HS RESOURCES INC, S-4, 1997-01-08

HS RESOURCES INC
S-4, 1997-01-08
CRUDE PETROLEUM & NATURAL GAS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 8, 1997
REGISTRATION NO. 33-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
HS RESOURCES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 1311 94-3036864
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
ONE MARITIME PLAZA
15TH FLOOR
SAN FRANCISCO, CALIFORNIA 94111
(415) 433-5795
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive office)
------------------------
JAMES M. PICCONE, ESQ.
GENERAL COUNSEL
HS RESOURCES, INC.
1999 BROADWAY, SUITE 3600
DENVER, COLORADO 80202
(303) 296-3600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
It is requested that copies of communications be sent to:
RONALD R. LEVINE II, ESQ.
DAVIS, GRAHAM & STUBBS LLP
370 SEVENTEENTH STREET, SUITE 4700
DENVER, COLORADO 80202
(303) 892-9400
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective
date of the Registration Statement.

If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================
PROPOSED
MAXIMUM PROPOSED
AMOUNT OFFERING MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 1/4% Senior Subordinated Notes
Due 2006......................... $150,000,000 100% $150,000,000 $45,455
- --------------------------------------------------------------------------------------------------
Guaranties of 9 1/4% Senior
Subordinated Notes............... (1) (1) (1) (1)
==================================================================================================
</TABLE>

(1) No separate consideration will be received for the guaranties of the debt
securities registered hereby.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2

***************************************************************************
* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY *
* NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH *
* SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO *
* REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF SUCH *
* STATE. *
* *
***************************************************************************

SUBJECT TO COMPLETION, DATED JANUARY 8, 1997
PRELIMINARY PROSPECTUS

HS RESOURCES, INC.
OFFER TO EXCHANGE ITS 9 1/4% SENIOR SUBORDINATED NOTES DUE 2006 THAT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 FOR ANY AND ALL OF ITS
OUTSTANDING 9 1/4% SENIOR SUBORDINATED NOTES DUE 2006

***************************************************************************
* *
* THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT *
* 5:00 P.M., NEW YORK CITY TIME, ON , 1997, *
* UNLESS EXTENDED (THE "EXPIRATION DATE") *
* *
***************************************************************************

HS Resources, Inc., a Delaware corporation (the "Company" or "HSR"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus (as the same may be amended or supplemented from time to time, the
"Prospectus") and in the accompanying Letter of Transmittal (which together
constitute the "Exchange Offer"), to exchange up to $150,000,000 aggregate
principal amount of its 9 1/4% Senior Subordinated Notes due 2006 (the "Exchange
Notes") that have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to a Registration Statement (as defined herein)
of which this Prospectus constitutes a part, for a like principal amount of its
outstanding 9 1/4% Senior Subordinated Notes Due 2006 (the "Outstanding Notes"
and, together with the Exchange Notes, the "Notes"), of which $150,000,000
aggregate principal amount is outstanding. The Exchange Notes and the
Outstanding Notes are collectively referred to herein as the "Notes."

The terms of the Exchange Notes are identical in all material respects to
the terms of the Outstanding Notes, except that (i) the Exchange Notes have been
registered under the Securities Act and therefore will not be subject to certain
restrictions on transfer applicable to the Outstanding Notes and generally will
not be entitled to registration rights, and (ii) the Exchange Notes will not
provide for any increase in the interest rate thereon related to such
registration rights. In that regard, the Outstanding Notes provide that if an
exchange offer registration statement is (i) not filed by January 24, 1997 or
(ii) not declared effective by March 27, 1997, Special Interest (as defined)
will accrue and be payable semi-annually until such time as an exchange offer
registration statement is filed or becomes effective, as the case may be. In
addition, (i) if an exchange offer is not consummated or a resale shelf
registration statement is not declared effective by April 25, 1997 or (ii) if
either the exchange offer registration statement or the resale shelf
registration statement has been declared effective and such registration
statement ceases to be effective or usable (subject to certain exceptions),
Special Interest will accrue and be payable semi-annually until such time as an
exchange offer is consummated or a resale shelf registration statement is
declared effective, as the case may be. See "Description of the Exchange Notes"
and "Description of the Outstanding Notes." The Exchange Notes are being offered
for exchange in order to satisfy certain obligations of the Company under the
Registration Agreement dated November 27, 1996 (the "Registration Agreement")
between the Company and the Initial Purchasers (as defined) of the Outstanding
Notes. The Exchange Notes will be issued under the same Indenture (as defined)
as the Outstanding Notes and the Exchange Notes and the Outstanding Notes will
constitute a single series of debt securities under the Indenture. In the event
that the Exchange Offer is consummated, any Outstanding Notes that remain
outstanding after consummation of the Exchange Offer and the Exchange Notes
issued in the Exchange Offer will vote together as a single class for purposes
of determining whether holders of the requisite percentage in outstanding
principal amount of Notes have taken certain actions or exercised certain rights
under the Indenture.

The Exchange Notes will be general, unsecured obligations of the Company,
subordinated in right of payment to all existing and any future Senior
Indebtedness (as defined) of the Company. The Exchange Notes will rank pari
passu with existing and any future senior subordinated indebtedness and senior
to any future subordinated indebtedness of the Company. See "Description of the
Exchange Notes -- Subordination." The Exchange Notes will be fully and
unconditionally guaranteed on an unsecured, senior subordinated basis by certain
Restricted Subsidiaries (as defined). Each of the current Subsidiary Guarantors
(as defined) is a borrower under, or guarantor of, the Chase Facility (as
defined), which ranks senior to the Exchange Notes, and the obligations under
the Chase Facility are secured by a significant portion of the assets of the
Company. In addition, all indebtedness and liabilities of the Company's
subsidiaries that are not Subsidiary Guarantors will be effectively senior in
right of payment to the Exchange Notes and the Subsidiary Guaranties (as
defined). As of September 30, 1996, after giving effect to the Offering of the
Outstanding Notes (the "Offering") and the application of the estimated net
proceeds of the Offering, (i) Senior Indebtedness would have been approximately
$173.0 million, (ii) senior subordinated indebtedness would have been
approximately $225.0 million, (iii) the total consolidated indebtedness of the
Company would have aggregated approximately $398.0 million and (iv) the total
liabilities and indebtedness of the Company's subsidiaries that are not
Subsidiary Guarantors (including trade payables, deferred taxes and accrued
liabilities), on an aggregate basis, would have been approximately $8.4 million.
The Indenture permits the Company and its Restricted Subsidiaries to incur
additional Indebtedness (as defined) under certain circumstances. See "Use of
Proceeds," "Description of Other Indebtedness" and "Description of the Exchange
Notes."

Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Exchange Notes received in exchange for Outstanding Notes where such Outstanding
Notes were acquired by such broker-dealer as a result of market making
activities or other trading activities. The Company has agreed that, starting on
the Expiration Date and ending on the close of business on the first anniversary
of the Expiration Date, it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."

SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

The date of this Prospectus is , 1997.
<PAGE> 3

THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE THAT ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
JAMES M. PICCONE, SECRETARY, HS RESOURCES, INC., 1999 BROADWAY, SUITE 3600,
DENVER, COLORADO 80202, TELEPHONE (303) 296-3600. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
.

The Company is making the Exchange Offer in reliance on the position of the
staff of the Division of Corporate Finance of the Securities and Exchange
Commission (the "Commission") as set forth in certain interpretive letters
addressed to third parties in other transactions. However, the Company has not
sought its own interpretive letter and there can be no assurance that the staff
of the Division of Corporate Finance of the Commission would make a similar
determination with respect to the Exchange Offer as it has in such interpretive
letters to third parties. Based on these interpretations by the staff of the
Division of Corporate Finance, and subject to the two immediately following
sentences, the Company believes that the Exchange Notes issued pursuant to this
Exchange Offer in exchange for the Outstanding Notes may be offered for resale,
resold and otherwise transferred by a holder thereof (other than a holder who is
a broker-dealer) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such Exchange Notes
are acquired in the ordinary course of such holder's business and that such
holder is not participating, and has no arrangement or understanding with any
person to participate, in a distribution (within the meaning of the Securities
Act) of such Exchange Notes. However, any holder of the Outstanding Notes who is
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act or who intends to participate in the Exchange Offer for the
purpose of distributing Exchange Notes, or any broker-dealer who purchased
Outstanding Notes from the Company to resell pursuant to Rule 144A under the
Securities Act ("Rule 144A") or any other available exemption under the
Securities Act, (a) will not be able to rely on the interpretations of the staff
of the Division of Corporate Finance of the Commission set forth in the above
mentioned interpretive letters, (b) will not be permitted or entitled to tender
such Outstanding Notes in the Exchange Offer and (c) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or other transfer of such Outstanding Notes unless such
sale is made pursuant to an exemption from such requirements. Each broker-dealer
that receives Exchange Notes for its own account in exchange for Outstanding
Notes, where such Outstanding Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution." In the event that applicable interpretations
by the staff of the Division of Corporate Finance of the Commission change or
otherwise do not permit resales of the Exchange Notes without compliance with
the registration and prospectus delivery requirements of the Securities Act,
holders of Exchange Notes who transfer Exchange Notes in violation of the
prospectus delivery provisions of the Securities Act or without an exemption
from registration thereunder may incur liability thereunder.

