directors of numerous other public and private companies, primarily in the energy industry. He was elected to our Board of Directors in August 2003.

Additional information required under Item 10, “Directors and Executive Officers of the Registrant, and Corporate Governance,” will be provided in our Proxy Statement for the 2006 Annual Meeting of Stockholders. Additional information regarding our corporate governance guidelines as well as the complete texts of its Code of Business Conduct and Ethics and the charters of our Audit Committee and our Compensation Committee may be found on our website at www.goodrichpetroleum.com.

Item 11.    Executive Compensation.

The information required by this Item is incorporated by reference to the information provided under the caption “Executive Compensation and Other Information” in our definitive proxy statement for the 2007 annual meeting of stockholders to be filed within 120 days from December 31, 2006.

Item 12.    Security Ownership of Certain Beneficial Owners and Management.

The information required by this Item is incorporated by reference to the information provided under the caption “Security Ownership of Certain Beneficial Owners and Management” in our definitive proxy statement for the 2007 annual meeting of stockholders to be filed within 120 days from December 31, 2006.

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

The information required by this Item is incorporated by reference to the information provided under the caption “Certain Relationships and Other Transactions” in our definitive proxy statement for the 2007 annual meeting of stockholders to be filed within 120 days from December 31, 2006.

Item 14.    Principal Accounting Fees and Services.

The information required by this Item is incorporated by reference to the information provided under the caption “Audit and Non-Audit Fees” in our definitive proxy statement for the 2007 annual meeting of stockholders to be filed within 120 days from December 31, 2006.

40

PART IV

Item 15.    Exhibits and Financial Statement Schedules

(a)    (1) and (2) Financial Statements and Financial Statement Schedules

See “Index to Consolidated Financial Statements” on page 48.

(a)    (3) Exhibits

1.1	Purchase Agreement by among Goodrich Petroleum Corporation, Bear, Sterns & Co. Inc. and BNP Paribas Securities Corp. and dated December 16, 2005 (Incorporated by reference to Exhibit 1.1 of the Company’s Form 8-K filed on December 16, 2005).
3.1	Amended and Restated Certificate of Incorporation of Goodrich Petroleum Corporation dated March 12, 1998 (Incorporated by reference to Exhibit 3.1 of the Company’s First Amended Registration Statement on Form S-1 (Registration No. 333-47078) filed November 22, 2000).
3.2	Bylaws of the Company, as amended and restated (Incorporated by reference to Exhibit 3.3 of the Company’s First Amended Registration Statement on Form S-1 (Registration No. 333-47078) filed November 22, 2000).
3.3	Certificate of Designation of 5.375% Series B Cumulative Convertible Preferred Stock (Incorporated by reference to Exhibit 1.1 of the Company’s Form 8-K filed on December 22, 2005).
4.1	Specimen Common Stock Certificate (Incorporated by reference to Exhibit 4.6 of the Company’s Registration Statement filed February 20, 1996 on Form S-8 (File No. 33-01077)).
4.2	Credit Agreement between Goodrich Petroleum Company, L.L.C. and BNP Paribas dated November 9, 2001 (Incorporated by reference to Exhibit 4.2 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2001).
4.3	Registration Rights Agreement dated December 21, 2005 among the Company, Bear, Sterns & Co. Inc. and BNP Paribas Securities Corp. (Incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on December 22, 2005).
4.4†	Goodrich Petroleum Corporation 2006 Long-Term Incentive Plan (Incorporated by reference to the Company’s Proxy Statement filed April 17, 2006).
4.5†	Form of Grant of Restricted Phantom Stock (1995 Stock Option Plan) (Incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-8 filed on October 23, 2006)
4.6†	Form of Grant of Restricted Phantom Stock (2006 Long-Term Incentive Plan) (Incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-8 filed on October 23, 2006).
4.7†	Form of Director Stock Option Agreement (with vesting schedule) (Incorporated by reference to Exhibit 4.4 to the Company’s Registration Statement on Form S-8 filed on October 23, 2006).
4.8†	Form of Director Stock Option Agreement (immediate vesting) (Incorporated by reference to Exhibit 4.5 to the Company’s Registration Statement on Form S-8 filed on October 23, 2006).
4.9†	Form of Incentive Stock Option Agreement (Incorporated by reference to Exhibit 4.6 to the Company’s Registration Statement on Form S-8 filed on October 23, 2006).
4.10†	Form of Nonqualified Option Agreement (Incorporated by reference to Exhibit 4.7 to the Company’s Registration Statement on Form S-8 filed on October 23, 2006).
*4.11	Registration Rights Agreement dated December 6, 2006 among Goodrich Petroleum Corporation, Bear, Sterns & Co. Inc., Deutsche Bank Securities Corp. and BNP Paribus Securities Corp.
*4.12	Indenture, dated December 6, 2006, between Goodrich Petroleum Corporation and Wells Fargo Bank, National Association, as Trustee.
10.1†	Goodrich Petroleum Corporation 1995 Stock Option Plan (Incorporated by reference to Exhibit 10.21 to the Company’s Registration Statement filed June 13, 1995 on Form S-4 (File No. 33-58631)).
10.2†	Consulting Services Agreement between Patrick E. Malloy and Goodrich Petroleum Corporation dated June 1, 2001 (Incorporated by reference to Exhibit 10.3 of the Company’s Annual Report filed on Form 10-K for the year ended December 31, 2001).

41

10.3 †	Goodrich Petroleum Corporation 1997 Non-Employee Director Compensation Plan (Incorporated by reference to the Company’s Proxy Statement filed April 27, 1998).
10.4	Form of Subscription Agreement dated September 27, 1999 (Incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K dated October 15, 1999).
10.5	Purchase and Sale Agreement between Goodrich Petroleum Company, LLC and Malloy Energy Company, LLC, dated March 4, 2002 (Incorporated by reference to Exhibit 10.7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2002).
10.6	Amended and Restated Credit Agreement between Goodrich Petroleum Company, L.L.C. and BNP Paribas dated February 25, 2005 (Incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on April 21, 2005).
10.7†	Severance Agreement between the Company and Walter G. Goodrich, dated April 25, 2003 (Incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K filed on April 21, 2005)
10.8†	Severance Agreement between the Company and Robert C. Turnham, Jr., dated April 25, 2003 (Incorporated by reference to Exhibit 10.3 of the Company’s Form 8-K filed on April 21, 2005)
10.9	First Amendment to the Amended and Restated Credit Agreement between Goodrich Petroleum Company, L.L.C. and BNP Paribas dated April 29, 2005 (Incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report Form 10-Q for the quarterly period ended March 31, 2005).
10.10	Amended and Restated Credit Agreement between Goodrich Petroleum Company, L.L.C. and BNP Paribas dated November 17, 2005 (Incorporated by reference to Exhibit 4.2 of the Company’s Form 8-K filed on November 23, 2005).
10.11	Second Lien Term Loan Agreement among Goodrich Petroleum Company L.L.C., BNP Paribas and Certain Lenders, dated as of November 17, 2005 (Incorporated by reference to Exhibit 4.3 of the Company’s Form 8-K filed on November 23, 2005).
10.12	First Amendment to Amended and Restated Credit Agreement between Goodrich Petroleum Company, L.L.C. and BNP Paribas dated as of December 14, 2005 (Incorporated by reference to Exhibit 4.1 of the Company’s Form 8-K filed on December 20, 2005).
10.13	First Amendment to Second Lien Term Loan Agreement among Goodrich Petroleum Company, L.L.C., BNP Paribas and Certain Lenders, dated as of December 14, 2005 (Incorporated by reference to Exhibit 4.2 of the Company’s Form 8-K filed on December 20, 2005).
10.14†	Letter Agreement by and between D. Hughes Walter, Jr. and Goodrich Petroleum Corporation dated May 8, 2006 (Incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on May 10, 2006).
10.15	Second Amendment to Amended and Restated Credit Agreement between Goodrich Petroleum Company, L.L.C. and BNP Paribas, dated as of June 21, 2006 (Incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2006).
10.16	Second Amendment to Second Lien Term Loan Agreement among Goodrich Petroleum Company, L.L.C. and BNP Paribas and Certain Lenders, dated as of June 21, 2006 (Incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q filed on August 9, 2006).
10.17	Third Amendment to Amended and Restated Credit Agreement between Goodrich Petroleum Company, L.L.C. and BNP Paribas and Certain Lenders, dated as of August 30, 2006 (Incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on September 6, 2006).
10.18	Third Amendment to Second Lien Term Loan Agreement among Goodrich Petroleum Company, L.L.C. and BNP Paribas and Certain Lenders, dated as of August 30, 2006 (Incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K filed on September 6, 2006).
10.19	Share Lending Agreement, dated November 30, 2006, among Goodrich Petroleum Corporation, Bear, Stearns & Co. Inc. and Bear Stearns International Limited (Incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K filed on December 4, 2006).

42

10.20	Forth Amendment to Amended and Restated Credit Agreement between Goodrich Petroleum Company, L.L.C. and BNP Paribas and Certain Lenders, dated as of November 30, 2006 (Incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K filed on December 4, 2006).
10.21	Severance Agreement with James Davis dated December 12, 2006 (Incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on January 8, 2007).
10.22	Severance Agreement with David R. Looney dated May 8, 2006 (Incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on January 10, 2007).
10.23	Severance Agreement wit Mark E. Ferchau dated April 1, 2005 (Incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K filed on January 10, 2007).
10.24	Purchase and Sale Agreement, dated January 12, 2007, among Goodrich Petroleum Corporation, Malloy Energy Company, LLC and Hilcorp Energy I, L.P. (Incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on January 19, 2007).
10.25†	Goodrich Petroleum Corporation Annual Bonus Plan.
*12.1	Ratio of Earnings to Fixed Charges
*12.2	Ratio of Earnings to Fixed Charges and Preference Securities Dividends
21	Subsidiaries of the Registrant
	Goodrich Petroleum Company LLC—organized in state of Louisiana
	Goodrich Petroleum Company—Lafitte, LLC—organized in state of Louisiana
	Drilling & Work over Company, Inc.—incorporated in state of Louisiana
	LECE, Inc.—incorporated in the state of Texas
*23.1	Consent of KPMG LLP—Independent Registered Public Accounting Firm
*23.2	Consent of Netherland, Sewell & Associates, Inc.
*24.1	Power of Attorney (included on signature page hereto).
*31.1	Certification by Chief Executive Officer Pursuant to 15 U.S.C. Section 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2	Certification by Chief Financial Officer Pursuant to 15 U.S.C. Section 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*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.
*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.

* Filed herewith.

† Denotes management contract or compensatory plan or arrangement.

43

GLOSSARY OF CERTAIN OIL AND GAS TERMS

As used herein, the following terms have specific meanings as set forth below:

MBbls	Barrels of crude oil or other liquid hydrocarbons
Bcf	Billion cubic feet
Bcfe	Billion cubic feet equivalent
MBbls	Thousand barrels of crude oil or other liquid hydrocarbons
Mcf	Thousand cubic feet of natural gas
Mcfe	Thousand cubic feet equivalent
MMBbls	Million barrels of crude oil or other liquid hydrocarbons
MMBtu	Million British thermal units
MMcf	Million cubic feet of natural gas
MMcfe	Million cubic feet equivalent
MMBoe	Million barrels of crude oil or other liquid hydrocarbons equivalent
SEC	United States Securities and Exchange Commission
U.S.	United States

Crude oil and other liquid hydrocarbons are converted into cubic feet of gas equivalent based on six Mcf of gas to one barrel of crude oil or other liquid hydrocarbons.

Development well is a well drilled within the proved area of an oil or natural gas field to the depth of a stratigraphic horizon known to be productive.

Dry hole is a well found to be incapable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of such production exceed production expenses and taxes.

Exploratory well is a well drilled to find and produce oil or natural gas reserves in an unproved area, to find a new reservoir in a field previously found to be productive of oil or gas in another reservoir, or to extend a known reservoir.

Farm-in or farm-out is an agreement whereby the owner of a working interest in an oil and gas lease or license assigns the working interest or a portion thereof to another party who desires to drill on the leased or licensed acreage. Generally, the assignee is required to drill one or more wells in order to earn its interest in the acreage. The assignor (the “farmor”) usually retains a royalty or reversionary interest in the lease. The interest received by an assignee is a “farm-in,” while the interest transferred by the assignor is a “farm-out.”

Field is an area consisting of a single reservoir or multiple reservoirs all grouped on or related to the same individual geological structural feature or stratigraphic condition.

PV10 is the pre-tax present value, discounted at 10% per year, of estimated future net revenues from the production of proved reserves, computed by applying sales prices in effect as of the dates of such estimates and held constant throughout the productive life of the reserves (except for consideration of price changes to the extent provided by contractual arrangements), and deducting the estimated future costs to be incurred in developing, producing and abandoning the proved reserves (computed based on current costs and assuming continuation of existing economic conditions).

Productive well is a well that is producing or is capable of production, including natural gas wells awaiting pipeline connections to commence deliveries and oil wells awaiting connection to production facilities.

Proved reserves are the estimated quantities of oil and gas which geological and engineering data demonstrate, with reasonable certainty, can be recovered in future years from known reservoirs under existing economic and operating conditions. Reservoirs are considered proved if shown to be economically producible by either actual production or conclusive formation tests.

44

Proved developed reserves are the portion of proved reserves that can be expected to be recovered through existing wells with existing equipment and operating methods.

Proved undeveloped reserves are the portion of proved reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.

Working interest is the operating interest that gives the owner the right to drill, produce and conduct operating activities on the property and a share of production.

Workover is a series of operations on a producing well to restore or increase production.

45

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GOODRICH PETROLEUM CORPORATION
By:	/s/    WALTER G. GOODRICH
	Walter G. Goodrich Chief Executive Officer

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints Walter G. Goodrich and David R. Looney and each of them, his true and lawful attorney-in-fact and agent, with full powers of substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report of Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting to said attorneys-in-fact, and each of them, full power and authority to perform any other act on behalf of the undersigned required to be done in connection therewith.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant in the capacities indicated on March 13, 2007.

Signature	Title
/s/    WALTER G. GOODRICH         Walter G. Goodrich	Vice Chairman, Chief Executive Officer and Director (Principal Executive Officer)
/s/    DAVID R. LOONEY         David R. Looney	Executive Vice President and Chief Financial Officer (Principal Financial Officer)
/s/    JAN L. SCHOTT         Jan L. Schott	Vice President and Controller (Principal Accounting Officer)
/s/    PATRICK E. MALLOY, III         Patrick E. Malloy, III	Chairman of Board of Directors
/s/    ROBERT C. TURNHAM, JR.         Robert C. Turnham, Jr.	President, Chief Operating Officer and Director
/s/    JOSIAH T. AUSTIN         Josiah T. Austin	Director
/s/    JOHN T. CALLAGHAN         John T. Callaghan	Director
/s/    GERALDINE A. FERRARO         Geraldine A. Ferraro	Director
/s/    HENRY GOODRICH         Henry Goodrich	Director

46

Signature	Title
/s/    MICHAEL J. PERDUE         Michael J. Perdue	Director
/s/    ARTHUR A. SEELIGSON         Arthur A. Seeligson	Director
/s/    GENE WASHINGTON         Gene Washington	Director
/s/    STEVEN A. WEBSTER         Steven A. Webster	Director

47

GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Management’s Annual Report on Internal Controls over Financial Reporting	49
Report of Independent Registered Public Accounting Firm—Consolidated Financial Statements	50
Report of Independent Registered Public Accounting Firm—Internal Controls over Financial Reporting	51
Consolidated Balance Sheets as of December 31, 2006 and 2005	52
Consolidated Statements of Operations for the years ended December 31, 2006, 2005 and 2004	53
Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004	54
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2006, 2005 and 2004	55
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2006, 2005 and 2004	56
Notes to Consolidated Financial Statements	57

48

MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROLS

OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rules 13a-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is a process designed 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. Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and board of directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

We assessed the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our evaluation under the framework in Internal Control—Integrated Framework, we have concluded that our internal control over financial reporting was effective as of December 31, 2006. Our assessment of the effectiveness of our internal control over financial reporting as of December 31, 2006 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which is included on page 52.

Management of Goodrich Petroleum Corporation

49

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Goodrich Petroleum Corporation:

We have audited the accompanying consolidated balance sheets of Goodrich Petroleum Corporation and Subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of operations, cash flows, stockholders’ equity and comprehensive income (loss) for each of the years in the three-year period ended December 31, 2006. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with 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. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Goodrich Petroleum Corporation and Subsidiaries as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, effective January 1, 2006, the Company changed its method of accounting for share based payments.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Goodrich Petroleum Corporation’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 14, 2007 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

KPMG LLP

New Orleans, Louisiana

March 14, 2007

50

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Goodrich Petroleum Corporation:

We have audited management’s assessment, included in the accompanying report, “Management’s Annual Report on Internal Controls over Financial Reporting”, that Goodrich Petroleum Corporation and subsidiaries maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Goodrich Petroleum Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit 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 effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Goodrich Petroleum Corporation and subsidiaries maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, Goodrich Petroleum Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Goodrich Petroleum Corporation and subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of operations, cash flows, stockholders’ equity, and comprehensive income (loss), for each of the years in the three-year period ended December 31, 2006, and our report dated March 14, 2007 expressed an unqualified opinion on those consolidated financial statements.

KPMG LLP

New Orleans, Louisiana

March 14, 2007

51

GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Amounts)

	December 31,
	2006			2005
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	6,184		$	19,842
Accounts receivable, trade and other, net of allowance		9,665			6,397
Accrued oil and gas revenue		10,689			11,863
Fair value of oil and gas derivatives		13,419			—
Fair value of interest rate derivatives		219			107
Prepaid expenses and other		994			463
Total current assets		41,170			38,672
PROPERTY AND EQUIPMENT:
Oil and gas properties (successful efforts method)		575,666			316,286
Furniture, fixtures and equipment		1,463			1,075
		577,129			317,361
Less: Accumulated depletion, depreciation and amortization		(156,509	)		(74,229	)
Net property and equipment		420,620			243,132
OTHER ASSETS:
Restricted cash and investments		2,039			2,039
Deferred tax asset		9,705			11,580
Other		5,730			1,103
Total other assets		17,474			14,722
TOTAL ASSETS	$	479,264		$	296,526
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	36,263		$	31,574
Accrued liabilities		26,811			15,973
Fair value of oil and gas derivatives		—			23,271
Accrued abandonment costs		263			92
Total current liabilities		63,337			70,910
LONG-TERM DEBT		201,500			30,000
Accrued abandonment costs		9,294			7,868
Fair value of oil and gas derivatives		—			6,159
Total liabilities		274,131			114,937
Commitments and contingencies (See Note 10)
STOCKHOLDERS’ EQUITY:
Preferred stock: 10,000,000 shares authorized:
Series A convertible preferred stock, $1.00 par value, issued and outstanding none and 791,968 shares, respectively		—			792
Series B convertible preferred stock, $1.00 par value, issued and outstanding 2,250,000 and 1,650,000 shares, respectively		2,250			1,650
Common stock: $0.20 par value, 50,000,000 shares authorized; issued and outstanding 28,218,422 and 24,804,737 shares, respectively		5,049			4,961
Additional paid in capital		213,666			187,967
Accumulated deficit		(14,571	)		(8,649	)
Unamortized restricted stock awards		—			(2,066	)
Accumulated other comprehensive loss		(1,261	)		(3,066	)
Total stockholders’ equity		205,133			181,589
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	479,264		$	296,526

See accompanying notes to consolidated financial statements.

52

GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except Per Share Amounts)

	Year Ended December 31,
	2006			2005			2004
REVENUES:
Oil and gas revenues	$	113,696		$	68,387		$	44,861
Other		2,458			1,016			151
		116,154			69,403			45,012
OPERATING EXPENSES:
Lease operating expense		21,877			9,931			7,402
Production taxes		5,993			4,053			3,105
Transportation		4,013			558			—
Depreciation, depletion and amortization		52,642			25,563			11,562
Exploration		15,058			6,867			4,426
Impairment of oil and gas properties		24,790			340			—
General and administrative		17,223			8,622			5,821
(Gain) loss on sale of assets		(23	)		(235	)		(50	)
Other		1,709			512			—
		143,282			56,211			32,266
Operating income (loss)		(27,128	)		13,192			12,746
OTHER INCOME (EXPENSE):
Interest expense		(7,845	)		(2,359	)		(1,110	)
Gain (loss) on derivatives not qualifying for hedge accounting		38,128			(37,680	)		2,317
Loss on early extinguishment of debt		(612	)		—			—
Gain on litigation judgment		—			—			2,118
		29,671			(40,039	)		3,325
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		2,543			(26,847	)		16,071
INCOME TAX (EXPENSE) BENEFIT		(904	)		9,397			1,707
INCOME (LOSS) FROM CONTINUING OPERATIONS		1,639			(17,450	)		17,778
Discontinued operations including gain on sale of assets, net of tax		—			—			749
NET INCOME (LOSS)		1,639			(17,450	)		18,527
PREFERRED STOCK DIVIDENDS		6,016			755			633
PREFERRED STOCK REDEMPTION PREMIUM		1,545			—			—
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK	$	(5,922	)	$	(18,205	)	$	17,894
NET INCOME (LOSS) PER COMMON SHARE—BASIC
INCOME (LOSS) FROM CONTINUING OPERATIONS	$	0.07		$	(0.75	)	$	0.91
DISCONTINUED OPERATIONS		—						0.04
NET INCOME (LOSS)	$	0.07		$	(0.75	)	$	0.95
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK	$	(0.24	)	$	(0.78	)	$	0.92
NET INCOME (LOSS) PER COMMON SHARE—DILUTED
INCOME (LOSS) FROM CONTINUING OPERATIONS	$	0.06		$	(0.75	)	$	0.87
DISCONTINUED OPERATIONS	$	—		$	—			0.04
NET INCOME (LOSS)	$	0.06		$	(0.75	)	$	0.91
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK	$	(0.24	)	$	(0.78	)	$	0.88
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—BASIC		24,948			23,333			19,552
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—DILUTED		25,412			23,333			20,347

See accompanying notes to consolidated financial statements.

53

GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

	Year Ended December 31,
	2006			2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss)	$	1,639		$	(17,450	)	$	18,527
Adjustments to reconcile net income (loss) to net cash provided by operating activities—
Depletion, depreciation, and amortization		52,642			25,563			11,562
Unrealized (gain) loss on derivatives not qualifying for hedge accounting		(40,185	)		26,960			(2,317	)
Deferred income taxes		904			(9,396	)		(1,303	)
Dry hole costs		7,926			2,014			—
Amortization of leasehold costs		5,488			3,344			1,035
Impairment of oil and gas properties		24,790			340			—
Stock based compensation (non-cash)		5,962			1,383			1,031
Loss on early extinguishment of debt		612			—			—
Gain on sale of assets		(23	)		(235	)		(814	)
Non-cash effect of discontinued operations, net		—			—			155
Other non-cash items		476			(156	)		(967	)
Change in assets and liabilities:
Accounts receivable, trade and other, net of allowance		(3,268	)		786			(3,683	)
Accrued oil and gas revenue		1,174			(8,741	)		(293	)
Prepaid expenses and other		(531	)		169			(280	)
Accounts payable		4,689			8,222			16,644
Accrued liabilities		2,838			12,759			1,731
Net cash provided by operating activities		65,133			45,562			41,028
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(261,435	)		(164,551	)		(47,501	)
Proceeds from sale of assets		2,698			980			2,087
Net cash used in investing activities		(258,737	)		(163,571	)		(45,414	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of bank borrowings		(184,500	)		(118,500	)		(1,000	)
Proceeds from bank borrowings		181,000			121,500			8,000
Proceeds from convertible note offering		175,000			—			—
Net proceeds from common stock offering		—			53,112			—
Net proceeds from preferred stock offering		28,973			79,775			—
Redemption of preferred stock		(9,319	)		—			—
Exercise of stock options and warrants		406			477			340
Production payments		—			(297	)		(361	)
Deferred financing costs		(5,598	)		(971	)		—
Preferred stock dividends		(6,016	)		(634	)		(633	)
Other		—			(60	)		—
Net cash provided by financing activities		179,946			134,402			6,346
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(13,658	)		16,393			1,960
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		19,842			3,449			1,489
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	6,184		$	19,842		$	3,449
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID DURING THE YEAR FOR INTEREST	$	7,284		$	1,862		$	865
CASH PAID DURING THE YEAR FOR INCOME TAXES	$	—		$	110		$	30

See accompanying notes to consolidated financial statements.

54

GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In Thousands)

	2006					2005				2004
	Shares		Amount			Shares	Amount			Shares	Amount
Series A Preferred Stock
Balance, beginning of year	792		$	792		792	$	792		792	$	792
Offering of preferred stock	(792	)		(792	)	—		—		—		—
Balance, end of year	—		$	—		792	$	792		792	$	792
Series B Preferred Stock
Balance, beginning of year	1,650		$	1,650		—	$	—		—	$	—
Offering of preferred stock	—			—		1,650		1,650		—		—
Issuance of preferred stock	600			600		—		—		—		—
Balance, end of year	2,250		$	2,250		1,650	$	1,650		—	$	—
Common Stock
Balance, beginning of year	24,805		$	4,961		20,587	$	4,117		18,130	$	3,626
Offering of common stock	—			—		3,710		742		—		—
Redemption of Series A preferred stock	6			1		—		—		—		—
Issuance and amortization of restricted stock	182			36		123		25		52		10
Exercise of stock options and warrants	66			44		371		74		2,376		475
Director stock grants	37			7		14		3		29		6
Shares pursuant to share lending agreement	3,122			—		—		—		—		—
Balance, end of year	28,218		$	5,049		24,805	$	4,961		20,587	$	4,117
Paid-in Capital
Balance, beginning of year			$	187,967			$	55,409			$	53,359
Offering of common stock				—				52,370				—
Offering of preferred stock				28,373				78,125				—
Redemption of Series A preferred stock				(6,983	)			—				—
Issuance and amortization of restricted stock				2,205				1,423				1,951
Reclassification from unamortized restricted stock awards upon adoption of FAS 123R				(2,066	)			—				—
Stock based compensation				2,487				—				—
Exercise of stock options and warrants				295				403				(135	)
Director stock grants				1,388				237				234
Balance, end of year			$	213,666			$	187,967			$	55,409
Retained Earnings (Deficit)
Balance, beginning of year			$	(8,649	)		$	9,556			$	(8,338	)
Net income (loss)				1,639				(17,450	)			18,527
Redemption of Series A preferred stock				(1,545	)			—				—
Preferred stock dividends				(6,016	)			(755	)			(633	)
Balance, end of year			$	(14,571	)		$	(8,649	)		$	9,556
Unamortized Restricted Stock Awards
Balance, beginning of year			$	(2,066	)		$	(1,762	)		$	(382	)
Issuance and amortization of restricted stock				—				(304	)			(1,380	)
Reclassification to APIC upon adoption of FAS 123R				2,066				—				—
Balance, end of year			$	—			$	(2,066	)		$	(1,762	)
Accumulated Other Comprehensive Loss
Balance, beginning of year			$	(3,066	)		$	(2,805	)		$	(998	)
Other comprehensive loss				1,805				(261	)			(1,807	)
Balance, end of year			$	(1,261	)		$	(3,066	)		$	(2,805	)
Total Stockholders’ Equity			$	205,133			$	181,589			$	65,307

See accompanying notes to consolidated financial statements.

55

GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In Thousands)

	Year Ended December 31,
	2006			2005			2004
Net income (loss)	$	1,639		$	(17,450	)	$	18,527
Other comprehensive income (loss):
Change in fair value of derivatives (1)		(1,025	)		(6,233	)		(5,909	)
Reclassification adjustment (2)		2,830			5,972			4,102
Other comprehensive income (loss)		1,805			(261	)		(1,807	)
Comprehensive income (loss)	$	3,444		$	(17,711	)	$	16,720
(1)    Net of income tax benefit of:	$	552		$	3,356		$	3,180
(2)    Net of income tax expense of:	$	1,524		$	3,216		$	2,209

See accompanying notes to consolidated financial statements.

56

GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—Description of Business and Significant Accounting Policies

We are in the primary business of exploration and production of crude oil and natural gas. We and our subsidiaries have interests in such operations in three states, primarily in Texas and Louisiana.

Principles of Consolidation—The consolidated financial statements include the financial statements of Goodrich Petroleum Corporation and its wholly-owned subsidiaries. Significant intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been made to the prior year statements to conform to the current year presentation.

Use of Estimates—Our Management has made a number of estimates and assumptions relating to the reporting of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.

Cash and Cash Equivalents—Cash and cash equivalents include cash on hand, demand deposit accounts and temporary cash investments with maturities of ninety days or less at date of purchase. Restricted cash represents amounts held in escrow for plugging and abandonment obligations which were incurred with the acquisition of our Burrwood and West Delta 83 fields in 2000.

Revenue Recognition—Revenues from the production of crude oil and natural gas properties in which we have an interest with other producers are recognized on the entitlements method. We record an asset or liability for natural gas balancing when we have purchased or sold more than our working interest share of natural gas production, respectively. At December 31, 2006 and 2005, the net assets for gas balancing were $1.5 million and $0.7 million, respectively. Differences between actual production and net working interest volumes are routinely adjusted. These differences are not significant.

Property and Equipment—We use the successful efforts method of accounting for exploration and development expenditures. Leasehold acquisition costs are capitalized. When proved reserves are found on an undeveloped property, leasehold cost is reclassified to proved properties. Significant undeveloped leases are reviewed periodically, and a valuation allowance is provided for any estimated decline in value. Cost of all other undeveloped leases is amortized over the estimated average holding period of the leases.

Costs of exploratory drilling are initially capitalized, but if proved reserves are not found the costs are subsequently expensed. All other exploratory costs are charged to expense as incurred. Development costs are capitalized, including the cost of unsuccessful development wells.

We recognize an impairment when the net of future cash inflows expected to be generated by an identifiable long-lived asset and cash outflows expected to be required to obtain those cash inflows is less than the carrying value of the asset. We perform this comparison for our oil and gas properties on a field-by-field basis using our estimates of future commodity prices and proved and probable reserves. The amount of such loss is measured based on the difference between the discounted value of such net future cash flows and the carrying value of the asset. For the years ended December 31, 2006 and 2005, we recorded impairments of $24.8 million and $0.3 million, respectively, as a result of certain non-core fields depleting earlier than anticipated. There were no impairments in 2004.

Depreciation and depletion of producing oil and gas properties are provided under the unit-of-production method. Proved developed reserves are used to compute unit rates for unamortized tangible and intangible development costs, and proved reserves are used for unamortized leasehold costs. As described in Note 3, we follow the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset

57

GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Retirement Obligations (“SFAS 143”). Our asset retirement obligations are amortized based upon units of production of proved reserves attributable to the properties to which the obligations relate. Some of these obligations relate to an individual producing well or group of producing wells and are amortized based on proved developed reserves attributable to that well or group of wells. Other asset retirement obligations may relate to an entire field or area that is not fully developed. Because these obligations relate to assets installed to service future development, they are amortized based on all proved reserves attributable to the field or area.

Gains and losses on disposals or retirements that are significant or include an entire depreciable or depletable property unit are included in income. All other dispositions, retirements, or abandonments are reflected in accumulated depreciation, depletion, and amortization.

Furniture, fixtures and equipment consists of office furniture, computer hardware and software and leasehold improvements. Depreciation of these assets is computed using the straight-line method over their estimated useful lives, which vary from one to five years.

Income Taxes—We follow the provisions of SFAS No. 109, “Accounting for Income Taxes”, (“SFAS 109”) which requires income taxes be accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Earnings Per Share—Basic income per common share is computed by dividing net income available for common stockholders, for each reporting period by the weighted average number of common shares outstanding during the period. Diluted income per common share is computed by dividing net income available for common stockholders for each reporting period by the weighted average number of common shares outstanding during the period, plus the effects of potentially dilutive common shares.

Derivative Instruments and Hedging Activities—We utilize derivative instruments such as futures, forwards, options, collars and swaps for purposes of hedging our exposure to fluctuations in the price of crude oil and natural gas and to hedge our exposure to changing interest rates. SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”), as amended, requires that all derivative instruments subject to the requirements of the statement be measured at fair value and recognized as assets or liabilities in the balance sheet. Upon entering into a derivative contract, we may designate the derivative as either a fair value hedge or a cash flow hedge, or decide that the contract is not a hedge, and thenceforth, mark the contract to market through earnings. We document the relationship between the derivative instrument designated as a hedge and the hedged items, as well as our objective for risk management and strategy for use of the hedging instrument to manage the risk. Derivative instruments designated as fair value or cash flow hedges are linked to specific assets and liabilities or to specific firm commitments or forecasted transactions. We assess at inception, and on an ongoing basis, whether a derivative instrument used as a hedge is highly effective in offsetting changes in the fair value or cash flows of the hedged item. A derivative that is not a highly effective hedge does not qualify for hedge accounting. Changes in the fair value of a qualifying fair value hedge are recorded in earnings along with the gain or loss on the hedged item. Changes in the fair value of a qualifying cash flow hedge are recorded in other comprehensive income, until earnings are affected by the cash flows of the hedged item. When the cash flow of the hedged item is recognized in the Statement of Operations, the fair value of the associated cash flow hedge is reclassified from other comprehensive income into earnings.

58

GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Ineffective portions of a cash flow hedging derivative’s change in fair value are recognized currently in earnings as other income (expense). If a derivative instrument no longer qualifies as a cash flow hedge, hedge accounting is discontinued and the gain or loss that was recorded in other comprehensive income is recognized over the period anticipated in the original hedge transaction.

Asset Retirement Obligations—We follow SFAS 143 (see Note 3) which applies to obligations associated with the retirement of tangible long-lived assets that result from the acquisition, construction and development of the assets. SFAS 143 requires that we record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset.

Commitments and Contingencies—Liabilities for loss contingencies, including environmental remediation costs, arising from claims, assessments, litigation, fines and penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated. Recoveries from third parties, which are probable of realization, are separately recorded, and are not offset against the related environmental liability.

Concentration of Credit Risk—Due to the nature of the industry, we sell our oil and natural gas production to a limited number of purchasers and, accordingly, amounts receivable from such purchasers could be significant. Revenues from two purchasers accounted for 35% and 15% of oil and gas revenues for the year ended December 31, 2006. For the year ended December 31, 2005, revenue from three purchasers accounted for 34%, 18% and 13% of oil and gas revenues. For the year ended December 31, 2004, revenues from two purchasers accounted for 45% and 15%, of oil and gas.

Share-Based Compensation Plans. In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”), replacing SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”), and superseding Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”). In January 2006, we adopted SFAS 123R which replaces SFAS 123 and supersedes APB 25. SFAS 123R requires new, modified and unvested share-based payment transactions with employees to be measured at fair value and recognized as compensation expense over the requisite service period. The fair value of each option award is estimated using a Black-Scholes option valuation model that requires us to develop estimates for assumptions used in the model. The Black-Scholes valuation model uses the following assumptions: expected volatility, expected term of option, risk-free interest rate and dividend yield. Expected volatility estimates are developed by us based on historical volatility of our stock. We use historical data to estimate the expected term of the options. The risk-free interest rate for periods within the expected life of the option is based on the U.S. Treasury yield in effect at the grant date. Our common stock does not pay dividends; therefore the dividend yield is zero. See Note 2.

New Accounting Pronouncements— In February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment of FASB Statement No. 115, which allows measurement at fair value of eligible financial assets and liabilities that are not otherwise measured at fair value. If the fair value option for an eligible item is elected, unrealized gains and losses for that item shall be reported in current earnings at each subsequent reporting date. SFAS 159 also establishes presentation and disclosure requirements designed to draw comparison between the different measurement attributes the company elects for similar types of assets and liabilities. SFAS 159 is effective for fiscal years beginning after November 15, 2007. Early adoption is permitted. We are currently assessing the impact of SFAS 159 on our financial statements.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108 (“SAB 108”), which became effective for fiscal years ending after November 15, 2006. SAB 108 provides

59

GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

guidance on the consideration of the effects of prior period misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB 108 requires an entity to evaluate the impact of correcting all misstatements, including both the carryover and reversing effects of prior year misstatements, on current year financial statements. If a misstatement is material to the current year financial statements, the prior year financial statements should also be corrected, even though such revision was, and continues to be, immaterial to the prior year financial statements. Correcting prior year financial statements for immaterial errors would not require previously filed reports to be amended. Such correction should be made in the current period filings. The adoption of this standard at December 31, 2006 had no impact on the company’s financial statements.