Each holder of Outstanding Notes who wishes to exchange Outstanding Notes
for Exchange Notes in the Exchange Offer will be required to represent that (i)
it is not an "affiliate" of the Company, (ii) any Exchange Notes to be received
by it are being acquired in the ordinary course of its business, (iii) it has no
arrangement or understanding with any person to participate in a distribution
(within the meaning of the Securities Act) of such Exchange Notes, and (iv) if
such holder is not a broker-dealer, such holder is not engaged in, and does not
intend to engage in, a distribution (within the meaning of the Securities Act)
of such Exchange Notes. Each broker-dealer that receives Exchange Notes for its
own account pursuant to the Exchange Offer must acknowledge that it acquired the
Outstanding Notes for its own account as the result of market-making activities
or other trading activities and must agree that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such Exchange Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. Based on the
position taken by the staff of the Division of Corporate Finance of the
Commission in the interpretive letters referred to above, the Company believes
that broker-dealers who acquired Outstanding Notes for their own accounts, as a
result of market-making activities or other trading activities ("Participating
Broker-Dealers"), may fulfill the prospectus delivery requirements with respect
to the Exchange Notes received upon exchange of such

2
<PAGE> 4

Outstanding Notes (other than Outstanding Notes that represent an unsold
allotment from the original sale of the Outstanding Notes) with a prospectus
meeting the requirements of the Securities Act, that may be the prospectus
prepared for an exchange offer so long as it contains a description of the plan
of distribution with respect to the resale of such Exchange Notes. Accordingly,
this Prospectus, as it may be amended or supplemented from time to time, may be
used by a Participating Broker-Dealer during the period referred to below in
connection with resales of Exchange Notes received in exchange for Outstanding
Notes where such Outstanding Notes were acquired by such Participating
Broker-Dealer for its own account as a result of market-making or other trading
activities. Subject to certain provisions set forth in the Registration
Agreement, the Company has agreed that this Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer in
connection with resales of such Exchange Notes for a period ending one year
after the consummation of the Exchange Offer or, if earlier, when all such
Exchange Notes have been disposed of by such Participating Broker-Dealer. See
"Plan of Distribution." Any Participating Broker-Dealer who is an "affiliate" of
the Company may not rely on such interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. See "The Exchange Offer -- Resales of
Exchange Notes."

In that regard, each Participating Broker-Dealer who surrenders Outstanding
Notes pursuant to the Exchange Offer will be deemed to have agreed, by execution
of the Letter of Transmittal, that, upon receipt of notice from the Company of
the occurrence of any event or the discovery of any fact which makes untrue in
any material respect or which causes this Prospectus to omit to state a material
fact necessary in order to make the statements contained or incorporated by
reference herein, in light of the circumstances under which they were made, not
misleading or of the occurrence of certain other events specified in the
Registration Agreement, such Participating Broker-Dealer will suspend the sale
of Exchange Notes pursuant to this Prospectus until the Company has amended or
supplemented this Prospectus to correct such misstatement or omission and has
furnished copies of the amended or supplemented Prospectus to each such
Participating Broker-Dealer or the Company has give notice that the sale of
Exchange Notes may be resumed, as the case may be. If the Company gives such
notice to suspend the sale of the Exchange Notes, it shall extend the one-year
period referred to above during which Participating Broker-Dealers are entitled
to use this Prospectus in connection with the resale of Exchange Notes by the
number of days during the period from and including the date of the giving of
such notice to and including the date when Participating Broker-Dealers shall
have received copies of the amended or supplemented Prospectus necessary to
permit resales of the Exchange Notes or to and including the date on which the
Company has given notice that the sale of Exchange Notes may be resumed, as the
case may be.

Prior to the Exchange Offer, there has been only a limited secondary market
and no public market for the Outstanding Notes. The Exchange Notes will be a new
issue of securities for which there is currently no market. Accordingly, there
can be no assurance as to the development or liquidity of any market for the
Exchange Notes. Although the Initial Purchasers have informed the Company that
they each currently intend to make a market in the Exchange Notes, they are not
obligated to do so, and any such market making may be discontinued at any time
without notice. Accordingly, there can be no assurance as to the development or
liquidity of any market for the Exchange Notes. The Company currently does not
intend to apply for listing of the Exchange Notes on any securities exchange or
for quotation through the National Association of Securities Dealers Automated
Quotation System.

Any Outstanding Notes not tendered and accepted in the Exchange Offer will
remain outstanding and will be entitled to all the same rights and will be
subject to the same limitations applicable thereto under the Indenture (except
for those rights that terminate upon the consummation of the Exchange Offer).
Following consummation of the Exchange Offer, the holders of Outstanding Notes
will continue to be subject to the existing restrictions upon transfer thereof
and the Company will have no further obligation to such holders (other than
Initial Purchasers or under certain limited circumstances relating to holders
who are not eligible to participate in the Exchange Offer) to provide the
registration under the Securities Act of the Outstanding Notes held by them. If
Outstanding Notes are tendered and accepted in the Exchange Offer, the market
for untendered Outstanding Notes is likely to diminish; accordingly, holders who
do not tender their Outstanding

3
<PAGE> 5

Notes may encounter difficulties in selling such notes following the Exchange
Offer. See "Risk Factors -- Consequences of a Failure to Exchange Outstanding
Notes."

THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OUTSTANDING NOTES ARE URGED TO READ THIS PROSPECTUS AND
THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER
THEIR OUTSTANDING NOTES PURSUANT TO THE EXCHANGE OFFER.

Outstanding Notes may be tendered for exchange on or prior to 5:00 p.m.,
New York City time, on , 1997, unless the Exchange Offer is
extended by the Company (in which case the term "Expiration Date" shall mean the
latest date and time to which the Exchange Offer is extended). Tenders of
Outstanding Notes may be withdrawn at any time on or prior to the Expiration
Date. The Exchange Offer is not conditioned upon any minimum principal amount of
Outstanding Notes being tendered for exchange. However, the Exchange Offer is
subject to certain events and conditions that may be waived by the Company and
to the terms and provisions of the Registration Agreement. See "The Exchange
Offer -- Conditions to the Exchange Offer." Outstanding Notes may be tendered in
whole or in part in a principal amount of $1,000 and integral multiples thereof.
The Company has agreed to pay all expenses of the Exchange Offer, except for any
expenses relating to the printing of this Prospectus, which printing expenses
will be paid by the Initial Purchasers. Each Exchange Note will bear interest
from the most recent date to which interest has been paid or duly provided for
on the Outstanding Note surrendered in exchange for such Exchange Note or, if no
such interest has been paid or duly provided for on such Outstanding Note, from
November 27, 1996. Holders of the Outstanding Notes whose Outstanding Notes are
accepted for exchange will not receive accrued interest on such Outstanding
Notes for any period from and after the last Interest Payment Date (as defined)
to which interest has been paid or duly provided for on such Outstanding Notes
prior to the original issue date of the Exchange Notes or, if no such interest
has been paid or duly provided for, will not receive any accrued interest on
such Outstanding Notes, and will be deemed to have waived the right to receive
any interest on such Outstanding Notes accrued from and after such Interest
Payment Date or, if no such interest has been paid or duly provided for, from
and after November 27, 1996. This Prospectus, together with the Letter of
Transmittal, is being sent to all registered holders of the Outstanding Notes as
of , 1997.

The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. See "Use of Proceeds." No dealer-manager is being
used in connection with this Exchange Offer. See "Plan of Distribution."

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES
OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH OFFER WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE COMPANY
OR ITS SUBSIDIARIES SINCE THE DATE HEREOF.

4
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TABLE OF CONTENTS

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PAGE
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AVAILABLE INFORMATION................................................................. 5
INCORPORATION BY REFERENCE............................................................ 6
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS....................................... 6
PROSPECTUS SUMMARY.................................................................... 7
RISK FACTORS.......................................................................... 17
THE EXCHANGE OFFER.................................................................... 24
USE OF PROCEEDS....................................................................... 33
CAPITALIZATION........................................................................ 34
SELECTED HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA............................. 35
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.......................................................................... 37
BUSINESS AND PROPERTIES............................................................... 44
MANAGEMENT............................................................................ 54
DESCRIPTION OF OTHER INDEBTEDNESS..................................................... 57
DESCRIPTION OF THE EXCHANGE NOTES..................................................... 59
DESCRIPTION OF THE OUTSTANDING NOTES.................................................. 91
CERTAIN FEDERAL INCOME TAX CONSEQUENCES............................................... 91
PLAN OF DISTRIBUTION.................................................................. 94
LEGAL MATTERS......................................................................... 96
EXPERTS............................................................................... 96
GLOSSARY OF OIL AND NATURAL GAS TERMS................................................. 97
</TABLE>

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports and other information may be inspected and copied at
the public reference facilities of the Commission, Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, as well as at the following
Regional Offices: 7 World Trade Center, Suite 1300, New York, New York 10048,
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material can be obtained from the Commission by mail at
prescribed rates. Requests should be directed to the Commission's Public
Reference Section, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission also maintains a website at
http://www.sec.gov that contains reports, proxy statements, and other
information. HSR's common stock is listed on the New York Stock Exchange (the
"NYSE"). Reports, proxy and information statements and other information
relating to HSR can be inspected at the offices of the NYSE at 20 Broad Street,
New York, New York 10005. In addition, for so long as any of the Outstanding
Notes remains outstanding, the Company and the Subsidiary Guarantors have agreed
to make available to any prospective purchaser of the Outstanding Notes or
beneficial owner of the Outstanding Notes in connection with any sale thereof
the information required by Rule 144A(d)(4) under the Securities Act. Any such
request and requests for the agreements summarized herein should be directed to
James M. Piccone, Secretary, HS Resources, Inc., 1999 Broadway, Suite 3600,
Denver, Colorado 80202, telephone (303) 296-3600.

This Prospectus constitutes a part of a registration statement on Form S-4
(the "Registration Statement") filed by the Company with the Commission under
the Securities Act. This Prospectus does not contain all the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission, and reference is
hereby made to the Registration Statement and to the exhibits relating thereto
for further information with respect to the Company and the Notes. Any
statements contained herein concerning the provisions of any document are not
necessarily complete, and, in each instance, reference is made to a copy of such
document filed as an exhibit to the Registration Statement or otherwise filed
with the Commission. Each such statement is qualified in its entirety by such
reference.

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<PAGE> 7

INCORPORATION BY REFERENCE

The Company's annual report on Form 10-K for the year ended December 31,
1995, quarterly reports on Form 10-Q for the quarters ended March 31, 1996, June
30, 1996, and September 30, 1996, and Current Report on Form 8-K filed June 22,
1996, are incorporated by reference in this Prospectus. All documents filed by
the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the Exchange Offer shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement modified or superseded shall not be deemed, except as so modified or
superseded, to constitute part of this Prospectus.

Upon request, the Company will provide without charge to each person to
whom a copy of this Prospectus has been delivered a copy of any documents
incorporated by reference herein (other than exhibits unless the exhibits are
specifically incorporated by reference into this Prospectus). Requests should be
directed to James M. Piccone, HS Resources, Inc., 1999 Broadway, Suite 3600,
Denver, Colorado 80202.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Prospectus includes statements that are not purely historical and are
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act, including statements regarding the
Company's expectations, hopes, beliefs, intentions or strategies regarding the
future. All statements other than statements of historical facts included in
this Prospectus, including without limitation, statements under "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business and Properties" regarding
reserves and their values, planned capital expenditures, increases in oil and
natural gas production, the number and prospective nature of anticipated wells
to be drilled in 1996 and thereafter, development potential, infill potential,
exploitation and exploration prospects and leads, drilling prospects,
consolidation opportunities, markets for the Company's oil and gas production
and the Company's financial position, business strategy and other plans and
objectives for future operations, and future oil and natural gas demand, supply,
marketing, transportation and pricing factors, are forward-looking statements.
All forward-looking statements included in this Prospectus are based on
information available to the Company on the date hereof, and the Company assumes
no obligation to update such forward-looking statements. Although the Company
believes that the assumptions and expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to have been correct or that the Company will take any actions that may
presently be planned. There are numerous uncertainties inherent in estimating
quantities of proved oil and natural gas reserves and projecting future rates of
production and timing of development expenditures, including many factors beyond
the control of the Company. Certain important factors that could cause actual
results to differ materially from the Company's expectations are disclosed under
"Risk Factors" and elsewhere in this Prospectus. All subsequent written or oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by such factors.

6
<PAGE> 8

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the Consolidated
Financial Statements, the Unaudited Pro Forma Combined Financial Statements and
the notes thereto appearing elsewhere or incorporated by reference in this
Prospectus. The pro forma combined statement of operations and reserve
information give effect to (i) the acquisition of certain assets from Basin
Exploration, Inc. ("Basin") in March and June 1996 (the "Acquisitions") and (ii)
the merger with Tide West Oil Company ("Tide West") in June 1996 (the "Merger").
Prospective purchasers should carefully consider the information set forth in
"Risk Factors" in evaluating the Offering. Certain terms relating to the oil and
natural gas industry are defined in "Glossary of Oil and Natural Gas Terms."
Unless the context otherwise requires, all references in this Prospectus to
"HSR" or the "Company" are to HS Resources, Inc. and its subsidiaries.

THE COMPANY

HS Resources, Inc. is a leading United States independent energy company
engaged in the development, acquisition, exploitation, exploration, production
and marketing of oil and natural gas. Through its experienced management and
technical staff, the Company has consistently increased reserves and production
and has established itself as one of the most efficient operators in the
industry. HSR has created a diversified asset base in three core geographic
areas: the Denver-Julesburg Basin (the "D-J Basin") of the Rocky Mountains, the
Anadarko and Arkoma Basins of the Mid-Continent and the on-shore Gulf Coast
area. It has done so by executing a large scale development drilling program
focused in the Wattenberg Field area of the D-J Basin and through the
Acquisitions, the Merger and the formation of Gulf Coast joint ventures. The
Company believes that each core geographic area adds operational and financial
opportunities, positioning the Company to maximize the benefits of its more
predictable, long-lived production in the D-J Basin, while providing meaningful
exposure to higher return potential exploitation and exploration projects in the
Mid-Continent and Gulf Coast. HSR has an inventory of growth opportunities that
includes in excess of 1,850 infill, development and exploratory drilling
locations and over 1.1 million gross undeveloped acres.

The Company has achieved substantial growth in reserves, production,
revenues and EBITDA (as defined) over the past five years. HSR has increased
reserves from 20.8 MMBoe as of December 31, 1990, to 143.9 MMBoe on a pro forma
basis as of December 31, 1995. HSR also increased production from 0.9 MMBoe for
the year ended December 31, 1991, to 11.1 MMBoe on a pro forma basis for the
year ended December 31, 1995. Oil and natural gas revenues and EBITDA also have
grown significantly over this period, increasing from $12.8 million and $8.3
million, respectively, for the year ended December 31, 1991, to $115.2 million
and $84.8 million, respectively, on a pro forma basis for the year ended
December 31, 1995. On a pro forma basis for the nine months ended September 30,
1996, the Company generated oil and natural gas revenues of $96.5 million and
EBITDA of $73.5 million.

At December 31, 1995, the Company's pro forma reserves had an estimated
pre-tax present value (discounted at 10%) of $555 million. Natural gas
constituted approximately 75% of the Company's reserves and approximately 73% of
the Company's reserves were classified as proved developed. At September 30,
1996, the Company operated more than 73% of its 3,544 wells. Management believes
that its ability to control the operation of its wells and to minimize overhead
expenses has contributed to the Company achieving one of the lowest cost
structures in the industry.

BUSINESS STRATEGY

7
<PAGE> 9

techniques, (iv) effecting consolidation in its core geographic areas, (v)
maintaining low operating costs, (vi) capturing downstream value and (vii)
maximizing financial flexibility.

- Increase Diversified Long-lived Asset Base. HSR has assembled a
diversified portfolio of predictable, long-lived properties, which, in
the aggregate, generate significant high margin production and cash
flows. HSR presently owns interests in 3,544 gross wells and had an
aggregate pro forma reserves-to-production ratio of 13:1 as of December
31, 1995. The Company's current product mix consists of approximately 75%
natural gas and 25% oil, with most wells producing both oil and natural
gas. The Company is diversified geographically and geologically with core
producing properties across the D-J Basin and the Mid-Continent area and
also owns extensive undeveloped leaseholds in the Gulf Coast and Rocky
Mountain regions.

- Build a Substantial Inventory of Development, Exploitation and
Exploration Projects. The Company intends to continue expanding its
substantial portfolio of development, exploitation and exploration
projects. As of September 30, 1996, HSR had identified approximately 900
development drillsites and 750 potential infill drillsites in the D-J
Basin. The lower risk infill and development projects in the D-J Basin
are complemented by relatively higher risk and potentially higher return
exploitation and exploration projects in the Mid-Continent and Gulf Coast
regions. Based upon preliminary interpretation of seismic and geologic
data, the Company has identified approximately 170 exploitation and
development drilling locations in the Mid-Continent area and
approximately 60 exploitation and exploration projects and leads in its
Gulf Coast project area.

- Utilize Advanced Exploration, Drilling and Production Techniques. In the
D-J Basin, the Company is testing the use of coiled tubing drilling and
is using both sophisticated fracturing technologies and directional
drilling to enhance production and obtain additional reserves from
existing wellbores. In order to improve its exploitation and exploration
drilling success rates, the Company utilizes 3-D seismic extensively,
including advanced imaging techniques of coherence cube or continuity
processing and advanced interpretation and geostatistical techniques. The
Company has acquired more than 450 square miles of 3-D seismic data in
its core geographic areas and plans to acquire an additional 180 square
miles of 3-D seismic data in the Gulf Coast within the next six months.
The Company, directly or indirectly, employs or contracts with 33
experienced geologists and geophysicists to develop its projects.

- Consolidate in Core Geographic Areas. The Company is continuing to
pursue its consolidation strategy in the D-J Basin, where it currently
produces approximately 24% of total D-J Basin natural gas production. By
effecting consolidation in the D-J Basin, the Company capitalizes on
opportunities for further operating and administrative cost efficiencies
and improves its product marketing position through control of increased
volumes. HSR will pursue a similar consolidation strategy in various
fields and basins within the Mid-Continent area.

- Maintain Low Operating Costs. The Company is an industry leader in
operational efficiencies and field management, historically ranking as
one of the lowest cost operators in the United States. During 1995, HSR's
general and administrative expenses were $0.80 per Boe, and its lease
operating expenses were $1.95 per Boe. On a pro forma basis, during the
first nine months of 1996, the Company's general and administrative
expenses were $0.66 per Boe, and its lease operating expenses were $2.19
per Boe.

- Capture Downstream Value. The Company seeks to enhance both its margins
and operating flexibility through its marketing, trading and
transportation business. HSR is one of the most active natural gas
producer/marketers in the Colorado Front Range area and directly markets
approximately 60% of its natural gas production from the D-J Basin. A
significant portion of this production is sold directly to over 400
commercial and industrial end users. In the Mid-Continent area, the
Company markets its own natural gas production and also purchases third
party natural gas for resale. The Colorado Front Range and Mid-Continent
marketing and trading operations are fully integrated, thus providing
opportunities for HSR to improve product prices and profit from market
imbalances and trading opportunities between the two regions and to
capitalize on the combined expertise of the two groups.

8
<PAGE> 10

- Maximize Financial Flexibility. The Company is committed to maintaining
substantial financial flexibility. In funding its growth, HSR has
employed a broad array of financing strategies to minimize its cost of
capital, including public equity and debt, tax credit financing
structures, divestitures and asset monetizations. Management currently
expects its 1997 capital expenditure budget to be fully funded by
internally-generated cash flow. Additionally, the Company intends to
divest approximately $65 million of non-core properties and apply the
proceeds from such sales to reduce outstanding borrowings under the Chase
Facility.

RECENT DEVELOPMENTS

Basin Property Acquisitions

In March and June of 1996, the Company completed the Acquisitions,
acquiring all of Basin's D-J Basin properties for aggregate cash consideration
of $125.5 million. The Acquisitions included a total of 850 gross wells at
December 31, 1995, having approximately 35 MMBoe of net proved reserves and
approximately 5,500 Boe of net daily production. The Acquisitions also included
approximately 250 potential development drillsites. The acquired properties are
in the immediate vicinity of HSR's existing D-J Basin operations, and HSR has
integrated these assets into its property base with no material increase in
overhead, resulting in a substantial decrease in general and administrative
costs per Boe of production. In addition to the improved economics associated
with consolidation, HSR's controlled natural gas volumes in the D-J Basin have
increased, strengthening HSR's active Colorado Front Range natural gas marketing
activities. The Company believes that there remain significant future
exploitation and infill drilling opportunities to further develop existing
reserves in the D-J Basin through the application of developing technologies,
including directional drilling applications.

Tide West Merger

On June 17, 1996, the Company completed the Merger with Tide West. The
total consideration of $187.7 million consisted of $119.8 million in cash and
net liabilities assumed and HSR common stock with an aggregate market value of
approximately $67.9 million. The Merger added 1,259 gross wells, approximately
39.1 MMBoe of net proved reserves and approximately 9,985 Boe of net daily
production to the Company. Through the Merger, the Company diversified its
property base into the Mid-Continent area, acquired a large inventory of
exploitation, development and exploration opportunities, and acquired an active
natural gas trading and transportation operation. The geographical location of
the Tide West properties and the proximity of the Tide West properties to the
Mid-Continent markets and Henry Hub provide the Company with product market and
price diversification. Tide West's undrilled locations have a relatively higher
reserve potential but a slightly higher risk profile than HSR's D-J Basin
properties. To date, HSR has identified approximately 170 potential exploitation
and development drillsites on properties acquired in the Merger.