In December 2006, FASB issued a FASB Staff Position (“FSP”) EITF 00-19-2 “Accounting for Registration Payment Arrangements” (“FSP 00-19-2”). This FSP addresses an issuer’s accounting for registration payment arrangements. This FSP specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, should be separately recognized and measured in accordance with FASB Statement No. 5 “Accounting for Contingencies.” The guidance in this FSP amends FASB Statements No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity,” as well as FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” to include scope exceptions for registration payment arrangements. This FSP is effective immediately for registration payment arrangements and the financial instruments subject to those arrangements that are entered into or modified subsequent to the date of issuance of this FSP. For registration payment arrangements and financial instruments subject to those arrangements that were entered into prior to the issuance of this FSP, this is effective for financial statements issued for fiscal years beginning after December 15, 2006, and interim periods within those fiscal years. We are currently evaluating the impact that the implementation of FSP EITF 00-19-2 may have in our consolidated results of operations and financial position.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. SFAS 157 is effective for fiscal years beginning after December 15, 2007. We plan to adopt SFAS 157 beginning in the first quarter of fiscal 2008. We are currently evaluating the impact, if any, the adoption of SFAS 157 will have on our consolidated financial position, results of operations or cash flows.

In July 2006, the FASB issued Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48, which clarifies SFAS 109, establishes the criterion that an individual tax position has to meet for some or all of the benefits of that position to be recognized in our consolidated financial statements. On initial application, FIN 48 will be applied to all tax positions for which the statute of limitations remains open. Only tax positions that meet the more-likely-than-not recognition threshold at the adoption date will be recognized or continue to be recognized. The cumulative effect of applying FIN 48 will be reported as an adjustment to retained earnings at the beginning of the period in which it is adopted. FIN 48 is effective for fiscal years beginning after December 15, 2006, and we plan to adopt FIN 48 on January 1, 2007. We do not expect that the adoption of FIN 48 will have a significant effect on our consolidated financial statements or our ability to comply with our current debt covenants.

60

GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets” (“SFAS 156”), which requires all separately recognized servicing assets and servicing liabilities be initially measured at fair value. SFAS 156 permits, but does not require, the subsequent measurement of servicing assets and servicing liabilities at fair value. Adoption is required as of the beginning of the first fiscal year that begins after September 15, 2006. The adoption of SFAS 156 is not expected to have a material effect on our consolidated financial position, results of operations or cash flows.

In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and 140” (“SFAS 155”). SFAS 155 clarifies certain issues relating to embedded derivatives and beneficial interests in securitized financial assets. The provisions of SFAS 155 are effective for all financial instruments acquired or issued after fiscal years beginning after September 15, 2006. We are currently assessing the impact that the adoption of SFAS 155 will have on our consolidated financial position, results of operations or cash flows.

We do not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on our accompanying financial statements.

NOTE 2—Stock-Based Compensation

Share-Based Employee Compensation Plans

Stock Option and Incentive Programs

We have historically had two plans, which provide for stock option and other incentive awards for our key employees, consultants and directors: (a) the Goodrich Petroleum Corporation 1995 Stock Option Plan (the “1995 Plan”), which allowed grants of stock options, restricted stock awards, stock appreciation rights, long-term incentive awards and phantom stock awards, or any combination thereof, to key employees and consultants, and (b) the Goodrich Petroleum Corporation 1997 Director Compensation Plan (the “Directors’ Plan”), which allowed grants of stock and options to each director who is not and has never been an employee of the Company. The Goodrich Petroleum Corporation 1995 Stock Option Plan expired according to its original terms in late 2005; however, our Board of Directors approved the extension of the 1995 Plan through December 31, 2005 and the granting of a total of 525,000 stock options at an exercise price of $23.39 and 101,129 shares of restricted stock to certain of our employees and officers as of December 6, 2005, subject to approval at our 2006 Annual Meeting of Stockholders. As of February 9, 2006, our directors and executive officers reached a level of more than 50% ownership of our total shares of Common Stock outstanding; therefore, stockholder approval of these actions was no longer contingent. For accounting purposes, we began expensing the December 6, 2005 grants based on the grant date value as determined under SFAS 123R, which utilizes the closing price of our Common Stock as of February 9, 2006. At our 2006 Annual Meeting of Stockholders, a proposal to implement a new combined plan to replace both the Goodrich Petroleum Corporation 1995 Stock Option Plan and the Goodrich Petroleum Corporation 1997 Director Compensation Plan was approved.

Prior to the expiration of the 1995 Stock Option Plan, the two Goodrich plans had authorized grants of options to purchase up to a combined total of 2,300,000 shares of authorized but unissued common stock. Stock options under both plans were granted with an exercise price equal to the stock’s fair market value at the date of grant, and all employee stock options granted under the 1995 Stock Option Plan generally had ten year terms and three year pro rata vesting. Share options granted under the Director Plan generally became exercisable immediately and expire, if not exercised, ten years thereafter.

In May 2006, our shareholders approved our 2006 Long-Term Incentive Plan (the “2006 Plan”), at our annual meeting of stockholders. The 2006 Plan is similar to and replaces our previously adopted 1995 Incentive

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GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Plan (the “1995 Plan”) and 1997 Non-Employee Directors’ Stock Option Plan (the “Directors’ Plan”). No further awards will be granted under the previously adopted plans, however, those plans shall continue to apply to and govern awards made thereunder. Under the 2006 Plan, a maximum of 2.0 million new shares are reserved for issuance as awards of share options to officers, employees and non-employee directors. Share options granted to officers and employees will generally become exercisable in one-third increments over a three year period and to the extent not exercised, expire on the tenth anniversary of the date of grant. Share options granted to non-employee directors will usually be immediately exercisable and to the extent not exercised, expire on the tenth anniversary of the date of grant. The exercise price of share options granted under the 2006 Plan will equal the market value of the underlying stock on the date of grant.

At December 31, 2006, options to purchase 100,000 shares of our common stock were outstanding under the 2006 Plan and options to purchase 923,500 shares of our common stock were outstanding under the 1995 Plan and the Directors’ Plan. In order to satisfy share option exercises, shares are issued from authorized but unissued common stock.

A summary of stock option activity is as follows:

	Number of Options		Weighted Average Exercise Price	Range of Exercise Price		Weighted Average Remaining Contractual Life
Outstanding, January 1, 2004	236,813			$	0.75 to $5.85	7.7 yrs
Granted—1995 stock option plan	220,000		16.46
Exercised—1995 stock option plan	(2,750	)	2.90
Exercised—1997 director compensation plan	(43,563	)	3.74
Outstanding, December 31, 2004	410,500			$	0.75 to $16.46	8.5 yrs
Granted—1997 director compensation plan	150,000		19.78
Exercised—1995 stock option plan	(25,000	)	2.88
Exercised—1997 director compensation plan	(16,000	)	4.92
Outstanding, December 31, 2005	519,500		13.70	$	0.75 to $19.78	8.4 yrs
Granted—2006 stock option plan	625,000		24.10
Exercised—1995 stock option plan	(66,000	)	7.23
Forfeited—1995 stock option plan	(55,000	)	22.13
Outstanding, December 31, 2006	1,023,500		20.01	$	.75 to $27.81	8.2 yrs
Exercisable, December 31, 2004	169,500		3.20
Exercisable, December 31, 2005	372,100		12.60
Exercisable, December 31, 2006	492,167		16.36

Adoption of New Accounting Pronouncement

Effective January 1, 2006 we adopted SFAS 123R, which required us to measure the cost of stock based compensation granted, including stock options and restricted stock, based on the fair market value of the award as of the grant date, net of estimated forfeitures. SFAS 123R supersedes SFAS 123 and APB 25. We adopted SFAS 123R using the modified prospective application method of adoption, which required us to record compensation cost related to unvested stock awards as of December 31, 2005, by recognizing the unamortized grant date fair value of these awards over the remaining service periods of those awards with no change in historical reported earnings. Awards granted after December 31, 2005, are valued at fair value in accordance with provisions of SFAS 123R and recognized on a straight line basis over the service periods of each award. We estimated forfeiture rates for all unvested awards based on our historical experience. The January 1, 2006,

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GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

balance of unamortized restricted stock awards of $2.1 million was reclassified against additional paid-in-capital upon adoption of SFAS 123R. In fiscal 2006 and future periods, common stock par value will be recorded when the restricted stock is issued and additional paid-in-capital will be increased as the restricted stock compensation cost is recognized for financial reporting purposes. Prior period financial statements have not been restated.

In 2003 we commenced granting a series of restricted share awards with three year vesting periods to eligible employees. During 2006, 2005 and 2004, we contributed $7.1 million, $1.5 million and $2.1 million, respectively, under the plan through the issuance of 215,629, 75,750 and 238,750 shares, respectively, of our common stock. During 2006, 2005 and 2004, $2.1 million, $1.1 million and $0.6 million, respectively, were charged to compensation expense related to the restricted share awards. During 2006, 2005 and 2004, we recorded credits to the contra equity account of $0.4 million, $0.1 million and $0.2 million, respectively, for the value of 18,162, 12,832 and 28,918 shares, respectively, of non-vested restricted share awards that were forfeited by terminated employees. The fair value of restricted stock vested during 2006, 2005, and 2004 were $1.4 million, $0.8 million, and $0.2 million, respectively.

Total stock based compensation for the year ended December 31, 2006, of $5.7 million has been recognized as a component of general and administrative expenses in the accompanying Consolidated Financial Statements.

Prior to 2006, we accounted for stock-based compensation in accordance with APB 25 using the intrinsic value method, which did not require that compensation cost be recognized for our stock options provided the option exercise price was established at 100% of the common stock fair market value on the date of grant. Under APB 25, we were required to record expense over the vesting period for the value of restricted stock granted. Prior to 2006, we provided pro forma disclosure amounts in accordance with SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure” (“SFAS 148”), as if the fair value method defined by SFAS 123 had been applied to our stock-based compensation. Our net loss and net loss per share for the year ended December 31, 2005, would have been greater if compensation cost related to stock options had been recorded in the financial statements based on fair value at the grant dates. Our net income and net income per share for the year ended December 31, 2004, would have been less if compensation cost related to stock options had been recorded in the financial statements based on fair values at the grant dates.

Pro forma net income (loss) as if the fair value based method had been applied to all awards for the years ended December 31, 2005 and 2004, is as follows (in thousands, except per share amounts):

	2005			2004
Net income (loss) as reported	$	(17,450	)	$	18,527
Add: Stock based compensation programs recorded as expense, net of tax		743			579
Deduct: Total stock based compensation expense, net of tax		(1,236	)		(609	)
Pro forma net income (loss)	$	(17,943	)	$	18,497
Net income (loss) applicable to common stock, as reported	$	(18,205	)	$	17,894
Add: Stock based compensation programs recorded as expense, net of tax		743			579
Deduct: Total stock based compensation expense, net of tax		(1,236	)		(609	)
Pro forma net income (loss) applicable to common stock	$	(18,698	)	$	17,864
Net income (loss) applicable to common stock per share:
Basic—as reported	$	(0.78	)	$	0.92
Basic—pro forma	$	(0.80	)	$	0.91
Diluted—as reported	$	(0.78	)	$	0.88
Diluted—pro forma	$	(0.80	)	$	0.88

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GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The per share weighted average fair value of stock options granted during the years ended December 31, 2006, 2005 and 2004, were $12.98, $9.69 and $7.96, respectively, on the date of grant.

The estimated fair value of the options granted during 2006 and prior years was calculated using a Black Scholes Merton option pricing model (Black Scholes). The following schedule reflects the various assumptions included in this model as it relates to the valuation of our options:

	December 31, 2006		December 31, 2005		December 31, 2004
Risk free interest rate	4.50-4.97	%	4.50-6.00	%	6	%
Weighted average volatility	54-57	%	47-57	%	46	%
Dividend yield	0	%	0	%	0	%
Expected years until exercise	5-6		5		5

The Black Scholes model incorporates assumptions to value stock-based awards. The risk-free rate of interest for periods within the expected term of the option is based on a zero-coupon U.S. government instrument over the expected term of the equity instrument. Expected volatility is based on the historical volatility of our common stock. We generally use the midpoint of the vesting period and the life of the grant to estimate employee option exercise timing (expected term) within the valuation model. This methodology is not materially different from our historical data on exercise timing. In the case of director options, we used historical exercise behavior. Employees and directors that have different historical exercise behavior with regard to option exercise timing and forfeiture rates are considered separately for valuation and attribution purposes.

The following table summarizes the components of our stock-based compensation programs recorded as expense (in thousands):

	Year Ended December 31,
	2006			2005			2004
Restricted stock:
Pretax compensation expense	$	2,092		$	1,143		$	891
Tax benefit		(732	)		(400	)		(312	)
Restricted stock expense, net of tax	$	1,360		$	743		$	579
Director stock grants:
Pretax compensation expense	$	1,383		$	240		$	140
Tax benefit		(484	)		(84	)		(49	)
Director stock grants expense, net of tax	$	899		$	156		$	91
Stock options:
Pretax compensation expense	$	2,487		$	—		$	—
Tax benefit		(870	)		—			—
Stock option expense, net of tax	$	1,617		$	—		$	—
Total share based compensation:
Pretax compensation expense	$	5,962		$	1,383		$	1,031
Tax benefit		(2,086	)		(484	)		(361	)
Total share based compensation expense, net of tax	$	3,876		$	899		$	670

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GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

As of December 31, 2006, $6.6 million and $7.0 million of total unrecognized compensation cost related to restricted stock and stock options, respectively, is expected to be recognized over a weighted average period of approximately 1.9 years for restricted stock and 1.8 years for stock options.

Option activity under our stock option plans as of December 31, 2006, and changes during the 12 months then ended were as follows:

	Shares		Wtd. Avg. Exercise Price		Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2006	519,500		$	13.70
Granted	625,000			24.10
Exercised	(66,000	)		7.24
Forfeited	(55,000	)		22.13
Outstanding at December 31, 2006	1,023,500		$	20.01	8.2	$	16,547,788
Exercisable at December 31, 2006	492,167		$	16.36	7.5	$	9,755,141

The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value (the difference between our closing stock price on the last trading day of the fourth quarter of 2006 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, 2006. The amount of aggregate intrinsic value will change based on the fair market value of our stock. The total intrinsic value of options exercised during the year ended December 31, 2006, 2005, and 2004 was $1.7 million, $0.8 million, and $0.4 million respectively.

The following table summarizes information on unvested restricted stock outstanding as of December 31, 2006:

	Number of Shares		Weighted Average Grant-Date Fair Value
Unvested at January 1, 2006	263,890		$	11.13
Vested	(182,303	)		12.03
Granted	215,629			32.72
Forfeited	(18,162	)		21.54
Unvested at December 31, 2006	279,054		$	26.12

In May 2006, an officer of the Company resigned and the Company accelerated the vesting of (1) options to purchase 10,000 shares and (2) 2,916 shares of previously unvested restricted stock that had been issued to the officer in 2004. The affected options are required to be accounted for as a modification of an award with a service vesting condition under SFAS 123R. The fair market value was calculated immediately prior to the modification and immediately after the modification to determine the incremental fair market value. This incremental value and the unamortized balance of the restricted stock resulted in the immediate recognition of compensation expense of approximately $0.1 million.

In December of 2006, a second officer of the company resigned and the company accelerated the vesting of 6,749 shares of previously unvested restricted stock that had been issued over the period of 2004-2005. The unamortized balance of $0.1 million was immediately recognized as compensation expense.

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GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In December of 2006, the non-employee Directors of the company were granted a total of 26,824 shares of unrestricted stock to compensate them for past services. The charge in the financial statements relative to this grant is based on the fair market value of the shares at the grant date, and resulted in additional compensation expense of $1.1 million.

NOTE 3—Asset Retirement Obligations

SFAS 143 provides accounting requirements for retirement obligations associated with tangible long-lived assets and requires that an asset retirement cost should be capitalized as part of the cost of the related long-lived asset and subsequently allocated to expense using a systematic and rational method.

The reconciliation of the beginning and ending asset retirement obligation for the periods ending December 31, 2006 and 2005, is as follows (in thousands):

	December 31,
	2006			2005
Beginning balance	$	7,960		$	6,811
Liabilities incurred		1,366			1,004
Liabilities settled		(190	)		(39	)
Accretion expense (reflected in depletion, depreciation and amortization expense)		438			363
Other		(17	)		(179	)
Ending balance		9,557			7,960
Less: current portion		(263	)		(92	)
	$	9,294		$	7,868

NOTE 4—Long-Term Debt

Long-term debt consisted of the following balances (in thousands):

	December 31,
	2006		2005
Senior Credit Facility (see below for rate detail)	$	26,500		—
Second-lien Term Loan, bearing interest at a weighted average interest rate of 8.9% at December 31, 2005		—		30,000
3.25% convertible senior notes due 2026		175,000		—
Total debt		201,500		30,000
Less current maturities		—		—
Total long-term debt	$	201,500	$	30,000

In December 2006, we sold $175 million of 3.25% convertible senior notes due in December, 2026. With a portion of the proceeds of the note offering we fully repaid the outstanding balance of the second lien term loan. The notes mature on December 1, 2026, unless earlier converted, redeemed or repurchased. The notes will be our senior unsecured obligations and will rank equally in right of payment to all of our other existing and future indebtedness. The notes accrue interest at a rate of 3.25% annually and paid semi-annually on June 1 and December 1 beginning June 1, 2007.

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GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Prior to December 1, 2011, the notes will not be redeemable. On or after December 11, 2011, we may redeem for cash all or a portion of the notes, and the investors may require us to repay the notes on each of December 11, 2011, 2016 and 2021. The notes are convertible into shares of our common stock at a rate equal to the sum of

a) 15.1653 shares per $1,000 principal amount of notes (equal to a “base conversion price” of approximately $65.94 per share) plus

b) an additional amount of shares per $1,000 of principal amount of notes equal to the incremental share factor (2.6762), multiplied by a fraction, the numerator of which is the applicable stock price less the “base conversion price” and the denominator of which is the applicable stock price.

On November 17, 2005, we amended our existing credit agreement and entered into an amended and restated senior credit agreement (the “Senior Credit Facility”) and a second lien term loan (the “Term Loan”) that expanded our borrowing capabilities and extended our credit facility for an additional two years. Total lender commitments under the Senior Credit Facility were $200.0 million which matures on February 25, 2010. Revolving borrowings under the Senior Credit Facility are subject to periodic redeterminations of the borrowing base which is currently established at $150.0 million, and is currently scheduled to be redetermined in March 2007, based upon our 2006 year-end reserve report. In 2006, we fully repaid $50.0 million on the Term Loan and repaid $134.5 million of the revolving borrowings under the Senior Credit Facility. Interest on revolving borrowings under the Senior Credit Facility accrues at a rate calculated, at our option, at either the bank base rate plus 0.00% to 0.50%, or LIBOR plus 1.25% to 2.00%, depending on borrowing base utilization. At December 31, 2006, we had $123.5 million of excess borrowing capacity under our revolving bank credit facility.

The terms of the Senior Credit Facility require us to maintain certain covenants. Capitalized terms are defined in the credit agreement. The covenants include:

• Current Ratio of 1.0/1.0,

• Interest Coverage Ratio which is not less than 3.0/1.0 for the trailing four quarters, and

• Total Debt no greater than 3.5 times EBITDAX for the trailing four quarters.

EBITDAX is earnings before interest expense, income tax, DD&A and exploration expense.

As of December 31, 2006, we were in compliance with all of the financial covenants of the Amended and Restated Credit Agreement.

NOTE 5—Net Income (Loss) Per Common Share

Net income (loss) was used as the numerator in computing basic and diluted income (loss) per common share for the years ended December 31, 2006, 2005 and 2004. The following table reconciles the weighted average shares outstanding used for these computations (in thousands):

	Year Ended December 31,
	2006	2005	2004
Basic method	24,948	23,333	19,552
Stock warrants	129	—	478
Stock options and restricted stock	335	—	317
Dilutive method	25,412	23,333	20,347

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GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 6—Income Taxes

Income tax (expense) benefit consisted of the following (in thousands):

	Year Ended December 31,
	2006			2005		2004
Current:
Federal	$	—		$	—	$	—
State		—			—		—
		—			—		—
Deferred:
Federal		(904	)		9,397		1,303
State		—			—		—
		(904	)		9,397		1,303
Total	$	(904	)	$	9,397	$	1,303

The following is a reconciliation of the U.S. statutory income tax rate at 35% to our income (loss) before income taxes (in thousands):

	Year Ended December 31,
	2006			2005			2004
Income (loss) from continuing operations
Tax at U.S. statutory income tax	$	(890	)	$	9,397		$	(5,625	)
Nondeductible expenses		(14	)		(5	)		(6	)
Valuation allowance and other		—			5			7,338
		(904	)		9,397			1,707
Income (loss) from discontinued operations
Tax at U.S. statutory income tax		—			—			(404	)
		—			—			(404	)
Total tax (expense) benefit	$	(904	)	$	9,397		$	(1,303	)

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GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2006 and 2005 are presented below (in thousands).

	2006			2005
Deferred tax assets:
Differences between book and tax basis of:
Operating loss carryforwards	$	24,599		$	16,064
Statutory depletion carryforward		7,034			7,034
AMT tax credit carryforward		1,480			1,480
Derivative financial instruments		—			10,263
Compensation		421			—
Contingent liabilities and other		462			466
Total gross deferred tax assets		33,996			35,307
Less valuation allowance		(13,263	)		(13,263	)
Net deferred tax asset		20,733			22,044
Deferred tax liabilities:
Differences between book and tax basis of:
Property and equipment		(6,255	)		(10,464	)
Derivative financial instruments		(4,773	)		—
Total gross deferred tax liabilities		(11,028	)		(10,464	)
Net deferred tax asset	$	9,705		$	11,580

Our stock based deferred compensation plans generated $3.5 million of additional tax deductions in 2006 which are not recognized as a component of our deferred tax asset. We recognize the benefits from excess tax stock compensation deductions after the utilization of net operating loss carryforwards generated from operations. These excess tax benefits will be recorded as additional paid in capital when realized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based primarily upon the level of projections for future taxable income and the reversal of future taxable temporary differences over the periods which the deferred tax assets are deductible, management believes it is more likely than not we will realize the benefits of our deferred tax assets, net of the existing valuation allowance at December 31, 2006.

We have tax net operating loss carryforwards totaling $73.8 million which expire in years 2007 through 2026 as follows (in thousands):

2007	$	7,894
2008		4,286
2009		3,247
2010		6,451
2011		—
2012 through 2026		51,907
Total	$	73,785

An ownership change in accordance with Internal Revenue Code (IRC) § 382, occurred in August 1995 and again in August 2000. The net operating losses (NOLs) generated prior to August 1995 are subject to an annual

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GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

IRC § 382 limitation of $1.7 million. The IRC § 382 annual limitation for the ownership change in August 2000 is $3.6 million. The latter IRC § 382 ownership change limitation is a cumulative limitation and does not eliminate or increase the limitation on the pre-August 1995 NOLs. The NOLs generated after August 1995 and prior to August 2000, are subject to an annual limitation of $3.6 million less the annual amount utilized for pre-August 1995 NOLs. It should be noted that the same IRC § 382 limitations apply to the alternative minimum tax net operating loss carryforwards, depletion carryforwards, and alternative minimum tax credit carryforwards. The minimum tax credit carryforward (“MTC”) of $1.5 million as of December 31, 2006, will not begin to be utilized until after the available NOLs have been utilized or expired and when regular tax exceeds the current year alternative minimum tax. The unused annual IRC § 382 limitations can be carried over to subsequent years.

NOTE 7—Stockholders’ Equity

Common Stock—At December 31, 2006, a total of 7,733,613 unissued shares of Goodrich common stock were reserved for the following: (a) 1,023,500 shares for the exercise of stock options; (b) 3,587,850 shares for the conversion of Series B convertible preferred stock; and (c) 3,122,263 shares for the conversion of the 3.25% convertible senior notes. Stock warrants issued in connection with a September 1999 private placement of convertible notes and subsidiary securities at exercise prices ranging from $0.9375 to $1.50 per share expired in September 2006. Each warrant was exercisable into one share of common stock upon payment of the exercise price, however, the holders of the stock warrants could, in certain circumstances, elect a cashless exercise whereby additional “in the money” warrants could be tendered to cover the exercise price of the warrants. Pursuant to a May 2003 stock purchase agreement, the holders of 2,369,527 warrants to purchase common stock elected a cashless exercise of such warrants resulting in the issuance of 2,109,169 shares of common stock in three separate installments which closed in January, April, and July 2004. There were no further exercises of warrants to be made pursuant to the stock purchase agreement; however, in February 2005, the holder of 330,000 warrants to purchase common stock elected to exercise such warrants by paying the exercise price in cash. As of December 31, 2006, none of said warrants remained outstanding.

In May 2005, we completed a public offering of 3,710,000 shares of our common stock at an offering price of $15.40 per share resulting in net proceeds of $53.1 million, after underwriting discount and offering costs. We used the proceeds to repay all outstanding indebtedness to BNP under our previous senior credit facility in the amount of $39.5 million with the balance being added to working capital to be used primarily to fund an accelerated drilling program in the Cotton Valley Trend of East Texas and Northwest Louisiana.

Share Lending Agreement—With the offering of the 3.25% convertible senior notes we agreed to lend an affiliate of Bear, Stearns & Co. (BSC) a total of 3,122,263 shares of our common stock. The shares of stock were lent to the affiliate of BSC under the Share Lending Agreement. Under this agreement, BSC is entitled to offer and sell such shares and use the sale to facilitate the establishment of a hedge position by investors in the notes. BSC will receive all proceeds from all such common stock offerings and lending transactions under this agreement. We will not receive any of the proceeds from these transactions. BSC is obligated to return the shares to us in the event of certain circumstances, including the redemption of the notes or the conversion of shares pursuant to the terms of the 3.25% convertible notes offering.

The 3,122,263 shares of common stock outstanding as of December 31, 2006, under the Share Lending Agreement are required to be returned to the Company. The shares are treated in basic and diluted earnings per share as if they were already returned and retired. There is no impact of the shares of common stock lent under the Share Lending Agreement in the earnings per share calculation.

Preferred Stock—Our Series A Convertible Preferred Stock (the “Series A Convertible Preferred Stock”) has a par value of $1.00 per share with a liquidation preference of $10.00 per share, aggregating to $7.9 million,

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GOODRICH PETROLEUM CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

and is convertible at the option of the holder at any time, unless earlier redeemed, into shares of our common stock at an initial conversion rate of 0.4167 shares of common stock per share of Series A Convertible Preferred Stock. The Series A Convertible Preferred Stock also will automatically convert to common stock if the closing price for the Series A Convertible Preferred Stock exceeds $15.00 per share for ten consecutive trading days. The Series A Convertible Preferred Stock is redeemable in whole or in part, at $12.00 per share, plus accrued and unpaid dividends. Dividends on the Series A Convertible Preferred Stock accrue at an annual rate of 8% and are cumulative. In February 2006, we fully redeemed all issued and outstanding shares of our Series A Convertible Preferred Stock at a net cost of approximately $9.3 million.

Our Series B Convertible Preferred Stock (the “Series B Convertible Preferred Stock”) was initially issued on December 21, 2005, in a private placement of 1,650,000 shares for net proceeds of $79.8 million (after offering costs of $2.7 million). Each share of the Series B Convertible Preferred Stock has a liquidation preference of $50 per share, aggregating to $82.5 million, and bears a dividend of 5.375% per annum. Dividends are payable quarterly in arrears beginning March 15, 2006. If we fail to pay dividends on our Series B Convertible Preferred Stock on any six dividend payment dates, whether or not consecutive, the dividend rate per annum will be increased by 1.0% until we have paid all dividends on our Series B Convertible Preferred Stock for all dividend periods up to and including the dividend payment date on which the accumulated and unpaid dividends are paid in full.

Each share is convertible at the option of the holder into our common stock, par value $0.20 per share (the “Common Stock”) at any time at an initial conversion rate of 1.5946 shares of Common Stock per share, which is equivalent to an initial conversion price of approximately $31.36 per share of Common Stock. Upon conversion of the Series B Convertible Preferred Stock, we may choose to deliver the conversion value to holders in cash, shares of Common Stock, or a combination of cash and shares of Common Stock.

On or after December 21, 2010, we may, at our option, cause the Series B Convertible Preferred Stock to be automatically converted into that number of shares of Common Stock that are issuable at the then-prevailing conversion rate, pursuant to the Company Conversion Option. We may exercise our conversion right only if, for 20 trading days within any period of 30 consecutive trading days ending on the trading day prior to the announcement of our exercise of the option, the closing price of the Common Stock equals or exceeds 130% of the then-prevailing conversion price of the Series B Convertible Preferred Stock. The Series B Convertible Preferred Stock is non-redeemable by us.

We used the net proceeds of the offering of Series B Convertible Preferred Stock to fully repay all outstanding indebtedness under our senior revolving credit facility. The remaining net proceeds of the offering were added to our working capital to fund 2006 capital expenditures and for other general corporate purposes.

On January 23, 2006, the initial purchasers of the Series B Convertible Preferred Stock exercised their over-allotment option to purchase an additional 600,000 shares at the same price per share, resulting in net proceeds of $29.0 million, which was used to fund our 2006 capital expenditure program.

NOTE 8—Hedging Activities

Commodity Hedging Activity

We enter into swap contracts, costless collars or other hedging agreements from time to time to manage the commodity price risk for a portion of our production. We consider these to be hedging activities and, as such, monthly settlements on these contracts are reflected in our crude oil and natural gas sales, provided the contracts are deemed to be “effective” hedges under FAS 133. Our strategy, which is administered by the Hedging

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Committee of the Board of Directors, and reviewed periodically by the entire Board of Directors, has been to generally hedge between 30% and 70% of our production. As of December 31, 2006, the commodity hedges we utilized were in the form of: (a) swaps, where we receive a fixed price and pay a floating price, based on NYMEX quoted prices; and (b) collars, where we receive the excess, if any, of the floor price over the reference price, based on NYMEX quoted prices, and pay the excess, if any, of the reference price over the ceiling price. Hedge ineffectiveness results from difference changes in the NYMEX contract terms and the physical location, grade and quality of our oil and gas production. As of December 31, 2006, our open forward positions on our outstanding commodity hedging contracts, all of which were with either BNP or Bank of Montreal (BMO), was as follows:

Swaps	Volume	Average Price
Natural gas (MMBtu/day)
1Q 2007	10,000	$	7.77
Oil (Bbl/day)
1Q 2007	400	$	53.35
2Q 2007	400		53.35
3Q 2007	400		53.35
4Q 2007	400		53.35

Collars	Volume	Floor/Cap
Natural gas (MMBtu/day)
1Q 2007	10,000	$  9.00 – $10.65
2Q 2007	10,000	9.00 – $10.65
3Q 2007	10,000	9.00 – $10.65
4Q 2007	10,000	9.00 – $10.65
1Q 2007	15,000	$  7.00 – $13.60
2Q 2007	15,000	7.00 – $13.60
3Q 2007	15,000	7.00 – $13.60
4Q 2007	15,000	7.00 – $13.60
2Q 2007	5,000	$  7.00 – $13.90
3Q 2007	5,000	7.00 – $13.90
4Q 2007	5,000	7.00 – $13.90
Oil (Bbl/day)
1Q 2007	400	$60.00 – $76.50
2Q 2007	400	$60.00 – $76.50
3Q 2007	400	$60.00 – $76.50
4Q 2007	400	$60.00 – $76.50

The fair value of the oil and gas hedging contracts in place at December 31, 2006, resulted in a net asset of $13.4 million. As of December 31, 2006, $1.2 million (net of $0.6 million in income taxes) of deferred losses on derivative instruments accumulated in other comprehensive loss are expected to be reclassified into earnings during the next twelve months. For the year ended December 31, 2006, we recognized in earnings a gain from derivatives not qualifying for hedge accounting in the amount of $38.1 million (also included in this gain amount are settlement payments on ineffective gas and oil hedges totaling $2.1 million in 2006). This gain was recognized because our gas hedges were deemed to be ineffective for 2006, and all of our oil hedges were deemed ineffective in the fourth quarter of 2006, accordingly, the changes in fair value of such hedges could no longer be reflected in other comprehensive loss. In the fourth quarter of 2006, we reclassified $0.7 million of

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previously deferred losses (net of $0.4 million in income taxes) from accumulated other comprehensive loss to loss on derivatives not qualifying for hedge accounting as the cash flow of the hedged items was recognized.

Subsequent to year end, we unwound the oil collar for 400 barrels per day referenced above. As a result, we expect to recognize a gain of $0.9 million in the first quarter of 2007. Subsequent to year end, we have entered into a series of physical sales contracts which will result in us selling approximately 18,500 MMbtu of gas per day in calendar year 2008 for an average price of $8.01 MMbtu before transportation charges.

Despite the measures taken by us to attempt to control price risk, we remain subject to price fluctuations for natural gas and crude oil sold in the spot market. Prices received for natural gas sold on the spot market are volatile due primarily to seasonality of demand and other factors beyond our control. Domestic crude oil and gas prices could have a material adverse effect on our financial position, results of operations and quantities of reserves recoverable on an economic basis.

Interest Rate Swaps

We have a variable-rate debt obligation that exposes us to the effects of changes in interest rates. To partially reduce our exposure to interest rate risk, from time to time we enter into interest rate swap agreements. At December 31, 2006, we had the following interest rate swaps in place with BNP (in millions):

Effective Date	Maturity Date	LIBOR Swap Rate		Notional Amount
02/27/06	02/26/07	4.08	%	23.0
02/27/06	02/26/07	4.85	%	17.0
02/27/07	02/26/09	4.86	%	40.0

The fair value of the interest rate swap contracts in place at December 31, 2006, resulted in an asset of $0.2 million. For the years ended December 31, 2006 and 2005, our earnings were not significantly affected by cash flow hedging ineffectiveness of the interest rates swaps.

NOTE 9—Fair Value of Financial Instruments

The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of SFAS No. 107, “Disclosures About Fair Value of Financial Instruments” (“SFAS 107”). The estimated fair value amounts have been determined using available market information and valuation methodologies described below. Considerable judgment is required in interpreting market data to develop the estimates of fair value. The use of different market assumptions or valuation methodologies may have a material effect on the estimated fair value amounts.

The carrying values of items comprising current assets and current liabilities approximate fair values due to the short-term maturities of these instruments. The carrying amounts and fair values of the other financial instruments and derivatives at December 31, 2006 and 2005, are as follows (in thousands):

	2006						2005
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
Second Lien Term Loan	$	0		$	0		$	30,000		$	30,000
Senior Credit Facility		26,500			26,500			—			—
3.25% Convertible Senior Notes		175,000			170,240			—			—
Derivative assets (liabilities)
Oil		(1,446	)		(1,446	)		(4,810	)		(4,810	)
Gas		14,865			14,865			(24,620	)		(24,620	)
Interest rate		219			219			107			107

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 10—Commitments and Contingencies

Operating Leases—We have commitments under an operating lease agreement for office space. Total rent expense for the years ended December 31, 2006, 2005, and 2004, was approximately $0.6 million, $0.4 million, and $0.3 million respectively. We also have non-cancellable drilling rig commitments with various term end dates through 2009.

Transportation Contracts—We have entered into two gas gathering and processing agreements where we are obligated to pay a minimum amount, as calculated on a yearly amount, or pay deficiencies at a specified gathering fee rate. Our production committed to these contracts is expected to exceed the minimum yearly volumes provided in the contracts, therefore avoiding payments for deficiencies.

In 2007 we purchased acreage that was committed to a gas gathering agreement where we have a four year obligation to pay a minimum amount, as calculated on a yearly amount, or pay deficiencies at a specified gathering fee rate. The first year of the contract commitment began on September 1, 2006. Our potential share of the minimum yearly amount ranges from approximately $0.1 million in the first year to approximately $0.5 million in the fourth year. The potential effect of this agreement is not included in the table below since our share of the commitment will not be determined until well(s) are drilled in 2007.

At December 31, 2006, future minimum rental payments due, drilling rig commitments, and transportation contract commitments are as follows:

			Payments due by Period										After 2011
	Total		2007		2008		2009		2010		2011
	(in thousands)
Operating leases for office space	$	1,992	$	701	$	710	$	491	$	48	$	42		—
Drilling rig commitments		80,247		45,983		24,956		9,308		—		—		—
Transportation contracts		2,159		758		540		540		321		—		—
Total (1)	$	84,398	$	47,442	$	26,206	$	10,339	$	369	$	42	$	—

(1) This table does not include the estimated liability for dismantlement, abandonment and restoration costs of oil and gas properties of $9.6 million. The Company records a separate liability for the fair value of this asset retirement obligation. See Note 3.

Contingencies—In July 2005, we received a Notice of Proposed Tax Due from the State of Louisiana asserting that we underpaid our Louisiana franchise taxes for the years 1998 through 2004 in the amount of $0.5 million. The Notice of Proposed Tax Due includes additional assessments of penalties and interest in the amount of $0.4 million for a total asserted liability of $0.9 million. We believe that we have fully paid our Louisiana franchise taxes for the years in question; therefore, we intend to vigorously contest the Notice of Proposed Tax Due. We have commenced our analysis of this contingency and have not recorded any provision for possible payment of additional Louisiana franchise taxes nor any related penalties and interest.

Litigation—In the third quarter of 2004, we recognized a non-recurring gain in the amount of $2.1 million, reflecting the proceeds of a successful litigation judgment. We commenced the litigation as plaintiff in February 2000 against the operator of a South Louisiana property which was jointly acquired by us and the defendant in

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 1999. The judgment provided for recovery of our damages and a portion of our attorneys’ fees as well as interest calculated on our damages.

We are party to additional lawsuits arising in the normal course of business. We intend to defend these actions vigorously and believe, based on currently available information, that adverse results or judgments from such actions, if any, will not be material to our financial position or results of operations.

NOTE 11—Related Party Transactions

On March 12, 2002, we completed the sale of a 30% working interest in the existing production and shallow rights, and a 15% working interest in the deep rights below 10,600 feet, in our Burrwood and West Delta 83 fields for $12.0 million to Malloy Energy Company, LLC (“MEC”), led by Patrick E. Malloy, III and participated in by Sheldon Appel, each of whom were members of our Board of Directors at that time, as well as Josiah Austin, who subsequently became a member of our Board of Directors. Mr. Malloy is now Chairman of our Board of Directors and Mr. Appel retired from the Board of Directors in February 2004.

Subsequent to the acquisition of a 30% working interest in the Burrwood and West Delta 83 fields in March 2002, MEC acquired an approximate 30% working interest in three other fields we operated in 2003 and 2004. In accordance with industry standard joint operating agreements, we bill MEC for its share of the capital and operating costs of the three fields on a monthly basis. As of December 31, 2006 and 2005, the amounts billed and outstanding to MEC for its share of monthly capital and operating costs were $1.3 million and $0.5 million, respectively, and are included in trade and other accounts receivable at each year-end. Such amounts at each year-end were paid by MEC to us in the month subsequent to billing and the affiliate is current on payment of its billings.

We also serve as the operator for a number of other oil and gas wells owned by an affiliate of MEC in which we own a 7% after payout working interest. In accordance with industry standard joint operating agreements, we bill the affiliate for its share of the capital and operating costs of these wells on a monthly basis. As of December 31, 2006 and 2005, the amounts billed and outstanding to the affiliate for its share of monthly capital and operating costs were $19,000 and $78,000, respectively, and are included in trade and other accounts receivable at each year-end. Such amounts at each year-end were paid by the affiliate to us in the month subsequent to billing and the affiliate is current on payment of its billings.

Additionally, we also serve as the operator for a number of other oil and gas wells owned by an affiliate of MEC whereby we do not have a working interest. In accordance with industry standard joint operating agreements, we bill the affiliate for its share of the capital and operating costs of these wells on a monthly basis. As of December 31, 2006 and 2005, the amounts billed and outstanding to the affiliate for its share of monthly capital and operating costs were $81,000 and $272,000, respectively, and are included in trade and other accounts receivable at each year-end. Such amounts at each year-end were paid by the affiliate to us in the month subsequent to billing and the affiliate is current on payment of its billings.

NOTE 12—Acquisitions and Divestitures

On February 7, 2007, we announced the acquisition of drilling and development rights to acreage located in the Angelina River play. We acquired a 60% working interest in the acreage and will operate the joint venture. The acquisition was completed in two separate transactions. In the initial transaction, we acquired a 40% working interest for $2.0 million from a private company. We also agreed to carry the private company for a

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20% working interest in the drilling of five wells. In the second transaction, we are purchasing the remaining 20% working interest in the acreage in a like-kind exchange for our 30% interest in the Mary Blevins field.

On January 12, 2007, the Company and Malloy Energy entered into a Purchase and Sale Agreement with a private company for the sale of substantially all of its oil and gas properties in South Louisiana. The total sales price for the company’s interest in the oil and gas properties will be approximately $100 million. The total sales price for Malloy Energy’s interests in these properties was approximately $30 million. See Note 11 “Related Party Transactions” for additional information regarding Malloy Energy. Both the company and Malloy Energy’s total consideration will be reduced by an amount equal to its proportionate share of the greater of $20 million or normal closing adjustments. The effective date of the transaction is July 1, 2006 and we expect to close the sale in late March, 2007. Subsequent to December 31, 2006, the company’s interest in oil and gas properties in South Louisiana met the criteria for reporting as held for sale. The company expects to complete the sale in the first quarter of 2007. Mr. Malloy is Chairman of our Board of Directors. As of December 31, 2006, the carrying value of the assets and liabilities to be disposed of was approximately $69 million.

On December 6, 2006, we closed on the acquisition of additional interests in the Dirgin-Beckville field in the Cotton Valley Trend for $6.1 million from a private company. With this acquisition, we now own an approximate 99% working interest in this field.

In October 2004, we sold our operated interests in the Marholl and Sean Andrew fields, along with our non-operated interests in the Ackerly field, all of which were located in West Texas, for gross proceeds of approximately $2.1 million. We realized a gain of $0.9 million on the sale of these non-core properties. The results of operations of these sold properties, including the gain on sale, have been presented as discontinued operations in the accompanying consolidated statement of operations.

Results for these properties reported as discontinued operations were as follows (in thousands):

	Year Ended December 31, 2004
Oil and gas sales	$	566
Operating expenses		(290	)
Gain on sale		877
Income before income taxes		1,153
Income tax expense		(404	)
Income from discontinued operations	$	749

NOTE 13—Oil and Gas Producing Activities (Unaudited)

Capitalized Costs Related to Oil and Gas Producing Activities

The table below reflects our capitalized costs related to oil and gas producing activities at December 31, 2006, and 2005 (in thousands):

	2006			2005
Proved properties	$	555,013		$	301,842
Unproved properties		20,653			14,444
		575,666			316,286
Less accumulated depreciation, depletion and amortization		(155,204	)		(73,291	)
Net oil and gas properties	$	420,462		$	242,995

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Costs Incurred

Costs incurred in oil and gas property acquisition, exploration and development activities, whether capitalized or expensed, are summarized as follows (in thousands):

	Year Ended December 31,
	2006		2005		2004
Property Acquisition
Unproved	$	8,569	$	9,216	$	5,528
Proved		6,120		—		—
Exploration		12,263		14,021		4,874
Development (1)		244,240		143,574		36,351
	$	271,192	$	166,811	$	46,753

(1) Includes asset retirement costs of $1.3 million in 2006, $1.1 million in 2005 and $0.4 million in 2004.

Oil and Natural Gas Reserves

All of our reserve information related to crude oil, condensate, and natural gas liquids and natural gas was compiled based on evaluations performed by Netherland, Sewell & Associates, Inc. as of December 31, 2006 and 2005. All of the subject reserves are located in the continental United States.

Many assumptions and judgmental decisions are required to estimate reserves. Quantities reported are considered reasonable but are subject to future revisions, some of which may be substantial, as additional information becomes available. Such additional knowledge may be gained as the result of reservoir performance, new geological and geophysical data, additional drilling, technological advancements, price changes, and other factors.

Regulations published by the SEC define proved reserves as those volumes of crude oil, condensate, and natural gas liquids and natural gas that geological and engineering data demonstrate with reasonable certainty are recoverable from known reservoirs under existing economic and operating conditions. Proved developed reserves are those volumes expected to be recovered through existing wells with existing equipment and operating methods. Proved undeveloped reserves are those volumes expected to be recovered as a result of making additional investments by drilling new wells on acreage offsetting productive units or recompleting existing wells.

The following table sets forth our net proved oil and gas reserves at December 31, 2006, 2005 and 2004 and the changes in net proved oil and gas reserves for the years ended December 31, 2006, 2005 and 2004:

	Natural Gas (MMcf)						Oil (MBbls)
	2006		2005		2004		2006		2005		2004
Proved Reserves at beginning of period	142,963		67,682		30,903		4,973		5,589		7,805
Revisions of previous estimates (1)	(66,409	)	(10,382	)	(6,666	)	(1,612	)	(648	)	(3,466	)
Extensions, discoveries and other additions (2)	115,732		91,900		48,322		311		440		1,987
Purchases of minerals in place	7,727		—		—		3		—		—
Sales of minerals in place	—		—		(54	)	—		—		(249	)
Production	(13,001	)	(6,237	)	(4,823	)	(474	)	(408	)	(488	)
Proved Reserves at end of period	187,012		142,963		67,682		3,201		4,973		5,589

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Natural Gas (MMcf)			Oil (MBbls)
	2006	2005	2004	2006	2005	2004
Proved developed:
Beginning of period	56,700	24,362	23,429	1,796	2,228	3,601
End of period	76,679	56,700	24,362	1,862	1,796	2,228

(1) Revisions of previous estimates were negative on an overall basis in 2006, 2005 and 2004 related to the following: (a) with respect to 2006, the primary cause of the revisions was the significant pricing difference between December 31, 2006 and December 31, 2005, which caused a number of our proved undeveloped locations in the Cotton Valley area to become uneconomic at the lower prices, as well as some volume revisions in these same properties and in South Louisiana as a result of updated production performance, and (b) with respect to 2005 and 2004, the premature depletion or decline in production from our South Louisiana wells which had larger estimates of producible reserves at the previous reporting period and new and/or revised interpretations of technical data from recently drilled wells in that region, updated production performance from existing and offset wells, and/or the results of enhanced 3-D seismic evaluations.

(2) Extensions, discoveries and other reserve additions were positive on an overall basis in 2006, primarily related to our continued drilling activities on existing and newly acquired properties in the Cotton Valley Trend of East Texas and North Louisiana. The main reason for the increases in 2005 and 2004 was the commencement of our Cotton Valley drilling program in the first quarter of 2004 which resulted in a substantial volume of both proved developed and proved undeveloped reserves being recorded in those years.

The following table summarizes our combined oil and gas reserve information on an MMcfe basis.

	Year Ended December 31,
	2006	2005	2004
Total proved	206,217	172,799	101,216
Proved developed	87,852	67,474	37,732

Standardized Measure

The standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves as of year-end is shown below (in thousands):

	2006			2005			2004
Future revenues	$	1,190,367		$	1,798,972		$	654,543
Future lease operating expenses and production taxes		(409,775	)		(379,872	)		(151,186	)
Future development costs (1)		(337,576	)		(245,868	)		(86,919	)
Future income tax expense		(28,764	)		(353,472	)		(104,870	)
Future net cash flows		414,252			819,760			311,568
10% annual discount for estimated timing of cash flows		(213,971	)		(409,140	)		(130,890	)
Standardized measure of discounted future net cash flows	$	200,281		$	410,620		$	180,678
Average price used to calculate reserves (2)
Natural gas (per Mcf)	$	5.64		$	10.54		$	6.14
Oil (per Bbl)	$	57.75		$	58.80		$	42.72

(1) Includes cumulative asset retirement obligations of $9.6 million, $8.0 million and $6.8 million in 2006, 2005 and 2004, respectively.

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(2) These average prices, used to estimate our reserves at these dates, reflect applicable transportation and quality differentials on a well-by-well basis.

Future revenues are computed by applying year-end prices of oil and gas to the year-end estimated future production of proved oil and gas reserves. The base prices used for the PV-10 calculation were public market prices on December 31 adjusted by differentials to those market prices. These price adjustments were done on a property-by-property basis for the quality of the oil and natural gas and for transportation to the appropriate location. Estimates of future development and production costs are based on year-end costs and assume continuation of existing economic conditions and year-end prices. We will incur significant capital in the development of our Cotton Valley Trend properties. We believe with reasonable certainty that we will be able to obtain such capital in the normal course of business. The estimated future net cash flows are then discounted using a rate of 10 percent per year to reflect the estimated timing of the future cash flows. The standardized measure of discounted cash flows is the future net cash flows less the computed discount.

Changes in Standardized Measure

The following are the principal sources of change in the standardized measure of discounted net cash flows for the years shown (in thousands):

	Year Ended December 31,
	2006			2005			2004
Net changes in prices and production costs related to future production	$	(360,635	)	$	185,709		$	84,156
Sales and transfers of oil and gas produced, net of production costs		(81,813	)		(53,845	)		(34,354	)
Net change due to revisions in quantity estimates		(70,212	)		(48,540	)		(27,462	)
Net change due to extensions, discoveries and improved recovery		122,144			321,529			60,239
Net change due to purchases and sales of minerals in place		8,044			—			(4,278	)
Future development costs		(44,339	)		(79,618	)		(53,739	)
Net change in income taxes		142,131			(124,526	)		(22,640	)
Accretion of discount		58,768			24,148			21,462
Change in production rates (timing) and other		15,573			5,085			(6,680	)
	$	(210,339	)	$	229,942		$	16,704

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 14—Summarized Quarterly Financial Data (Unaudited)

(In Thousands, Except Per Share Amounts)

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total
2006
Revenues	$	25,251		$	30,626		$	29,435		$	30,842		$	116,154
Operating income		4,986			2,234			(93	)		(34,255	)		(27,128	)
Net income (loss)		11,592			4,298			8,181			(22,432	)		1,639	(2)
Net income applicable to common stock		8,575			2,777			6,670			(23,944	)		(5,922	)(2)
Basic income per average common share (1)		0.34			0.11			0.27			(0.90	)		0.07
Diluted income per average common share (1)		0.34			0.11			0.27			(0.90	)		0.06
2005
Revenues	$	12,823		$	13,541		$	17,537		$	25,502		$	69,403
Operating income		691			104			3,040			9,357			13,192
Net income (loss)		(6,151	)		(445	)		(19,474	)		8,620			(17,450	)(3)
Net income applicable to common stock		(6,309	)		(603	)		(19,632	)		8,339			(18,205	)(3)
Basic income per average common share (1)		(0.30	)		(0.02	)		(0.79	)		0.35			(0.75	)
Diluted income per average common share (1)		(0.30	)		(0.02	)		(0.79	)		0.34			(0.75	)

(1) The sum of the per share amounts per quarter does not equal the year due to the changes in the average number of common shares outstanding.

(2) Includes a $40.2 million unrealized gain on derivatives not qualifying for hedge accounting.

(3) Includes a $27.0 million unrealized loss on derivatives not qualifying for hedge accounting.

80

EX-4.11

Exhibit 4.11

GOODRICH PETROLEUM CORPORATION

$125,000,000

3.25% Convertible Senior Notes due 2026

REGISTRATION RIGHTS AGREEMENT

December 6, 2006

BEAR, STEARNS & CO. INC.

DEUTSCHE BANK SECURITIES CORP.

BNP PARIBUS SECURITIES CORP.

c/o Bear, Stearns & Co. Inc.

383 Madison Avenue

New York, New York 10179

Ladies and Gentlemen:

Goodrich Petroleum Corporation, a Delaware corporation (the “Company”), proposes to issue and sell to Bear, Stearns & Co. Inc., Deutsche Bank Securities Inc. and BNP Paribus Securities Corp. (collectively, the “Initial Purchasers”), upon the terms set forth in a purchase agreement dated December 1, 2006 (the “Purchase Agreement”), $125,000,000 aggregate principal amount (the “Firm Notes”) of the Company’s 3.25% Convertible Senior Notes due 2026. In addition, the Company has granted to the Initial Purchasers an option to purchase up to $50,000,000 additional aggregate principal amount of its 3.25% Convertible Senior Notes due 2026 (the “Optional Notes” and, together with the Firm Notes, the “Purchased Notes”). The Purchased Notes are to be issued pursuant to an Indenture (the “Indenture”) to be dated as of December 6, 2006, between the Company and Wells Fargo Bank, National Association, as trustee (the “Trustee”). The Purchased Notes shall be convertible in accordance with their terms and the terms of the Indenture into shares of common stock (“Common Stock”), par value $0.20 per share of the Company, or a combination of cash and Common Stock. The Common Stock that may be issued upon conversion of the Purchased Notes are hereinafter referred to as the “Conversion Shares” and the Purchased Notes and the Conversion Shares are hereinafter referred to collectively as the “Securities.” As an inducement to the Initial Purchasers to enter into the Purchase Agreement and in satisfaction of a condition to the obligations of the Initial Purchasers thereunder, the Company agrees with the Initial Purchasers for the benefit of the holders of Securities (“Holders,” and includes any person that has a beneficial interest in any Transfer Restricted Security (as defined below) in book-entry form) from time to time of the Transfer Restricted Security as follows:

1. Shelf Registration. So long as any Transfer Restricted Security (as defined in Section 1(d) below) exists, the Company shall take the following actions:

(a) The Company shall use its reasonable best efforts to cause to be declared effective no later than 240 days after the date on which the Initial Purchasers purchase the

Firm Notes pursuant to the Purchase Agreement (the “Closing Date”) a registration statement (the “Shelf Registration Statement”) on an appropriate form under the Securities Act of 1933, as amended (the “Securities Act”) relating to the offer and sale of the Transfer Restricted Securities by the Holders thereof from time to time in accordance with the methods of distribution set forth in the Shelf Registration Statement and Rule 415 under the Securities Act (hereinafter, the “Shelf Registration”); provided, however, that no Holder (other than an Initial Purchaser) shall be entitled to have the Securities held by it covered by such Shelf Registration Statement unless such Holder agrees in writing to be bound by all the provisions of this Agreement applicable to such Holder.

(b) The Company shall use its reasonable best efforts to keep the Shelf Registration Statement continuously effective, in order to permit the prospectus included therein to be lawfully delivered by the Holders of the relevant Securities, until all of the Securities covered by the Shelf Registration Statement (i) have been sold pursuant thereto or (ii) are eligible to be sold under Rule 144(k) under the Securities Act (or any successor rule thereof), assuming for this purpose that the Holders thereof are not affiliates of the Company (in any such case, such period being called the “Shelf Registration Period.”) The Company shall be deemed not to have used its reasonable best efforts to keep the Shelf Registration Statement effective during the Shelf Registration Period if it voluntarily takes any action that would result in Holders of Securities covered thereby not being able to offer and sell such Securities during that period, unless such action is required by applicable law.

(c) Notwithstanding any other provisions of this Agreement to the contrary, the Company shall cause the Shelf Registration Statement and the related prospectus and any amendment or supplement thereto, as of the effective date of the Shelf Registration Statement, amendment or supplement, (i) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the Commission and (ii) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, the Company shall have no such obligations or liabilities with respect to any written information pertaining to any Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein.

(d) “Transfer Restricted Securities” means each Security until (i) the date on which such Security has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (ii) the date on which such Security is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. “Transfer Restricted Notes” means each Purchased Note that is a Transfer Restricted Security.

2. Registration Procedures. In connection with the Shelf Registration contemplated by Section 1 hereof, the following provisions shall apply so long as any Transfer Restricted Security exists:

(a) The Company shall (i), if requested by an Initial Purchaser, furnish, without charge, to such Initial Purchaser, prior to the filing thereof with the Commission, a copy of the Shelf Registration Statement and each amendment thereof and each

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supplement, if any, to the prospectus included therein and, in the event that an Initial Purchaser (with respect to any portion of an unsold allotment from the original offering) is participating in the Shelf Registration Statement, the Company shall use its best efforts to reflect in each such document, when so filed with the Commission, such comments as such Initial Purchaser reasonably may propose, (ii) include in each such document the names of the Holders who have delivered written notice to the Company at least three business days prior to the filing thereof that they propose to sell Transfer Restricted Securities pursuant to the Shelf Registration Statement as selling securityholders and (iii) file pursuant to Rule 424(b) under the Securities Act within five business days a supplement to the prospectus contained in the Shelf Registration Statement or, if required, file a post-effective amendment to the Shelf Registration Statement, in each case, to cover new Holders of Securities upon at least seven business days prior written notice by such new Holders to such effect; provided, however, that in no event shall the Company be required to file pursuant to more than one post-effective amendment to the Shelf Registration Statement or supplement to the related prospectus during any calendar quarter.

(b) The Company shall give written notice to the Initial Purchasers, the Holders of the Securities and the Holders of Transfer Restricted Securities included within the coverage of the Shelf Registration Statement (which notice shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made):

(i) of the issuance by the Commission of any stop order suspending the effectiveness of the Shelf Registration Statement or the initiation of any proceedings for that purpose;

(ii) of the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and

(iii) of the happening of any event that requires the Company to make changes in the Shelf Registration Statement or the prospectus in order that the Shelf Registration Statement or the prospectus do not contain an untrue statement of a material fact nor omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the prospectus, in light of the circumstances under which they were made) not misleading.

(c) The Company shall make every reasonable effort to obtain the withdrawal at the earliest possible time, of any order suspending the effectiveness of the Shelf Registration Statement.

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(d) The Company shall furnish to each Holder of Transfer Restricted Securities included within the coverage of the Shelf Registration, without charge, if the Holder so requests in writing, at least one copy of the Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules and all exhibits thereto (including those, if any, incorporated by reference).

(e) The Company shall, during the Shelf Registration Period, deliver to each Holder of Transfer Restricted Securities included within the coverage of the Shelf Registration Statement, without charge, as many copies of the prospectus (including each preliminary prospectus) included in the Shelf Registration Statement and any amendment or supplement thereto as such person may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Transfer Restricted Securities covered by the prospectus, or any amendment or supplement thereto, included in the Shelf Registration Statement.

(f) Prior to any public offering of the Securities pursuant to the Shelf Registration Statement, the Company shall register or qualify or cooperate with the Holders of the Transfer Restricted Securities included therein and their respective counsel in connection with the registration or qualification of the Securities for offer and sale under the securities or “blue sky” laws of such states of the United States as any Holder reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities covered by the Shelf Registration Statement; provided, however, that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified or (ii) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject.

(g) The Company shall cooperate with the Holders of the Transfer Restricted Securities to facilitate the timely preparation and delivery of certificates representing the Securities to be sold pursuant to the Shelf Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Holders may request a reasonable period of time prior to sales of the Securities pursuant to the Shelf Registration Statement, except in such cases where such Transfer Restricted Securities are required to be issued only in book-entry form pursuant to the terms of the Certificate of Designation.

(h) Upon the occurrence of any event contemplated by paragraphs (ii) through (v) of Section 2(b) above during the Shelf Registration Period, the Company shall promptly prepare and file a post-effective amendment to the Shelf Registration Statement or a supplement to the related prospectus and any other required document so that, as thereafter delivered to Holders of the Securities or purchasers of Securities, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the Initial Purchasers or the Holders of Transfer Restricted Securities included within the coverage of the Shelf Registration Statement, in accordance with paragraphs

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(ii) through (v) of Section 2(b) above, to suspend the use of the prospectus until the requisite changes to the prospectus have been made, then the Initial Purchasers and the Holders shall suspend use of such prospectus.

(i) Not later than the effective date of the Shelf Registration Statement, the Company will provide CUSIP numbers for the Purchased Notes registered for resale under the Shelf Registration Statement, and provide one or more certificates for such Purchased Notes, in a form eligible for deposit with The Depository Trust Company.

(j) The Company will comply with all rules and regulations of the Commission to the extent and so long as they are applicable to the Shelf Registration and will make generally available to its security holders (or otherwise provide in accordance with Section 11(a) of the Securities Act) an earnings statement satisfying the provisions of Section 11(a) of the Securities Act, no later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company’s first fiscal quarter commencing after the effective date of the Shelf Registration Statement, which statement shall cover such 12-month period.

(k) The Company may require each Holder of Securities to be sold pursuant to the Shelf Registration Statement to furnish to the Company such information regarding the Holder and the distribution of the Securities as the Company may from time to time reasonably require for inclusion in the Shelf Registration Statement, and the Company may exclude from such registration the Securities of any Holder that fails to furnish such information within the applicable time period specified in Section 2(a) above.

(l) The Company shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form) and take all such other action, if any, as any Holder of the Securities shall reasonably request in order to facilitate the disposition of the Securities pursuant to any Shelf Registration.

(m) In the case of any Shelf Registration, the Company shall (i) make reasonably available for inspection by the Holders of the Securities, any underwriter participating in any disposition pursuant to the Shelf Registration Statement and any attorney, accountant or other agent retained by the Holders of the Securities or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Company and (ii) cause the Company’s officers, directors, employees, accountants and auditors to supply all relevant information reasonably requested by the Holders of the Securities or any such underwriter, attorney, accountant or agent in connection with the Shelf Registration Statement, in each case, as shall be reasonably necessary to enable such persons, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that the foregoing inspection and information gathering shall be coordinated on behalf of the Initial Purchasers by Bear Stearns & Co. Inc. and on behalf of the other parties, by one counsel designated by and on behalf of such other parties as described in Section 3 hereof.

(n) In the case of any Shelf Registration, the Company, if requested by any Holder of Securities covered thereby, shall cause (i) its counsel to deliver an opinion and

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updates thereof relating to the Securities in customary form addressed to such Holders and the managing underwriters, if any, thereof and dated, in the case of the initial opinion, the effective date of such Shelf Registration Statement (it being agreed that the matters to be covered by such opinion shall include, without limitation, the due incorporation and good standing of the Company and its subsidiaries; the qualification of the Company and its subsidiaries to transact business as foreign corporations; the due authorization, execution and delivery of the relevant agreement of the type referred to in Section 2(l) hereof; the due authorization, execution, authentication and issuance, and the validity and enforceability, of the applicable Securities; the absence of governmental approvals required to be obtained in connection with the Shelf Registration Statement, the offering and sale of the applicable Securities, or any agreement of the type referred to in Section 2(l) hereof; the compliance as to form of such Shelf Registration Statement and any documents incorporated by reference therein with the requirements of the Securities Act; and, as of the date of the opinion and as of the effective date of the Shelf Registration Statement or most recent post-effective amendment thereto, as the case may be, the absence from such Shelf Registration Statement and the prospectus included therein, as then amended or supplemented, and from any documents incorporated by reference therein of an untrue statement of a material fact or the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any such documents, in the light of the circumstances existing at the time that such documents were filed with the Commission under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)); (ii) its officers to execute and deliver all customary documents and certificates and updates thereof requested by any underwriters of the applicable Securities and (iii) its independent public accountants to provide to the selling Holders of the applicable Securities and any underwriter therefor a comfort letter in customary form and covering matters of the type customarily covered in comfort letters in connection with primary underwritten offerings, subject to receipt of appropriate documentation as contemplated, and only if permitted, by the American Institute of Certified Public Accountants’ Professional Standard AU Section 634 “Letters for Underwriters and Certain Other Requesting Parties.”

(o) The Company shall use its best efforts to cause the Common Stock included in such Shelf Registration Statement to be, upon resale thereunder, listed on each securities exchange, if any, on which any shares of Common Stock are then listed.

(p) The Company shall use its best efforts to take all other steps necessary to effect the registration of the Transfer Restricted Securities covered by the Shelf Registration Statement contemplated hereby.

3. Registration Expenses.

(a) All expenses incident to the Company’s performance of and compliance with this Agreement will be borne by the Company, regardless of whether the Shelf Registration Statement is ever filed or becomes effective, including without limitation:

(i) all registration and filing fees and expenses;

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(ii) all fees and expenses of compliance with federal securities and state “blue sky” or securities laws;

(iii) all expenses of printing (including printing certificates and printing of prospectuses), messenger and delivery services and telephone;

(iv) all fees and disbursements of counsel for the Company;

(v) all application and filing fees in connection with listing on a national securities exchange or automated quotation system pursuant to the requirements hereof; and

(vi) all fees and disbursements of independent certified public accountants of the Company (including the expenses of any special audit and comfort letters required by or incident to such performance).

The Company will bear its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any person, including special experts, retained by the Company.

(b) In connection with the Shelf Registration Statement, the Company will reimburse the Initial Purchasers and the Holders of Transfer Restricted Securities who are selling or reselling Securities pursuant to the “Plan of Distribution” contained in the Shelf Registration Statement for the reasonable fees and disbursements of not more than one counsel, which shall be Davis Polk & Wardwell unless another firm is chosen by the Holders of a majority in aggregate principal amount of the Transfer Restricted Notes for whose benefit such Registration Statement is being prepared.

4. Indemnification.

(a) The Company agrees to indemnify and hold harmless each Holder of the Transfer Restricted Securities included within the coverage of the Shelf Registration Statement and each person, if any, who controls such Holder within the meaning of the Securities Act or the Exchange Act (each Holder and such controlling persons are referred to collectively as the “Indemnified Parties”) from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof (including, but not limited to, any losses, claims, damages, liabilities or actions relating to purchases and sales of the Securities) to which each Indemnified Party may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Shelf Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to the Shelf Registration, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse, as incurred, the Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect

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thereof; provided, however, that (i) the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in the Shelf Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein and (ii) with respect to any untrue statement or omission or alleged untrue statement or omission made in any prospectus relating to a Shelf Registration Statement, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any Holder from whom the person asserting any such losses, claims, damages or liabilities purchased the Securities concerned, to the extent that a prospectus relating to such Securities was required to be delivered by such Holder under the Securities Act in connection with such purchase and any such loss, claim, damage or liability of such Holder results from the fact that there was not sent or given to such person, at or prior to the written confirmation of the sale of such Securities to such person, a copy of the final prospectus if the Company had previously furnished copies thereof to such Holder; provided further, however, that this indemnity agreement will be in addition to any liability which the Company may otherwise have to such Indemnified Party. The Company shall also indemnify underwriters, their officers and directors and each person who controls such underwriters within the meaning of the Securities Act or the Exchange Act to the same extent as provided above with respect to the indemnification of the Holders of the Securities if requested by such Holders.

(b) Each Holder of the Securities, severally and not jointly, will indemnify and hold harmless the Company and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act from and against any losses, claims, damages or liabilities or any actions in respect thereof, to which the Company or any such controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Shelf Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein; and, subject to the limitation set forth immediately preceding this clause, shall reimburse, as incurred, the Company for any legal or other expenses reasonably incurred by the Company or any such controlling person in connection with investigating or defending any loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition to any liability which such Holder may otherwise have to the Company or any of its controlling persons.

(c) Promptly after receipt by an Indemnified Party under this Section 4 of notice of the commencement of any action or proceeding (including a governmental

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investigation), such Indemnified Party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 4, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party (i) will not relieve the indemnifying party from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and the indemnifying party has been materially prejudiced by such failure and (ii) will not, in any event, relieve the indemnifying party from any obligations to any Indemnified Party other than the indemnification obligation provided in paragraph (a) or (b) above. In case any such action is brought against any Indemnified Party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnified Party (who shall not, except with the consent of the Indemnified Party, be counsel to the indemnifying party), and after notice from the indemnifying party to such Indemnified Party of its election so to assume the defense thereof the indemnifying party will not be liable to such Indemnified Party under this Section 4 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such Indemnified Party in connection with the defense thereof; provided, however, if such Indemnified Party shall have been advised by counsel that there are one or more defenses available to it that are in conflict with those available to the indemnifying party (in which case the indemnifying party shall not have the right to direct the defense of such action on behalf of the Indemnified Party), the reasonable fees and expenses of such Indemnified Party’s counsel shall be borne by the indemnifying party. 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 any Indemnified Party 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. No indemnifying party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending or threatened action in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party unless such settlement (i) includes an unconditional release of such Indemnified Party from all liability on any claims that are the subject matter of such action, and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any Indemnified Party.

(d) If the indemnification provided for in this Section 4 is unavailable or insufficient to hold harmless an Indemnified Party under subsections (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such Indemnified Party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to in subsection (a) or (b) above in such proportion as is appropriate to reflect the relative fault of the indemnifying party or parties on the one hand and the Indemnified Party on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or such

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Holder or such other Indemnified Party, as the case may be, on the other, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid by an Indemnified Party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding any other provision of this Section 4(d), the Holders shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such Holders from the sale of the Securities pursuant to the Shelf Registration Statement exceeds the amount of damages which such Holders have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph (d), each person, if any, who controls such Indemnified Party within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as such Indemnified Party and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as the Company.

(e) The agreements contained in this Section 4 shall survive the sale of the Securities pursuant to the Shelf Registration Statement and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any Indemnified Party.

5. Additional Interest Under Certain Circumstances.

(a) Additional interest (“Additional Interest”) with respect to the Purchased Notes shall accrue as follows if any of the following events occur (each such event in clauses (i) and (ii) below being herein called a “Registration Default”):

(i) the Shelf Registration Statement required by this Agreement is not declared effective by the Commission on or prior to 240 days after the Closing Date; and

(ii) if after the Shelf Registration Statement required by this Agreement has been declared effective by the Commission but (A) such Registration Statement thereafter ceases to be effective or (B) the Shelf Registration Statement or the related prospectus ceases to be usable in connection with resales of Transfer Restricted Notes during the periods specified herein because either (1) any event occurs as a result of which the related prospectus forming part of such Shelf Registration Statement would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, or (2) it shall be necessary to amend such Shelf Registration Statement or supplement the related prospectus, to comply with the Securities Act or the Exchange Act or the respective rules thereunder.

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Each of the foregoing will constitute a Registration Default whatever the reason for any such event and whether it is voluntary or involuntary or is beyond the control of the Company or pursuant to operation of law or as a result of any action or inaction by the Commission. Additional Interest shall accrue on the Purchased Notes from and including the date on which any such Registration Default shall occur to but excluding the date on which all such Registration Defaults have been cured, at a rate of 0.25% per annum (above the rate shown on the cover page of the Offering Memorandum in addition to the interest otherwise accruing on the Purchased Notes) for the first 90 days following the date of such Registration Default and at a rate of 0.50% per annum thereafter; provided, however, that the Additional Interest rate on the Purchased Notes shall not exceed in the aggregate 0.50% per annum and shall not be payable under more than one clause above for any given period of time, except that if Additional Interest would be payable under more than one clause above, but at a rate of 0.25% per annum under one clause and at a rate of 0.50% per annum under the other, then the Additional Interest rate shall be the higher rate of 0.50% per annum; provided further, however, that (1) upon the effectiveness of the Shelf Registration Statement (in the case of clause (i) above), (2) upon the effectiveness of the Shelf Registration Statement which had ceased to remain effective (in the case of clause (ii) above), (3) upon the termination of certain transfer restrictions on the Securities as a result of the application of Rule 144(k) or any successor provision or (4) for any period after the second anniversary from the Closing Date, Additional Interest on the Purchased Notes as a result of such clause, as the case may be, shall cease to accrue.

(b) A Registration Default referred to in Section 5(a)(ii) hereof shall be deemed not to have occurred and be continuing in relation to the Shelf Registration Statement or the related prospectus if such Registration Default has occurred solely as a result of (x) the filing of a post-effective amendment to the Shelf Registration Statement to incorporate annual audited financial information with respect to the Company where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related prospectus (y) other material events, with respect to the Company that would need to be described in the Shelf Registration Statement or the related prospectus or (z) the occurrence or existence of any corporate development that, in the discretion of the Company, makes it appropriate to suspend the availability of the Shelf Registration Statement and the related prospectus. The Company will use its reasonable best efforts to ensure that the use of the prospectus may be resumed in the case of clause (x) above, as promptly as practicable, in the case of clause (y) above, as soon as, in the sole judgment of the Company, public disclosure of such material event would not be prejudicial to or contrary to the interests of the Company or, if necessary to avoid unreasonable burden or expense, as soon as practicable thereafter and in the case of clause (z) above, as soon as, in the discretion of the Company, such suspension is no longer appropriate; provided, however, that in any case if such Registration Default occurs for a period in excess of 120 days in any 12 month period, Additional Interest shall be payable on the principal amount of the Purchased Notes that are Transfer Restricted Notes in accordance with the above paragraph from the day such 120 period expires until such Registration Default is cured.

(c) Any amounts of Additional Interest due pursuant to Section 5(a) will be payable in cash on the regular interest payment dates with respect to the Purchased Notes

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on the same terms and conditions and subject to the same limitations as pertain at such time for the payment of regular interest. The amount of Additional Interest will be determined by multiplying the applicable Additional Interest rate by the aggregate outstanding principal amount of Purchased Notes and further multiplied by a fraction, the numerator of which is the number of days such Additional Interest rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months), and the denominator of which is 360.

6. Rules 144 and 144A. The Company shall use its best efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time during the Shelf Registration Period the Company is not required to file such reports, it will, upon the request of any Holder of Transfer Restricted Securities, make publicly available other information so long as necessary to permit sales of their securities pursuant to Rules 144 and 144A. The Company covenants that it will take such further action as any Holder of Transfer Restricted Securities may reasonably request, all to the extent required from time to time to enable such Holder to sell Transfer Restricted Securities without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including the requirements of Rule 144A(d)(4)). The Company will provide a copy of this Agreement to prospective purchasers of Initial Securities identified to the Company by the Initial Purchasers upon request. Upon the request of any Holder of Transfer Restricted Securities, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 6 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act.

7. Underwritten Registrations. If any of the Transfer Restricted Securities 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 administer the offering (“Managing Underwriters”) will be selected by the Holders of a majority of the aggregate principal amount of Purchased Notes to be included in such offering.

No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person’s Transfer Restricted Securities on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements.