Gulf Coast Joint Ventures

The Company's strategy in establishing operations in the on-shore Gulf
Coast region has been to joint venture with experienced Gulf Coast exploration
organizations that have existing projects and positions and are at the forefront
of applied technologies, including advanced imaging applications of 3-D seismic
data. To date, the Company has formed two joint ventures, SouthTech Exploration,
L.L.C. ("SouthTech") and Chenier Exploration ("Chenier"), that are complementary
in approach and geographic coverage. As a result, the Company has accelerated
its cycle time in generating, analyzing and exploiting 3-D seismic projects in
the Gulf Coast. Entry into the Gulf Coast is a key component of the Company's
diversification strategy. High rate, shorter-lived production from this area
will complement the Company's existing long-lived production profile.
Furthermore, the higher return potential of the Gulf Coast provides greater
balance to the Company's overall risk profile.

9
<PAGE> 11

THE EXCHANGE OFFER

EXCHANGE OFFER............ Up to $150,000,000 aggregate principal amount of
Exchange Notes are being offered in exchange for like
aggregate principal amount of Outstanding Notes.
Outstanding Notes may be tendered for exchange in
whole or in part in a principal amount of $1,000 and
integral multiples thereof. The Company is making the
exchange offer in order to satisfy its obligations
under the Registration Agreement relating to the
Outstanding Notes. The Company will issue the
Exchange Notes to tendering holders of the
Outstanding Notes promptly following the Expiration
Date.

REGISTRATION AGREEMENT.... The Outstanding Notes were sold by the Company on
November 27, 1996 to Salomon Brothers Inc, Chase
Securities Inc., Lehman Brothers Inc. and Prudential
Securities Incorporated (collectively, the "Initial
Purchasers"), who placed the Outstanding Notes with
Qualified Institutional Buyers ("QIBs") and
institutional accredited investors. In connection
therewith, the Company executed and delivered for the
benefit of the holders of the Outstanding Notes the
Registration Agreement providing for, among other
things, the Exchange Offer.

EXPIRATION DATE........... 5:00 p.m., New York City time, on ,
1997 unless the Exchange Offer is extended by the
Company. See "The Exchange Offer -- Expiration Date;
Extensions; Amendments."

CONDITIONS TO THE
EXCHANGE OFFER.......... The Exchange Offer is subject to certain conditions,
which may be waived by the Company in its sole
discretion. See "The Exchange Offer -- Conditions to
the Exchange Offer." The Exchange Offer is not
conditioned upon any minimum aggregate principal
amount of Outstanding Notes being tendered or
accepted for exchange.

The Company reserves the right (i) to delay the
acceptance of the Outstanding Notes for exchange,
(ii) to terminate or amend the Exchange Offer at any
time prior to the Expiration Date upon the occurrence
of certain conditions, (iii) to extend the Expiration
Date of the Exchange Offer and retain all of the
Outstanding Notes tendered pursuant to the Exchange
Offer, subject, however, to the right of holders of
the Outstanding Notes to withdraw their tendered
Outstanding Notes or (iv) to waive any condition or
otherwise amend the terms of the Exchange Offer in
any respect. See "The Exchange Offer -- Conditions to
the Exchange Offer."

PROCEDURES FOR TENDERING
OUTSTANDING NOTES....... Each holder of Outstanding Notes wishing to accept
the Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein and
therein, and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with such
Outstanding Notes and any other required
documentation to the Exchange Agent (as defined) at
the address set forth herein. By executing the Letter
of Transmittal each holder will represent to the
Company that, among other things, (i) the Exchange
Notes acquired pursuant to the Exchange Offer by the
holder and any beneficial owners of Outstanding Notes
are being acquired in the ordinary course of business
of the person receiving such Exchange Notes, (ii)
neither the holder nor such beneficial owner is
participating in, intends to participate in or has an
arrangement or understanding with any person to
participate in the distribution of such Exchange
Notes and (iii) neither the holder nor such
beneficial owner is an "affiliate," as defined under
Rule 405 of the Securities Act, of

10
<PAGE> 12

the Company, or, if it is an affiliate of the
Company, that it will comply with the registration
and prospectus delivery requirements of the
Securities Act to the extent applicable. Each
broker-dealer that receives Exchange Notes for its
own account in exchange for Outstanding Notes, where
such Outstanding Notes were acquired by such broker
or dealer as a result of market making activities or
other trading activities, may participate in the
Exchange Offer but may be deemed an "underwriter"
under the Securities Act and, therefore, must
acknowledge in the Letter of Transmittal that it will
deliver a prospectus in connection with any resale of
such Exchange Notes. The Company has undertaken, for
a period of one year from the consummation of the
Exchange Offer, to maintain the effectiveness of this
Prospectus for use in satisfaction of such persons'
obligations to deliver a prospectus. The Letter of
Transmittal states that by so acknowledging and by
delivering a prospectus, a broker or dealer will not
be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. See "The Exchange
Offer -- Resales of Exchange Notes."

SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS....... Any beneficial owner whose Outstanding Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender such Outstanding Notes in the
Exchange Offer should contact such registered holder
promptly and instruct such registered holder to
tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on its own behalf,
such owner must, prior to completing and executing
the Letter of Transmittal and delivering its
Outstanding Notes, either make appropriate
arrangements to register ownership of the Outstanding
Notes in such owner's name or obtain a properly
completed bond power from the registered holder. The
transfer of registered ownership may take
considerable time and may not be able to be completed
prior to the Expiration Date.

GUARANTEED DELIVERY
PROCEDURES.............. Holders of Outstanding Notes who wish to tender their
Outstanding Notes and whose Outstanding Notes are not
immediately available or who cannot deliver their
Outstanding Notes, the Letter of Transmittal or any
other documents required by the Letter of Transmittal
to the Exchange Agent prior to the Expiration Date
must tender their Outstanding Notes according to the
guaranteed delivery procedures set forth in "The
Exchange Offer -- Guaranteed Delivery Procedures."

WITHDRAWAL RIGHTS......... Tenders may be withdrawn at any time prior to the
Expiration Date. See "The Exchange
Offer -- Withdrawal Rights."

CERTAIN FEDERAL INCOME TAX
CONSEQUENCES............ The exchange of the Outstanding Notes for Exchange
Notes by tendering holders will not be a taxable
exchange for federal income tax purposes, and such
holders will not recognize any taxable gain or loss
or any interest income for federal income tax
purposes as a result of such exchange. Holders should
review the information set forth under "Certain
Federal Income Tax Consequences" for a discussion of
certain U.S. tax considerations relating to the
Exchange Notes prior to tendering the Outstanding
Notes in the Exchange Offer.

USE OF PROCEEDS........... The Company will not receive any cash proceeds from
the issuance of the Exchange Notes offered hereby.
See "Use of Proceeds."

11
<PAGE> 13

EXCHANGE AGENT............ Harris Trust Company of New York is serving as
Exchange Agent in connection with the Exchange Offer.
See "The Exchange Offer -- Exchange Agent."

THE EXCHANGE NOTES

EXCHANGE NOTES............ $150,000,000 in aggregate principal amount of 9 1/4%
Senior Subordinated Notes due 2006. The form and
terms of the Exchange Notes are identical in all
material respects to the terms of the respective
Outstanding Notes for which they may be exchanged
pursuant to the Exchange Offer, except for certain
transfer restrictions and registration rights
relating to the Outstanding Notes and except for
certain interest provisions relating to such
registration rights. See "Description of the Exchange
Notes."

MATURITY.................. November 15, 2006.

INTEREST ON THE
EXCHANGE NOTES.......... The Exchange Notes will bear interest at the rate of
9 1/4% per annum, payable semiannually on May 15 and
November 15, commencing May 15, 1997.

OPTIONAL REDEMPTION....... The Exchange Notes will be redeemable at the option
of the Company, in whole or in part, at any time on
or after November 15, 2001, at the redemption prices
set forth herein, plus accrued and unpaid interest,
if any, to the date of redemption. In addition, prior
to November 15, 1999, up to 33 1/3% of the aggregate
principal amount of the Notes originally issued is
redeemable at the option of the Company, in whole or
in part, from time to time, at 109.25% of the
principal amount thereof, plus accrued and unpaid
interest, if any, to the date of redemption, with the
net proceeds of one or more Equity Offerings (as
defined), provided that at least 66 2/3% of the
aggregate principal amount of the Notes originally
issued remains outstanding immediately after such
redemption. See "Description of the Exchange
Notes -- Optional Redemption."

SUBSIDIARY GUARANTIES..... The Exchange Notes will be unconditionally guaranteed
on a senior subordinated basis by each of the Initial
Subsidiary Guarantors (as defined) under the
Subsidiary Guaranties and by certain Restricted
Subsidiaries of the Company if they become a
Significant Subsidiary (as defined) in the future.
See "Description of the Exchange Notes -- Subsidiary
Guaranties."

SUBORDINATION OF EXCHANGE
NOTES AND SUBSIDIARY
GUARANTIES.............. The Exchange Notes and the Subsidiary Guaranties will
be general, unsecured obligations of the Company and
the Subsidiary Guarantors, as applicable. The Notes
and the Subsidiary Guaranties will be subordinated in
right of payment to all existing and any future
Senior Indebtedness, will rank pari passu with
existing and any future senior subordinated
indebtedness and senior to any future subordinated
indebtedness of the Company or the Subsidiary
Guarantors, as applicable. See "Description of the
Exchange Notes -- Subordination." As of September 30,
1996, after giving effect to the Offering, (i) Senior
Indebtedness would have been approximately $173.0
million, (ii) senior subordinated indebtedness would
have been approximately $225.0 million, (iii) the
total consolidated indebtedness of the Company would
have aggregated approximately $398.0 million and (iv)
the total liabilities and indebtedness of the
Company's subsidiaries that are not Subsidiary
Guarantors (including trade payables, deferred taxes
and accrued liabilities), on an aggregate basis,
would have been approximately $8.4 million. Subject
to certain limitations set forth in the Indenture,
the

12
<PAGE> 14

Company and its subsidiaries (including the
Subsidiary Guarantors) may incur additional
indebtedness including indebtedness that would be
senior to or pari passu with the Notes. See
"Capitalization," "Management's Discussion and
Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources,"
"Description of Other Indebtedness," and "Description
of the Exchange Notes -- Certain Covenants."

CHANGE OF CONTROL......... Upon the occurrence of a Change of Control (as
defined), each holder of the Exchange Notes may
require the Company to purchase for cash such
holder's Notes at 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to
the date of purchase. In the event of a Change of
Control, there can be no assurance that the Company
or the Subsidiary Guarantors will have the financial
resources or be permitted under the terms of their
other indebtedness to repurchase the Exchange Notes.
See "Risk Factors -- Risks Relating to a Change of
Control" and "Description of the Exchange
Notes -- Repurchase at the Option of Holders Upon a
Change of Control."

CERTAIN COVENANTS......... The Indenture pursuant to which the Exchange Notes
will be issued contains certain covenants that, among
other things, limit the ability of the Company and
its Restricted Subsidiaries to (i) incur additional
Indebtedness, (ii) incur Indebtedness that is
subordinate to Senior Indebtedness but senior to the
Exchange Notes, (iii) incur secured Indebtedness that
is not Senior Indebtedness, (iv) pay dividends or
make other distributions with respect to the Capital
Stock (as defined) or Redeemable Stock (as defined)
of the Company or to purchase, redeem or retire
Capital Stock or Redeemable Stock of the Company or
any Affiliate (as defined) thereof or make other
Restricted Payments (as defined), (v) enter into
certain transactions with Affiliates, (vi) create
certain liens, (vii) enter into certain
consolidations, mergers and transfers of assets,
(viii) issue any Capital Stock of a Restricted
Subsidiary or permit any Person (as defined) other
than the Company or a Restricted Subsidiary to own
such stock, (ix) permit any Restricted Subsidiary to
suffer to exist certain types of restrictions on the
ability of Restricted Subsidiaries to pay dividends
and make other transfers of assets to the Company and
other Restricted Subsidiaries and (x) dispose of the
proceeds of certain asset sales. All of these
limitations are subject to a number of important
qualifications. See "Description of the Exchange
Notes -- Certain Covenants" and "-- Merger,
Consolidation and Sale of Substantially All Assets."

LISTING................... None. See "Risk Factors -- Lack of Public Market."

SINKING FUND.............. None

For additional information with respect to the Exchange Notes (including defined
terms), see "Description of the Exchange Notes."

RISK FACTORS

An investment in the Exchange Notes involves certain risks that a potential
purchaser should carefully evaluate prior to making such an investment. See
"Risk Factors."

13
<PAGE> 15

SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA

The following table presents summary financial data for the Company as of
the dates and for the periods indicated. The financial data for the years ended
December 31, 1993, 1994 and 1995, were derived from the audited consolidated
financial statements of the Company. The financial data for the nine months
ended September 30, 1995 and 1996, have been derived from the Company's
unaudited consolidated financial statements. The unaudited pro forma combined
statement of operations data for the year ended December 31, 1995, and for the
nine months ended September 30, 1996, give effect to the Acquisitions and the
Merger as if such transactions had occurred at the beginning of each such
period. The summary historical and pro forma financial data are qualified in
their entirety by, and should be read in conjunction with, "Management's
Discussion and Analysis of Financial Condition and Results of Operations," the
Unaudited Pro Forma Combined Financial Statements and the Consolidated Financial
Statements and the respective related notes thereto, presented elsewhere herein.
For additional information relating to the Company's operations, see "Business
and Properties."

<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------------- PRO FORMA COMBINED
NINE MONTHS -----------------------------
ENDED NINE MONTHS
YEARS ENDED DECEMBER 31, SEPTEMBER 30, YEAR ENDED ENDED
------------------------------ ------------------- DECEMBER 31, SEPTEMBER 30,
1993 1994 1995 1995 1996 1995 1996
-------- -------- -------- -------- -------- ------------- -------------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Oil and natural gas revenues............. $ 45,382 $ 58,827 $ 53,394 $ 41,013 $ 67,169 $115,179 $ 96,454
Trading and transportation and other..... 2,095 1,574 1,946 1,589 21,594 88,228 71,803
-------- -------- -------- -------- -------- -------- --------
Total revenues..................... 47,477 60,401 55,340 42,602 88,763 203,407 168,257
-------- -------- -------- -------- -------- -------- --------
Production expense....................... 9,692 13,444 13,986 10,723 16,726 30,439 23,595
Cost of trading and transportation....... -- -- -- -- 18,951 80,642 66,175
Depreciation, depletion and
amortization........................... 15,299 25,079 26,609 20,593 29,523 61,302 43,533
General and administrative expense....... 3,123 4,228 4,076 2,997 2,923 7,573 4,964
Interest expense and other............... 3,118 7,539 10,219 7,575 15,482 27,404 20,739
-------- -------- -------- -------- -------- -------- --------
Total expenses..................... 31,232 50,290 54,890 41,888 83,605 207,360 159,006
Income (loss) before provision for income
taxes.................................. 16,245 10,111 450 714 5,158 (3,953) 9,251
Provision (benefit) for income taxes..... 6,189 3,852 176 277 1,965 (1,506) 3,525
-------- -------- -------- -------- -------- -------- --------
Net income (loss).................. $ 10,056 $ 6,259 $ 274 $ 437 $ 3,193 $ (2,447) $ 5,726
======== ======== ======== ======== ======== ======== ========
Net income (loss) per share........ $ 0.93 $ 0.53 $ 0.02 $ 0.04 $ 0.24 $ (0.14) $ 0.33
======== ======== ======== ======== ======== ======== ========
Weighted average number of common and
common equivalent shares............... 10,858 11,713 11,440 11,474 13,546 17,601 17,431
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents................ $ 21,119 $ 657 $ 117 $ 1,076 $ 5,944 $ -- $ --
Working capital (deficiency)............. 16,221 (2,384) (16,115) (5,943) 3,608 -- --
Oil and natural gas properties, net...... 184,188 242,009 278,811 265,744 652,512 -- --
Total assets............................. 228,260 269,070 302,089 287,732 708,690 -- --
Long-term debt........................... 74,420 103,478 125,537 123,522 392,316 -- --
Stockholders' equity..................... 113,299 119,358 119,174 119,595 186,817 -- --
OTHER FINANCIAL DATA:
Net cash provided by operating
activities............................. $ 33,745 $ 36,553 $ 31,179 $ 28,358 $ 34,001 $ -- $ --
Capital expenditures(1).................. 59,202 72,169 33,529 28,584 34,392 -- --
EBITDA(2)................................ 34,662 42,729 37,278 28,881 50,163 84,753 73,523
Ratio of EBITDA to interest expense(2)... 11.1x 5.7x 3.6x 3.8x 3.2x 3.1x 3.5x
As adjusted pro forma ratio of EBITDA to
interest expense(2)(3)................. -- -- -- -- -- 2.8x 3.1x
Ratio of earnings to fixed
charges(4)(5).......................... 5.0x 1.9x -- -- 1.2x -- 1.2x
As adjusted pro forma ratio of earnings
to fixed charges(3)(4)(5).............. -- -- -- -- -- -- 1.1x
</TABLE>

(See footnotes on following page)

14
<PAGE> 16

- ---------------

(1) Capital expenditures exclude acquisition costs of $34,697,000, $14,044,000
and $29,357,000 for the years ended December 31, 1993, 1994 and 1995,
respectively, and $15,360,000 and $220,549,000 for the nine months ended
September 30, 1995 and 1996, respectively.

(2) EBITDA, or "earnings before interest, income taxes, extraordinary items,
depreciation and amortization," reflects income from operations plus
depreciation, depletion and amortization, impairment of proved oil and
natural gas properties, non-recurring costs and exploration expense. EBITDA
is not a generally accepted accounting principle measure, but provides
supplemental information for evaluating the Company's ability to make
payments in respect of the Notes. It should not be construed as an
alternative to income from operations, net income or cash flow from
operations and is presented solely as a supplemental disclosure.

(3) The unaudited as adjusted pro forma ratio of EBITDA to interest expense and
the unaudited as adjusted pro forma ratio of earnings to fixed charges give
effect to the Offering and the use of proceeds thereof as if the Offering
had been consummated at the beginning of the indicated period. See "Use of
Proceeds."

(4) For purposes of calculating the ratio of earnings to fixed charges and the
unaudited as adjusted pro forma ratio of earnings to fixed charges, earnings
consist of net earnings before income taxes and fixed charges (exclusive of
capitalized interest). Fixed charges consist of interest expense (which
includes amounts capitalized and the amortization of debt discount) and that
portion of rental cost that is equivalent to interest (estimated to be
one-third of rental cost).

(5) Earnings were insufficient to cover fixed charges by $1,551,000, $767,000
and $8,142,000 at December 31, 1995, September 30, 1995, and pro forma
December 31, 1995, respectively. As adjusted pro forma earnings were
insufficient to cover as adjusted pro forma fixed charges by $11,567,000 at
December 31, 1995.

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<PAGE> 17

SUMMARY OPERATING AND RESERVE DATA

The following table presents summary operating data and estimated net
proved reserves as of the dates and for the periods indicated. The pro forma
combined information gives effect to the Acquisitions and the Merger as if such
transactions had occurred at the beginning of each such period. For additional
information relating to the Company's estimated net oil and natural gas reserves
and operating data, see "Business and Properties -- Oil and Natural Gas
Reserves," "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Results of Operations" and Notes to Consolidated
Financial Statements.