8. Miscellaneous.

(a) Remedies. The Company acknowledges and agrees that any failure by the Company to comply with its obligations under Section 1 hereof may result in material irreparable injury to the Initial 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 or any Holder may obtain such relief as may be required to specifically enforce the Company’s obligations under Section 1 hereof. The Company further agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

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(b) No Inconsistent Agreements. The Company will not on or after the date of this Agreement enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company’s securities under any agreement in effect on the date hereof.

(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 by the Company and the written consent of the Holders of a majority of the aggregate principal amount of outstanding Transfer Restricted Notes affected by such amendment, modification, supplement, waiver or consents. Without the consent of the Holder of each Transfer Restricted Note then outstanding, however, no modification may change the provisions relating to the payment of Additional Interest.

(d) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first-class mail, facsimile transmission, or air courier which guarantees overnight delivery:

(1) if to the Holders, at the most current address shown for the Holders in the records of the Transfer Agent, with a copy in like manner as follows:

(2) if to the Initial Purchasers:

	Bear Stearns & Co. Inc.
	383 Madison Avenue
	New York, New York 10179
	Attention: Stephen Parish
	Equity Capital Markets
	Facsimile: (212) 272-3485
	Deutsche Bank Securities Inc.
	60 Wall Street
	44th Floor
	New York, New York 10005
	Attention: Tad Neafsey
	Energy, Utilities & Chemicals
	Facsimile: (212) 797-0072
with a copy to:
	Davis Polk & Wardwell
	450 Lexington Avenue
	New York, New York 10017
	Attention: Richard D. Truesdell, Jr.
	Facsimile: (212) 450-4674

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(3) if to the Company, at its address as follows:

	Goodrich Petroleum Corporation
	808 Travis Street, Suite 1320
	Houston, Texas 77002
	Attention: Walter G. Goodrich
	Facsimile: (713) 780-9254
with a copy to:
	Vinson & Elkins L.L.P.
	2300 First City Tower
	1001 Fannin Street
	Houston, Texas 77002
	Attention: Keith R. Fullenweider
	Facsimile: (713) 615-5085

All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; three business days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged by recipient’s facsimile machine operator, if sent by facsimile transmission; and on the day delivered, if sent by overnight air courier guaranteeing next day delivery.

(e) Third Party Beneficiaries. The Holders shall be third party beneficiaries to the agreements made hereunder between the Company, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcement necessary or advisable to protect their rights or the rights of Holders hereunder.

(f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including, without the need for an express assignment or any consent by the Company thereto, subsequent Holders of Transfer Restricted Securities. The Company hereby agrees to extend the benefits of this Agreement to any Holder of Transfer Restricted Securities and any such Holder may specifically enforce the provisions of this Agreement as if an original party hereto.

(g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

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

(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

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(j) Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.

(k) Securities Held by the Company. Whenever the consent or approval of Holders of a specified number of Transfer Restricted Securities is required hereunder, Securities held by the Company or its affiliates (other than subsequent Holders of Transfer Restricted Securities if such subsequent Holders are deemed to be affiliates solely by reason of their holdings of such Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage.

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

Very truly yours,
GOODRICH PETROLEUM CORPORATION
By:	/s/ David R. Looney
Name:	David R. Looney
Title:	Executive Vice President and Chief Financial Officer

15

The foregoing Registration

Rights Agreement is hereby confirmed

and accepted as of the date first

above written.

BEAR, STEARNS & CO. INC.

DEUTSCHE BANK SECURITIES CORP.

BNP PARIBUS SECURITIES CORP.

By:	BEAR, STEARNS & CO. INC.
By:	/s/ Paul S. Rosica
Name:	Paul S. Rosica
Title:	Senior Managing Director

16

EX-4.12

Exhibit 4.12

GOODRICH PETROLEUM CORPORATION

AS ISSUER,

AND

WELLS FARGO BANK, NATIONAL ASSOCIATION,

AS TRUSTEE

3.25% Convertible Senior Notes due 2026

INDENTURE

Dated as of December 6, 2006

TABLE OF CONTENTS

		PAGE
	ARTICLE 1
	DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01.	Definitions	1
Section 1.02.	Other Definitions	9
Section 1.03.	Incorporation by Reference of Trust Indenture Act	10
Section 1.04.	Rules of Construction	10
	ARTICLE 2
	THE SECURITIES
Section 2.01.	Title; Amount and Issue of Securities; Principal and Interest	11
Section 2.02.	Form of Securities	13
Section 2.03.	Legends	13
Section 2.04.	Execution and Authentication	17
Section 2.05.	Registrar and Paying Agent	18
Section 2.06.	Paying Agent to Hold Money in Trust	19
Section 2.07.	Holder Lists	19
Section 2.08.	General Provisions Relating to Transfer and Exchange	20
Section 2.09.	Book-Entry Provisions for the Global Securities	21
Section 2.10.	Special Transfer Provisions	22
Section 2.11.	Mutilated, Destroyed, Lost or Wrongfully Taken Securities	24
Section 2.12.	Outstanding Securities	25
Section 2.13.	Temporary Securities	25
Section 2.14.	Cancellation	26
Section 2.15.	Payment of Interest; Defaulted Interest	26
Section 2.16.	Computation of Interest	28
Section 2.17.	CUSIP and ISIN Numbers	28
Section 2.18.	Calculation Of Original Issue Discount	28
	ARTICLE 3
	COVENANTS
Section 3.01.	Payment of Securities	29
Section 3.02.	Maintenance of Office or Agency	29
Section 3.03.	Corporate Existence	30
Section 3.04.	Payment of Taxes and Other Claims	30
Section 3.05.	Compliance Certificate	30
Section 3.06.	Further Instruments and Acts	30
Section 3.07.	Statement by Officers as to Default	30
Section 3.08.	Additional Interest and Contingent Interest	31

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Section 3.09.	Subsidiary Guarantees	31
Section 3.10.	Calculation Of Original Issue Discount	31
	ARTICLE 4
	SUCCESSOR COMPANY
Section 4.01	Consolidation, Merger and Sale of Assets	31
	ARTICLE 5
	REPORTING OBLIGATIONS
Section 5.01.	Reporting Obligations	32
Section 5.02.	Compliance with TIA	33
	ARTICLE 6
	REDEMPTION OF SECURITIES
Section 6.01.	Optional Redemption.	33
Section 6.02.	Election to Redeem; Notice to Trustee	33
Section 6.03.	Selection by Trustee of Securities to Be Redeemed	33
Section 6.04.	Notice of Redemption	34
Section 6.05.	Deposit of Redemption Price	35
Section 6.06.	Securities Payable on Redemption Date	35
Section 6.07.	Securities Redeemed in Part	36
	ARTICLE 7
	DEFAULTS AND REMEDIES
Section 7.01.	Events of Default	36
Section 7.02.	Acceleration	38
Section 7.03.	Sole Remedy for Failure to Report	38
Section 7.04.	Other Remedies	39
Section 7.05.	Waiver of Past Defaults	39
Section 7.06.	Control by Majority	40
Section 7.07.	Limitation on Suits	40
Section 7.08.	Rights of Holders to Receive Payment	41
Section 7.09.	Collection Suit by Trustee	41
Section 7.10.	Trustee May File Proofs of Claim	41
Section 7.11.	Priorities	41
Section 7.12.	Restoration of Rights and Remedies	42
Section 7.13.	Undertaking of Costs	42
	ARTICLE 8
	TRUSTEE
Section 8.01.	Duties of Trustee	42

iii

Section 8.02.	Rights of Trustee	44
Section 8.03.	Individual Rights of Trustee	45
Section 8.04.	Trustee’s Disclaimer	45
Section 8.05.	Notice of Defaults	45
Section 8.06.	Reports by Trustee to Holders	45
Section 8.07.	Compensation and Indemnity	46
Section 8.08.	Replacement of Trustee	47
Section 8.09.	Successor Trustee by Merger	48
Section 8.10.	Eligibility; Disqualification	48
Section 8.11.	Preferential Collection of Claims Against Company	48
	ARTICLE 9
	DISCHARGE OF INDENTURE
Section 9.01.	Discharge of Liability on Securities	48
Section 9.02.	Reinstatement	50
Section 9.03.	Officers’ Certificate; Opinion of Counsel	50
	ARTICLE 10
	AMENDMENTS
Section 10.01.	Without Consent of Holders	50
Section 10.02.	With Consent of Holders	51
Section 10.03.	Compliance with Trust Indenture Act	52
Section 10.04.	Revocation and Effect of Consents and Waivers	52
Section 10.05.	Notation on or Exchange of Securities	53
Section 10.06.	Trustee to Sign Amendments	53
	ARTICLE 11
	PURCHASE AT THE OPTION OF HOLDERS UPON A FUNDAMENTAL CHANGE; PURCHASE AT THE OPTION OF HOLDERS
Section 11.01.	Purchase at the Option of the Holder Upon a Fundamental Change	53
Section 11.02.	Purchase of Securities at the Option of the Holder.	55
Section 11.03.	Further Conditions and Procedures for Purchase at the Option of the Holder Upon a Fundamental Change and Purchase of Spiecurities at the Option of the Holder	57
	ARTICLE 12
	CONVERSION
Section 12.01.	Conversion of Securities	62
Section 12.02.	Adjustments to Conversion Rate and the Incremental Share Factor	68

iv

Section 12.03.	Adjustment to Common Stock Delivered Upon Certain Fundamental Changes	76
Section 12.04.	Conversion After a Public Acquirer Change of Control	77
Section 12.05.	Effect of Recapitalizations, Reclassifications, and Changes of Common Stock	78
Section 12.06.	Responsibility of Trustee	79
Section 12.07.	Stockholder Rights Plan	80
Section 12.08.	No Stockholder Rights	80
Section 12.09.	Withholding Taxes for Adjustments in Conversation Rate	80
	ARTICLE 13
	[RESERVED]
	ARTICLE 14
	MISCELLANEOUS
Section 14.01.	Trust Indenture Act Controls	81
Section 14.02.	Notices	81
Section 14.03.	Communication by Holders with other Holders	82
Section 14.04.	Certificate and Opinion as to Conditions Precedent	82
Section 14.05.	Statements Required in Certificate or Opinion	82
Section 14.06.	When Securities Are Disregarded	83
Section 14.07.	Rules by Trustee, Paying Agent and Registrar	83
Section 14.08.	Legal Holidays	83
Section 14.09.	Governing Law	83
Section 14.10.	No Recourse Against Others	83
Section 14.11.	Successors	83
Section 14.12.	Multiple Originals	83
Section 14.13.	Qualification of Indenture	83
Section 14.14.	Table of Contents; Headings	84
Section 14.15.	Severability Clause	84
Section 14.16.	Calculations	84
EXHIBIT A	Form of the Security

v

INDENTURE dated as of December 6, 2006, between Goodrich Petroleum Corporation., a Delaware corporation (the “Company”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee (the “Trustee”).

Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Company’s 3.25% Convertible Senior Notes due 2026 (the “Securities”) on the date hereof.

ARTICLE 1

DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.01. Definitions.

“Additional Interest” means all amounts, if any, payable pursuant to Section 5 of the Registration Rights Agreement and Section 7.03 hereof.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling, controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Applicable Conversion Rate” means, for each $1,000 principal amount of Securities to be converted (i) if the Applicable Stock Price for such Securities is less than or equal to the Base Conversion Price, the Base Conversion Rate and (ii) if the Applicable Stock Price for such Securities is greater than the Base Conversion Price, a number determined in accordance with the following formula:

Base Conversion Rate +	(Applicable Stock Price–Base Conversion Price)	x Incremental Share Factor
	Applicable Stock Price

“Applicable Stock Price” means, for any Securities to be converted, the average of the Last Reported Sale Prices of the Common Stock over the ten Trading Day period starting on, and including, the third Trading Day following the Conversion Date for such Securities.

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

“Base Conversion Price” means a dollar amount (initially $65.94) equal to $1,000 divided by the Base Conversion Rate.

“Base Conversion Rate” means, in respect of each $1,000 principal amount of Securities, at an initial rate of 15.1653 shares of Common Stock, subject to adjustments as set forth herein.

“Beneficial Owner” shall mean any Person who is considered a beneficial owner of a security in accordance with Rule 13d-3 promulgated by the SEC under the Exchange Act.

“Bid Solicitation Agent” means, initially, the Trustee. The Company may change the Bid Solicitation Agent, but the Bid Solicitation Agent shall not be the Company’s Affiliate. The Bid Solicitation Agent shall solicit bids from securities dealers in accordance with Section 12.01 that are believed by the Company to be willing to bid for the Securities.

“Board of Directors” means, as to any Person, the board of directors of such Person or any duly authorized committee thereof.

“Business Day” means each day that is not a Saturday, Sunday or other day on which banking institutions in New York, New York or Houston, Texas are authorized or required by law to close.

“Capital Stock” of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity.

“Common Equity” of any Person means Capital Stock of such Person that is generally entitled to (1) vote in the election of directors of such Person or (2) if such Person is not a corporation, vote or otherwise participate in the selection of the governing body, partners, managers or others that will control the management or policies of such Person.

“Common Stock” means the Company’s common stock, par value $0.20 per share.

“Company” means Goodrich Petroleum Corporation or its successors and assigns.

“Contingent Interest” has the meaning set forth in Exhibit A attached hereto.

“Conversion Agent” means the office or agency appointed by the Company where Securities may be presented for conversion. The Conversion Agent appointed by the Company shall initially be the Trustee.

2

“Conversion Value” means, for each $1,000 principal amount of the Securities to be converted, an amount equal to the Applicable Conversion Rate for such Securities multiplied by the Applicable Stock Price for such Securities.

“Custodian” means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law.

“Default” means any event which is, or after notice or passage of time or both would be, an Event of Default.

“Definitive Securities” means certificated Securities that are not Global Securities.

“DTC” means The Depository Trust Company, its nominees and their respective successors and assigns, or such other depository institution hereinafter appointed by the Company pursuant to the terms of this Indenture.

“Ex-Dividend Date” means, in respect of an issuance, a dividend or distribution to holders of Common Stock, the first date on which Common Stock trades on the applicable exchange or in the applicable market, regular way, without the right to receive the issuance, dividend or distribution in question.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.

“Fair Market Value” means the amount that a willing buyer would pay a willing seller in an arm’s length transaction.

A “Fundamental Change” shall be deemed to have occurred if any of the following occurs:

(1) any “person” or “group” within the meaning of Section 13(d) of the Exchange Act, other than the Company, any Subsidiary of the Company or any employee benefit plan of the Company or any such Subsidiary, files a Schedule TO or any other schedule, form or report under the Exchange Act disclosing that such person or group has become the Beneficial Owner of Common Equity of the Company representing more than 50% of the ordinary voting power of the Company’s Common Equity;

(2) consummation of any share exchange, consolidation or merger of the Company pursuant to which the Common Stock will be converted into cash, securities or other property or any sale, lease or other transfer (in one transaction or a series of transactions) of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, to any Person other than one of the

3

Company’s Subsidiaries; provided, however, that a transaction where the holders of more than 50% of all classes of the Company’s Common Equity immediately prior to such transaction own, directly or indirectly, more than 50% of all classes of Common Equity of the continuing or surviving entity or transferee or parent thereof immediately after such event shall not be a Fundamental Change; or

(3) the Company’s Common Stock (or other Common Equity into which the Securities are then convertible) ceases to be listed on a U.S. national or regional securities exchange or quoted on an established automated over-the-counter trading market in the United States for a period of 30 consecutive Scheduled Trading Days,

provided, however, that a Fundamental Change described in clause (2) of the definition above shall not be deemed to have occurred if at least 90% of the consideration received or to be received by the holders of the Company’s Common Stock, excluding cash payments for fractional shares and cash payments in respect of statutory dissenters’ rights, in connection with the transaction or transactions constituting the Fundamental Change described in clause (2) consists of shares of common stock (or depositary receipts or shares evidencing common stock) traded on a U.S. national or regional securities exchange, or which shall be so traded when issued or exchanged in connection with such Fundamental Change as described in clause (2) of the definition above (such securities being referred to as “Publicly Traded Securities”) and as a result of such transaction or transactions the Securities become convertible into such consideration.

“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the (i) Public Company Accounting Oversight Board, (ii) statements and pronouncements of the Financial Accounting Standards Board, (iii) in such other statements by such other entity as may be approved by a significant segment of the accounting profession as in effect from time to time and (iv) the rules and regulations of the SEC governing to inclusion of financial statements in period reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC.

“Global Securities” means certificated Securities in global form, without interest coupons, substantially in the form of Exhibit A hereto and registered in the name of DTC or a nominee of DTC.

“Holder” means the Person in whose name a Security is registered in the Securities Register.

4

“Incremental Share Factor” means 2.6762, subject to the same proportional adjustment as the Base Conversion Rate as set forth herein.

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

“Initial Purchasers” means the several initial purchasers named in Schedule I to the Purchase Agreement.

“Interest Payment Date” has the meaning set forth in Exhibit A attached hereto.

“Issue Date” means December 6, 2006.

“Last Reported Sale Price” of the Common Stock (or any other security for which a Last Reported Sale Price must be obtained) means, on any date, the closing sale price per share of Common Stock or such security (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on that date as reported in composite transactions for the principal U.S. national or regional securities exchange on which the Common Stock or such other security is listed for trading. If the Common Stock or such security is not listed for trading on a U.S. national or regional securities exchange on the relevant date, the Last Reported Sale Price will be the mid-point of the last quoted bid and ask prices for the Common Stock or such security in the over-the-counter market on the relevant date as reported by the National Quotation Bureau or similar organization. If the Common Stock or such security is not so quoted, the Last Reported Sale Price will be the average of the mid-point of the last bid and ask prices for the Common Stock or such security on the relevant date from each of at least three nationally recognized independent investment banking firms (which may include one or more Initial Purchasers or their Affiliates) selected by the Company for this purpose.

“Majority Owner” of a Person means the Person having “beneficial ownership” (as defined in Rule 13(d)(3) under the Exchange Act) of more than 50% of the total voting power of all shares of the respective Person’s Common Equity.

“Offering Memorandum” means the offering memorandum, dated December 1, 2006, relating to the offering by the Company of the Securities.

“Officer” means, with respect to any Person, the Chairman of the Board (if an executive officer), the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Chief Administrative Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice President of such Person.

5

“Officers’ Certificate” means a certificate signed on behalf of the Company by two Officers of the Company that meets the requirements of Section 14.05 hereof.

“Original Issue Discount” means the amount of ordinary interest income on a Security that must be accrued as original issue discount for United States federal income tax purposes pursuant to Treasury Regulation Section 1.1275-4 or any successor provision.

“Opinion of Counsel” means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee.

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

“Preferred Stock”, as applied to the Capital Stock of any corporation, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation.

“Public Acquirer Change of Control” means a Fundamental Change of the type set forth in clause (2) in the definition thereof (after giving effect to the proviso to the definition) in which the acquirer has a class of common stock (or depositary receipts or shares in respect thereof) traded on any U.S. national securities exchange or which will be so traded when issued or exchanged in connection with such Fundamental Change (the “Public Acquirer Common Stock”). If an acquirer does not itself have a class of common stock (or depositary receipts or shares in respect thereof) satisfying the foregoing requirement, it shall be deemed to have Public Acquirer Common Stock if a corporation that directly or indirectly is the Majority Owner of the acquirer has a class of common stock (or depositary receipts or shares in respect thereof) satisfying the foregoing requirement; in such case, all references to Public Acquirer Common Stock shall refer to such class of common stock (or depositary receipts or shares in respect thereof).

“Purchase Agreement” means the Purchase Agreement dated as of December 1, 2006 between the Company and the Initial Purchasers relating to the initial purchase and sale of the Securities.

6

“QIB” means any “qualified institutional buyer” (as such term is defined in Rule 144A).

“Redemption Date” means, with respect to any redemption of Securities, the date of redemption with respect thereto.

“Registration Rights Agreement” means the Registration Rights Agreement dated as of the Issue Date among the Initial Purchasers and the Company.

“Regular Record Date” for the payment of interest on the Securities (including Contingent Interest and Additional Interest, if any), means the May 15 (whether or not a Business Day) immediately preceding an Interest Payment Date on June 1 and November 15 (whether or not a Business Day) immediately preceding an Interest Payment Date on December 1.

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

“Scheduled Trading Day” means a day that is scheduled to be a Trading Day on the primary United States national securities exchange or market on which the Common Stock is listed or admitted to trading.

“SEC” means the United States Securities and Exchange Commission.

“Securities” has the meaning ascribed to it in the second introductory paragraph of this Indenture.

“Securities Act” means the Securities Act of 1933 (15 U.S.C. §§ 77a – 77aa), as amended, and the rules and regulations of the SEC promulgated thereunder.

“Securities Custodian” means the custodian with respect to the Global Security (as appointed by DTC), or any successor Person thereto and shall initially be the Trustee.

“Shelf Registration Statement” shall have the meaning contemplated by and in accordance with the terms of the Registration Rights Agreement.

“Significant Subsidiary” means any Subsidiary that would be a “Significant Subsidiary” of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC.

“Stated Maturity” means December 1, 2026.

“Stock Price” means, in respect of a Fundamental Change, the price per share of Common Stock paid in connection with such Fundamental Change,

7

which shall be equal to (i) if such Fundamental Change is a transaction set forth in clause (2) of the definition thereof, and holders of Common Stock receive only cash in such transaction, the cash amount paid per share of Common Stock and (ii) in all other cases, the average of the Last Reported Sale Prices of the Common Stock over the five Trading Day period ending on the Trading Day preceding the Effective Date of such Fundamental Change.

“Subsidiary” means, with respect to any Person, (a) any corporation, association or other business entity of which more than 50% of the total Common Equity is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (b) any other Person whose results for financial reporting purposes are consolidated with those of such Person in accordance with GAAP.

“TIA” or “Trust Indenture Act” means the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb), as in effect on the date of this Indenture, except as provided in Section 10.03.

“Trading Day” means any day during which (i) trading in the Common Stock generally occurs on the primary United States national securities exchange or market on which the Common Stock (or other security in question) is listed or admitted for trading and (ii) there is no Market Disruption Event. “Market Disruption Event” means, for the purpose of the definition of Trading Day, the occurrence or existence during the one half-hour period ending on the scheduled close of trading on the principal U.S. national or regional securities exchange on which the Common Stock is listed for trading of any material suspension or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the stock exchange or otherwise) in the Common Stock or in any options contracts or future contracts relating to the Common Stock.

“Trading Price” of the Securities on any date of determination means the average of the secondary market bid quotations per $1,000 principal amount of the Securities obtained by the Bid Solicitation Agent for $5,000,000 principal amount of the Securities at approximately 3:30 p.m., New York City time, on such determination date from two independent nationally recognized securities dealers the Company will select, but if only one such bid can reasonably be obtained by the Bid Solicitation Agent, this one bid shall be used. If the Bid Solicitation Agent cannot reasonably obtain at least one bid for $5,000,000 principal amount of the Securities from a nationally-recognized securities dealer or if, in the Company’s reasonable judgment, the bid quotations are not indicative of the secondary market value of the Securities, then the Trading Price of the Securities will be determined by the Company’s Board of Directors based on a good faith estimate of the fair value of the Securities; provided however that, for purposes of determining the Trading Price pursuant to Section 12.01(a)(ii), if the Bid Solicitation Agent cannot reasonably obtain on any Trading Day at least one

8

bid for $5,000,000 principal amount of the Securities from a nationally recognized securities dealer, then the Trading Price per $1,000 principal amount of Securities for such Trading Day will be deemed to be less than 95% of the product of the Last Reported Sale Price of the Common Stock and the Applicable Conversion Rate on such Trading Day.

“Trust Officer” means, when used with respect to the Trustee, the officer within the corporate trust department of the Trustee having direct responsibility for the administration of this Indenture.

“Trustee” means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor.

“UCC” means the Uniform Commercial Code as in effect in the State of New York.

Section 1.02. Other Definitions.

Term	Defined in Section
“Additional Shares”	12.03	(a)
“Agent Members”	2.09	(a)
“Authenticating Agent”	2.04
“Company Notice”	11.03	(a)
“Company Notice Date”	11.03	(a)
“Company Order”	2.04
“Contingent Payment Debt Regulations”	2.18
“Conversion Date”	12.01	(c)
“Conversion Obligation”	12.01	(d)(i)
“Conversion Value”	12.01	(d)
“Defaulted Interest”	2.15
“Effective Date”	12.03	(b)
“Event of Default”	7.01
“Fundamental Change Purchase Date”	11.01
“Fundamental Change Purchase Notice”	11.01	(b)
“Fundamental Change Purchase Price”	11.01
“Global Security Legend”	2.03	(iv)
“Legal Holiday”	14.08
“Measurement Period”	12.01	(a)(ii)
“Paying Agent”	2.05
“Public Acquirer Common Stock”	1.01
“Public Debt Securities”	3.09
“Purchase Date”	11.02	(a)
“Purchase Notice”	11.02	(a)
“Purchase Price”	11.02	(a)

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Term	Defined in Section
“Redemption Price”	6.01	(b)
“Reference Property”	12.05
“Registrar”	2.05
“Relevant Date”	12.01	(d)(iii)
“Reorganization Event”	12.05
“Restricted Securities”	2.03
“Restricted Securities Legend”	2.03
“Securities Register”	2.05
“Settlement Amount”	12.01	(d)
“Special Interest Payment Date”	2.15	(a)
“Special Record Date”	2.15	(a)
“Spin-Off”	12.02	(c)
“Successor Company”	4.01	(a)

Section 1.03. Incorporation by Reference of Trust Indenture Act. This Indenture is subject to the mandatory provisions of the TIA which are incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings:

“Commission” means the SEC.

“indenture securities” means the Securities.

“indenture security holder” means a Holder.

“indenture to be qualified” means this Indenture.

“indenture trustee” or “institutional trustee” means the Trustee.

“obligor” on the Securities means the Company and any other successor obligor on the Securities.

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

Section 1.04. Rules of Construction. Unless the context otherwise requires:

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

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

(c) “or” is not exclusive;

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(d) “including” means including without limitation;

(e) words in the singular include the plural and words in the plural include the singular;

(f) the principal amount of any non-interest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP; and

(g) the principal amount of any Preferred Stock shall be the greater of (i) the maximum liquidation value of such Preferred Stock and (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such Preferred Stock.

ARTICLE 2

THE SECURITIES

Section 2.01. Title; Amount and Issue of Securities; Principal and Interest. (a) The Securities shall be known and designated as the “3.25% Convertible Senior Notes due 2026” of the Company. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is initially limited to $175,000,000, except for Securities authenticated and delivered upon registration of, transfer of, or in exchange for, or in lieu of other Securities pursuant to Section 2.03, 2.04, 2.08, 2.09, 2.10, 2.11, 2.13, 6.07, 10.05, 11.03, or 12.01; provided that additional Securities may be issued in an unlimited aggregate principal amount from time to time thereafter as set forth pursuant to Section 2.04, but only if such additional Securities to be issued are part of the same issue as the Securities initially issued and sold pursuant to the Offering Memorandum for United States federal income tax purposes. The Securities shall be issuable in denominations of $1,000 or multiples thereof.

(b) The Securities shall mature on December 1, 2026 unless earlier converted, redeemed or repurchased in accordance with the provisions hereof.

(c) Interest on the Securities shall accrue from and including the date specified on the face of such Securities until the principal thereof is paid or made available for payment. Interest shall be payable semiannually in arrears on June 1 and December 1 in each year, commencing June 1, 2007. For purposes of this Indenture and the Securities, unless the context clearly requires otherwise, references to “interest” shall include Additional Interest and Contingent Interest.

(d) A Holder of any Security at 5:00 p.m., New York City time, on a Regular Record Date shall be entitled to receive interest (including Contingent

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Interest and Additional Interest, if any), on such Security on the corresponding Interest Payment Date, notwithstanding the conversion of such Securities at any time after the close of business on such Regular Record Date. Securities surrendered for conversion during the period from 5:00 p.m., New York City time, on any Regular Record Date to 9:00 a.m., New York City time, on the corresponding Interest Payment Date must be accompanied by payment of an amount equal to the interest (including Contingent Interest and Additional Interest, if any) payable on such Securities. Notwithstanding the foregoing, no such payment of interest (including Contingent Interest and Additional Interest) need be made by any converting Holder (i) if the Company has specified a Redemption Date that is after a Regular Record Date and on or prior to the corresponding Interest Payment Date, (ii) if the Company has specified a Fundamental Change Purchase Date that is after a Regular Record Date and on or prior to the corresponding Interest Payment Date, or (iii) to the extent of any overdue interest (including Contingent Interest and Additional Interest, if any) existing at the time of conversion of such Security. Except as described above, no interest, Contingent Interest or Additional Interest, if any, on converted Securities will be payable by the Company on any Interest Payment Date subsequent to the date of conversion, and delivery of shares of Common Stock or the combination of cash and shares of Common Stock, if applicable, pursuant to Article 12 hereunder, together with any cash payment for any fractional share, upon conversion will be deemed to satisfy in full the Company’s obligation to pay the principal amount of the Securities and accrued and unpaid interest and Contingent Interest and Additional Interest, if any, to, but not including, the related Conversion Date.

(e) Principal of, interest (including Contingent Interest and Additional Interest, if any) and premium, if any, on, Global Securities shall be payable to DTC in immediately available funds.

(f) Principal of, and any premium on, Definitive Securities shall be payable at the office or agency of the Company maintained for such purpose, which initially shall be the corporate trust office of the Trustee. Interest (including Contingent Interest and Additional Interest, if any), on Definitive Securities will be payable (i) to Holders having an aggregate principal amount of $5,000,000 or less, by check mailed to the Holders of these Securities and (ii) to Holders having an aggregate principal amount of more than $5,000,000, either by check mailed to each Holder or, upon application by a Holder to the Registrar not later than the relevant Regular Record Date, by wire transfer in immediately available funds to such Holder’s account within the United States, which application shall remain in effect until the Holder notifies, in writing, the Registrar to the contrary.

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Section 2.02. Form of Securities.

(a) Except as otherwise provided pursuant to this Section 2.02, the Securities are issuable in fully registered form without coupons in substantially the form of Exhibit A hereto, with such applicable legends as are provided for in Section 2.03. The Securities are not issuable in bearer form. The terms and provisions contained in the form of Security shall constitute, and are hereby expressly made, a part of this Indenture and to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. Any of the Securities may have such letters, numbers or other marks of identification and such notations, legends and endorsements as the officers executing the same may approve (execution thereof to be conclusive evidence of such approval) and as are not inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any securities exchange or automated quotation system on which the Securities may be listed or designated for issuance, or to conform to usage.

(b) The Securities shall be issued initially in the form of one or more permanent Global Securities, with the applicable legends as provided in Section 2.03. Each Global Security shall be duly executed by the Company and authenticated and delivered by the Trustee, and shall be registered in the name of DTC or its nominee and retained by the Trustee, as Securities Custodian, at its corporate trust office, for credit to the accounts of the Agent Members holding the Securities evidenced thereby. The aggregate principal amount of the Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee, as Securities Custodian, and of DTC or its nominee, as hereinafter provided.

Section 2.03. Legends. Each Security issued hereunder shall, upon issuance, bear the legend set forth in Section 2.03(i), and each Common Stock certificate representing shares of the Common Stock issued upon conversion of any Security issued hereunder, shall, upon issuance, unless as otherwise set forth below, bear the legend set forth in Section 2.03(ii) (each such legend, a “Restricted Securities Legend”), and such legend shall not be removed except as provided in Section 2.03(iii). Each Security that bears or is required to bear the Restricted Securities Legend set forth in Section 2.03(i) (together with each Common Stock certificate representing shares of the Common Stock issued upon conversion of such Security that bears or is required to bear the Restricted Securities Legend set forth in Section 2.03(ii), collectively, the “Restricted Securities”) shall be subject to the restrictions on transfer set forth in this Section 2.03 (including the Restricted Securities Legend set forth below), and the Holder of each such Restricted Security, by such Holder’s acceptance thereof, shall be deemed to have agreed to be bound by all such restrictions on transfer.

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As used in Section 2.03, the term “transfer” encompasses any sale, pledge, transfer or other disposition whatsoever of any Restricted Security.

(i) Restricted Securities Legend for Securities. Except as provided in Section 2.03(iii), any certificate evidencing such Security (and all Securities issued in exchange therefor or substitution thereof, other than stock certificates representing shares of the Common Stock, if any, issued upon conversion thereof which shall bear the legend set forth in Section 2.03(ii), if applicable) shall bear a Restricted Securities Legend in substantially the following form:

“THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER AGREES (1) THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH SECURITY, EXCEPT (A) TO THE COMPANY; (B) UNDER A REGISTRATION STATEMENT THAT HAS BECOME EFFECTIVE UNDER THE SECURITIES ACT; (C) ONLY IN THE CASE OF THIS SECURITY TO A PERSON THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A ADOPTED UNDER THE SECURITIES ACT) THAT IS PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER QUALIFIED INSTITUTIONAL BUYER AND TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, ALL IN COMPLIANCE WITH RULE 144A (IF AVAILABLE); OR (D) UNDER ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT; AND (2) IT WILL, PRIOR TO ANY TRANSFER OF THIS SECURITY FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS MAY BE REQUIRED PURSUANT TO THE INDENTURE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.”

(ii) Restricted Securities Legend for the Common Stock Issued Upon Conversion of the Securities. Each stock certificate representing Common Stock issued upon conversion of Securities bearing a Restricted Securities Legend will, subject to the availability of a Shelf Registration Statement and registration thereunder as set forth in the Registration Rights Agreement, bear the following legend:

“THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET

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FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER AGREES (1) THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY, EXCEPT (A) TO THE COMPANY; (B) UNDER A REGISTRATION STATEMENT THAT HAS BECOME EFFECTIVE UNDER THE SECURITIES ACT; OR (C) UNDER ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT; AND (2) IT WILL, PRIOR TO ANY TRANSFER OF THIS SECURITY FURNISH TO THE TRANSFER AGENT AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS MAY BE REQUIRED TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.”

(iii) Removal of the Restricted Securities Legends. The Restricted Securities Legend may be removed from any Security or any Common Stock certificate representing shares of the Common Stock issued upon conversion of any Security if there is delivered to the Company such satisfactory evidence, which may include an opinion of independent counsel, as may be reasonably required by the Company, that neither such legend nor the restrictions on transfer set forth therein are required to ensure that transfers of such Security or shares of the Common Stock issued upon conversion of Securities, as the case may be, will not violate the registration requirements of the Securities Act or the qualification requirements under any state securities laws. Upon provision of such satisfactory evidence, at the written direction of the Company, (x) in the case of a Security, the Trustee shall authenticate and deliver in exchange for such Security another Security or Securities having an equal aggregate principal amount that do not bear such legend or (y) in the case of a Common Stock certificate representing shares of the Common Stock, the transfer agent for the Common Stock shall authenticate and deliver in exchange for the Common Stock certificate or certificates representing such shares of Common Stock bearing such legend, one or more new Common Stock certificates representing a like aggregate number of shares of Common Stock that do not bear such legend. If the Restricted Securities Legend has been removed from a Security or Common Stock certificates representing shares of the Common Stock issued upon conversion of any Security as provided above, no other Security issued in exchange for all or any part of such Security, or no other Common Stock

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certificates issued in exchange for such Common Stock, shall bear such legend, unless the Company has reasonable cause to believe that such other Security is a “restricted security” (or such shares of Common Stock are “restricted securities”) within the meaning of Rule 144 and instructs the Trustee in writing to cause a Restricted Securities Legend to appear thereon.

Any Security (or Security issued in exchange or substitution therefor) as to which the conditions for removal of the Restricted Securities Legend set forth in Section 2.03(i) as set forth therein have been satisfied may, upon surrender of such Security for exchange to the Registrar in accordance with the provisions of Section 2.08, be exchanged for a new Security or Securities, of like tenor and aggregate principal amount, which shall not bear the Restricted Securities Legend required by Section 2.03(i).

Any Common Stock certificate representing shares of Common Stock issued upon conversion of any Security as to which the conditions for removal of the Restricted Securities Legend set forth in Section 2.03(ii) have been satisfied may, upon surrender of the Common Stock certificates representing such shares of Common Stock for exchange in accordance with the procedures of the transfer agent for the Common Stock, be exchanged for a new Common Stock certificate or certificates representing a like aggregate number of shares of Common Stock, which shall not bear the Restricted Securities Legend.

(iv) Global Security Legend. Each Global Security shall also bear the following legend (the “Global Security Legend”) on the face thereof:

“UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS 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.

TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE

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AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO IN THE TERMS OF SECURITIES ATTACHED HERETO.”

(v) Legend for Definitive Securities. Definitive Securities, in addition to the legend set forth in Section 2.03(i), will also bear a legend substantially in the following form:

“THIS SECURITY WILL NOT BE ACCEPTED IN EXCHANGE FOR A BENEFICIAL INTEREST IN A GLOBAL SECURITY UNLESS THE HOLDER OF THIS SECURITY, SUBSEQUENT TO SUCH EXCHANGE, WILL HOLD NO SECURITIES.”