<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------------------ PRO FORMA COMBINED
NINE MONTHS -----------------------------
ENDED NINE MONTHS
YEARS ENDED DECEMBER 31, SEPTEMBER 30, YEAR ENDED ENDED
-------------------------------- ------------------ DECEMBER 31, SEPTEMBER 30,
1993 1994 1995 1995 1996 1995 1996
-------- -------- -------- ------- ------- ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
NET PRODUCTION DATA:
Oil (MBbls)............................. 967 1,664 1,582 1,263 1,360 2,806 1,757
Natural gas (MMcf)...................... 14,684 20,108 21,049 16,328 23,221 49,858 34,533
Total production (MBoe)................. 3,414 5,015 5,090 3,985 5,230 11,116 7,513
Average Sales Prices:
Oil (per Bbl)........................... $ 16.09 $ 14.83 $ 16.52 $ 16.29 $ 20.32 $ 16.60 $ 20.37
Natural gas (per Mcf)................... 2.03 1.70 1.30 1.25 1.70 1.38 1.76
OPERATING DATA:
Lease operating expense (per Boe)......... 1.60 1.66 1.95 1.89 2.23 1.97 2.19
Production taxes (per Boe)................ 1.24 1.02 0.80 0.80 0.97 0.76 0.96
General and administrative expense (per
Boe).................................... 0.91 0.84 0.80 0.75 0.56 0.68 0.66
Five year average finding cost (per
Boe)(1)................................. 3.36 4.31 4.61 -- -- -- --
Net wells completed during the period..... 219 215 109 88 115 -- --
RESERVE INFORMATION:
Net proved reserves (end of period)(2)(3)
Oil (MBbls)............................. 16,300 18,301 19,588 -- -- 35,332 --
Natural gas (MMcf)...................... 252,413 265,278 298,777 -- -- 651,498 --
Total net proved reserves (MBoe)........ 58,369 62,514 69,384 -- -- 143,915 --
Annual reserve replacement(3)(4).......... 509% 183% 241% -- -- -- --
Estimated reserve life (years)(3)(5)...... 17 12 14 -- -- 13 --
Estimated future net revenues before
income taxes (in thousands)(2)(3)....... $432,060 $463,303 $532,954 -- -- $1,089,704 --
Present value of estimated future net
revenues before income taxes (discounted
at 10%) (in thousands)(2)(3)............ $210,537 $230,331 $257,045 -- -- $ 555,368 --
</TABLE>

- ---------------

(1) Represents the average finding cost per Boe during the five years ended
December 31 of the year indicated. See "Glossary of Oil and Natural Gas
Terms."

(2) As of December 31, 1995, the average sales prices used for purposes of
estimating the Company's net proved reserves, the future net revenues
therefrom and the present value of such future net revenues were $1.65 per
Mcf of natural gas and $18.59 per Bbl and excludes the effects of the
Company's hedging activities. See "Risk Factors -- Volatility of Oil and
Natural Gas Prices; Marketability of Production," "-- Estimation of
Reserves," "Business and Properties -- Oil and Natural Gas Reserves" and
Note 16 to Consolidated Financial Statements.

(3) Estimates of the Company's historical net proved oil and natural gas
reserves and related revenues as of December 31, 1993, 1994 and 1995, were
prepared by the Company and reviewed by Williamson Petroleum Consultants,
Inc., independent petroleum engineers. Estimates of the Company's pro forma
net proved oil and natural gas reserves and related revenues as of December
31, 1995, were prepared by the Company. See "Risk Factors -- Volatility of
Oil and Natural Gas Prices; Marketability of Production," "-- Estimation of
Reserves," "-- Replacement Reserves," "Business and Properties -- Oil and
Natural Gas Reserves" and Note 16 to Consolidated Financial Statements.

(4) The annual reserve replacement is a percentage determined on a Boe basis by
dividing the estimated reserves added during a year from exploitation,
development and exploration activities, acquisitions of proved reserves and
revisions of previous estimates, excluding property sales, by the oil and
natural gas produced during that year.

(5) Estimated reserve life is calculated on a Boe basis by dividing the total
estimated proved reserves at year-end by the total production during the
year.

16
<PAGE> 18

RISK FACTORS

Holders of the Outstanding Notes should consider carefully the specific
factors set forth below, as well as the other information set forth elsewhere in
this Prospectus, in connection with their investment in the Company and in
considering the Exchange Offer.

VOLATILITY OF OIL AND NATURAL GAS PRICES; MARKETABILITY OF PRODUCTION

The Company's revenues, profitability and future rate of growth are
substantially dependent upon prevailing prices for its oil and natural gas.
Hydrocarbon prices can be extremely volatile and in recent years have been
depressed at times by warm weather, weak demand and excess total domestic and
imported supplies. Oil and natural gas prices have risen recently, but there can
be no assurance that such price levels will be sustained. Prices are also
affected by actions of state and local agencies, the United States and foreign
governments and international cartels. These external factors and the volatile
nature of the energy markets make it difficult to estimate accurately future
prices of oil and natural gas. Prices for D-J Basin natural gas, which
represents a significant portion of the Company's overall production, were
depressed until recently and have at times been more volatile than the prices
prevailing in the broader United States natural gas market. Although from time
to time the Company hedges a portion of its oil and natural gas production to
provide some protection from price declines, any substantial or extended decline
in the price of oil or natural gas would have a material adverse effect on the
Company's financial condition and results of operations. The marketability of
the Company's production depends upon the availability and capacity of
refineries, natural gas gathering systems, pipelines and processing facilities.
Federal and state regulation of oil and natural gas production and
transportation, general economic conditions and changes in supply and demand all
could adversely affect the Company's ability to produce and market its oil and
natural gas. If market factors were to change dramatically, the financial impact
on the Company could be substantial. The availability of markets and the
volatility of product prices are beyond the control of the Company and thus
represent a significant risk. See "-- Governmental and Environmental Regulation"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

EFFECTS OF LEVERAGE; EXISTING INDEBTEDNESS

As of September 30, 1996, as adjusted to give effect to the Offering and
the application of the estimated net proceeds therefrom, the Company's total
long-term debt would have been approximately $398.0 million. See
"Capitalization" and "Use of Proceeds From the Sale of the Outstanding Notes."
The Company's leverage has important consequences to holders of the Notes,
including the following: (i) the Company's ability to obtain additional
financing in the future for working capital, capital expenditures, acquisitions
or general corporate purposes may be impaired; (ii) a portion of the Company's
cash flow from operations must be dedicated to the payment of the principal of
and interest on its existing indebtedness; (iii) certain of the Company's
borrowings, principally those under the Chase Facility, are at variable rates of
interest, which may make the Company vulnerable to increases in interest rates;
and (iv) the terms of certain of the Company's indebtedness permit its creditors
to accelerate payments upon certain events of default or a change of control of
the Company. As of September 30, 1996, after giving effect to the Offering and
the application of the estimated net proceeds therefrom (but excluding the
effect of interest rate hedging arrangements covering $80 million in principal
amount of indebtedness), 43.5% of the aggregate borrowings of the Company would
have been floating rate obligations and 56.5% of the Company's borrowings would
have been fixed rate obligations, with an overall range of interest rates from
6 3/4% to 9 7/8% per annum. See "Use of Proceeds" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

The Chase Facility, the indenture under which the Company's 9 7/8% Notes
(as defined) were issued (the "Existing Indenture") and the Indenture impose
financial and other restrictions on the Company and its subsidiaries, including
limitations on the incurrence of additional indebtedness and limitations on the
sale of assets. The Chase Facility also requires the Company to (i) make
periodic payments of interest, (ii) make principal payments from the proceeds of
certain asset sales and in the event the Company's outstanding debt exceeds the
Borrowing Base (as defined therein), (iii) maintain certain financial ratios,
including interest

17
<PAGE> 19

coverage and leverage ratios and (iv) maintain a minimum level of consolidated
cash flow. There can be no assurance that these requirements or other material
requirements of the Chase Facility will be met in the future. If they are not,
the lenders under the Chase Facility would be entitled to declare the
indebtedness thereunder immediately due and payable. Additionally, in the event
of such an acceleration of indebtedness by the lenders under the Chase Facility,
a default would be deemed to occur under the terms of the Notes and the 9 7/8%
Notes. See "Description of Other Indebtedness" and "Description of the Exchange
Notes -- Events of Default and Notice."

In addition, the Indenture and the Existing Indenture contain certain
restrictive covenants that may limit the ability of the Company to engage in
certain transactions. The restrictive covenants contained in the Indenture are
in many cases materially different from the restrictive covenants contained in
the Existing Indenture, and in certain cases, may allow the Company to engage in
transactions that are prohibited by the terms of the 9 7/8% Notes. The Company's
ability to take advantage of any such possible increased flexibility may be
limited during the period that the 9 7/8% Notes remain outstanding. Similarly,
the restrictive covenants in the Indenture may limit the ability of the Company
to engage in transactions permitted by the Existing Indenture. See "Description
of Other Indebtedness" and "Description of the Exchange Notes -- Certain
Covenants."

Moreover, in certain situations, holders of the 9 7/8% Notes have rights
that are senior to the rights of the holders of the Notes. Specifically, in the
event of an asset sale by the Company that triggers an obligation to offer to
purchase the 9 7/8% Notes and the Notes pursuant to their respective indentures,
the Company is required to fulfill such payment obligations relating to the
9 7/8% Notes prior to fulfilling such payment obligations relating to the Notes.
There can be no assurance that the Company will have sufficient funds to fulfill
its obligations under the Indenture in the event of such an asset sale. See
"Description of Other Indebtedness" and "Description of the Exchange
Notes -- Certain Covenants -- Limitation on Asset Sales."

Based upon the current and anticipated level of operations, the Company
believes that its cash flow from operations, together with the estimated net
proceeds from the sale of the Outstanding Notes, the proceeds available under
the Chase Facility and its other sources of liquidity, will be adequate to meet
its anticipated requirements in the foreseeable future for working capital,
capital expenditures, interest payments and scheduled principal payments. There
can be no assurance, however, that the Company's business will continue to
generate cash flow at or above current levels. If the Company is unable to
generate sufficient cash flow from operations to service its debt, it may be
required to refinance all or a portion of its existing debt, including the Notes
(provided the necessary consents are obtained), or to obtain additional
financing. There can be no assurance that any such refinancing would be possible
or that any additional financing could be obtained. The Company's ability to
meet its debt service obligations and reduce total indebtedness will be
dependent not only upon its future drilling and production performance, but also
on oil and natural gas prices, general economic conditions and financial,
business and other factors affecting the Company's operations, many of which are
beyond the Company's control. The Company's strategy and historical focus has
been, and is expected to continue to be, the development, acquisition,
exploitation, exploration, production and marketing of oil and natural gas. Each
of these activities requires substantial capital. The Company intends to finance
such capital expenditures in the future through cash flow from operations, the
incurrence of additional indebtedness and/or the issuance of additional equity
securities. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources." For a more detailed
description of certain of the Company's outstanding indebtedness and loan
covenants related thereto that could limit the Company's operating and financial
flexibility, see "Description of Other Indebtedness."