Section 2.04. Execution and Authentication. One Officer shall sign the Securities for the Company by manual or facsimile signature. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless.

A Security shall not be valid until an authorized signatory of the Trustee manually authenticates the Security. The signature of the Trustee on a Security shall be conclusive evidence that such Security has been duly and validly authenticated and issued under this Indenture. A Security shall be dated the date of its authentication.

At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities executed by the Company in an unlimited aggregate principal amount to the Trustee for authentication, together with a written order of the Company signed by two Officers or by an Officer and an Assistant Secretary of the Company (the “Company Order”) for the authentication and delivery of such Securities, and the Trustee in accordance with such Company Order shall authenticate and deliver such Securities as in this Indenture provided and not otherwise. All Securities issued on the Issue Date shall be identical in all respects with any such Securities authenticated and delivered thereafter, other than issue dates, the date from which interest accrues, appropriate CUSIP numbers or other identifying notations and any changes relating thereto. Notwithstanding anything to the contrary contained in this Indenture, subject to Section 2.12, all Securities issued under this Indenture shall vote and consent together on all matters as one class and no series of Securities will have the right to vote or consent as a separate class on any matter.

The Trustee may appoint an agent (the “Authenticating Agent”) reasonably acceptable to the Company to authenticate the Securities. Initially, the Trustee will act as the Authenticating Agent. Any such instrument shall be evidenced by an instrument signed by a Trust Officer of the Trustee, a copy of

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which shall be furnished to the Company. Unless limited by the terms of such appointment, any such Authenticating Agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by the Authenticating Agent. An Authenticating Agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands.

In case the Company, pursuant to Article 4, shall be consolidated or merged with or into, or shall convey, transfer or lease all or substantially all of its properties and assets to, any Person, and the Successor Company, if not the Company, shall have executed an indenture supplemental hereto with the Trustee pursuant to Article 4, any of the Securities authenticated or delivered prior to such consolidation, merger, conveyance, transfer or lease may, from time to time, at the request of the Successor Company, be exchanged for other Securities executed in the name of the Successor Company with such changes in phraseology and form as may be appropriate, but otherwise in substance of like tenor as the Securities surrendered for such exchange and of like principal amount; and the Trustee, upon Company Order of the Successor Company, shall authenticate and deliver Securities as specified in such order for the purpose of such exchange. If Securities shall at any time be authenticated and delivered in any new name of a Successor Company pursuant to this Section 2.04 in exchange or substitution for or upon registration of transfer of any Securities, such Successor Company, at the option of the Holders but without expense to them, shall provide for the exchange of all Securities at the time outstanding for Securities authenticated and delivered in such new name.

Section 2.05. Registrar and Paying Agent. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the “Registrar”) and an office or agency where Securities may be presented for payment (the “Paying Agent”). The Registrar shall keep a register of the Securities and of their transfer and exchange (the “Securities Register”). The Company may have one or more co-registrars and one or more additional paying agents. The term “Paying Agent” includes any additional paying agent and the term “Registrar” includes any co-registrar.

The Company shall enter into an appropriate agency agreement with any Registrar or Paying Agent not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of each such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 8.07. The Company or any of its domestically organized, wholly owned Subsidiaries may act as Paying Agent, Registrar or transfer agent.

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The Company initially appoints the Trustee as Registrar and Paying Agent for the Securities. The Company may remove any Registrar or Paying Agent upon written notice to such Registrar or Paying Agent and to the Trustee; provided, however, that no such removal shall become effective until (i) acceptance of any appointment by a successor as evidenced by an appropriate agreement entered into by the Company and such successor Registrar or successor Paying Agent, as the case may be, and delivered to the Trustee or (ii) notification to the Trustee that the Trustee shall serve as Registrar or Paying Agent until the appointment of a successor in accordance with clause (i) above. The Registrar or Paying Agent may resign at any time upon written notice to the Company and the Trustee.

Section 2.06. Paying Agent to Hold Money in Trust. By no later than 11:00 a.m., New York City time, on the date on which any principal of, interest (including Contingent Interest and Additional Interest, if any) and premium, if any, on any Security is due and payable, the Company shall deposit with the Paying Agent a sum sufficient in immediately available funds to pay such principal, interest (including Contingent Interest and Additional Interest, if any) and premium, if any, when due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that such Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by such Paying Agent for the payment of principal of, interest (including Contingent Interest and Additional Interest, if any) or premium, if any, on the Securities and shall notify the Trustee in writing of any default by the Company in making any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent (other than the Trustee) to pay all money held by it to the Trustee and to account for any funds disbursed by such Paying Agent. Upon complying with this Section 2.06, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money delivered to the Trustee. Upon any bankruptcy, reorganization or similar proceeding with respect to the Company, the Trustee shall serve as Paying Agent for the Securities.

Section 2.07. Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders and shall otherwise comply with TIA § 312(a). If the Trustee is not the Registrar, or to the extent otherwise required under the TIA, the Company shall furnish or cause the Registrar to furnish to the Trustee, in writing at least five 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 Holders and the Company shall otherwise comply with TIA § 312(a).

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Section 2.08. General Provisions Relating to Transfer and Exchange. The Securities are issuable only in registered form. A Holder may transfer a Security only by written application to the Registrar stating the name of the proposed transferee and otherwise complying with the terms of this Indenture. No such transfer shall be effected until, and such transferee shall succeed to the rights of a Holder only upon, final acceptance and registration of the transfer by the Registrar in the Securities Register. Furthermore, any Holder of a Global Security shall, by acceptance of such Global Security, agree that transfers of beneficial interests in such Global Security may be effected only through a book-entry system maintained by the Holder of such Global Security (or its agent) and that ownership of a beneficial interest in the Global Security shall be required to be reflected in a book-entry.

When Securities are presented to the Registrar with a request to register the transfer or to exchange them for an equal aggregate principal amount of Securities of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met (including that such Securities are duly endorsed or accompanied by a written instrument of transfer duly executed by the Holder thereof or by an attorney who is authorized in writing to act on behalf of the Holder). Subject to Section 2.04, to permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Securities at the Registrar’s request. No service charge shall be made for any registration of transfer or exchange or redemption of the Securities, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge required by law or permitted under the terms of this Indenture.

Neither the Company nor the Registrar shall be required to exchange or register a transfer of any Securities:

(a) selected for redemption under Article 6 or, if a portion of any Security is selected for redemption, the portion thereof selected for redemption;

(b) surrendered for conversion or, if a portion of any Security is surrendered for conversion, the portion thereof surrendered for conversion; or

(c) in certificated form for a period of 15 days prior to mailing a notice of redemption under Article 6.

The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between beneficial owners of any Global Security) other than to require delivery of such certificates and other

20

documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

Section 2.09. Book-Entry Provisions for the Global Securities. (a) The Global Securities initially shall:

(i) be registered in the name of DTC (or a nominee thereof);

(ii) be delivered to the Trustee as Securities Custodian;

(iii) bear the Restricted Securities Legend set forth in Section 2.03(i); and

(iv) bear the Global Security Legend set forth in Section 2.03(iv).

Members of, or participants in, DTC (“Agent Members”) shall have no rights under this Indenture with respect to any Global Security held on their behalf by DTC, or the Trustee as its custodian, or under such Global Security, and DTC may be treated by the Company, the Trustee and any agent of the Company, or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing contained herein shall prevent the Company, the Trustee or any agent of the Company, or Trustee from giving effect to any written certification, proxy or other authorization furnished by DTC or impair, as between DTC and the Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Security.

(b) The Holder of a Global Security may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities.

(c) A Global Security may not be transferred, in whole or in part, to any Person other than DTC (or a nominee thereof) or to a successor thereof (or such successor’s nominee), and no such transfer to any such other Person may be registered. Beneficial interests in a Global Security may be transferred in accordance with the rules and procedures of DTC and the provisions of Section 2.10.

(d) If at any time:

(i) DTC notifies the Company in writing that it is unwilling or unable to continue to act as depositary for the Global Securities and a successor depositary for the Global Securities is not appointed by the Company within 90 days of such notice;

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(ii) DTC ceases to be registered as a “clearing agency” under the Exchange Act and a successor depositary for the Global Securities is not appointed by the Company within 90 days of such cessation;

(iii) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of the Definitive Securities under this Indenture in exchange for all or any part of the Securities represented by a Global Security or Global Securities, subject to the procedures of DTC; or

(iv) an Event of Default has occurred and is continuing and the Registrar has received a request from DTC for the issuance of Definitive Securities in exchange for such Global Security or Global Securities;

the Securities Custodian shall surrender such Global Security or Global Securities to the Trustee for cancellation and the Company shall execute, and the Trustee, upon receipt of an Officers’ Certificate and Company Order for the authentication and delivery of Securities, shall authenticate and deliver in exchange for such Global Security or Global Securities, Definitive Securities in an aggregate principal amount equal to the aggregate principal amount of such Global Security or Global Securities. Such Definitive Securities shall be registered in such names as DTC (or any nominee thereof) shall identify in writing as the beneficial owners of the Securities represented by such Global Security or Global Securities.

(e) Notwithstanding the foregoing, in connection with any transfer of beneficial interests in a Global Security to the beneficial owners thereof pursuant to Section 2.09(d), the Registrar shall reflect on its books and records the date and a decrease in the principal amount of such Global Security in an amount equal to the principal amount of the beneficial interests in such Global Security to be transferred.

Section 2.10. Special Transfer Provisions. Unless a Security is no longer a Restricted Security, the following provisions shall apply to any sale, pledge or other transfer of such Securities:

(a) Transfer of Securities to a QIB. The following provisions shall apply with respect to the registration of any proposed transfer of Securities to a QIB:

(i) If the Securities to be transferred consist of a beneficial interest in the Global Securities, the transfer of such interest may be effected only through the book-entry systems maintained by DTC.

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(ii) If the Securities to be transferred consist of Definitive Securities, the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on the form of Security stating (or has otherwise advised the Company and the Registrar in writing) that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed a certification stating or has otherwise advised the Company and the Registrar in writing that:

(A) it is purchasing the Securities for its own account or an account with respect to which it exercises sole investment discretion;

(B) it and any such account is a QIB within the meaning of Rule 144A;

(C) it is aware that the sale to it is being made in reliance on Rule 144A;

(D) it acknowledges that it has received such information regarding the Company as it has requested pursuant to Rule 144A or has determined not to request such information; and

(E) it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A.

(b) General. By its acceptance of any Security bearing the Restricted Securities Legend, each Holder of such a Security acknowledges the restrictions on transfer of such Security set forth in this Indenture and agrees that it will transfer such Security only as provided in this Indenture. The Registrar shall not register a transfer of any Security unless such transfer complies with the restrictions on transfer of such Security set forth in this Indenture. The Registrar shall be entitled to receive and rely on written instructions from the Company verifying that such transfer complies with such restrictions on transfer. In connection with any transfer of Securities, each Holder agrees by its acceptance of the Securities to furnish the Registrar or the Company such certifications, legal opinions or other information as either of them may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or a transaction not subject to, the registration requirements of the Securities Act; provided that the Registrar shall not be required to determine (but may rely on a determination made by the Company with respect to) the sufficiency of any such certifications, legal opinions or other information.

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The Registrar shall retain copies of all certifications, letters, notices and other written communications received pursuant to Section 2.09 hereof or this Section 2.10. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar.

Section 2.11. Mutilated, Destroyed, Lost or Wrongfully Taken Securities. If a mutilated Security is surrendered to the Registrar or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the requirements of Section 8-405 of the UCC are met, such that the Holder (a) notifies the Company or the Trustee within a reasonable time after such Holder has notice of such loss, destruction or wrongful taking and the Registrar has not registered a transfer prior to receiving such notification, (b) makes such request to the Company or Trustee prior to the Security being acquired by a protected purchaser as defined in Section 8-303 of the UCC and (c) satisfies any other reasonable requirements of the Trustee. Such Holder shall furnish an indemnity bond sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee, the Paying Agent and the Registrar from any loss which any of them may suffer if a Security is replaced, and, in the absence of notice to the Company or the Trustee that such Security has been acquired by a protected purchaser, the Company shall execute and upon Company Order the Trustee shall authenticate and make available for delivery, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or wrongfully taken Security, a new Security of like tenor and principal amount, bearing a number not contemporaneously outstanding.

In case any such mutilated, destroyed, lost or wrongfully taken Security has become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security.

Upon the issuance of any new Security under this Section 2.11, the Company may require the payment by the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) in connection therewith.

Every new Security issued pursuant to this Section 2.11 in lieu of any mutilated, destroyed, lost or wrongfully taken Security shall constitute an original additional contractual obligation of the Company and any other obligor upon the Securities, whether or not the mutilated, destroyed, lost or wrongfully taken Security shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and ratably with any and all other Securities duly issued hereunder.

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The provisions of this Section 2.11 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or wrongfully taken Securities.

Section 2.12. Outstanding Securities. Securities outstanding at any time are all Securities authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation and those described in this Section 2.12 as not outstanding. A Security does not cease to be outstanding in the event the Company or an Affiliate of the Company holds the Security; provided, however, that (i) for purposes of determining which Securities are outstanding for consent or voting purposes hereunder, the provisions of Section 14.06 shall apply and (ii) in determining whether the Trustee shall be protected in making a determination whether the Holders of the requisite principal amount of outstanding Securities are present at a meeting of Holders of Securities for quorum purposes or have consented to or voted in favor of any request, demand, authorization, direction, notice, consent, waiver, amendment or modification hereunder, or relying upon any such quorum, consent or vote, only Securities which a Trust Officer of the Trustee actually knows to be held by the Company or an Affiliate of the Company shall not be considered outstanding.

If a Security is replaced or paid pursuant to Section 2.11, it ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to them that the replaced Security is held by a protected purchaser.

If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a Redemption Date or at Stated Maturity, money sufficient to pay all principal, premium, if any, and interest payable on that date with respect to the Securities (or portions thereof) to be redeemed or maturing, as the case may be, then on and after that date such Securities (or portions thereof) cease to be outstanding and interest (including Contingent Interest and Additional Interest, if any) on them ceases to accrue.

Section 2.13. Temporary Securities. In the event that Definitive Securities are to be issued under the terms of this Indenture, until such Definitive Securities are ready for delivery, the Company may prepare and upon receipt of a Company Order the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of Definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and upon receipt of a Company Order the Trustee shall authenticate Definitive Securities. After the preparation of Definitive Securities, the temporary Securities shall be exchangeable for Definitive Securities upon surrender of the temporary Securities at any office or agency maintained by the Company for that purpose and such exchange shall be without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute, and the

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Trustee shall authenticate and make available for delivery in exchange therefor, one or more Definitive Securities representing an equal principal amount of Securities. Until so exchanged, the Holder of temporary Securities shall in all respects be entitled to the same benefits under this Indenture as a Holder of Definitive Securities.

Section 2.14. Cancellation. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar, the Conversion Agent and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange, conversion or payment. The Trustee and no one else shall cancel all Securities surrendered for registration of transfer, exchange, conversion, payment or cancellation and dispose of such Securities in accordance with its internal policies and customary procedures including delivery of a certificate describing such Securities disposed of (subject to the record retention requirements of the Exchange Act). The Company may not issue new Securities to replace Securities it has paid for or converted or delivered to the Trustee for cancellation for any reason other than in connection with a transfer or exchange.

At such time as all beneficial interests in a Global Security have either been exchanged for Definitive Securities, transferred, redeemed, repurchased, converted or canceled, such Global Security shall be returned by the Securities Custodian to the Trustee for cancellation or retained and canceled by the Trustee. At any time prior to such cancellation, if any beneficial interest in a Global Security is exchanged for Definitive Securities, transferred in exchange for an interest in another Global Security, redeemed, repurchased, converted or canceled, the principal amount of Securities represented by such Global Security shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the Securities Custodian for such Global Security) with respect to such Global Security, by the Trustee or the Securities Custodian, to reflect such reduction.

Section 2.15. Payment of Interest; Defaulted Interest. Interest (including Contingent Interest and Additional Interest, if any) on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name such Security (or one or more predecessor Securities) is registered at the close of business on the Regular Record Date for such payment at the office or agency of the Company maintained for such purpose pursuant to Section 2.05. The Company shall pay interest upon any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) upon the overdue installments of accrued and unpaid interest at the rate borne by the Securities from the required payment date.

Any interest on any Security which is payable, but is not paid when the same becomes due and payable and such nonpayment continues for a period of 30

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days, shall forthwith cease to be payable to the Holder on the Regular Record Date, and such interest and (to the extent lawful) interest on such interest at the rate borne by the Securities (such interest and interest thereon herein collectively called “Defaulted Interest”) shall be paid by the Company at its election, in each case, as provided in clause (a) or (b) below:

(a) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective predecessor Securities) are registered at the close of business on a Special Record Date (as defined below) for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date (not less than 30 days after such notice) of the proposed payment (the “Special Interest Payment Date”), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a record date (the “Special Record Date”) for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the Special Interest Payment Date and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date, and in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date and Special Interest Payment Date therefor to be given in the manner provided for in Section 14.02, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date and Special Interest Payment Date therefor having been so given, such Defaulted Interest shall be paid on the Special Interest Payment Date to the Persons in whose names the Securities (or their respective predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (b).

(b) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, if, after notice is given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee.

Subject to the foregoing provisions of this Section 2.15, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest (including Contingent Interest and Additional Interest, if any) accrued and unpaid, and to accrue, which were carried by such other Security.

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Section 2.16. Computation of Interest. Interest (including Contingent Interest and Additional Interest, if any) on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months.

Section 2.17. CUSIP and ISIN Numbers. The Company in issuing the Securities may use “CUSIP” and “ISIN” numbers (if then generally in use) and, if so, the Trustee shall use “CUSIP” and “ISIN” numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such CUSIP or ISIN numbers. The Company shall promptly notify the Trustee in writing of any change in the CUSIP and ISIN numbers.

Section 2.18. Calculation Of Original Issue Discount. The Company agrees, and by acceptance of a Certificated Security or a beneficial ownership interest in a Global Security each Holder and each beneficial owner of the Securities shall be deemed to have agreed, for United States federal income tax purposes, (1) to treat the Securities as indebtedness that is subject to Treasury Regulations Section 1.1275-4 (the “Contingent Payment Debt Regulations”) and, for purposes of the Contingent Payment Debt Regulations, to treat the cash and the fair market value of any stock beneficially received upon any conversion of the Securities as a contingent payment, (2) to accrue interest with respect to the Securities as original issue discount on a constant yield basis, according to the “noncontingent bond method” set forth in Treasury Regulations Section 1.1275-4(b), using the comparable yield of 8.5% per annum compounded semi-annually and (3) in the absence of an administrative determination or judicial ruling to the contrary, to be bound by the Company’s determination of the “comparable yield” and “projected payment schedule,” within the meaning of the Contingent Payment Debt Regulations, with respect to the Securities. A Holder may obtain the issue price, the amount of original issue discount, the issue date, the yield to maturity, the comparable yield and the projected payment schedule for the Securities by submitting a written request for such information to the Goodrich Petroleum Corporation, 808 Travis Street, Suite 1320, Houston, Texas 77002, Attention: Chief Financial Officer.

The Company acknowledges and agrees, and each Holder and any beneficial owner of a Security by its purchase thereof shall be deemed to acknowledge and agree, that (i) the comparable yield and the schedule of projected payments are not determined for any purpose other than for the determination of interest accruals and adjustments thereof in respect of the

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Securities for United States federal income tax purposes and (ii) the comparable yield and the schedule of projected payments do not constitute a projection or representation regarding the amounts payable on the Securities.

ARTICLE 3

COVENANTS

Section 3.01. Payment of Securities. The Company shall promptly pay the principal of, interest (including Contingent Interest and Additional Interest, if any) and premium, if any, on the Securities on the dates and in the manner provided in the Securities and in this Indenture. Principal, interest (including Contingent Interest and Additional Interest, if any) and premium, if any, shall be considered paid on the date due if by 11:00 a.m., New York City time, on such date the Trustee or the Paying Agent holds in accordance with this Indenture immediately available funds sufficient to pay all principal, interest (including Contingent Interest and Additional Interest, if any) and premium, if any, then due.

The Company shall pay interest on overdue principal or premium, if any, at the rate specified therefor in the Securities, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful.

Notwithstanding anything to the contrary contained in this Indenture, the Company may, to the extent it is required to do so by law, deduct or withhold income or other similar taxes imposed by the United States of America from principal, premium or interest (including Contingent Interest and Additional Interest, if any) payments hereunder.

Section 3.02. Maintenance of Office or Agency. The Company will maintain an office or agency where the Securities may be presented or surrendered for payment, where, if applicable, the Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company will give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served to the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands.

The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind any such designation. The Company will give prompt written notice to the Trustee of any such designation or rescission and any change in the location of any such other office or agency.

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Section 3.03. Corporate Existence. Except as otherwise provided in Article 4, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect (i) its existence and (ii) the material rights (charter and statutory), licenses and franchises of the Company, except, in the case of clause (ii), to the extent the Company otherwise reasonably determines it no longer desirable.

Section 3.04. Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (i) all material taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary and (ii) all lawful claims for labor, materials and supplies, which, if unpaid, might by law become a material liability or lien upon the property of the Company or any Subsidiary; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which appropriate reserves, if necessary (in the good faith judgment of management of the Company), are being maintained in accordance with GAAP or where the failure to effect such payment will not be disadvantageous to the Holders.

Section 3.05. Compliance Certificate. The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company an Officers’ Certificate, one of the signers of which shall be the principal executive officer, principal financial officer or principal accounting officer of the Company, stating that in the course of the performance by the signers of their duties as Officers of the Company they would normally have knowledge of any Default or Event of Default and whether or not the signers know of any Default or Event of Default that occurred during such period. If they do, the certificate shall describe each Default or Event of Default, its status and the action the Company is taking or proposes to take with respect thereto. The Company also shall comply with TIA § 314(a)(4).

Section 3.06. Further Instruments and Acts. Upon request of the Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture.

Section 3.07. Statement by Officers as to Default. The Company shall deliver to the Trustee, within 30 days after the Company becomes aware of the occurrence of any Event of Default or Default, an Officers’ Certificate setting forth the details of such events which would constitute an Event of Default or Default, its status and the action which the Company proposes to take with respect thereto.

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Section 3.08. Additional Interest and Contingent Interest. If Additional Interest is payable by the Company pursuant to the Registration Rights Agreement or Section 7.03, or if Contingent Interest is payable by the Company pursuant to the terms of the Securities, the Company shall deliver to the Trustee an Officers’ Certificate to that effect stating (i) the amount of such Additional Interest, or Contingent Interest that is payable and (ii) the date on which such Additional Interest, or Contingent Interest is payable. Unless and until a Trust Officer of the Trustee receives such a certificate, the Trustee may assume without inquiry that no Additional Interest, or Contingent Interest is payable. If the Company has paid Additional Interest, or Contingent Interest directly to the persons entitled to it, the Company shall deliver to the Trustee an Officers’ Certificate setting forth the particulars of such payment.

Section 3.09. Subsidiary Guarantees. If the Company shall issue any unsecured debt securities that are publicly traded or eligible for trading in the Portal Market (“Public Debt Securities”), and any of the Company’s Subsidiaries provides a guarantee with respect to such Public Debt Securities, then the Company shall, within 30 days following such issuance, cause each such Subsidiary to execute a supplement to this Indenture under which such Subsidiary will guarantee the Company’s obligations under the Securities on terms substantially similar (in the Company’s good faith determination) to the guarantees with respect to the Public Debt Securities. The guarantee of the Securities by any such Subsidiary may be released if the Subsidiary no longer guarantees such Public Debt Securities, if such Subsidiary is dissolved or liquidated, if such Subsidiary is no longer the Company’s Subsidiary or upon satisfaction and discharge of the Securities in accordance with this Indenture.

Section 3.10. Calculation Of Original Issue Discount. The Company shall file with the Trustee promptly at the end of each calendar year (i) a written notice specifying the amount of Original Issue Discount (including daily rates and accrual periods) accrued on the Securities as of the end of such year and (ii) such other specific information relating to such Original Issue Discount as may then be reasonably requested by the Trustee and relevant under the Internal Revenue Code of 1986, as amended from time to time, or the Treasury regulations promulgated thereunder.

ARTICLE 4

SUCCESSOR COMPANY

Section 4.01. Consolidation, Merger and Sale of Assets. The Company shall not consolidate with or merge with or into, or convey, transfer or lease all or substantially all its properties and assets to, another Person, unless:

(a) the resulting, surviving or transferee Person (the “Successor Company”), if not the Company, shall expressly assume, by supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Securities, this Indenture and, to the extent then still operative, the Registration Rights Agreement;

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(b) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; and

(c) the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, stating that such consolidation, merger or transfer and such supplemental indenture, if any, comply with this Indenture.

For purposes of this Section 4.01, the conveyance, transfer or lease of all or substantially all of the properties and assets of one or more Subsidiaries of the Company, which properties and assets, if held by the Company instead of such Subsidiaries, would constitute all or substantially all of the properties and assets of the Company on a consolidated basis, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company.

The Successor Company will succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture, but, in the case of a lease of all or substantially all its properties and assets, the Company will not be released from the obligation to pay the principal of, premium, if any, and interest (including Contingent Interest and Additional Interest, if any) on the Securities.

ARTICLE 5

REPORTING OBLIGATIONS

Section 5.01. Reporting Obligations. (a) The Company shall deliver to the Trustee, within 15 days after filing with the SEC, copies of its annual reports and of information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. For the avoidance of doubt, the foregoing is not intended to create any obligation to timely file reports with the SEC.

(b) Delivery of reports, information and other documents under this Section 5.01 to the Trustee is for informational purposes only and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers’ Certificates).

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Section 5.02. Compliance with TIA. The Company also shall comply with the other provisions of Section 314(a) of the Trust Indenture Act.

ARTICLE 6

REDEMPTION OF SECURITIES

Section 6.01. Optional Redemption.

(a) Prior to December 1, 2011, the Securities shall not be redeemable.

(b) On and after December 1, 2011, subject to the terms and conditions of this Article 6, the Company may, at its option, redeem for cash all or a portion of the Securities, at a price (the “Redemption Price”) equal to 100% of the principal amount of Securities to be redeemed, plus accrued and unpaid interest (including Contingent Interest and Additional Interest, if any) to but excluding the Redemption Date.

(c) In the event that the Redemption Date occurs after a Regular Record Date for the payment of interest and on or prior to the related Interest Payment Date, the Redemption Price for any such Securities to be redeemed shall be 100% of the principal amount of such Securities, and accrued and unpaid interest (including Contingent Interest and Additional Interest, if any) shall be paid to the Holder on such Regular Record Date.

Section 6.02. Election to Redeem; Notice to Trustee. In case of any redemption at the election of the Company, the Company shall, on or prior to the date that is 15 days prior to the date on which notice is given to the Holders (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Securities to be redeemed and shall deliver to the Trustee such documentation and records as shall enable the Trustee to select the Securities to be redeemed pursuant to Section 6.03. Any such notice may be cancelled at any time prior to notice of such redemption being mailed to any Holder and shall thereby be void and of no effect.

Section 6.03. Selection by Trustee of Securities to Be Redeemed. If less than all the Securities are to be redeemed at any time pursuant to this Article 6, the particular Securities to be redeemed shall be selected by the Trustee, from the outstanding Securities not previously called for redemption, by lot or on a pro rata basis among the Securities or by such other method as the Trustee shall deem fair and appropriate, including any method required by DTC or any successor depositary (and in such manner as is not prohibited by applicable legal requirements) and which may provide for the selection for redemption of portions of the principal of the Securities; provided, however, that no such partial redemption shall reduce the portion of the principal amount of a Security not redeemed to less than $1,000.

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The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed.

For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed.

If any Securities selected for partial redemption are thereafter surrendered for conversion in part before termination of the conversion right with respect to the portion of the Securities so selected, the converted portion of such Securities shall be deemed (so far as may be), solely for purposes of determining the aggregate principal amount of Securities to be redeemed by the Company, to be the portion selected for redemption. Securities which have been converted during a selection of Securities to be redeemed may be treated by the Trustee as outstanding for the purpose of such selection. Nothing in this Section 6.03 shall affect the right of any Holder to convert any Securities pursuant to Article 12 before the termination of the conversion right with respect thereto.

Section 6.04. Notice of Redemption. Notice of redemption shall be given in the manner provided for in Section 14.02 not less than 30 nor more than 60 calendar days prior to the Redemption Date, to the Trustee, the Paying Agent and each Holder of Securities to be redeemed. The Trustee shall give notice of redemption in the Company’s name and at the Company’s expense; provided, however, that the Company shall deliver to the Trustee an Officers’ Certificate, at least 15 calendar days prior to the date on which notice is required to be given to the Holders (unless shorter notice shall be satisfactory to the Trustee), requesting that the Trustee give such notice at the Company’s expense and setting forth the information to be stated in such notice as provided in the following items.

All notices of redemption shall state:

(a) the Redemption Date;

(b) the Redemption Price;

(c) the then current Base Conversion Rate and the Share Incremental Factor and provide a statement that the Securities called for redemption may be converted at any time before the close of business on the third Scheduled Trading Day prior to the Redemption Date, and that Holders who wish to convert Securities must comply with the relevant procedures;

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(d) if less than all outstanding Securities are to be redeemed, the identification of the particular Securities (or portion thereof) to be redeemed, as well as the aggregate principal amount of Securities to be redeemed and the aggregate principal amount of Securities to be outstanding after such partial redemption;

(e) in case any Security is to be redeemed in part only, the notice which relates to such Security shall state that on and after the Redemption Date, upon surrender of such Security, the Holder will receive, without charge, a new Security or Securities of authorized denominations for the principal amount thereof remaining unredeemed;

(f) that on the Redemption Date the Redemption Price will become due and payable upon each such Security, or the portion thereof, to be redeemed, and, unless the Company defaults in making the redemption payment, that interest (including Contingent Interest and Additional Interest, if any) on Securities called for redemption (or the portion thereof) will cease to accrue on and after said date;

(g) the place or places where such Securities are to be surrendered for payment of the Redemption Price;

(h) the name and address of the Paying Agent and the Conversion Agent;

(i) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price; and

(j) the CUSIP or ISIN number, and that no representation is made as to the accuracy or correctness of the CUSIP or ISIN number, if any, listed in such notice or printed on the Securities.

Section 6.05. Deposit of Redemption Price. Prior to 11:00 a.m., New York City time, on any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 2.06) an amount of money sufficient to pay the Redemption Price of all the Securities which are to be redeemed on that date other than Securities or portions of Securities called for redemption that are beneficially owned by the Company and have been delivered by the Company to the Trustee for cancellation.

Section 6.06. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, unless converted, become due and payable at the Redemption Price, and from and after such date (unless the Company shall default in the payment of the Redemption Price, accrued and unpaid interest (including

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Contingent Interest and Additional Interest, if any) or premium, if any, such Securities shall cease to bear interest or Additional Interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price.

If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal and any premium shall, until paid, bear interest from the Redemption Date at the rate borne by the Securities.

Section 6.07. Securities Redeemed in Part. Any Security which is to be redeemed only in part (pursuant to the provisions of this Article 6) shall be surrendered at the office or agency of the Company maintained for such purpose pursuant to Section 3.02 (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder’s attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and make available for delivery to the Holder of such Security at the expense of the Company, a new Security or Securities, of any authorized denomination as requested by such Holder, in an aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered; provided that each such new Security will be in a principal amount of $1,000 or multiple thereof.

ARTICLE 7

DEFAULTS AND REMEDIES

Section 7.01. Events of Default. Each of the following is an “Event of Default”:

(a) default in any payment of interest (including Contingent Interest and Additional Interest, if any) or premium, if any, on any Security when the same becomes due and payable, and such default continues for a period of 30 days;

(b) default in the payment of the principal of any Security when the same becomes due and payable at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration of acceleration or otherwise;

(c) failure by the Company to comply with its obligation to convert the Securities in accordance with this Indenture, upon exercise of a Holder’s conversion right and such failure continues for a period of 10 days;

(d) failure by the Company to give a Company Notice of the occurrence of a Fundamental Change to Holders pursuant to Section 11.01 or notice of a specified corporate transaction (as described in Section 12.01(a)(iv)) or a notice of a Public Acquirer Change of Control (as described in Section 12.04(c)) to Holders, in each case when due;

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(e) failure by the Company to comply with its obligations under Article 4;

(f) failure by the Company for a period of 60 days after written notice from the Trustee or Holders of at least 25% in principal amount of Securities then outstanding has been received to comply with any obligation, covenant or agreement in this Indenture or under the Securities (or 180 days after such notice with respect to any failure to comply with Article 5 hereof) (other than those referred to in Section 7.01(a) through (e) and Section 7.01(g) through (i));

(g) default by the Company or any Subsidiary in the payment of the principal or interest on any mortgage, agreement or other instrument under which there may be outstanding, or by which there may be secured or evidenced, any indebtedness for money borrowed in excess of $25,000,000 in the aggregate of the Company and/or any such Subsidiary, whether such indebtedness now exists or shall hereafter be created, resulting in such indebtedness becoming or being declared due and payable, and such acceleration shall not have been rescinded or annulled within 30 days after written notice of such acceleration has been received by the Company or such Subsidiary from the Trustee (or to the Company and the Trustee from Holders of at least 25% in principal amount of outstanding Securities);

(h) the Company or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law:

(i) commences a voluntary case or proceeding;

(ii) consents to the entry of judgment, decree or order for relief against it in an involuntary case or proceeding;

(iii) consents to the appointment of a Custodian of it or for any substantial part of its property;

(iv) makes a general assignment for the benefit of its creditors;

(v) consents to or acquiesces in the institution of a bankruptcy or an insolvency proceeding against it;

(vi) takes any corporate action to authorize or effect any of the foregoing; or

(vii) takes any comparable action under any foreign laws relating to insolvency;

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(i) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

(i) is for relief against the Company or any Significant Subsidiary in an involuntary case;

(ii) appoints a Custodian of the Company for all or substantially all of the Company’s or any Significant Subsidiary’s property; or

(iii) orders the winding up or liquidation of the Company or Significant Subsidiary;

and, in each case, the order or decree or relief remains unstayed and in effect for 90 days.

The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body.

Notwithstanding the foregoing, a Default under clause (f) or (g) of this Section 7.01 will not constitute an Event of Default until the Trustee notifies the Company (or the Holders of 25% or more in principal amount of the outstanding Securities notify the Company and the Trustee) of the Default in writing and the Company does not cure such Default within the time specified in clause (f) or (g) of this Section 7.01 after receipt of such notice.

Section 7.02. Acceleration. Subject to Section 7.03, if an Event of Default (other than an Event of Default specified in Section 7.01(h) or Section 7.01(i) above) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in outstanding principal amount of the outstanding Securities by notice to the Company and the Trustee, may, and the Trustee at the request of such Holders shall, declare the principal of and accrued and unpaid interest, if any, and Additional Interest and premium, if any, on all the Securities to be due and payable. Upon such a declaration, such principal, premium, if any, and accrued and unpaid interest and Additional Interest, if any, shall be due and payable immediately. If an Event of Default specified in Section 7.01(h) or Section 7.01(i) above occurs and is continuing, the principal of and accrued and unpaid interest, if any, and Additional Interest and premium, if any, on all the Securities outstanding shall be immediately due and payable with no further action by the Trustee or the Holders.

Section 7.03. Sole Remedy for Failure to Report. Notwithstanding any other provision of this Indenture, the sole remedy for an Event of Default relating

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to the failure to comply with the reporting obligations under Article 5 of this Indenture, and for any failure to comply with the requirements of Section 314(a)(1) of the TIA, will for the 365 days after the occurrence of such an Event of Default consist exclusively of the right to receive Additional Interest on the principal amount of the Securities at a rate equal to 0.25% per annum. This Additional Interest will be in addition to any Additional Interest that may accrue as a result of a registration default as described in the Registration Rights Agreement and will be payable in the same manner and subject to the same terms as other interest payable under this Indenture. The Additional Interest will accrue on all outstanding Securities from and including the date on which an Event of Default relating to a failure to comply with Article 5 or Section 314(a)(1) of the TIA first occurs to but not excluding the 365^th day thereafter (or such earlier date on which the Event of Default relating to the reporting obligations under Article 5 or Section 314(a)(1) of the TIA shall have been cured or waived). On such 365^th day (or earlier, if the Event of Default relating to such reporting obligations is cured or waived prior to such 365^th day), such Additional Interest will cease to accrue and the Securities will be subject to acceleration and other remedies as provided in this Article 7 if the Event of Default is continuing. For the avoidance of doubt, the provisions of this Section 7.02 will not affect the rights of Holders of Securities in the event of the occurrence of any other Event of Default and will have no effect on the rights of Holders of Securities under the Registration Rights Agreement.

Section 7.04. Other Remedies. If an Event of Default other than an Event of Default specified in Section 7.01(f), occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, interest (including Contingent Interest and Additional Interest, if any) or premium, if any, on the Securities or to enforce the performance of any provision of the Securities or this Indenture.

The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder 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. No remedy is exclusive of any other remedy. All available remedies are cumulative.

Section 7.05. Waiver of Past Defaults. The Holders of a majority in principal amount of the outstanding Securities by notice to the Trustee may (a) waive, by their consent (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Securities), an existing Default or Event of Default and its consequences except (i) a Default or Event of Default resulting from the non-payment of the principal, interest (including Contingent Interest and Additional Interest, if any) or premium, if any, on a Security, (ii) a Default or Event of Default resulting from the failure to

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deliver, upon conversion, shares of Common Stock or the combination of cash and shares of Common Stock, if any, upon the conversion of the Security or (iii) a Default or Event of Default in respect of a provision that under Section 10.02 cannot be amended without the consent of each Holder affected and (b) rescind any such acceleration with respect to the Securities and its consequences if (i) rescission would not conflict with any judgment or decree of a court of competent jurisdiction and (ii) all existing Events of Default, other than the nonpayment of the principal of, interest (including Contingent Interest and Additional Interest, if any) or premium, if any, on the Securities that have become due solely by such declaration of acceleration, have been cured or waived. When a Default or Event of Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any consequent right.

Section 7.06. Control by Majority. The Holders of a majority in principal amount of the outstanding Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that limits with law or this Indenture or, subject to Sections 8.01 and 8.02, that the Trustee determines is unduly prejudicial to the rights of other Holders or would involve the Trustee in personal liability; provided, however, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction.

Section 7.07. Limitation on Suits. Subject to Section 7.08, a Holder may not pursue any remedy with respect to this Indenture or the Securities unless:

(a) such Holder has previously given to the Trustee written notice stating that an Event of Default is continuing;

(b) Holders of at least 25% in principal amount of the outstanding Securities have requested that the Trustee pursue the remedy;

(c) such Holders have offered to the Trustee security or indemnity reasonably satisfactory to it against any loss, liability or expense to be incurred in compliance with such request;

(d) the Trustee has not complied with such request within 60 days after receipt of the request and the offer of security or indemnity; and

(e) the Holders of a majority in principal amount of the outstanding Securities have not given the Trustee a direction that, in the opinion of the Trustee, is inconsistent with such request within such 60-day period.

A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder.

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Section 7.08. Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture (including, without limitation, Section 7.07), the right of any Holder to receive payment of principal of, interest (including Contingent Interest and Additional Interest, if any) or premium, if any, on the Securities held by such Holder, on or after the respective due dates expressed in the Securities, 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.

Section 7.09. Collection Suit by Trustee. If an Event of Default specified in clauses (a) or (b) of Section 7.01 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then due and owing (together with interest on any unpaid interest (including Contingent Interest and Additional Interest, if any) to the extent lawful) and the amounts provided for in Section 8.07.

Section 7.10. Trustee May File Proofs of Claim. The Trustee may 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 (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relative to the Company or its respective creditors or properties and, unless prohibited by law or applicable regulations, may be entitled and empowered to participate as a member of any official committee of creditors appointed in such matter, and may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee 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 for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due to the Trustee under Section 8.07.

Section 7.11. Priorities. If the Trustee collects any money or property pursuant to this Article 7, it shall pay out the money or property in the following order:

FIRST: to the Trustee for amounts due under Section 8.07;

SECOND: to Holders for amounts due and unpaid on the Securities for principal, interest (including Contingent Interest and Additional Interest, if any) or premium, if any, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal, interest and premium, respectively; and

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THIRD: to the Company.

The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section 7.11. At least 15 days before such record date, the Company shall mail to each Holder and the Trustee a notice that states the record date, the payment date and amount to be paid.

Section 7.12. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted a proceeding to enforce any right or remedy under this Indenture and the proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to the Holder, then, subject to any determination in the proceeding, the Company, the Trustee and the Holders will be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Company, the Trustee and the Holders will continue as though no such proceeding had been instituted.

Section 7.13. Undertaking of Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, 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 and expenses, 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 7.13 does not apply to a suit by the Trustee, a suit by the Company, a suit by a Holder pursuant to Section 7.08 or a suit by Holders of more than 10% in outstanding principal amount of the Securities.

ARTICLE 8

TRUSTEE

Section 8.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise 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; provided that if 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 of the Holders unless such Holders have offered to the Trustee reasonable indemnity or security against loss, liability or expense that might be incurred in compliance with such request or direction.

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(b) Except during the continuance of an Event of Default:

(i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(ii) 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, opinions or orders furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificates, opinions or orders which by any provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall examine such certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).

(c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:

(i) this paragraph does not limit the effect of paragraph (b) of this Section 8.01;

(ii) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer of the Trustee unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and

(iii) the Trustee shall 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 7.06.

(d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 8.01.

(e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company.

(f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

(g) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

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(h) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 8.01 and to the provisions of the TIA.

(i) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company.

Section 8.02. Rights of Trustee. Subject to Section 8.01:

(a) The Trustee may conclusively rely on any document (whether in its original or facsimile form) reasonably 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. The Trustee shall receive and retain financial reports and statements of the Company as provided herein, but shall have no duty to review or analyze such reports or statements to determine compliance under covenants or other obligations of the Company.

(b) Before the Trustee acts or refrains from acting, it may require an Officers’ Certificate and/or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on an Officers’ Certificate and an Opinion of Counsel.

(c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care.

(d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers, unless the Trustee’s conduct constitutes willful misconduct or negligence.

(e) The Trustee may consult with counsel of its selection, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel.

(f) The Trustee shall not be responsible or liable for special, indirect, or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) resulting from actions taken in good faith and which the Trustee believes to be authorized or within its rights or powers, unless the Trustee’s conduct constitutes willful misconduct or negligence.

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(g) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, Securities Custodian and other Person employed to act hereunder.

(h) The Trustee may request that the Company deliver a certificate setting forth the names of individuals and/or titles of Officers authorized at such time to take specified actions pursuant to this Indenture.

Section 8.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent or Registrar may do the same with like rights. However, the Trustee must comply with Sections 8.10 and 8.11. In addition, the Trustee shall be permitted to engage in transactions with the Company; provided, however, that if, during the continuance of any Default, the Trustee acquires any conflicting interest the Trustee must (i) eliminate such conflict within 90 days of acquiring such conflicting interest, (ii) apply to the SEC for permission to continue acting as Trustee or (iii) resign.

Section 8.04. Trustee’s Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Securities, shall not be accountable for the Company’s use of the proceeds from the Securities, shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee and shall not be responsible for any statement of the Company in this Indenture or in any document issued in connection with the sale of the Securities or in the Securities other than the Trustee’s certificate of authentication.

Section 8.05. Notice of Defaults. If a Default or Event of Default occurs and is continuing and if a Trust Officer of the Trustee has actual knowledge thereof, the Trustee shall mail by first class mail to each Holder at the address set forth in the Securities Register 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, interest (including Contingent Interest and Additional Interest, if any) or premium, if any, on any Security (including payments pursuant to the optional redemption or required repurchase provisions of such Security, if any), the Trustee may withhold the notice if and so long as it determines in good faith that withholding the notice is in the interests of Holders.

Section 8.06. Reports by Trustee to Holders. As promptly as practicable after each May 15 beginning with the May 15 following the date of this Indenture, and in any event prior to July 1 in each year, the Trustee shall mail to each Holder a brief report dated as of such May 15 that complies with TIA § 313(a), if required by such TIA § 313(a). The Trustee also shall comply with TIA § 313(b). The Trustee shall also transmit by mail all reports required by TIA § 313(c).

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Section 8.07. Compensation and Indemnity. The Company shall pay to the Trustee from time to time such compensation for its acceptance of this Indenture and services hereunder as the Company and the Trustee shall from time to time agree in writing. The Trustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust. In addition to the compensation the Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it. Such expenses shall include the reasonable compensation and out-of-pocket expenses, disbursements and advances of the Trustee’s agents, counsel, accountants and experts. The Company shall indemnify the Trustee against any and all loss, liability, damages, claims or expense (including reasonable attorneys’ fees and expenses) incurred by it without negligence or bad faith on its part in connection with the administration of this trust and the performance of its duties hereunder, including the costs and expenses of enforcing this Indenture (including this Section 8.07) and of defending itself against any claims (whether asserted by any Holder, the Company, or otherwise). The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall provide reasonable cooperation at the Company’s expense in the defense. The Trustee may have separate counsel and the Company shall pay the fees and expenses of such counsel, provided that the Company shall not be required to pay such fees and expenses if it assumes the Trustee’s defense, and, in the reasonable judgment of outside counsel to the Trustee, there is no conflict of interest between the Company and the Trustee in connection with such defense. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee’s own willful misconduct, negligence or bad faith.

To secure the Company’s payment obligations in this Section 8.07, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of, interest (including Contingent Interest and Additional Interest, if any) and premium, if any, on particular Securities. Such lien shall survive the satisfaction and discharge of this Indenture. The Trustee’s right to receive payment of any amounts due under this Section 8.07 shall not be subordinate to any other unsecured liability or debt of the Company.

The Company’s payment obligations pursuant to this Section 8.07 shall survive the discharge of this Indenture. When the Trustee incurs expenses after the occurrence of a Default specified in Section 7.01(h) or Section 7.01(i) with respect to the Company, the expenses are intended to constitute expenses of administration under any Bankruptcy Law.

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Section 8.08. Replacement of Trustee. The Trustee may resign at any time by so notifying the Company. The Holders of a majority in principal amount of the Securities may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Company shall remove the Trustee if:

(a) the Trustee fails to comply with Section 8.10;

(b) the Trustee is adjudged bankrupt or insolvent;

(c) a receiver or other public officer takes charge of the Trustee or its property; or

(d) the Trustee otherwise becomes incapable of acting.

If the Trustee resigns or is removed by the Company or by the Holders of a majority in principal amount of the Securities and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of the Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee.

A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 8.07.

If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of at least 10% in principal amount of the Securities may petition, at the Company’s expense, any court of competent jurisdiction for the appointment of a successor Trustee.

If the Trustee fails to comply with Section 8.10, unless the Trustee’s duty to resign is stayed as provided in TIA § 310(b), any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

Notwithstanding the replacement of the Trustee pursuant to this Section 8.08, the Company’s obligations under Section 8.07 shall continue for the benefit of the retiring Trustee.

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Section 8.09. Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation or banking association without any further act shall be the successor Trustee.

In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture, any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; provided that the right to adopt the certificate of authentication of any predecessor Trustee or authenticate Securities in the name of any predecessor Trustee shall only apply to its successor or successors by merger, consolidation or conversion.

Section 8.10. Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA § 310(a). The Trustee shall have a combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition. The Trustee shall comply with 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 8.11. Preferential Collection of Claims Against Company. The Trustee shall comply with 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.

ARTICLE 9

DISCHARGE OF INDENTURE

Section 9.01. Discharge of Liability on Securities. When (1) the Company shall deliver to the Registrar for cancellation all Securities theretofore authenticated (other than any Securities which have been mutilated, destroyed, lost or wrongfully taken and in lieu of or in substitution for which other Securities shall have been authenticated and delivered) and not theretofore canceled, or (2) all the Securities not theretofore canceled or delivered to the Registrar for cancellation shall have (a) been deposited for conversion (after all related Observation Periods have elapsed) and the Company shall deliver to the Holders shares of Common Stock or a combination of cash and shares of Common Stock,

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as applicable, sufficient to pay all amounts owing in respect of all Securities (other than any Securities which shall have been mutilated, destroyed, lost or wrongfully taken and in lieu of or in substitution for which other Securities shall have been authenticated and delivered) not theretofore canceled or delivered to the Registrar for cancellation or (b) become due and payable on the Stated Maturity, Purchase Date, Fundamental Change Purchase Date or Redemption Date, as applicable, and the Company shall deposit with the Trustee cash and shares of Common Stock, as applicable, sufficient to pay all amounts owing in respect of all Securities (other than any Securities which shall have been mutilated, destroyed, lost or wrongfully taken and in lieu of or in substitution for which other Securities shall have been authenticated and delivered) not theretofore canceled or delivered to the Registrar for cancellation, including the principal amount, premium, if any, and interest (including Contingent Interest and Additional Interest, if any) accrued and unpaid to such Stated Maturity, Purchase Date, Fundamental Change Purchase Date or Redemption Date, as the case may be, and if in either case (1) or (2) the Company shall also pay or cause to be paid all other sums payable hereunder by the Company, then this Indenture with respect to the Securities shall cease to be of further effect (except as to (i) remaining rights of registration of transfer, substitution and exchange and conversion of Securities; (ii) rights hereunder of Holders to receive from the Trustee payments of the amounts then due, including interest (including Contingent Interest and Additional Interest, if any) or premium, if any, with respect to the Securities and the other rights, duties and obligations of Holders, as beneficiaries hereof solely with respect to the amounts, if any, so deposited with the Trustee; and (iii) the rights, obligations and immunities of the Trustee, Authenticating Agent, Paying Agent, Conversion Agent and Registrar under this Indenture with respect to the Securities), and the Trustee, on demand of the Company accompanied by an Officers’ Certificate and an Opinion of Counsel as required by Section 9.03 and at the cost and expense of the Company, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture with respect to the Securities; however, the Company hereby agrees to reimburse the Trustee, Authenticating Agent, Paying Agent, Conversion Agent and Registrar for any costs or expenses thereafter reasonably and properly incurred by the Trustee, Authenticating Agent, Paying Agent, Conversion Agent and Registrar and to compensate the Trustee, Authenticating Agent, Paying Agent, Conversion Agent and Registrar for any services thereafter reasonably and properly rendered by the Trustee, Authenticating Agent, Paying Agent, Conversion Agent and Registrar in connection with this Indenture with respect to the Securities.

Section 9.02. Reinstatement. If the Trustee or the Paying Agent is unable to apply any money to the Holders entitled thereto by reason of any order or judgment of any court of governmental authority enjoining, restraining or otherwise prohibiting such application, the Company’s obligations under this

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Indenture with respect to the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 9.01 until such time as the Trustee or the Paying Agent is permitted to apply all such money in accordance with this Indenture and the Securities to the Holders entitled thereto; provided, however, that if the Company makes any payment of principal amount of, interest (including Contingent Interest and Additional Interest, if any) or premium, if any, on any Security following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money held by the Trustee or Paying Agent.

Section 9.03. Officers’ Certificate; Opinion of Counsel. Upon any application or demand by the Company to the Trustee to take any action under Section 9.01, the Company shall furnish to the Trustee an Officers’ Certificate or Opinion of Counsel stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with.

ARTICLE 10

AMENDMENTS

Section 10.01. Without Consent of Holders. The Company and the Trustee may amend this Indenture and the Securities without notice to or consent of any Holder:

(a) to cure any ambiguity, omission, defect or inconsistency in this Indenture in a manner that does not individually or in the aggregate adversely affect the rights of any Holder of Securities in any material respect;

(b) to comply with Article 4 in respect of the assumption by a Successor Company of an obligation of the Company under this Indenture;

(c) to secure the Securities or add guarantees with respect thereto;

(d) to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company;

(e) to comply with any requirement of the SEC in connection with the qualification of this Indenture under the TIA;

(f) to provide for the acceptance of appointment by a successor Trustee or Paying Agent or facilitate the administration of the trusts under this Indenture by more than one Trustee or Paying Agent;

(g) to add to any Events of Default for the benefit of Holders of Securities;

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(h) to make any change that does not materially adversely affect the rights of any Holder; or

(i) to conform the text of this Indenture or the Securities to the “Description of Notes” section of the Offering Memorandum.

After an amendment under this Section 10.01 becomes effective, the Company shall mail to Holders a notice briefly describing such amendment. The failure to give such notice to all Holders, or any defect therein, shall not impair or affect the validity of an amendment under this Section 10.01.

Section 10.02. With Consent of Holders. The Company and the Trustee may amend this Indenture and the Securities without notice to any Holder but with the written or electronic consent of the Holders of at least a majority in principal amount of the Securities then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Securities), and subject to the provisions of Section 7.05, past Defaults or compliance with the provisions of this Indenture or the Securities issued hereunder may be waived with the written consent of the Holders of at least a majority in principal amount of the Securities then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Securities). However, without the consent of each Holder affected, an amendment or waiver may not:

(a) reduce the percentage in aggregate principal amount of Securities whose Holders must consent to an amendment or waive any past default;

(b) reduce the rate of or extend the stated time for payment of interest, including Additional Interest, or premium, on any Security;

(c) reduce the principal of or extend the Stated Maturity of any Security;

(d) otherwise impair the right of any Holder to receive payment of principal of, interest (including Contingent Interest and Additional Interest, if any) or premium, if any, on such Holder’s Securities on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder’s Securities;

(e) make any change that impairs or adversely affects the conversion rights of any Securities;

(f) reduce the Redemption Price, the Fundamental Change Purchase Price or the Purchase Price payable upon the redemption or repurchase or conversion of any Security or amend or modify in any manner adverse to Holders of the Securities the Company’s obligation to make such payments;

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(g) make any Security payable in currency other than that stated in the Security (it being understood that all references to cash in this Indenture and the Securities are to U.S. legal tender); or

(h) make any changes to the amendment provisions which require each Holder’s consent or to the waiver provisions.

It shall not be necessary for the consent of the Holders under this Section 10.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. A consent to any amendment or waiver under this Indenture by any Holder of the Securities given in connection with a tender or exchange of such Holder’s Securities will not be rendered invalid by such tender or exchange.

After an amendment under this Section 10.02 becomes effective, the Company shall mail to Holders a notice briefly describing such amendment. The failure to give such notice to all Holders, or any defect therein, shall not impair or affect the validity of an amendment under this Section 10.02.

Section 10.03. Compliance with Trust Indenture Act. Every amendment or supplement to this Indenture or the Securities shall comply with the TIA as then in effect.

Section 10.04. Revocation and Effect of Consents and Waivers. A consent to an amendment or a waiver by a Holder of a Security shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holder’s Security, even if notation of the consent or waiver is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder’s Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective or otherwise in accordance with any related solicitation documents. After an amendment or waiver becomes effective, it shall bind every Holder. An amendment or waiver shall become effective upon receipt by the Trustee of the requisite number of written or electronic consents under Section 10.01 or 10.02, as applicable.

The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding 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 give

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such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall become valid or effective more than 120 days after such record date.

Section 10.05. Notation on or Exchange of Securities. If an amendment changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment.

Section 10.06. Trustee to Sign Amendments. The Trustee shall sign any amendment authorized pursuant to this Article 10 if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive and (subject to Sections 8.01 and 8.02) shall be fully protected in relying upon an Officers’ Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture.

ARTICLE 11

PURCHASE AT THE OPTION OF HOLDERS UPON A FUNDAMENTAL

CHANGE; PURCHASE AT THE OPTION OF HOLDERS

Section 11.01. Purchase at the Option of the Holder Upon a Fundamental Change. If a Fundamental Change shall occur at any time, each Holder shall have the right, at such Holder’s option, to require the Company to purchase any or all of such Holder’s Securities on a date specified by the Company that is no later than the 35^th calendar day after the date of the Company Notice of the occurrence of such Fundamental Change (subject to extension to comply with applicable law, as provided in Section 11.03(d)) (the “Fundamental Change Purchase Date”). The Company shall purchase such Securities at a price (the “Fundamental Change Purchase Price”), which shall be paid in cash, equal to 100% of the principal amount of the Securities to be purchased plus accrued and unpaid interest, including any Additional Interest, to but excluding the Fundamental Change Purchase Date, unless the Fundamental Change Purchase Date is between a Regular Record Date and the Interest Payment Date to which it relates, in which case the Fundamental Change Purchase Price shall equal 100% of the principal amount of Securities to be purchased and accrued and unpaid interest, including Additional Interest, shall be paid to the Holder of record on the Regular Record Date.

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(a) Notice of Fundamental Change. The Company, or at its request (which must be received by the Paying Agent at least three Business Days (or such lesser period as agreed to by the Paying Agent) prior to the date the Paying Agent is requested to give such notice as described below) the Paying Agent, in the name of and at the expense of the Company, shall mail to all Holders and the Trustee a Company Notice of the occurrence of a Fundamental Change and of the purchase right arising as a result thereof, including the information required by Section 11.03(a) hereof, on or before the 20^th calendar day after the occurrence of such Fundamental Change. The Company shall promptly furnish to the Paying Agent a copy of such Company Notice.

(b) Exercise of Option. For a Security to be so purchased at the option of the Holder, such Holder must deliver to the Paying Agent such Security duly endorsed for transfer, together with a written notice of purchase (a “Fundamental Change Purchase Notice”) in the form entitled “Form of Fundamental Change Purchase Notice” attached to the Security duly completed, on or before the Business Day immediately preceding the Fundamental Change Purchase Date, subject to extension to comply with applicable law. The Fundamental Change Purchase Notice shall state:

(i) if certificated, the certificate numbers of the Securities which the Holder shall deliver to be purchased, or if not certificated, such notice must comply with appropriate DTC procedures;

(ii) the portion of the principal amount of the Securities which the Holder shall deliver to be purchased, which portion must be $1,000 in principal amount or a multiple thereof; and

(iii) that such Securities shall be purchased as of the Fundamental Change Purchase Date pursuant to the terms and conditions specified in paragraph 5 of the Securities and in this Indenture.

(c) Procedures. The Company shall purchase from a Holder, pursuant to this Section 11.01, Securities if the principal amount of such Securities is $1,000 or a multiple of $1,000 if so requested by such Holder.

Any purchase by the Company contemplated pursuant to the provisions of this Section 11.01 shall be consummated by the delivery of the Fundamental Change Purchase Price to be received by the Holder promptly following the later of the Fundamental Change Purchase Date or the time of book-entry transfer or delivery of the Securities.

Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Fundamental Change Purchase Notice contemplated by this Section 11.01 shall have the right at any time prior to the close of business on the

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Business Day prior to the Fundamental Change Purchase Date to withdraw such Fundamental Change Purchase Notice (in whole or in part) by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 11.03(b).

The Paying Agent shall promptly notify the Company of the receipt by it of any Fundamental Change Purchase Notice or written notice of withdrawal thereof.

At or before 11:00 a.m. (New York City time) on the Fundamental Change Purchase Date, the Company shall deposit with the Paying Agent (or if the Company or an Affiliate of the Company is acting as the Paying Agent, shall segregate and hold in trust) cash sufficient to pay the aggregate Fundamental Change Purchase Price of the Securities to be purchased pursuant to this Section 11.01. Payment by the Paying Agent of the Fundamental Change Purchase Price for such Securities shall be made promptly following the later of the Fundamental Change Purchase Date or the time of book-entry transfer or delivery of such Securities. If the Paying Agent holds, in accordance with the terms of this Indenture, cash sufficient to pay the Fundamental Change Purchase Price of such Securities on the Fundamental Change Purchase Date, then, on and after such date, such Securities shall cease to be outstanding and interest (including Contingent Interest and Additional Interest, if any), on such Securities shall cease to accrue, whether or not book-entry transfer of such Securities is made or such Securities are delivered to the Paying Agent, and all other rights of the Holder shall terminate (other than the right to receive the Fundamental Change Purchase Price and previously accrued and unpaid interest (including Contingent Interest and Additional Interest, if any), upon delivery or transfer of the Securities). Nothing herein shall preclude any withholding tax required by law.

The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all cash held by the Paying Agent for the payment of the Fundamental Change Purchase Price and shall notify the Trustee of any default by the Company in making any such payment. If the Company or an Affiliate of the Company acts as Paying Agent, it shall segregate the cash held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to deliver all cash held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon doing so, the Paying Agent shall have no further liability for the cash delivered to the Trustee.

Section 11.02. Purchase of Securities at the Option of the Holder.

(a) A Holder shall have the option to require the Company to purchase any outstanding Securities on each of December 1, 2011, December 1, 2016 and December 1, 2021 (each, a “Purchase Date”), at a price (the “Purchase Price”)

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which shall be paid in cash, equal to 100% of the principal amount of the Securities to be repurchased plus any accrued and unpaid interest, including any Additional Interest, to but excluding the Purchase Date, upon:

(i) delivery to the Paying Agent by the Holder of a written notice of purchase (a “Purchase Notice”) at any time from the opening of business on the date that is 20 Business Days prior to the relevant Purchase Date until the close of business on the second Business Day prior to such Purchase Date, stating:

(A) if certificated, the certificate numbers of the Securities which the Holder will deliver to be purchased, or, if not certificated, the Purchase Notice must comply with appropriate DTC procedures;

(B) the portion of the principal amount of the Securities which the Holder will deliver to be purchased, which portion must be $1,000 in principal amount or a multiple thereof;

(C) that such Securities shall be purchased by the Company as of the Purchase Date pursuant to the terms and conditions specified in paragraph 4 of the Securities and in this Indenture; and

(ii) delivery or book-entry transfer of such Securities to the Paying Agent (together with all necessary endorsements) at the offices of the Paying Agent, such delivery or transfer being a condition to receipt by the Holder of the Purchase Price therefor; provided, however, that such Purchase Price shall be so paid pursuant to this Section 11.02 only if the Securities so delivered or transferred to the Paying Agent shall conform in all respects to the description thereof in the related Purchase Notice.

(b) The Company shall purchase from a Holder, pursuant to this Section 11.02, Securities if the principal amount of such Securities is $1,000 or a multiple of $1,000 if so requested by such Holder.

(c) Any purchase by the Company contemplated pursuant to the provisions of this Section 11.02 shall be consummated by the delivery of the Purchase Price to be received by the Holder promptly following the later of the Purchase Date or the time of book-entry transfer or delivery of the Securities.

(d) Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Purchase Notice contemplated by this Section 11.02 shall have the right at any time prior to the close of business on the Business Day prior to the Purchase Date to withdraw such Purchase Notice (in whole or in part) by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 11.03(b).

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(e) The Paying Agent shall promptly notify the Company of the receipt by it of any Purchase Notice or written notice of withdrawal thereof.

(f) At or before 11:00 a.m. (New York City time) on the Purchase Date, the Company shall deposit with the Paying Agent (or if the Company or an Affiliate of the Company is acting as the Paying Agent, shall segregate and hold in trust) cash sufficient to pay the aggregate Purchase Price of the Securities to be purchased pursuant to this Section 11.02. Payment by the Paying Agent of the Purchase Price for such Securities shall be made promptly following the later of the Purchase Date or the time of book-entry transfer or delivery of such Securities. If the Paying Agent holds, in accordance with the terms of this Indenture, cash sufficient to pay the Purchase Price of such Securities on the Purchase Date, then, on and after such date, such Securities shall cease to be outstanding and interest (including Contingent Interest and Additional Interest, if any) on such Securities shall cease to accrue, whether or not book-entry transfer of such Securities is made or such Securities are delivered to the Paying Agent, and all other rights of the Holder shall terminate (other than the right to receive the Purchase Price and previously accrued interest (including Contingent Interest and Additional Interest, if any) upon delivery or transfer of the Securities). Nothing herein shall preclude any withholding tax required by law.

(g) The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all cash held by the Paying Agent for the payment of the Purchase Price and shall notify the Trustee of any default by the Company in making any such payment. If the Company or an Affiliate of the Company acts as Paying Agent, it shall segregate the cash held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to deliver all cash held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon doing so, the Paying Agent shall have no further liability for the cash delivered to the Trustee.

Section 11.03. Further Conditions and Procedures for Purchase at the Option of the Holder Upon a Fundamental Change and Purchase of Securities at the Option of the Holder.

(a) Notice of Purchase Date or Fundamental Change. The Company shall send notices (each, a “Company Notice”) to the Holders, the Trustee and the Paying Agent, not less than 20 Business Days prior to each Purchase Date, or on or before the 20^th calendar day after the occurrence of the Fundamental Change, as the case may be (each such date of delivery, a “Company Notice Date”). Each Company Notice shall include a form of Purchase Notice or Fundamental Change Purchase Notice, as the case may be, to be completed by a Holder and shall state:

(i) the applicable Purchase Price or Fundamental Change Purchase Price, as the case may be;

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(ii) if conversion is permitted under Section 12.01(a)(iv), the Base Conversion Rate and the Incremental Share Factor at the time of such notice and any expected adjustments to the Base Conversion Rate and the Incremental Share Factor;

(iii) the applicable Purchase Date or Fundamental Change Purchase Date, as the case may be, and the last date on which a Holder may exercise its repurchase rights under Section 11.01 or Section 11.02, as applicable;

(iv) the name and address of the Paying Agent and the Conversion Agent;

(v) that Securities must be surrendered to the Paying Agent to collect payment of the Purchase Price or the Fundamental Change Purchase Price, as the case may be;

(vi) that Securities as to which a Purchase Notice or a Fundamental Change Purchase Notice has been delivered may be surrendered for conversion only if the applicable Purchase Notice or Fundamental Change Purchase Notice, as the case may be, has been withdrawn in accordance with the terms of this Indenture;

(vii) that the Purchase Price or the Fundamental Change Purchase Price for any Securities as to which a Purchase Notice or a Fundamental Change Purchase Notice, as applicable, has been given and not withdrawn shall be paid by the Paying Agent promptly following the later of the Purchase Date or the Fundamental Change Purchase Date, as applicable, or the time of book-entry transfer or delivery of such Securities;

(viii) the procedures the Holder must follow under Sections 11.01 or 11.02, as applicable, and Section 11.03;

(ix) that, unless the Company defaults in making payment of such Purchase Price or Fundamental Change Purchase Price on Securities covered by any Purchase Notice or Fundamental Change Purchase Notice, as applicable, interest (including Contingent Interest and Additional Interest, if any) will cease to accrue on and after the Purchase Date or Fundamental Change Purchase Date, as applicable;

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(x) the CUSIP or ISIN number of the Securities;

(xi) the procedures for withdrawing a Purchase Notice or a Fundamental Change Purchase Notice, as the case may be; and

(xii) in the case of a Company Notice pursuant to Section 11.01, the events causing a Fundamental Change and the effective date of the Fundamental Change.

Simultaneously with providing such Company Notice, the Company will publish a notice containing the information in such Company Notice in a newspaper of general circulation in The City of New York or publish such information on its then existing website or through such other public medium as it may use at the time.

At the Company’s request, made at least five Business Days prior to the date upon which such notice is to be mailed, and at the Company’s expense, the Paying Agent shall give the Company Notice in the Company’s name; provided, however, that, in all cases, the text of the Company Notice shall be prepared by the Company.

(b) Adequacy and Effect of Purchase Notice or Fundamental Change Purchase Notice; Withdrawal; Effect of Event of Default. The Company shall reasonably determine whether the Purchase Notice or Fundamental Change Purchase Notice delivered by the relevant Holders satisfies the conditions set out in Section 11.02(a), Section 11.01(b) and Section 11.03 for such notices. The Company’s determination under this Section 11.03(b) will be binding and conclusive, absent manifest error.

Upon receipt by the Company of the Purchase Notice or Fundamental Change Purchase Notice specified in Section 11.02(a) or Section 11.01(b), as applicable, the Holder of the Securities in respect of which such Purchase Notice or Fundamental Change Purchase Notice, as the case may be, was given shall (unless such Purchase Notice or Fundamental Change Purchase Notice is withdrawn as specified in the following two paragraphs) thereafter be entitled to receive solely the Purchase Price or Fundamental Change Purchase Price with respect to such Securities. Such Purchase Price or Fundamental Change Purchase Price shall be paid by the Paying Agent to such Holder promptly following the later of (x) the Purchase Date or the Fundamental Change Purchase Date, as the case may be, with respect to such Securities (provided the conditions in this Article 11 have been satisfied) and (y) the time of delivery or book-entry transfer of such Securities to the Paying Agent by the Holder thereof in the manner

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required by Section 11.02 or Section 11.01, as applicable. Securities in respect of which a Purchase Notice or Fundamental Change Purchase Notice, as the case may be, has been given by the Holder thereof may not be converted on or after the date of the delivery of such Purchase Notice or Fundamental Change Purchase Notice, as the case may be, unless such Purchase Notice or Fundamental Change Purchase Notice, as the case may be, has first been validly withdrawn as specified in the following two paragraphs.

A Purchase Notice or Fundamental Change Purchase Notice, as the case may be, may be withdrawn by means of a written notice of withdrawal delivered to the office of the Paying Agent at any time prior to 5:00 p.m., New York City time, on the Business Day prior to the Purchase Date or the Fundamental Change Purchase Date, as the case may be, to which it relates, specifying:

(i) the principal amount of the Securities with respect to which such notice of withdrawal is being submitted;

(ii) if certificated, the certificate number of the Securities in respect of which such notice of withdrawal is being submitted, or, if not certificated, the written notice of withdrawal must comply with appropriate DTC procedures; and

(iii) the principal amount, if any, of such Securities which remains subject to the original Purchase Notice or Fundamental Change Purchase Notice, as the case may be, and which has been or shall be delivered for purchase by the Company.

There shall be no purchase of any Securities pursuant to Section 11.02 or Section 11.01 if an Event of Default has occurred and is continuing (other than a default that is cured by the payment of the Purchase Price or Fundamental Change Purchase Price, as the case may be). The Paying Agent shall promptly return to the respective Holders thereof any Securities (x) with respect to which a Purchase Notice or Fundamental Change Purchase Notice, as the case may be, has been withdrawn in compliance with this Indenture, or (y) held by it during the continuance of an Event of Default (other than a default that is cured by the payment of the Purchase Price or Fundamental Change Purchase Price, as the case may be) in which case, upon such return, the Purchase Notice or Fundamental Change Purchase Notice with respect thereto shall be deemed to have been withdrawn.

(c) Securities Purchased in Part. Any Securities that are to be purchased only in part shall be surrendered at the office of the Paying Agent (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder’s attorney duly authorized in

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writing) and the Company shall execute and the Trustee or the Authenticating Agent shall authenticate and deliver to the Holder of such Securities, without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder in aggregate principal amount equal to, and in exchange for, the portion of the principal amount of the Securities so surrendered which is not purchased.

(d) Covenant to Comply with Securities Laws Upon Purchase of Securities. In connection with any offer to purchase Securities under Section 11.02 or Section 11.01, the Company shall, to the extent applicable, (a) comply with Rules 13e-4 and 14e-1 (and any successor provisions thereto) under the Exchange Act, if applicable; (b) file the related Schedule TO (or any successor schedule, form or report) under the Exchange Act, if applicable; and (c) otherwise comply with all applicable federal and state securities laws so as to permit the rights and obligations under Section 11.02 or Section 11.01 to be exercised in the time and in the manner specified in Section 11.02 or Section 11.01. To the extent any other provision of this Indenture conflicts with any of the foregoing, the foregoing shall govern.

(e) Repayment to the Company. Subject to applicable abandoned property laws, the Trustee and the Paying Agent shall return to the Company any cash or property that remains unclaimed, as provided in paragraph 8 of the Securities, together with interest that the Trustee or Paying Agent, as the case may be, has expressly agreed in writing to pay, if any, that is held by them for the payment of a Purchase Price or Fundamental Change Purchase Price, as the case may be; provided, however, that to the extent that the aggregate amount of cash or property deposited by the Company pursuant to Section 11.01(c) or Section 11.02(f), as applicable, exceeds the aggregate Purchase Price or Fundamental Change Purchase Price, as the case may be, of the Securities or portions thereof which the Company is obligated to purchase as of the Purchase Date or the Fundamental Change Purchase Date, as the case may be, then promptly on and after the Business Day following the Purchase Date or Fundamental Change Purchase Date, as the case may be, the Trustee and the Paying Agent shall return any such excess to the Company together with interest that the Trustee or Paying Agent, as the case may be, has expressly agreed in writing to pay, if any.

(f) Officers’ Certificate. At least five Business Days before the Company Notice Date, the Company shall deliver an Officers’ Certificate to the Trustee specifying whether the Company desires the Trustee to give the Company Notice required by Section 11.03(a) herein.

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ARTICLE 12

CONVERSION

Section 12.01. Conversion of Securities. (a) Right to Convert. Subject to the procedures for conversion set forth in this Article 12, a Holder may convert its Securities prior to November 1, 2026 when one or more of the conditions specified below are met and during the related specified period, subject to the limitation in clause 12.01(a)(iii). On and after November 1, 2026, as set forth under clause (b) below, a Holder may convert its Securities until the close of business on the second Business Day immediately preceding Stated Maturity regardless of the conditions specified below. Whenever the Securities shall become convertible upon one or more of the conditions stated in clauses (i), (ii), (iv)(A), (iv)(B) or (iv)(C) below, the Company or, at the Company’s request, the Trustee in the name and at the expense of the Company, shall notify the Holders of the event triggering such convertibility in the manner provided in Section 14.02 and, in the case of one or more conditions stated in clauses (iv)(B) or (iv)(C), the Company shall also publish a notice in accordance with Section 11.03(a). For the avoidance of doubt, the Trustee has no duty to determine if Securities have become convertible, and its only obligation is to notify Holders of such at the Company’s request. Whenever the Securities shall become convertible upon the condition stated in clause (iii), notice of the event triggering such convertibility shall be given in accordance with the provisions of Section 6.04. Any notice so given shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice.