CONSEQUENCES OF A FAILURE TO EXCHANGE OUTSTANDING NOTES

The Outstanding Notes have not been registered under the Securities Act or
any state securities laws and therefore may not be offered, sold or otherwise
transferred except in compliance with the registration requirements of the
Securities Act and any other applicable securities laws, or pursuant to an
exemption therefrom or in a transaction not subject thereto, and in each case in
compliance with certain other conditions and restrictions, including the
Company's and the Trustee's right in certain cases to require the delivery of
opinions of counsel, certifications and other information prior to any such
transfer. Outstanding Notes that

18
<PAGE> 20

remain outstanding after the consummation of the Exchange Offer will continue to
bear a legend reflecting such restrictions on transfer. In addition, upon
consummation of the Exchange Offer, holders of Outstanding Notes that remain
outstanding will not be entitled to any rights to have such Outstanding Notes
registered under the Securities Act or to any similar rights under the
Registration Agreement (subject to certain limited exceptions). The Company
currently intends to register under the Securities Act Outstanding Notes that
remain outstanding after consummation of the Exchange Offer only if such
Outstanding Notes are held by Initial Purchasers and persons ineligible to
participate in the Exchange Offer. If Outstanding Notes are tendered and
accepted in the Exchange Offer, the market for untendered Outstanding Notes is
likely to diminish; accordingly, holders who do not tender their Outstanding
Notes may encounter difficulties in selling such notes following the Exchange
Offer.

The Exchange Notes and any Outstanding Notes that remain outstanding after
consummation of the Exchange Offer will constitute a single series of debt
securities under the Indenture and, accordingly, will vote together as a single
class for purposes of determining whether holders of the requisite percentage in
outstanding principal amount thereof have taken certain actions or exercised
certain rights under the Indenture. See "Description of the Exchange Notes."

The Indenture provides that if an exchange offer registration statement is
(i) not filed by January 24, 1997 or (ii) not declared effective by March 27,
1997, Special Interest will accrue and be payable semi-annually until such time
as an exchange offer registration statement is filed or becomes effective, as
the case may be. In addition, (i) if an exchange offer is not consummated or a
resale shelf registration statement is not declared effective by April 25, 1997
or (ii) if either the exchange offer registration statement or the resale shelf
registration statement has been declared effective and such registration
statement ceases to be effective or usable (subject to certain exceptions),
Special Interest will accrue and be payable semi-annually until such time as an
exchange offer is consummated or a resale shelf registration statement is
declared effective, as the case may be. Following consummation of the Exchange
Offer neither the Outstanding Notes nor the Exchange Notes will be entitled to
any increase in the interest rate thereon. See "Description of the Outstanding
Notes" and "Description of the Exchange Notes."

SUBORDINATION OF THE NOTES AND THE SUBSIDIARY GUARANTIES

The Outstanding Notes are and the Exchange Notes will be subordinated in
right of payment to all present and future Senior Indebtedness of the Company,
including the principal, premium (if any) and interest with respect to the
Senior Indebtedness. The Notes will rank pari passu with all present and future
senior subordinated indebtedness of the Company and will rank senior to all
future Subordinated Indebtedness (as defined) of the Company. In addition, the
Subsidiary Guaranties will be subordinated in right of payment to all existing
and future Senior Indebtedness of the Subsidiary Guarantors, will rank pari
passu with all existing and future senior subordinated indebtedness of the
Subsidiary Guarantors and will rank senior to all future Subordinated
Indebtedness of the Subsidiary Guarantors. As of September 30, 1996, after
giving effect to the Offering and the application of the estimated net proceeds
therefrom, the Company and the Subsidiary Guarantors would have had
approximately $173.0 million of Senior Indebtedness outstanding. Consequently,
in the event of a bankruptcy, liquidation, dissolution, reorganization or
similar proceeding with respect to the Company, assets of the Company and the
Subsidiary Guarantors will be available to pay obligations of the Notes only
after all Senior Indebtedness of the Company and the Subsidiary Guarantors has
been paid in full. There can be no assurance that there will be sufficient
assets to pay amounts due on all or any of the Notes. The holders of any
indebtedness of the Company's subsidiaries other than the Subsidiary Guarantors
will be entitled to payment thereof from the assets of such subsidiaries prior
to the holders of any general, unsecured obligations of the Company, including
the Notes. See "Description of the Exchange Notes -- Subordination,"
"Description of the Outstanding Notes" and "-- Subsidiary Guaranties."

The Notes are also unsecured and will be effectively subordinated to any
secured indebtedness of the Company. As of the date of this Prospectus, the
indebtedness outstanding under the Chase Facility is secured by liens on a
portion of the assets of the Company. Any Senior Indebtedness of the Company or
any Subsidiary Guarantor may be secured by all or a portion of the assets of the
Company or such Subsidiary Guarantor, as appropriate. The ability of the Company
to comply with the provisions of the Chase Facility or

19
<PAGE> 21

any other Senior Indebtedness may be affected by events beyond the Company's
control. The breach of any such provisions could result in a default under the
Chase Facility or any other Senior Indebtedness, in which case, depending on the
actions taken by the lenders thereunder, or their successors or assignees, such
lenders could elect to declare all amounts borrowed under the Chase Facility or
any other Senior Indebtedness, together with accrued interest, to be due and
payable, and the Company and the Subsidiary Guarantors could be prohibited from
making payments of interest and principal on the Notes until the default is
cured or all Senior Indebtedness is paid or satisfied in full. In addition, such
lenders could proceed against the collateral, which constitutes a significant
portion of the Company's assets. See "Description of Other Indebtedness,"
"Description of the Exchange Notes -- Subordination" and "Description of the
Outstanding Notes."

FRAUDULENT CONVEYANCE

If a court in a lawsuit brought by an unpaid creditor or representative of
creditors, such as a trustee in bankruptcy, or the Company as a
debtor-in-possession, were to determine under relevant Federal or state
fraudulent conveyance statutes that the Company did not receive fair
consideration or reasonably equivalent value for incurring indebtedness,
including the Notes, and that, at the time of such incurrence, the Company (i)
was insolvent, (ii) was rendered insolvent by reason of such incurrence or
grant, (iii) was engaged in a business or transaction for which the assets
remaining with the Company constituted unreasonably small capital or (iv)
intended to incur, or believed that it would incur, debts beyond its ability to
pay such debts as they matured, then such court, subject to applicable statutes
of limitation, could void the Company's obligations under the Notes, subordinate
the Notes to other indebtedness of the Company or take other action detrimental
to the holders of the Notes.

The measure of insolvency for these purposes will depend upon the governing
law of the relevant jurisdiction. Generally, however, a company will be
considered insolvent for these purposes if the sum of that company's debts is
greater than the fair value or the fair saleable value of all of that company's
property or if the present fair saleable value of that company's assets is less
than the amount that will be required to pay its probable liability on its
existing debts as they become absolute and matured. Moreover, regardless of
solvency, a court could void an incurrence of indebtedness, including the Notes,
if it determined that such transaction was made with the intent to hinder, delay
or defraud creditors. In addition, a court could subordinate indebtedness,
including the Notes, to the claims of all existing and future creditors on
similar grounds. The Company believes that, after giving effect to the Offering,
the Company was (i) neither insolvent nor rendered insolvent by the incurrence
of indebtedness in connection with the Offering, (ii) in possession of
sufficient capital to run its business effectively and (iii) incurring debts
within its ability to pay as the same mature or become due.

In addition, the Subsidiary Guaranties may be subject to review under
relevant Federal and state fraudulent conveyance and similar statutes in a
bankruptcy or reorganization case or a lawsuit brought by or on behalf of
creditors of the Subsidiary Guarantors. In such a case, the analysis set forth
above would generally apply, except that the Subsidiary Guaranties could also be
subject to the claim that, since the Subsidiary Guaranties were incurred for the
benefit of the Company (and only indirectly for the benefit of the Subsidiary
Guarantors), the obligations of the Subsidiary Guarantors thereunder were
incurred for less than reasonably equivalent value of fair consideration. A
court could void the Subsidiary Guarantors' obligation under the Subsidiary
Guaranties, subordinate the Subsidiary Guaranties to other indebtedness of the
Subsidiary Guarantors or take other action detrimental to the holders of the
Notes. See "Description of Other Indebtedness," "Description of the Exchange
Notes" and "Description of the Outstanding Notes."

ESTIMATION OF RESERVES

There are numerous uncertainties in estimating quantities of proved
reserves, future rates of production and the timing and success of development
expenditures, including many factors beyond the control of the Company. Thus,
the reserve data set forth in this Prospectus are calculated estimates only. The
Company's historical reserve information set forth in this Prospectus represents
estimates based on reports prepared by the Company and reviewed by Williamson
Petroleum Consultants, Inc. as of December 31, 1995. The reserve information
with respect to the properties acquired in the Acquisitions and the Merger is
based upon reports

20
<PAGE> 22

prepared by the Company, which reports have not been reviewed by an independent
petroleum engineer. Although the Company believes all of its reserve estimates
to be reasonable, reserve estimates are only estimates and should be expected to
change as additional information becomes available. Furthermore, estimates of
oil and natural gas reserves, of necessity, are projections based on engineering
and production data, and the interpretation thereof, the projection of future
rates of production and the timing and success of development expenditures.

Reserve engineering is a subjective process of estimating underground
accumulations of oil and natural gas that cannot be exactly measured, and the
accuracy of any reserve estimate is a function of the quality of available data
and of engineering and geological interpretation and judgment. Accordingly,
estimates of the economically recoverable quantities of oil and natural gas
attributable to any particular property or group of properties, classifications
of such reserves based on risk of recovery and estimates of the future net cash
flows expected therefrom, which are prepared by different engineers or by the
same engineers at different times, may vary substantially. Moreover, there can
be no assurance that the reserves set forth herein will ultimately be produced
or that the proved undeveloped reserves will be developed within the periods
anticipated. Variances from the estimates contained herein could be material. In
addition, the estimates of future net revenues from proved reserves of the
Company and the present value thereof are based upon certain assumptions about
production levels, prices and costs, which may be inaccurately estimated. With
respect to such estimates, the Company emphasizes that the discounted future net
cash flows should not be construed as representative of the fair market value of
the proved oil and natural gas properties belonging to the Company, as
discounted future net cash flows are based upon projected cash flows that do not
provide for changes in oil and natural gas prices or for changes in expenses and
capital costs. The accuracy of such estimates is highly dependent upon the
accuracy of the assumptions upon which they were based. Actual results may
differ materially from the results estimated. Holders of Outstanding Notes
making a decision whether to exchange such notes for Exchange Notes are
cautioned not to place undue reliance on the reserve data and resulting cash
flow estimates included in this Prospectus.