(i) Conversion Upon Satisfaction of Sale Price Condition. A Holder may surrender all or a portion of its Securities for conversion during any fiscal quarter (and only during such fiscal quarter) commencing after March 31, 2007 if the Last Reported Sale Price for the Common Stock for at least 20 Trading Days during the period of 30 consecutive Trading Days ending on the last Trading Day of the immediately preceding fiscal quarter is greater than or equal to 135% of the Base Conversion Price in effect on such last Trading Day.

(ii) Conversion Upon Satisfaction of Trading Price Condition. Prior to December 1, 2011, a Holder may surrender its Securities for conversion during the five Business Day period after any 10 consecutive Trading Day period (the “Measurement Period”) in which the Trading Price per $1,000 principal amount of Securities, as determined following a request by a Holder in accordance with the procedures set forth in this Section 12.01(a)(ii), for each Trading Day of the Measurement Period was less than 95% of the product of the Last Reported Sale Price of the Common Stock and the applicable Conversion Rate for such Trading Day. In connection with any conversion in accordance with this Section 12.01(a)(ii), the Bid Solicitation Agent shall have no obligation to

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determine the Trading Price of the Securities unless requested by the Company; and the Company shall have no obligation to make such request unless a Holder provides the Company with reasonable evidence that the Trading Price per $1,000 principal amount of Securities would be less than 95% of the product of the Last Reported Sale Price of the Common Stock and the applicable Conversion Rate. Promptly after receiving such evidence, the Company shall instruct the Bid Solicitation Agent to determine the Trading Price of the Securities beginning on the next Trading Day and on each successive Trading Day until the Trading Price per $1,000 principal amount of Securities for any Trading Day is greater than or equal to 95% of the product of the Last Reported Sale Price of the Common Stock and the applicable Conversion Rate.

Solely for purposes of determining the satisfaction of the Trading Price condition described above, the Applicable Conversion Rate on any day will be determined as if the Applicable Stock Price were the Last Reported Sale Price on such day.

(iii) Conversion Upon Notice of Redemption. If the Company calls any or all of the Securities for Redemption, a Holder may surrender for the Securities called for redemption at any time prior to the close of business on the third Scheduled Trading Day prior to the related Redemption Date, even if the Securities are not otherwise convertible at such time, after which time a Holder’s right to convert will expire unless the Company defaults in the payment of the Redemption Price.

(iv) Conversion Upon Specified Corporate Transactions.

(A) If the Company elects to (1) distribute to all holders of Common Stock any rights or warrants entitling them to purchase, for a period expiring within 45 days after the Ex-Dividend Date of the distribution, shares of Common Stock at a price per share less than the average of the Last Reported Sale Price of Common Stock for the 10 consecutive Trading Day period ending on the Trading Day immediately preceding the Ex-Dividend Date for such distribution, or (2) distribute to all holders of Common Stock assets, debt securities or rights to purchase securities of the Company, which distribution has a per share Fair Market Value, as determined by the Company’s Board of Directors, exceeding 15% of the Last Reported Sale Price on the Trading Day immediately preceding the Ex-Dividend Date for such distribution, then, in each case, the Company must notify the Holders of such distribution and of their rights under this clause (A), in the manner provided in Section 14.02, at least 15 Scheduled Trading Days prior to the Ex-Dividend Date for such

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distribution. Once the Company has given such notice, Holders may surrender Securities for conversion at any time until the earlier of 5:00 p.m., New York City time, on the Business Day immediately prior to such Ex-Dividend Date or the Company’s announcement that such distribution will not take place even if the Securities are not otherwise convertible at such time.

(B) If the Company is party to a transaction described in clause (2) of the definition of Fundamental Change (without giving effect to the proviso set forth in the definition thereof relating to Publicly Traded Securities), the Company must notify Holders of such an event and of their rights under this clause (B), in the manner provided in Section 14.02, at least 15 Scheduled Trading Days prior to the anticipated effective date for such transaction. Once the Company has given such notice, Holders may surrender Securities for conversion at any time until seven Scheduled Trading Days after the actual effective date of such transaction or, if later, the related Fundamental Change Purchase Date.

(C) A Holder may surrender all or a portion of such Holder’s Securities for conversion, if a Fundamental Change of the type described in clause (1) or (3) in the definition thereof occurs. In such event, Holders may surrender Securities for conversion at any time beginning on the actual Effective Date of such Fundamental Change until and including the date which is seven Scheduled Trading Days after the actual effective date of such transaction or, if later, until the related Fundamental Change Purchase Date.

A Holder may convert a portion of the principal amount of Securities if the portion is $1,000 or a multiple of $1,000. The number of shares of Common Stock issuable or the combination of cash payable and the number of shares of Common Stock issuable, if any, upon conversion of a Security shall be determined as set forth in Section 12.01(d).

(b) Conversion During Specified Period Immediately Prior to Stated Maturity. Notwithstanding anything herein to the contrary, a Holder may surrender its Securities for conversion beginning on November 1, 2026, until the close of business on the second Business Day immediately preceding the Stated Maturity.

(c) Conversion Procedures. The following procedures shall apply to the conversion of Securities:

(i) In respect of a Definitive Security, a Holder must (A) complete and manually sign the conversion notice on the back of the Security, or a facsimile of such conversion notice; (B) deliver such conversion notice, which is irrevocable, and the Security

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to the Conversion Agent; (C) to the extent any shares of Common Stock issuable upon conversion are to be issued in a name other than the Holder’s, furnish appropriate endorsements and transfer documents as may be required by the Conversion Agent; (D) if required pursuant to Section 12.01(f) below, pay all transfer or similar taxes; and (E) if required pursuant to Section 2.01(d) above, pay funds equal to interest payable on the next Interest Payment Date to which such Holder is not entitled.

(ii) In respect of a beneficial interest in a Global Security, a Beneficial Owner must comply with DTC’s procedures for converting a beneficial interest in a Global Security and, if required pursuant to Section 2.01(d) above, pay funds equal to interest payable on the next Interest Payment Date to which such Beneficial Owner is not entitled, and if required, taxes or duties, if any.

The date a Holder satisfies the foregoing requirements is the “Conversion Date” hereunder.

If a Holder converts more than one Security at the same time, the number of shares of Common Stock issuable or the combination of the cash payable and number of shares of Common Stock issuable upon the conversion, if any, shall be based on the total principal amount of the Securities converted.

Upon surrender of a Security that is converted in part, the Company shall execute, and the Trustee or the Authenticating Agent shall authenticate and deliver to the Holder, a new Security in an authorized denomination equal in principal amount to the unconverted portion of the Security surrendered.

Delivery of shares of Common Stock will be accomplished by delivery to the Conversion Agent of certificates for the relevant number of shares of Common Stock, other than in the case of Holders of Global Securities in book-entry form with DTC, in which case shares of Common Stock shall be delivered in accordance with DTC customary practices.

(d) Settlement Upon Conversion. In the event that the Company receives a Holder’s notice of conversion upon satisfaction of one or more of the conditions to conversion described in this Section 12.01, the Company will notify the relevant Holders within two Scheduled Trading Days following the Conversion Date whether the Company will satisfy its obligation to convert the Securities through delivery of (x) shares of Common Stock pursuant to clause (ii) below (plus cash in lieu of fractional shares) or (y) a combination of cash and

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shares of Common Stock pursuant to clause (i) below. At any time on or before the 13^th Scheduled Trading Day prior to the Stated Maturity, the Company may irrevocably waive, in its sole discretion without the consent of the Holders, by notice to the Trustee and to the Holders, its right to satisfy its Conversion Obligation in shares of its Common Stock pursuant to clause (ii) below (plus cash in lieu of any fractional shares); provided that the Company may not elect to satisfy such obligation pursuant to clause (ii) below if the Company has made the election to waive such right to do so. Notwithstanding the foregoing, if the Company elects to redeem the Securities, it will, in its notice of redemption, elect whether it will settle any conversions of Securities called for redemption pursuant to clause (i) or (ii) below (unless it has irrevocably elected to waive its right to satisfy its Conversion Obligation pursuant to clause (ii) below), which election shall apply to all Securities converted following the Company’s notice of redemption.

(i) If the Company chooses or has to satisfy its obligation to convert the Securities (the “Conversion Obligation”) by a combination of cash and shares of Common Stock, upon conversion the Company will, deliver to converting Holders, in respect of each $1,000 principal amount of Securities being converted, a “Settlement Amount” equal to (i) cash in an amount equal to the lesser of (a) the Conversion Value and (b) $1,000; (ii) if the Conversion Value is greater than $1,000, an amount in shares equal to the difference between the Conversion Value and $1,000, divided by the Applicable Stock Price for such Securities; and (iii) cash in lieu of any fractional shares as described below in Section 12.01(e).

The Settlement Amount in respect of any Security converted pursuant to this clause (i) will be delivered to converting Holders as soon as practicable following the last day following the determination of the Applicable Stock Price for such Security.

(ii) If the Company elects to satisfy all of its Conversion Obligation with respect to Securities to be converted in shares of Common Stock, the Company will deliver to any converting Holder, for each $1,000 principal amount of the Securities, a number of shares of Common Stock equal to the Applicable Conversion Rate for such Securities, plus cash in lieu of any fractional shares determined as described below in Section 12.01(e).

The shares of Common Stock in respect of any Security converted (and cash in lieu of any fractional shares) pursuant to this clause (ii) will be delivered through the Conversion Agent or DTC as soon as practicable following the determination of the Applicable Stock Price for such Security.

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(iii) With respect to a conversion of a Security pursuant hereto, at and after the close of business on the last Trading Day (the “Relevant Date”) of the 10 Trading Day period used to determine the Applicable Stock Price for such conversion, the Person in whose name any certificate representing any shares of Common Stock issuable upon such conversion is registered shall be treated as a stockholder of record of the Company to the extent permitted by law. On and after the Conversion Date with respect to a conversion of a Security pursuant hereto, all rights of the Holder of such Security shall terminate, other than the right to receive the consideration deliverable upon conversion of such Security as provided herein. A Holder of a Security is not entitled, as such, to any rights of a holder of Common Stock until, if such Holder converts such Security and is entitled pursuant hereto to receive shares of Common Stock in respect of such conversion, the close of business on the Relevant Date or respective Relevant Dates, as the case may be, with respect to such conversion.

(e) Cash Payments in Lieu of Fractional Shares. The Company shall not issue a fractional share of Common Stock upon conversion of Securities. Instead the Company shall deliver cash for the current market value of the fractional share. The current market value of a fractional share shall be determined to the nearest 1/10,000th of a share by multiplying the Applicable Stock Price by the fractional amount and rounding the product to the nearest whole cent.

(f) Taxes on Conversion. If a Holder converts Securities, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of shares of Common Stock upon the conversion. However, the Holder shall pay any such tax which is due because the Holder requests the shares to be issued in a name other than the Holder’s name. The Conversion Agent may refuse to deliver the certificates representing the Common Stock being issued in a name other than the Holder’s name until the Conversion Agent receives a sum sufficient to pay any tax which shall be due because the shares are to be issued in a name other than the Holder’s name, but the Conversion Agent shall have no duty to determine if any such tax is due. Nothing herein shall preclude any withholding of tax required by law.

(g) Certain Covenants of the Company.

(i) The Company shall, prior to issuance of any Securities hereunder, and from time to time as may be necessary, reserve out of its authorized but unissued Common Stock or shares of Common Stock held in treasury, a sufficient number of shares of Common Stock, free of preemptive rights, to permit the conversion of the Securities.

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(ii) All shares of Common Stock delivered upon conversion of the Securities shall be newly issued shares or treasury shares, shall be duly and validly issued and fully paid and nonassessable and shall be free from preemptive rights and free of any lien or adverse claim.

(iii) The Company shall endeavor promptly to comply with all federal and state securities laws regulating the issuance and delivery of shares of Common Stock upon the conversion of Securities, if any, and shall cause to have listed or quoted all such shares of Common Stock on each U.S. national securities exchange or over-the-counter or other domestic market on which the Common Stock is then listed or quoted.

(iv) Before taking any action which would cause an adjustment increasing the Base Conversion Rate to an amount that would cause the Base Conversion Price to be reduced below the then par value per share of the Common Stock, if any, of the shares of Common Stock issuable upon conversion of the Securities, the Company will take all corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue shares of such Common Stock at such adjusted Base Conversion Rate.

Section 12.02. Adjustments to Conversion Rate and the Incremental Share Factor. The applicable Conversion Rate shall be adjusted by the Company (and the Incremental Share Factor shall be proportionally adjusted on the same basis as set forth below) as follows:

(a) If the Company issues shares of Common Stock as a dividend or distribution on shares of the Common Stock, or effects a share split or share combination, the Base Conversion Rate will be adjusted based on the following formula:

CR’ = CR₀ x OS’ OS₀

where,
CR0	=	the Base Conversion Rate in effect immediately prior to the Ex-Dividend Date for such dividend or distribution, or the effective date of such share split or share combination, as the case may be;
CR’	=	the new Base Conversion Rate in effect immediately after the Ex-Dividend Date for such dividend or distribution, or the effective date of such share split or share combination, as the case may be;

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OS0	=	the number of shares of Common Stock outstanding immediately prior to the Ex-Dividend Date for such dividend or distribution, or the effective date of such share split or share combination, as the case may be; and
OS’	=	the number of shares of Common Stock outstanding immediately after such dividend or distribution, or the effective date of such share split or share combination, as the case may be.

Such adjustment shall become effective immediately after (i) the Ex-Dividend Date for such dividend or distribution or (ii) the date on which such split or combination becomes effective, as applicable. If any dividend or distribution of the type described in this Section 12.02(a) is declared but not so paid or made, the new Base Conversion Rate shall again be adjusted to the Base Conversion Rate that would then be in effect if such dividend or distribution had not been declared.

(b) If the Company distributes to all holders of its Common Stock any rights or warrants entitling them to purchase, for a period of not more than 45 days after the Ex-Dividend Date for the distribution, shares of Common Stock at a price per share less than the average of the Last Reported Sale Prices of the Common Stock for the 10 consecutive Trading Day period ending on the Trading Day immediately preceding the Ex-Dividend Date for such distribution, the Base Conversion Rate will be adjusted based on the following formula:

CR’ = CR₀ x OS₀ + X OS₀ + Y

where,
CR0	=	the Base Conversion Rate in effect immediately prior to the Ex-Dividend Date for such distribution;
CR’	=	the new Base Conversion Rate in effect immediately after the Ex-Dividend Date for such distribution;
OS0	=	the number of shares of Common Stock outstanding immediately prior to the Ex-Dividend Date for such distribution;
X	=	the total number of shares of Common Stock issuable pursuant to such rights or warrants; and
Y	=	the number of shares of Common Stock equal to the aggregate price payable to exercise such rights or warrants divided by the average of the Last Reported Sale Prices of the Common Stock over the 10 consecutive Trading Day period ending on the Trading Day immediately preceding the Ex-Dividend Date for such distribution.

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For purposes of this Section 12.02(b), in determining whether any rights or warrants entitle the Holders to subscribe for or purchase shares of Common Stock at less than the average of the applicable Last Reported Sale Prices, and in determining the aggregate exercise or conversion price payable for such shares of Common Stock, there shall be taken into account any consideration received by the Company for such rights or warrants and any amount payable on exercise or conversion thereof, with the value of such consideration, if other than cash, to be determined by the Board of Directors. If any right or warrant described in this Section 12.02(b) is not exercised or converted prior to the expiration of the exercisability or convertibility thereof, the new Base Conversion Rate shall be readjusted to the Base Conversion Rate that would then be in effect if such right or warrant had not been so issued. Any adjustment made pursuant to this Section 12.02(b) shall become effective immediately after the Ex-Dividend Date for the applicable distribution.

(c) If the Company distributes shares of Capital Stock, evidences of its indebtedness or other assets or property of the Company to all holders of the Common Stock, excluding:

(i) dividends or distributions referred to in clause (a) or (b) above;

(ii) dividends or distributions paid exclusively in cash; and

(iii) Spin-Offs to which the provisions set forth below in this clause (c) shall apply;

then the Base Conversion Rate will be adjusted based on the following formula:

CR’ = CR₀ x       SP₀ SP – FMV

where,
CR0	=	the Base Conversion Rate in effect immediately prior to the Ex-Dividend Date for such distribution;
CR’	=	the new Base Conversion Rate in effect immediately after the Ex-Dividend Date for such distribution;
SP0	=	the average of the Last Reported Sale Prices of the Common Stock over the 10 consecutive Trading Day period ending on the Trading Day immediately preceding the Ex-Dividend Date for such distribution; and

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FMV = the average of the Fair Market Values (as determined by the Board of Directors) of the shares of Capital Stock, evidences of indebtedness, assets or property distributed with respect to each outstanding share of Common Stock on the Ex-Dividend Date for such distribution.

Such adjustment shall become effective immediately after the Ex-Dividend Date for the applicable distribution.

With respect to an adjustment pursuant to this clause (c) where there has been a payment of a dividend or other distribution on the Common Stock of shares of Capital Stock of any class or series, or similar equity interest, of or relating to a Subsidiary or other business unit (a “Spin-Off”), the Base Conversion Rate in effect immediately before 5:00 p.m., New York City time, on the tenth Trading Day immediately following, and including, the effective date of the Spin-Off will be increased based on the following formula:

CR’ = CR₀ x FMV₀ + MP₀         MP₀

where,
CR0	=	the Base Conversion Rate in effect immediately prior to the tenth Trading Day immediately following, and including, the effective date of the Spin-Off;
CR’	=	the new Base Conversion Rate in effect immediately after the tenth Trading Day immediately following, and including, the effective date of the Spin-Off;
FMV0	=	the average of the Last Reported Sale Prices of the Capital Stock or similar equity interest distributed to holders of Common Stock applicable to one share of Common Stock over the first 10 consecutive Trading Day period immediately following, and including, the effective date of the Spin-Off; and
MP0	=	the average of the Last Reported Sale Prices of Common Stock over the first 10 consecutive Trading Day period immediately following, and including, the effective date of the Spin-Off.

Such adjustment shall occur immediately after the tenth Trading Day immediately following, and including, the effective date of the Spin-Off provided that, for purposes of determining the Base Conversion Rate, in respect of any conversion during the ten Trading Days following the effective date of any Spin-Off, references within the portion of this clause (c) related to “Spin-Offs” to 10 Trading Days shall be deemed replaced with such lesser number of Trading Days as have elapsed between the effective date of such Spin-Off and the relevant Conversion Date.

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If any such dividend or distribution described in this clause (c) is declared but not paid or made, the new Base Conversion Rate shall be readjusted to be the Base Conversion Rate that would then be in effect if such dividend or distribution had not been declared.

(d) If any cash dividend or distribution is made to all holders of Common Stock, the Base Conversion Rate will be adjusted based on the following formula:

CR’ = CR₀ x     SP₀ SP₀ – C

where,
CR0	=	the Base Conversion Rate in effect immediately prior to the Ex-Dividend Date for such distribution;
CR’	=	the new Base Conversion Rate in effect immediately after the Ex-Dividend Date for such distribution;
SP0	=	the Last Reported Sale Price of the Common Stock on the Trading Day immediately preceding the Ex-Dividend Date for such distribution; and
C	=	the amount in cash per share of Common Stock of the Company distributes to holders of Common Stock.

An adjustment to the Base Conversion Rate made pursuant to this clause (d) shall become effective immediately after the Ex-Dividend Date for the applicable dividend or distribution. If any dividend or distribution described in this clause (d) is declared but not so paid or made, the new Base Conversion Rate shall be readjusted to the Base Conversion Rate that would then be in effect if such dividend or distribution had not been declared.

(e) If the Company or any of its Subsidiaries makes a payment in respect of a tender or exchange offer for Common Stock, to the extent that the cash and value of any other consideration included in the payment per share of Common Stock exceeds the Last Reported Sale Price of the Common Stock on the Trading Day next succeeding the last date on which tenders or exchanges may be made pursuant to such tender or exchange offer, the Base Conversion Rate will be increased based on the following formula:

CR’ = CR₀ x AC + (SP’xOS’)       OS₀ x SP^’

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where,
CR0	=	the Base Conversion Rate in effect at the close of business on the last Trading Day of the 10 consecutive Trading Day period commencing on the Trading Day next succeeding the date such tender or exchange offer expires;
CR’	=	the new Base Conversion Rate in effect immediately following the last Trading Day of the 10 consecutive Trading Day period commencing on the Trading Day next succeeding the date such tender or exchange offer expires;
AC	=	the aggregate value of all cash and any other consideration (as determined by the Board of Directors) paid or payable for shares purchased in such tender or exchange offer;
OS0	=	the number of shares of Common Stock outstanding immediately prior to the expiration of such tender or exchange offer;
OS’	=	the number of shares of Common Stock outstanding immediately after the expiration of such tender or exchange offer (after giving effect to the purchase or exchange of shares pursuant to such tender or exchange offer); and
SP’	=	the average of the Last Reported Sale Prices of Common Stock over the 10 consecutive Trading Day period commencing on the Trading Day next succeeding the date such tender or exchange offer expires.

The adjustment to the Base Conversion Rate under this clause (e) shall become effective immediately following the tenth Trading Day next succeeding the date such tender or exchange offer expires; provided that, for purposes of determining the Base Conversion Rate, in respect of any conversion during the ten Trading Days following the date that any tender or exchange offer expires, references within this clause (e) to 10 Trading Days shall be deemed replaced with such lesser number of Trading Days as have elapsed between the date such tender or exchange offer expires and the relevant Conversion Date. If the Company or one of its Subsidiaries is obligated to purchase Common Stock pursuant to any such tender or exchange offer but are permanently prevented by applicable law from effecting any such purchase or all such purchases are rescinded, the new Base Conversion Rate shall be readjusted to be the Base Conversion Rate that would be in effect if such tender or exchange offer had not been made.

(f) Notwithstanding the foregoing provisions of this Section 12.02, no adjustment will be made thereunder, nor shall an adjustment be made to the ability of a Holder to convert, for any distribution described therein if the Holder will otherwise participate in the distribution without conversion of such Holder’s securities as if such Holder held a number of shares of Common Stock equal to the applicable Base Conversion Rate plus the Incremental Share Factor, multiplied by the principal amount (expressed in thousands) of the Securities held

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by such holder, without having to convert its Securities. Further, if the application of the foregoing formulas in this Section 12.02 would result in a decrease in the Base Conversion Rate, no adjustment to the Base Conversion Rate will be made (except on account of share combinations).

(g) No adjustment to the Base Conversion Rate will be made unless as specifically set forth in this Section 12.02 and Section 12.03. Further, in the event of an adjustment to the Base Conversion Rate pursuant to Section 12.02(d) or Section 12.02(e), in no event will the Base Conversion Rate exceed 40 shares of Common Stock per $1,000 principal amount of Securities (subject to adjustment pursuant to clauses (a) (b) or (c) above). For the avoidance of doubt, this cap on the Base Conversion Rate will not apply to an adjustment to the Base Conversion Rate pursuant to Section 12.02(a), Section 12.02(b) and Section 12.02(c).

(h) Without limiting the foregoing, no adjustment to the Base Conversion Rate need be made:

(i) upon the issuance of any shares of Common Stock pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on securities of the Company and the investment of additional optional amounts in shares of Common Stock under any plan;

(ii) upon the issuance of any shares of Common Stock or options or rights to purchase shares of Common Stock pursuant to any present or future employee, director or consultant benefit plan or program or employee stock purchase plan of or assumed by the Company or any of its Subsidiaries;

(iii) upon the issuance of any shares of Common Stock pursuant to any option, warrant, right, or exercisable, exchangeable or convertible security not described in clause (ii) above and outstanding as of the Issue Date;

(iv) for a change in the par value of the Common Stock; or

(v) for accrued and unpaid Interest (including Contingent Interest and Additional Interest, if any).

(i) No adjustment to the Base Conversion Rate will be required unless the adjustment would require an increase or decrease of at least 1% of the Base Conversion Rate. If the adjustment is not made because the adjustment does not change the Base Conversion Rate by at least 1%, then the adjustment that is not made will be carried forward and taken into account in any future adjustment. All required calculations will be made to the nearest cent or 1/1000th of a share, as the case may be. Notwithstanding the foregoing, if the Securities are called for

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redemption, all adjustments not previously made will be made for all the Securities to be converted after the Company’s notice of redemption to the applicable Redemption Date.

(j) Whenever the Base Conversion Rate shall be adjusted in accordance with this Section 12.02, the Incremental Share Factor shall, effective on the date of adjustment of the Base Conversion Rate, be adjusted by multiplying the Incremental Share Factor prior to adjustment by a fraction, the numerator of which is the Base Conversion Rate as so adjusted and the denominator of which is the Base Conversion Rate prior to adjustment.

(k) Whenever the Base Conversion Rate and Incremental Share Factor is adjusted as herein provided, the Company shall promptly file with the Trustee and any Conversion Agent other than the Trustee an Officers’ Certificate setting forth the Base Conversion Rate and Incremental Share Factor after such adjustment and setting forth a brief statement of the facts requiring such adjustment. Unless and until a Trust Officer of the Trustee shall have received such Officers’ Certificate, the Trustee shall not be deemed to have knowledge of any adjustment of the Base Conversion Rate and Incremental Share Factor and may assume that the last Base Conversion Rate and Incremental Share Factor of which it has knowledge is still in effect. Promptly after delivery of such certificate, the Company shall prepare a notice of such adjustment of the Base Conversion Rate and Incremental Share Factor setting forth the adjusted Base Conversion Rate and Incremental Share Factor and the date on which each adjustment becomes effective and shall mail such notice of such adjustment of the Base Conversion Rate and Incremental Share Factor to the Holder of each Security at such Holder’s last address appearing on the Securities Register provided for in Section 2.05 of this Indenture within 20 days after execution thereof. Failure to deliver such notice shall not affect the legality or validity of any such adjustment.

(l) For purposes of this Section 12.02, the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. If the Company pays any dividend or makes any distribution on, or issues any rights, options or warrants in respect of, shares of Common Stock held in treasury by the Company, the Company shall not issue, transfer or convey such shares of Common Stock in a manner that would have the effect of circumventing the provisions of this Section 12.02.

(m) Whenever any provision of this Article 12 requires a calculation of an average of Last Reported Sale Prices over a span of multiple days, the Company will make appropriate adjustments (determined in good faith by the Board of Directors) to account for any adjustment to the Base Conversion Rate

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that becomes effective, or any event requiring an adjustment to the Base Conversion Rate where the Ex-Dividend Date of the event occurs, at any time during the period from which the average is to be calculated.

Section 12.03. Adjustment to Common Stock Delivered Upon Certain Fundamental Changes. (a) If a Holder elects to convert Securities pursuant to Section 12.01(a)(iv) above in connection with a Fundamental Change on or following the effective date of the transaction and the transaction has an effective date occurring on or prior to December 1, 2011, subject to Section 12.04 below, the Applicable Conversion Rate for such converted Securities shall be increased by an additional number of shares of Common Stock (the “Additional Shares”) as described below. Any conversion will be deemed to have occurred in connection with such Fundamental Change if such Securities are surrendered for conversion on or following the effective date of a Fundamental Change and prior to the expiration of the time during which Securities may be converted in respect of such Fundamental Change as specified in Section 12.01(a)(iv) and notwithstanding the fact that a Security may then be convertible because another condition to conversion also has been satisfied.

(b) The number of Additional Shares will be determined by reference to the table attached as Schedule A hereto, based on the actual effective date on which the Fundamental Change occurs or becomes effective (the “Effective Date”) and the Stock Price paid per share of Common Stock with respect to such Fundamental Change; provided that if the Stock Price is between two Stock Price amounts set forth in such table or the Effective Date is between two Effective Dates in the table, the number of Additional Shares will be determined by a straight-line interpolation between the number of Additional Shares set forth for the higher and lower Stock Price amounts and the two dates, as applicable, based on a 365-day year; provided further that if the Stock Price is greater than $200.00 per share (subject to adjustment as set forth in clause (c) below) or less than $43.96 per share (subject to adjustment as set forth in clause (c) below), then no Additional Shares will be added to the Applicable Conversion Rate. Notwithstanding the foregoing, the Applicable Conversion Rate shall not exceed 22.7480 per $1,000 principal amount of Securities on account of adjustments pursuant to this Section 12.03, subject to adjustments set out in Section 12.02(a) through (e).

(c) The Stock Prices set forth in the first row of the table in Schedule A hereto will be adjusted as of any date on which the Base Conversion Rate of the Securities is otherwise adjusted pursuant to Section 12.02. The adjusted Stock Prices will equal the Stock Prices applicable immediately prior to such adjustment, multiplied by a fraction, the numerator of which is the Base Conversion Rate immediately prior to such adjustment and the denominator of which is the Base Conversion Rate as so adjusted. The number of Additional Shares set forth in such table will be adjusted in the same manner as the Base Conversion Rate as set forth in Section 12.02.

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Section 12.04. Conversion After a Public Acquirer Change of Control. (a) In the event of a Public Acquirer Change of Control, the Company may, in lieu of increasing the Applicable Conversion Rate by Additional Shares pursuant to Section 12.03 above and in lieu of application of Section 12.05, elect to adjust the Conversion Obligation such that from and after the Effective Date of such Public Acquirer Change of Control, Holders shall be entitled to convert their Securities, subject to the conditions in Section 12.01(a), into a number of shares of Public Acquirer Common Stock, still subject to the Company’s right to elect to deliver cash and shares of Common Stock and the arrangements for payment upon conversion as set forth under Section 12.01 above. If the Company shall make such election in the manner described below, from and after the effect time of such Public Acquirer Change of Control:

(i) the Base Conversion Rate will be adjusted by multiplying the Base Conversion Rate in effect immediately prior to such transaction by a fraction (1) the numerator of which will be the average of the Last Reported Sale Prices of the Common Stock for the five consecutive Trading Days prior to but excluding the Effective Date of such Public Acquirer Change of Control, and (2) the denominator of which will be the average of the Last Reported Sale Prices of the Public Acquirer Common Stock for the five consecutive Trading Days commencing on the Trading Day next succeeding the Effective Date of such Public Acquirer Change of Control;

(ii) the Incremental Share Factor will be adjusted by proportionately adjusting the Incremental Share Factor immediately prior to such transaction on the same basis as the Base Conversion Rate; and

(iii) the Applicable Stock Price will be based upon the Last Reported Sale Prices of the Public Acquirer Common Stock.

(b) In order to make the election pursuant to this Section 12.04, the Company and the issuer of the Public Acquirer Common Stock shall execute with the Trustee a supplemental indenture providing that each Security shall be convertible into Public Acquirer Common Stock and execute an amendment to the Registration Rights Agreement (to the extent any Registrable Securities (as defined therein) remain outstanding) to make the provisions thereof apply to the Public Acquirer Common Stock. Such supplemental indenture shall provide for provisions and adjustments which shall be as nearly equivalent as may be practicable to the provisions and adjustments provided for in this Article 12 as determined in good faith by the Board of Directors of the Company or such issuer (which shall be conclusive).

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(c) At least 15 Scheduled Trading Days prior to the expected Effective Date of a Fundamental Change that is also a Public Acquirer Change of Control, the Company will provide a notice to all Holders, the Trustee and the Paying Agent stating whether the Company (i) elects to adjust the Base Conversion Rate, the Incremental Share Factor and the related Conversion Obligation as set forth in this Section 12.04 or (ii) does not elect to so adjust the Base Conversion Rate, the Incremental Share Factor and the related Conversion Obligation, in which case the Holders will have the right to convert Securities and, if applicable, receive Additional Shares as set forth in Section 12.03.

Section 12.05. Effect of Recapitalizations, Reclassifications, and Changes of Common Stock. (a) Except as otherwise provided in Section 12.04, if any of the following events occur: (i) any recapitalization, reclassification or change of the outstanding shares of Common Stock (other than a subdivision or combination to which Section 12.02(a) applies), (ii) any consolidation, merger, binding share exchange or combination of the Company with another Person, or (iii) any sale or conveyance to another Person of all or substantially all of the property and assets of the Company and its Subsidiaries, in each case as a result of which Common Stock would be converted into, or exchanged for, stock, other securities, other property or assets (including cash or any combination thereof) (any such event or transaction, a “Reorganization Event”), then, following the effective time of the Reorganization Event, the right to receive shares of Common Stock upon conversion of Securities, if any, will be changed into a right to receive the kind and amount of shares of stock, other securities or other property or assets (including cash or any combination thereof) (the “Reference Property”) that a Holder would have been entitled to receive upon such Reorganization Event in respect of Common Stock, as provided below. If the Reorganization Event causes Common Stock to be converted into the right to receive more than a single type of consideration (determined based in part upon any form of stockholder election), the Reference Property will be deemed to be the weighted average of the types and amounts of consideration received by the holders of Common Stock that affirmatively make such an election. The Company will notify Holders of the weighted average as soon as practicable after such determination is made. Upon such Reorganization Event, the Company or any Successor Company will enter into a supplemental indenture consistent with the foregoing. Such supplemental indenture shall provide for provisions and adjustments which shall be as nearly equivalent as may be practicable to the provisions and adjustments provided for in this Article 12, Article 10 and Article 11 and the definition of Fundamental Change, as appropriate, as determined in good faith by the Company (which determination shall be conclusive and binding), to make such provisions apply to such other Person if different from the original issuer of the Securities.

(b) Following the effective time of any such Reorganization Event, settlement of Securities converted shall be in units of Reference Property or cash and units of Reference Property, if applicable, determined in accordance with

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Section 12.01(d)(i) and Section 12.01(d)(ii) above. The Applicable Conversion Rate will relate to units of Reference Property (a “unit” of Reference Property being the kind and amount of reference property that a holder of one share of Common Stock would have received in such transaction); and the Applicable Stock Price will be determined based on Last Reported Sale Prices of one unit of Reference Property.

(c) Any issuer of securities included in the Reference Property shall execute an amendment to the Registration Rights Agreement (to the extent any Registrable Securities (as defined therein) remain outstanding) to make the provisions thereof applicable to such securities included in the Applicable Consideration.

(d) The Company shall cause notice of the execution of any supplemental indenture required by this Section 12.05 to be mailed to each Holder, at its address appearing on the Securities Register provided for in Section 2.05 of this Indenture, within 20 calendar days after execution thereof. Failure to deliver such notice shall not affect the legality or validity of such supplemental indenture.

(e) The above provisions of this Section 12.05 shall similarly apply to successive Reorganization Events.

(f) If this Section 12.05 applies to any event or occurrence, Section 12.02 shall not apply in respect of such event or occurrence.

(g) The Company shall not become a party to any Reorganization Event unless its terms are consistent with the foregoing. None of the foregoing provisions shall affect the right of a Holder of Securities to convert the Securities as set forth in and subject to Section 12.01 prior to the effective time of such Reorganization Event.

Section 12.06. Responsibility of Trustee. The Trustee and any other Conversion Agent shall not at any time be under any duty or responsibility to the Company or any Holder of Securities to determine when the Securities become convertible, the Base Conversion Rate, or whether any facts exist which may require any adjustment of the Base Conversion Rate, or with respect to the nature or extent or calculation of any such adjustment when made, or with respect to the method employed in making the same. The Trustee and any other Conversion Agent shall not be accountable with respect to the validity or value (or the kind or amount) of any shares of Common Stock, or of any securities or property, which may at any time be issued or delivered upon the conversion of any Security; and the Trustee and any other Conversion Agent make no representations with respect thereto. Neither the Trustee nor any Conversion Agent shall be responsible for any failure of the Company to issue, transfer or deliver any cash or shares of

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Common Stock or stock certificates or other securities or property upon the surrender of any Security for the purpose of conversion or to comply with any of the duties, responsibilities or covenants of the Company contained in this Article 12. Without limiting the generality of the foregoing, neither the Trustee nor any Conversion Agent shall be under any responsibility to determine the correctness of any provisions contained in any supplemental indenture entered into pursuant to Section 12.05 relating either to the kind or amount of shares of stock or securities or property (including cash) receivable by Holders upon the conversion of their Securities after any Reorganization Event or to any adjustment to be made with respect thereto, but, subject to the provisions of Section 8.01, may accept as conclusive evidence of the correctness of any such provisions, and shall be protected in relying upon, an Officers’ Certificate with respect thereto.

Section 12.07. Stockholder Rights Plan. To the extent that the Company has a rights plan in effect upon conversion of the Securities into Common Stock, the Holder will receive upon conversion of the Securities in respect of which the Company has elected to deliver Common Stock, if applicable, the rights under the rights plan, unless prior to any conversion, the rights have separated from the Common Stock, in which case, and only in such case, the Base Conversion Rate will be adjusted at the time of separation as if the Company distributed to all holders of Common Stock shares of the Company’s Capital Stock, evidences of indebtedness or assets as described in Section 12.02(c) above, subject to readjustment in the event of the expiration, termination or redemption of such rights. In lieu of any such adjustment, the Company may amend such applicable stockholder rights agreement to provide that upon conversion of the Securities the Holders will receive, in addition to the Common Stock issuable upon such conversion, the rights which would have attached to such Common Stock if the rights had not become separated from the Common Stock under such applicable stockholder rights agreement.

Section 12.08. No Stockholder Rights. For the avoidance of doubt, Holders of Securities will not have any rights as holders of Common Stock (including voting rights and rights to receive any dividends or other distributions on the Common Stock) if and until the Securities are converted into shares of Common Stock.

Section 12.09. Withholding Taxes for Adjustments in Conversation Rate. If the Company pays withholding taxes on behalf of a Holder as a result of an adjustment to the Base Conversion Rate, the Company may, at its option, set off such payments against payments of cash and shares of Common Stock on the Securities.

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ARTICLE 13

[RESERVED]

ARTICLE 14

MISCELLANEOUS

Section 14.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the provision required by the TIA shall control.

Section 14.02. Notices. Any notice or communication shall be in writing in the English language (including telecopy or e-mail promptly confirmed in writing) and delivered in person or mailed by first-class mail addressed as follows:

if to the Company:

Goodrich Petroleum Corporation

808 Travis, Suite 1320

Houston, Texas 77002

Attention: Chief Financial Officer

Fax: (713) 780-9254

if to the Trustee:

Wells Fargo Bank, National Association

1445 Ross Avenue, 2^nd Floor

Dallas, TX 75202

Tel: (214) 777-4078

Fax: (214) 777-4086

The Company or the Trustee by notice to the other may designate additional or different addresses (including e-mail addresses) for subsequent notices or communications.

Any notice or communication mailed to a registered Holder shall be mailed to the Holder at the Holder’s address as it appears on the Securities Register and shall be sufficiently given if so mailed within the time prescribed; provided that notices given to Holders holding Securities in book-entry form may be given through facilities of DTC or any successor depositary.

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Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it, except that notices to the Trustee shall be effective only upon receipt.

Section 14.03. Communication by Holders with other Holders. Holders may communicate pursuant to TIA § 312(b) with other Holders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA § 312(c).

Section 14.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee:

(a) an Officers’ Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and

(b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with.

Section 14.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include:

(a) a statement that the individual making such certificate or opinion has read such covenant or condition;

(b) 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;

(c) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(d) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with.

In giving such Opinion of Counsel, counsel may rely as to factual matters on an Officers’ Certificate or on certificates of public officials.

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Section 14.06. When Securities Are Disregarded. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or by any controlled Affiliate of the Company shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which a Trust Officer of the Trustee actually knows are so owned shall be so disregarded. Also, subject to the foregoing, only Securities outstanding at the time shall be considered in any such determination.

Section 14.07. Rules by Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action by, or a meeting of, Holders. The Registrar and the Paying Agent may make reasonable rules for their functions.

Section 14.08. Legal Holidays. A “Legal Holiday” is a Saturday, a Sunday or other day on which commercial banking institutions are authorized or required to be closed in New York City or Houston, Texas. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest or Additional Interest, if any, shall accrue for the intervening period. If a Regular Record Date is a Legal Holiday, the record date shall not be affected.

Section 14.09. Governing Law. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

Section 14.10. No Recourse Against Others. An incorporator, director, officer, employee, Affiliate or stockholder of the Company, solely by reason of this status, shall not have any liability for any obligations of the Company under the Securities, this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Holder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities.

Section 14.11. Successors. All agreements of the Company in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors.

Section 14.12. Multiple Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture.

Section 14.13. Qualification of Indenture. The Company shall qualify this Indenture under the TIA in accordance with the terms and conditions of the

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Registration Rights Agreement and shall pay all reasonable costs and expenses (including attorneys’ fees and expenses for the Company, the Trustee and the Holders) incurred in connection therewith, including, but not limited to, costs and expenses of qualification of this Indenture and the Securities and the printing of this Indenture and the Securities.

Section 14.14. Table of Contents; Headings. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof.

Section 14.15. Severability Clause. In case any provision in this Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and such provision shall be ineffective only to the extent of such invalidity, illegality or unenforceability.

Section 14.16. Calculations. Except as otherwise provided herein, the Company will be responsible for making all calculations called for under this Indenture and the Securities. The Company will make all such calculations in good faith and, absent manifest error, its calculations will be final and binding on Holders. The Company upon request will provide a schedule of its calculations to each of the Trustee and the Conversion Agent, and each of the Trustee and Conversion Agent is entitled to rely conclusively upon the accuracy of the Company’s calculations without independent verification. The Trustee will deliver a copy of such schedule to any Holder upon the request of such Holder.

[Remainder of the page intentionally left blank]

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IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above.

GOODRICH PETROLEUM CORPORATION
By:	/s/ David R. Looney
Name:	David R. Looney
Title:	Executive Vice President and Chief Financial Officer

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee
By:	/s/ Nancye Patterson
Name:	Nancye Patterson
Title:	Vice President

SCHEDULE A

The following table sets forth the number of Additional Shares to be added to the Applicable Conversion Rate per $1,000 principal amount of Securities pursuant to Section 12.03 of this Indenture:

	Stock Price
Effective Date	$43.96	$50.00	$55.00	$60.00	$65.00	$70.00	$80.00	$90.00	$100.00	$120.00	$140.00	$160.00	$180.00	$200.00
December 6, 2006	7.5827	6.8099	5.9698	5.3228	4.8167	4.2605	3.3635	2.7301	2.2664	1.6456	1.2581	0.9978	0.8126	0.6749
December 1, 2007	7.5827	6.5481	5.6634	4.9904	4.4713	3.9110	3.0228	2.4097	1.9709	1.4004	1.0567	0.8319	0.6750	0.5599
December 1, 2008	7.5827	6.1741	5.2364	4.5345	4.0037	3.4434	2.5765	1.9986	1.5989	1.1026	0.8192	0.6411	0.5200	0.4323
December 1, 2009	7.5827	5.7034	4.6829	3.9359	3.3871	2.8279	1.9969	1.4756	1.1367	0.7493	0.5482	0.4292	0.3507	0.2943
December 1, 2010	7.5827	5.1217	3.9339	3.0926	2.5060	1.9498	1.1959	0.7883	0.5622	0.3511	0.2612	0.2111	0.1771	0.1515
December 1, 2011	7.5827	4.8347	3.0165	1.5014	0.2193	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000	0.0000

Schedule A

EXHIBIT A

[FORM OF FACE OF SECURITY]

FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT AND THE ISSUE DATE OF THIS SECURITY IS DECEMBER 6, 2006. IN ADDITION, THIS SECURITY IS SUBJECT TO UNITED STATES FEDERAL INCOME TAX REGULATIONS GOVERNING CONTINGENT PAYMENT DEBT INSTRUMENTS. FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE, THE COMPARABLE YIELD OF THIS SECURITY IS 8.5%, COMPOUNDED SEMI-ANNUALLY (WHICH WILL BE TREATED AS THE YIELD TO MATURITY FOR UNITED STATES FEDERAL INCOME TAX PURPOSES).

THE COMPANY AGREES, AND BY ACCEPTANCE OF A CERTIFICATED SECURITY OR A BENEFICIAL OWNERSHIP INTEREST IN A GLOBAL SECURITY EACH HOLDER AND EACH BENEFICIAL OWNER OF THE SECURITIES SHALL BE DEEMED TO HAVE AGREED, FOR UNITED STATES FEDERAL INCOME TAX PURPOSES, (1) TO TREAT THE SECURITIES AS INDEBTEDNESS THAT IS SUBJECT TO TREASURY REGULATIONS SECTION 1.1275-4 (THE “CONTINGENT PAYMENT DEBT REGULATIONS”) AND, FOR PURPOSES OF THE CONTINGENT PAYMENT DEBT REGULATIONS, TO TREAT THE CASH AND THE FAIR MARKET VALUE OF ANY STOCK BENEFICIALLY RECEIVED UPON ANY CONVERSION OF THE SECURITIES AS A CONTINGENT PAYMENT, (2) TO ACCRUE INTEREST WITH RESPECT TO THE SECURITIES AS ORIGINAL ISSUE DISCOUNT ON A CONSTANT YIELD BASIS, ACCORDING TO THE “NONCONTINGENT BOND METHOD” SET FORTH IN TREASURY REGULATIONS SECTION 1.1275-4(B), USING THE COMPARABLE YIELD OF 8.5% PER ANNUM COMPOUNDED SEMI-ANNUALLY AND (3) IN THE ABSENCE OF AN ADMINISTRATIVE DETERMINATION OR JUDICIAL RULING TO THE CONTRARY, TO BE BOUND BY THE COMPANY’S DETERMINATION OF THE “COMPARABLE YIELD” AND “PROJECTED PAYMENT SCHEDULE,” WITHIN THE MEANING OF THE CONTINGENT PAYMENT DEBT REGULATIONS, WITH RESPECT TO THE SECURITIES. A HOLDER MAY OBTAIN THE ISSUE PRICE, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE ISSUE DATE, THE YIELD TO MATURITY, THE COMPARABLE YIELD AND THE PROJECTED PAYMENT SCHEDULE FOR THE SECURITIES BY SUBMITTING A WRITTEN REQUEST FOR SUCH INFORMATION TO THE GOODRICH PETROLEUM CORPORATION, 808 TRAVIS STREET, SUITE 1320, HOUSTON, TEXAS 77002, ATTENTION: CHIEF FINANCIAL OFFICER.

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[Restricted Securities Legend, if applicable]

[Global Security Legend, if applicable]

No. [    ]	Principal Amount $[                    ], as
revised by the Schedule of Increases and Decreases in Global Security attached hereto.

CUSIP NO.: [    ]

ISIN: [    ]

3.25% Convertible Senior Notes due 2026

Goodrich Petroleum Corporation, a Delaware corporation, promises to pay to [                            ], or registered assigns, the principal sum of [                            ] Dollars, as revised by the Schedule of Increases and Decreases in Global Security attached hereto, on December 1, 2026.

Interest Payment Dates:	June 1 and December 1
Regular Record Dates:	May 15 and November 15

Additional provisions of this Security are set forth on the attached “Terms of Securities.”

Dated: [                    ]

GOODRICH PETROLEUM CORPORATION

By:

Name:

Title:

TRUSTEE’S CERTIFICATE OF AUTHENTICATION
WELLS FARGO BANK, NATIONAL ASSOCIATION as Trustee, certifies that this is one of the Securities referred to in the Indenture.
By:
	Authorized Signatory

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TERMS OF SECURITIES

3.25% Convertible Senior Notes due 2026

The Company issued this Security under an Indenture dated as of December 6, 2006 (as it may be amended or supplemented from time to time in accordance with the terms thereof, the “Indenture”), among the Company and the Trustee, to which reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the Holders. Additional Securities may be issued under the Indenture in an unlimited aggregate principal amount subject to certain conditions specified in the Indenture.

1. Interest

Goodrich Petroleum Corporation, a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the “Company”), promises to pay interest on the principal amount of this Security at the rate of 3.25% per annum until (but excluding) December 1, 2026.

The Company will pay interest semiannually in arrears on June 1 and December 1 of each year (each, an “Interest Payment Date”), commencing June 1, 2007, to Holders of record on the immediately preceding May 15 and November 15. Interest on the Securities will accrue from the most recent date to which interest has been paid on the Securities or, if no interest has been paid, from December 6, 2006. Interest will be computed on the basis of a 360-day year of twelve 30-day months.

2. Contingent Interest

Subject to the accrual and record date provisions described above, the Company will pay Contingent Interest to the Holders of the Securities during any six-month period from an Interest Payment Date to, but excluding, the following Interest Payment Date, commencing with the six-month period beginning on December 1, 2011, if the Trading Price of the Securities for each of the five Trading Days ending on the third Trading Day immediately preceding the first day of the relevant six-month period equals 120% or more of the principal amount of the Securities.

The amount of Contingent Interest payable per each $1,000 principal amount of Securities with respect to any six-month period will equal 0.50% per annum of the average Trading Price of the Securities for the five Trading Days referred to above.

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Upon determination that Holders of the Securities will be entitled to receive Contingent Interest that will become payable during a relevant six-month period, on or prior to the start of such six-month period, the Company will provide notice to the Trustee setting forth the amount of contingent interest per $1,000 principal amount of the Securities and disseminate a press release through a public medium that is customary for such press releases.

The Company may cause to be withheld from any payment hereunder any tax withholding required by law or regulations, including, in the case of any withholding obligation arising from income that does not give rise to any cash or property from which any applicable withholding tax could be satisfied, set off against any subsequent payment of cash or property hereunder.

The Company may unilaterally increase the amount of Contingent Interest it may pay or pay interest or other amounts it is obligated to pay, but the Company will have no obligation to do so.

3. Method of Payment

By no later than 11:00 a.m. (New York City time) on the date on which any principal of, interest (including Contingent Interest and Additional Interest, if any) or premium, if any, on any Security is due and payable, the Company shall deposit with the Paying Agent money sufficient to pay such amount. The Company will pay principal, premium and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. Payments in respect of Securities represented by a Global Security (including principal, interest (including Contingent Interest and Additional Interest, if any) and premium, if any) will be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company. The Company will pay principal of Definitive Securities at the office or agency designated by the Company for such purpose. Interest (including Contingent Interest and Additional Interest, if any), on Definitive Securities will be payable (i) to Holders having an aggregate principal amount of $5,000,000 or less, by check mailed to the Holders of these Securities and (ii) to Holders having an aggregate principal amount of more than $5,000,000, either by check mailed to each Holder or, upon application by a Holder to the Registrar not later than the relevant record date, by wire transfer in immediately available funds to that Holder’s account within the United States, which application shall remain in effect until the Holder notifies, in writing, the Registrar to the contrary.

4. Redemption

Subject to certain conditions specified in the Indenture, the Securities will be redeemable, at the option of the Company, in whole at any time or in part from time to time, at any time on or after December 1, 2011 and at a price equal to

A-4

100% of the principal amount of Securities to be redeemed, plus accrued and unpaid interest (including Contingent Interest and Additional Interest, if any) to but excluding the Redemption Date (unless the Redemption Date is between a Regular Record Date and the Interest Payment Date to which it relates, in which case the Company will pay accrued and unpaid interest to the Holder of record on such Regular Record Date).

5. Purchase by the Company at the Option of the Holder; Purchase at the Option of the Holder Upon a Fundamental Change

(a) Subject to the terms and conditions of the Indenture, a Holder shall have the option to require the Company to purchase all or a portion of its Securities held by such Holder on each of December 1, 2011, December 1, 2016 and December 1, 2021 at a Purchase Price specified in the Indenture.

(b) If a Fundamental Change shall occur at any time, each Holder shall have the right, at such Holder’s option and subject to the terms and conditions of the Indenture, to require the Company to purchase all or a portion of its Securities at a Fundamental Change Purchase Price specified in the Indenture.

6. Conversion

Subject to the procedures for conversion set forth in the Indenture, a Holder may convert its Securities on or prior to November 1, 2026 only when one or more of the conditions specified in the Indenture are met and during the related specified period. On or after November 1, 2026, a Holder may convert its Securities until the close of business on the second Business Day immediately preceding Stated Maturity regardless of such conditions specified in the Indenture.

The initial Base Conversion Rate is 15.1653 shares of Common Stock per $1,000 principal amount of Securities, subject to adjustment in certain events described in the Indenture. Upon conversion, the Company will either (i) deliver shares of Common Stock based on the Applicable Conversion Rate or (ii) pay cash and shares of Common Stock, if any, as set forth in the Indenture. The Company shall deliver cash in lieu of any fractional share of Common Stock.

A Holder may convert a portion of the Securities only if the principal amount of such portion is $1,000 or a multiple of $1,000. No payment or adjustment shall be made for dividends on the Common Stock except as provided in the Indenture.

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7. Denominations; Transfer; Exchange

The Securities are in registered form without coupons in denominations of principal amount of $1,000 and multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange of Securities (i) so selected for redemption or, if a portion of any Security is selected for redemption, the portion thereof selected for redemption; (ii) surrendered for conversion or, if a portion of any Security is surrendered for conversion, the portion thereof surrendered for conversion; or (iii) in certificated form for a period of 15 days prior to mailing a notice of redemption under Article 6 of the Indenture.

8. Persons Deemed Owners

The registered Holder of this Security may be treated as the owner of it for all purposes.

9. Unclaimed Money

If money for the payment of principal, premium, if any, or interest (including Contingent Interest and Additional Interest, if any) remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company, subject to applicable abandoned property laws. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment.

10. Amendment, Waiver

Subject to certain exceptions, the Indenture contains provisions permitting an amendment of the Indenture or the Securities with the written consent of the Holders of at least a majority in principal amount of the then outstanding Securities and the waiver of any Event of Default (other than with respect to nonpayment or in respect of a provision that cannot be amended without the written consent of each Holder affected) or noncompliance with any provision with the written consent of the Holders of a majority in principal amount of the then outstanding Securities.

In addition, the Indenture permits an amendment of the Indenture or the Securities without the consent of any Holder under certain circumstances specified in the Indenture.

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11. Defaults and Remedies

Subject to the following paragraph, if an Event of Default specified in the Indenture occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Securities may declare all the Securities by notice to the Company to be due and payable immediately. In addition, certain specified Events of Default will cause the Securities to become immediately due and payable without further action by the Holders.

The sole remedy for an Event of Default relating to the Company’s failure to comply with the reporting obligations under Article 5 of the Indenture, and for any failure to comply with the requirements of Section 314(a)(1) of the TIA, will for the 365 days after the occurrence of such an Event of Default consist exclusively of the right to receive Additional Interest on the principal amount of the Securities at a rate equal to 0.25% per annum.

Holders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default or Event of Default (except a Default or Event of Default in payment of principal, interest (including Contingent Interest and Additional Interest, if any) or premium, if any) if it determines that withholding notice is in their interest.

12. Trustee Dealings with the Company

Subject to certain limitations set forth in the Indenture, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee.

13. No Recourse Against Others

An incorporator, director, officer, employee, Affiliate or stockholder of the Company, solely by reason of this status, shall not have any liability for any obligations of the Company under the Securities, the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Holder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities.

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14. Authentication

This Security shall not be valid until an authorized signatory of the Trustee manually authenticates this Security.

15. 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 entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act).

16. CUSIP Numbers

Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to 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 Securities or as contained in any notice of redemption, and reliance may be placed only on the other identification numbers placed thereon.

17. Governing Law

This Security and the Indenture shall be governed by, and construed in accordance with, the laws of the State of New York.

The Company will furnish to any Holder upon written request and without charge to the Holder a copy of the Indenture which has in it the text of this Security. Requests may be made to:

Goodrich Petroleum Corporation

808 Travis Street, Suite 1320

Houston, Texas 77002

Attention: Chief Financial officer

Facsimile: (713) 780-9254

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ASSIGNMENT FORM

To assign this Security, fill in the form below:

I or we assign and transfer this Security to

(Print or type assignee’s name, address and zip code)

(Insert assignee’s soc. sec. or tax I.D. No.)

and irrevocably appoint                      agent to transfer this Security on the books of the Company. The agent may substitute another to act for him.

Date: Your Signature:

Signature Guarantee:

(Signature must be guaranteed)

Sign exactly as your name appears on the other side of this Security.

The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions) with membership in an approved signature guarantee medallion program, pursuant to S.E.C. Rule 17Ad-15.

In connection with any transfer or exchange of any of the Securities evidenced by this certificate occurring prior to the date that is two years after the later of the date of original issuance of such Securities and the last date, if any, on which such Securities were owned by the Company or any Affiliate of the Company, the undersigned confirms that such Securities are being:

CHECK ONE BOX BELOW:

¨ 1 acquired for the undersigned’s own account, without transfer; or

¨ 2 transferred to the Company; or

¨ 3 transferred pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”); or

¨ 4 transferred pursuant to and in compliance with Rule 144A under the Securities Act; or

¨ 5 transferred pursuant to another available exemption from the registration requirements of the Securities Act.

Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any Person other than the

registered Holder thereof; provided, however, that if box (5) is checked, the Trustee or the Company may require, prior to registering any such transfer of the Securities, in their sole discretion, such legal opinions, certifications and other information as the Trustee or the Company may reasonably request to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, such as the exemption provided by Rule 144 under such Act.

	Signature:
Signature Guarantee:
(Signature must be guaranteed)	Signature:

The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions) with membership in an approved signature guarantee medallion program, pursuant to S.E.C. Rule 17Ad-15.

TO BE COMPLETED BY PURCHASER IF (4) ABOVE IS CHECKED.

The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A.

Dated:

[TO BE ATTACHED TO GLOBAL SECURITIES]

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY

The following increases or decreases in this Global Security have been made:

Date Amount of decrease
in Principal Amount of this Global Security Amount of increase
in Principal Amount of this Global Security Principal Amount of this Global Security following such decrease or increase Signature of
authorized signatory of Trustee or Securities Custodian

FORM OF CONVERSION NOTICE

To: Goodrich Petroleum Corporation

The undersigned registered Holder of this Security hereby exercises the option to convert this Security, or portion hereof (which is $1,000 principal amount or a multiple thereof) designated below in accordance with the terms of the Indenture referred to in this Security, and directs that cash, and the shares of Common Stock of Goodrich Petroleum Corporation, if any, issuable and deliverable upon such conversion, and any Securities representing any unconverted principal amount hereof, be issued and delivered to the registered Holder hereof unless a different name has been indicated below. If cash, shares or any portion of this Security not converted are to be issued in the name of a Person other than the undersigned, the undersigned shall pay all transfer taxes payable with respect thereto.

This notice shall be deemed to be an irrevocable exercise of the option to convert this Security.

Dated:
	Signature(s)
	The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions) with membership in an approved signature guarantee medallion program, pursuant to S.E.C. Rule 17Ad-15.
	Signature Guarantee
Fill in for registration of shares if to be delivered, and Securities if to be issued other than to and in the name of registered holder:
(Name)	Principal amount to be converted (if less than all): $                    ,000
(Street Address)
(City state and zip code)	Social Security or Other Taxpayer Number
Please print name and address

FORM OF FUNDAMENTAL CHANGE PURCHASE NOTICE

To: Goodrich Petroleum Corporation

The undersigned registered Holder of this Security hereby acknowledges receipt of a notice from Goodrich Petroleum Corporation (the “Company”) as to the occurrence of a Fundamental Change with respect to the Company and requests and instructs the Company to repurchase this Security, or the portion hereof (which is $1,000 principal amount or a multiple thereof) designated below, in accordance with the terms of the Indenture referred to in this Security and directs that the check in payment for this Security or the portion thereof and any Securities representing any unrepurchased principal amount hereof, be issued and delivered to the registered Holder hereof unless a different name has been indicated below. If any portion of this Security not repurchased is to be issued in the name of a Person other than the undersigned, the undersigned shall pay all transfer taxes payable with respect thereto.

Dated:
	Signature(s)
	The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions) with membership in an approved signature guarantee medallion program, pursuant to S.E.C. Rule 17Ad-15.
	Signature Guarantee
Fill in if a check is to be issued, or Securities are to be issued, other than to and in the name of registered Holder:
(Name)	Principal amount to be purchased (if less than all): $            ,000
(Street Address)
(City state and zip code)	Social Security or Other Taxpayer Number
Please print name and address

FORM OF PURCHASE NOTICE

To: Goodrich Petroleum Corporation

The undersigned registered Holder of this Security hereby acknowledges receipt of a notice from Goodrich Petroleum Corporation (the “Company”) as to the Holder’s option to require the Company to repurchase this Security and requests and instructs the Company to repurchase this Security, or the portion hereof (which is $1,000 principal amount or a multiple thereof) designated below, in accordance with the terms of the Indenture referred to in this Security and directs that the check in payment for this Security or the portion thereof and any Securities representing any unrepurchased principal amount hereof, be issued and delivered to the registered Holder hereof unless a different name has been indicated below. If any portion of this Security not repurchased is to be issued in the name of a Person other than the undersigned, the undersigned shall pay all transfer taxes payable with respect thereto.

Dated:
	Signature(s)
	The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions) with membership in an approved signature guarantee medallion program, pursuant to S.E.C. Rule 17Ad-15.
	Signature Guarantee
Fill in if a check is to be issued, or Securities are to be issued, other than to and in the name of registered Holder:
(Name)	Principal amount to be purchased (if less than all): $                    ,000
(Street Address)
(City state and zip code)	Social Security or Other Taxpayer Number
Please print name and address

EX-10.25

Exhibit 10.25

Goodrich Petroleum Corporation

Annual Bonus Plan

Section 1. Purpose of Plan

The purpose of the Plan is to promote the success of the Company by providing annual bonus incentives to participating Executives.

Section 2. Definitions

The following words and phrases as used herein shall have the following meanings unless a different meaning is plainly required by the context:

“Board” means the Board of Directors of the Company.

“Bonus” means a cash payment or payment opportunity as the context requires.

“Bonus Criteria” means the performance criteria and guidelines adopted by the Board for a Performance Period. The Bonus Criteria may include, without limitation, one or more business components, weightings of the components as to results achieved, comparisons with peer groups or indexes, and such other criteria and factors as the Board may deem appropriate.

“Committee” means the Compensation Committee of the Board.

“Company” means Goodrich Petroleum Corporation and any successor.

“Executive” means an individual who is a key employee of the Company or an affiliate of the Company.

“Participant” means an Executive selected or approved to participate in the Plan by the Committee.

“Performance Period” means each fiscal year of the Company.

“Plan” means the Annual Bonus Plan of the Company, as amended from time to time.

Section 3. Administration of the Plan

3.1 The Committee. The Plan shall be administered by the Board and the Committee, as provided herein.

3.2 Powers of the Committee. Subject to the further provisions herein, the Committee shall have the authority to determine the Executives who will participate in the Plan with respect to a Performance Period and shall otherwise be responsible for the general administration of the Plan. In this regard, the Committee shall have the authority to construe and interpret the Plan and any agreement or other document relating to any Bonus under the Plan, may adopt rules and regulations governing the administration of the Plan, and shall exercise all other duties and powers conferred on it by the Plan, or which are incidental or ancillary thereto.

3.3 Express Authority to Change Terms and Conditions of a Bonus. Without limiting the Committee’s authority under any other provision of the Plan, with the approval of the Board the Committee shall have the authority to accelerate a Bonus, to waive restrictive conditions for a Bonus, and to alter or modify the Bonus Criteria for a Performance Period at any time in such circumstances as the Board or Committee deems appropriate.

Section 4. Bonus Provisions

4.1 Selection of Participants. Based on the recommendation of the Chief Executive Officer of the Company, the Committee shall determine, before or as soon as reasonably practical after the beginning of each Performance Period, those Executives who will participate in the Plan for that Performance Period. The Chief Executive Officer shall be a participant each Performance Period unless the Committee provides otherwise.

4.2 Effect of Mid-Year Commencement of Service. If services as an Executive commence after the beginning of a Performance Period, the Board, based on the Committee’s recommendation, in its discretion, may grant a Bonus to such Executive and also may adjust the Performance Criteria for such Executive in such manner as the Board deems appropriate to reflect the actual period of service of the Executive during the Performance Period.

4.3 Determination of Bonus Amounts. The Board shall determine the standard or formula pursuant to which each Participant’s Bonus shall be calculated based on the Bonus Criteria and the amount to be paid to each Participant based on the level of achievement of the Bonus Criteria. The Board, based on the Committee’s recommendation, may also at any time establish additional conditions and terms of the payment of Bonuses as it may deem desirable and may take into account such factors as it deems appropriate in administering any aspect of the Plan. The Board, based on the Committee’s recommendation may, in its sole discretion, increase or decrease a Participant’s Bonus for a Performance Period based on such factors, including subjective factors, as the Board deems appropriate, including paying no Bonus at all notwithstanding the level of achievement of the Bonus Criteria for the Performance Period.

4.4 Board Certification. No Participant shall receive any Bonus payment under the Plan with respect to a Performance Period until the Board has approved such payment.

4.5 Time of Payment. Any Bonuses payable under the Plan shall be paid as soon as practicable following the Board’s approval of such payment, but not later than March 15 following the end of the Performance Period. Such payments shall be in cash, subject to applicable tax withholding requirements.

4.6 Employment Requirement. Unless the Board provides, a Participant shall not have a right to receive a Bonus unless such Participant remains an employee of the Company or an affiliate on the date the payment of the Bonus for the Performance Period is approved by the Board.

-2-

Section 5. General Provisions

5.1 No Right to Bonus or Continued Employment. Neither the establishment of the Plan nor the provision for or payment of any amounts hereunder nor any action of the Company (including, for purposes of this Section 5.1, any predecessor or subsidiary), the Board or the Committee in respect of the Plan, shall be held or construed to confer upon any person any legal right to receive, or any interest in, a Bonus, or any right to be continued in the employ of the Company or any affiliate of the Company. The Company expressly reserves any and all rights to discharge an Executive in its sole discretion, without liability of any person, entity or governing body under the Plan or otherwise.

5.2 Discretion of Board or Committee. Any decision made or action taken by the Board or the Committee arising out of or in connection with the creation, amendment, construction, administration, interpretation and effect of the Plan shall be within the absolute discretion of the Board or the Committee, as the case may be, and shall be conclusive and binding upon all persons. No member of the Board or the Committee shall have any liability for actions taken or omitted under the Plan by the member or any other person.

5.3 No Funding of Plan. The Company shall not be required to fund or otherwise segregate any cash or any other assets for payment to Participants under the Plan. The Plan shall constitute an “unfunded” plan of the Company. The Company shall not, by any provisions of the Plan, be deemed to be a trustee of any property, and any obligations of the Company to any Participant under the Plan shall be those of a debtor and any rights of any Participant or former Participant shall be limited to those of a general unsecured creditor.

5.4 Non-Transferability of Benefits and Interests. Except by will or the laws of descent and distribution, no Bonus that is payable under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any such attempted action be void and no such benefit shall be in any manner liable for or subject to debts, contracts, liabilities, engagements or torts of any Participant or former Participant.

5.5 Law to Govern. All questions pertaining to the construction, regulation, validity and effect of the provisions of the Plan shall be determined in accordance with the laws of the State of Texas.

5.6 Non-Exclusivity. The Plan does not limit the authority of the Company, the Board or the Committee, or any affiliate of the Company, to grant awards or authorize any other compensation under any other plan or authority. In addition, Executives not selected to participate in the Plan may participate in other plans of the Company or its affiliates.

Section 6. Amendments, Suspension or Termination of Plan

The Board may from time to time amend, suspend or terminate the Plan in whole or in part, and if suspended or terminated, may at any time reinstate any or all of the provisions of the Plan.

-3-

EX-12.1

Exhibit 12.1

GOODRICH PETROLEUM CORPORATION

RATIO OF EARNINGS TO FIXED CHARGES

(In Thousands, Except Ratios)

						Year ended December 31,
	2006		2005			2004		2003		2002
Earnings:
Income (loss) from continuing operations before income taxes	$	2,543	$	(26,847	)	$	16,071	$	5,742	$	(1,428	)
Plus: fixed charges		7,845		2,359			1,110		1,051		985
Earnings available for fixed charges	$	10,388	$	(24,488	)	$	17,181	$	6,793	$	(443	)
Fixed Charges:
Interest expense	$	7,845	$	2,359		$	1,110	$	1,051	$	985
Total fixed charges	$	7,845	$	2,359		$	1,110	$	1,051	$	985
Ratio of Earnings to Fixed Charges		1.32		(a	)		15.48		6.46		(b	)

(a) Earnings for the year ended December 31, 2005 were inadequate to cover fixed charges. The coverage deficiency was $26,847 thousand.

(b) Earnings for the year ended December 31, 2002 were inadequate to cover fixed charges. The coverage deficiency was $1,428 thousand.

EX-12.2

Exhibit 12.2

GOODRICH PETROLEUM CORPORATION

RATIO OF EARNINGS TO FIXED CHARGES AND PREFERENCE SECURITIES DIVIDENDS

(In Thousands, Except Ratios)

							Year ended December 31,
	2006			2005			2004			2003			2002
Earnings:
Income (loss) from continuing operations before income taxes	$	2,543		$	(26,847	)	$	16,071		$	5,742		$	(1,428	)
Plus: fixed charges		17,100			3,521			2,084			2,026			1,969
Preference securities dividends		(9,255	)		(1,162	)		(974	)		(975	)		(984	)
Earnings available for fixed charges	$	10,388		$	(24,488	)	$	17,181		$	6,793		$	(443	)
Fixed Charges:
Interest expense	$	7,845		$	2,359		$	1,110		$	1,051		$	985
Preference securities dividends		9,255			1,162			974			975			984
Total fixed charges	$	17,100		$	3,521		$	2,084		$	2,026		$	1,969
Ratio of Earnings to Fixed Charges and Preference Securities Dividends		0.61			(a	)		8.24			3.35			(b	)

(a) Earnings for the year ended December 31, 2005 were inadequate to cover fixed charges and preference securities dividends. The coverage deficiency was $28,009 thousand.

(b) Earnings for the year ended December 31, 2002 were inadequate to cover fixed charges and preference securities dividends. The coverage deficiency was $2,412 thousand.

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Goodrich Petroleum Corporation:

We consent to the incorporation by reference in the registration statement (No. 333-70840, No. 333-121560, No. 333-129642, and No. 333-133431) on Form S-3 and (No. 333-01077, No. 333-120425, No. 333-120427, and No. 333-138156) on Form S-8 of Goodrich Petroleum Corporation of our reports dated March 14, 2007, with respect to the consolidated balance sheets of Goodrich Petroleum Corporation as of December 31, 2006 and 2005, and the related consolidated statements of operations, cash flows, stockholders’ equity and comprehensive income (loss), and for each of the years in the three-year period ended December 31, 2006, management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2006 and the effectiveness of internal control over financial reporting as of December 31, 2006, which reports appear in the December 31, 2006 annual report on Form 10-K of Goodrich Petroleum Corporation.

Our report also refers to a change in the method of accounting for share-based payments in 2006.

KPMG, LLP

New Orleans, Louisiana

March 14, 2007

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS

We consent to the incorporation by reference in the Registration Statement on Form S-3 of Goodrich Petroleum Corporation of information relating to Goodrich Petroleum Corporation’s estimated proved reserves as set forth under the captions “Part I, Item 1 and 2. Business and Properties – Oil and Natural Gas Reserves” in Goodrich Petroleum Corporation’s Annual Report on Form 10-K for the year ended December 31, 2006.

Netherland Sewell & Associates, Inc.

/s/ Danny D Simmons

Danny D Simmons

Executive Vice President

Houston, Texas

March 12, 2007

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

15 U.S.C. SECTION 7241

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Walter G. Goodrich, certify that:

1. I have reviewed this annual report on Form 10-K of Goodrich Petroleum Corporation (“the Company”);

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 Company as of, and for, the periods presented in this report;

4. The Company’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 the Exchange Act Rules 13a-15(f) and 15d-15(f) for the Company 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 Company, 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 Company’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 Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting; and

5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent function):

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 Company’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 Company’s internal control over financial reporting.

Date: March 13, 2007

/s/ Walter G Goodrich

Walter G. Goodrich

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

15 U.S.C. SECTION 7241

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David R. Looney certify that:

1. I have reviewed this annual report on Form 10-K of Goodrich Petroleum Corporation (“the Company”);

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 Company as of, and for, the periods presented in this report;

4. The Company’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 the Exchange Act Rules 13a-15(f) and 15d-15(f) for the Company 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 Company, 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 Company’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 Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting; and

5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent function):

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 Company’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 Company’s internal control over financial reporting.

Date: March 13, 2007

/s/ David R Looney

David R. Looney

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Goodrich Petroleum Corporation (the “Company”) on Form 10-K for the year ended December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Walter G. Goodrich, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of this Sarbanes Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Walter G. Goodrich

Walter G. Goodrich

Chief Executive Officer

March 13, 2007

This certification is provided pursuant to Section 906 of the Sarbanes Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes Oxley Act of 2002, be deemed filed by the Company or the certifying officer for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 has been provided to Goodrich Petroleum Corporation and will be retained by it and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Goodrich Petroleum Corporation (the “Company”) on Form 10-K for the year ended December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David R. Looney, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of this Sarbanes Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ David R. Looney

David R. Looney

Chief Financial Officer

March 13, 2007

This certification is provided pursuant to Section 906 of the Sarbanes Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes Oxley Act of 2002, be deemed filed by the Company or the certifying officer for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 has been provided to Goodrich Petroleum Corporation and will be retained by it and furnished to the Securities and Exchange Commission or its staff upon request.