The Company accounts for its oil and natural gas producing activities under
the full cost method. This method imposes certain limitations on the carrying
(book) value of proved oil and natural gas properties and requires a writedown
of such assets for accounting purposes if such limits are exceeded. The risk
that the Company will be required to write down the carrying value of its oil
and natural gas properties increases as oil and natural gas prices decline or
remain depressed. If a writedown is required, it would result in a non-cash
charge to earnings. In the past, the Company has not been required to write down
its oil and natural gas properties. However, no assurance can be given that the
Company will not be required to make such a writedown in the future.

REPLACEMENT OF RESERVES

HSR's future performance depends in part upon its ability to acquire, find
and develop additional oil and natural gas reserves that are economically
recoverable. Without successful acquisition, exploration or development
activities, HSR's reserves will decline. No assurance can be given that HSR will
be able to acquire or find and develop additional reserves on an economic basis.

HSR's business is capital intensive and, to maintain its asset base of
proved oil and natural gas reserves, a significant amount of cash flow from
operations must be reinvested in property acquisitions, development or
exploration activities. To the extent cash flow from operations is reduced and
external sources of capital become limited or unavailable, HSR's ability to make
the necessary capital investments to maintain or expand its asset base would be
impaired. Without such investment, HSR's oil and natural gas reserves would
decline.

HSR's strategy will include continued exploitation and exploration of its
existing properties and may include opportunistic acquisitions of other oil and
natural gas properties. The successful acquisition of producing properties
requires an assessment of recoverable reserves, future oil and natural gas
prices and operating costs, potential environmental and other liabilities and
other factors. Such assessments are necessarily inexact and their accuracy
inherently uncertain. There can be no assurance that HSR's acquisition
activities and exploration and development projects will result in increases in
reserves. HSR's operations may

21
<PAGE> 23

be curtailed, delayed or canceled as a result of a lack of adequate capital and
other factors, such as title problems, weather, compliance with governmental
regulations or price controls, mechanical difficulties or shortages or delays in
the delivery of equipment. Furthermore, while HSR's revenues may increase if
prevailing natural gas and oil prices increase significantly, HSR's finding
costs for additional reserves could also increase. In addition, the costs of
exploration and development may materially exceed initial estimates.

SIGNIFICANTLY INCREASED OPERATIONS

The Acquisitions and the Merger substantially increased the Company's
reserves, cash flow and production. The Company's ability to achieve any
advantages from the Acquisitions and the Merger will depend in large part on
successfully integrating the properties and personnel of the acquired entities
into the operations of the Company. No assurances can be made that the Company
will be able to achieve such integration successfully.

RISKS OF HEDGING AND TRADING TRANSACTIONS

In order to manage its exposure to price risks in the marketing of its oil
and natural gas and in connection with its trading activities, HSR has in the
past entered and may in the future enter into oil and natural gas futures
contracts on the New York Mercantile Exchange ("NYMEX"), fixed price delivery
contracts and financial swaps. Those transactions that are intended to reduce
the effects of volatility of the price of oil and natural gas may limit
potential gains by HSR if oil and natural gas prices were to rise substantially
over the price established by the hedge. In addition, HSR's hedging and trading
may expose HSR to the risk of financial loss in certain circumstances, including
instances in which (i) production is less than expected, (ii) there is a
widening of price differentials between delivery points for HSR's production and
Henry Hub (in the case of NYMEX futures contracts) or delivery points required
by fixed price delivery contracts to the extent they differ from those of HSR's
production, (iii) HSR's customers or the counterparties to its futures contracts
fail to purchase or deliver the contracted quantities of oil or natural gas or
honor their financial commitments or (iv) a sudden, unexpected event materially
affects oil or natural gas prices. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

RISKS RELATING TO A CHANGE OF CONTROL

Upon a Change of Control, holders of the Notes and the 9 7/8% Notes will
have the right to require the Company to repurchase all or any part of such
holders' notes at a price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of repurchase. The certain
events that constitute a Change of Control under the Indenture and the Existing
Indenture would constitute a default under the Chase Facility, which prohibits
the purchase of the Notes by the Company in the event of certain Change of
Control events unless and until such time as the Company's indebtedness under
the Chase Facility is repaid in full. There can be no assurance that the Company
and the Subsidiary Guarantors would have sufficient financial resources
available to satisfy all of its or their obligations under the Chase Facility,
the Notes and the 9 7/8% Notes in the event of a Change of Control. The
Company's failure to purchase the 9 7/8% Notes or the Notes would result in a
default under the Existing Indenture, the Indenture and under the Chase
Facility, each of which could have adverse consequences for the Company and the
holders of the Notes. See "Description of Other Indebtedness," "Description of
the Exchange Notes -- Repurchase at the Option of the Holders Upon a Change of
Control" and "Description of the Outstanding Notes." The definition of "Change
of Control" in the Indenture includes a sale, lease, conveyance or transfer of
"all or substantially all" of the assets of the Company and certain of its
Restricted Subsidiaries taken as a whole to a person or group of persons. There
is little case law interpreting the phrase "all or substantially all" in the
context of an indenture. Because there is no precise established definition of
this phrase, the ability of a holder of the Notes to require the Company to
repurchase such Notes as a result of a sale, lease, conveyance or transfer of
all or substantially all of the Company's assets to a person or group of persons
may be uncertain.

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<PAGE> 24

GOVERNMENTAL AND ENVIRONMENTAL REGULATION

The Company's operations are subject to various Federal, state and local
governmental laws and regulations, which may be changed from time to time in
response to economic or political factors. Matters subject to regulation
include, but are not limited to, drilling and operations permits and approvals,
performance bonds, reports concerning operations, discharge and other permitting
requirements, the spacing of wells, unitization and pooling of properties and
taxation.

The Company's operations are subject to complex and constantly changing
environmental laws and regulations adopted by Federal, state and local
governmental authorities. Compliance with such laws has not had a material
adverse effect upon the Company to date. Nevertheless, the discharge of oil,
natural gas or other pollutants into the air, soil or water may give rise to
significant liabilities by the Company to the government and/or third parties,
and may require the Company to incur substantial costs for remediation.
Moreover, the Company has agreed to indemnify certain sellers of producing
properties from whom the Company has acquired properties against certain
liabilities for environmental claims associated with the properties purchased by
the Company. No assurance can be given that existing environmental laws or
regulations, as currently interpreted or as may be in the future, or future laws
or regulations will not materially adversely affect the Company's results of
operations and financial condition or that material indemnity claims will not
arise against the Company with respect to properties acquired by the Company.

Recently there has been an increased level of regulation of oil and natural
gas activities in Colorado. For example, the Colorado Oil and Gas Conservation
Commission adopted, and is considering the adoption of additional, stricter
regulation of matters such as soil conservation, land reclamation, fluid
disposal and bonding of oil and natural gas companies. Additionally, various
cities and counties are currently reviewing their ordinances to determine the
level of regulatory authority, if any, they should assert over such matters. At
present, it cannot be determined to what degree stricter regulations, if
adopted, would adversely affect the Company's operations.

OPERATING HAZARDS; UNINSURED RISKS

The Company's operations are subject to hazards and risks inherent in
drilling for and production and transportation of oil and natural gas, such as
fires, natural disasters, explosions, encountering formations with abnormal
pressures, blowouts, cratering, pipeline failures and spills, any of which can
result in loss of hydrocarbons, environmental pollution, personal injury claims
and other damage or impacts to properties of the Company and others, including
suspension of operations. The business is also subject to environmental hazards
such as oil spills, natural gas leaks, ruptures and discharges of toxic natural
gases, which could expose the Company to substantial liability due to pollution
and other environmental damage. The Company's coverages include, but are not
limited to, comprehensive general liability, automobile, personal injury, bodily
injury and property damage, pollution liability, physical damage on certain
assets, workers' compensation and control of well insurance. The Company
believes that its insurance is adequate and customary for companies of a similar
size engaged in operations similar to those of the Company, but losses could
occur for uninsurable or uninsured risks or in amounts in excess of existing
insurance coverage.

COMPETITION

The oil and natural gas industry is highly competitive. The Company
competes in the areas of property acquisitions and the development, production
and marketing of oil and natural gas with major oil companies, other independent
oil and natural gas concerns and individual producers and operators. The Company
also competes with major and independent oil and natural gas concerns in
recruiting and retaining qualified employees. Many of these competitors have
substantially greater financial and other resources than the Company.

LACK OF PUBLIC MARKET

The Outstanding Notes were issued to, and the Company believes are
currently owned by, a relatively small number of beneficial owners. The
Outstanding Notes have not been registered under the Securities Act

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<PAGE> 25

and will be subject to restrictions on transferability to the extent that they
are not exchanged for Exchange Notes. See "-- Consequences of a Failure to
Exchange Outstanding Notes."

Although the Exchange Notes will generally be permitted to be resold or
otherwise transferred by the holders (who are not affiliates of the Company)
without compliance with the registration and prospectus delivery requirements
under the Securities Act, they will constitute a new issue of securities with no
established trading market. See "Exchange Offer -- Resales of Exchange Notes."
The Company has been advised by the Initial Purchasers that the Initial
Purchasers presently intend to make a market in the Exchange Notes. However, the
Initial Purchasers are not obligated to do so and any market making activity
with respect to the Exchange Notes may be discontinued at any time without
notice. In addition, such market making activity will be subject to the limits
imposed by the Securities Act and the Exchange Act and may be limited during the
Exchange Offer. If the Exchange Notes are traded after their initial issuance,
they may trade at a discount from their initial offering price, depending upon
prevailing interest rates, the market for similar securities and other factors
including general economic conditions and the financial condition of the
Company. The Company does not intend to apply for a listing or quotation of the
Exchange Notes on any securities exchange or stock market. Accordingly, there
can be no assurance as to the development or liquidity of any market for the
Exchange Notes.

The liquidity of, and trading market for, the Notes also may be adversely
affected by general declines in the market for similar securities. Such a
decline may adversely affect such liquidity and trading markets independent of
the financial performance of, and prospects for, the Company.

Notwithstanding the registration of the Exchange Notes in the Exchange
Offer, holders who are "affiliates" (as defined under Rule 405 of the Securities
Act) of the Company may publicly offer for sale or resell the Exchange Notes
only in compliance with the provisions of Rule 144 under the Securities Act. See
"Exchange Offer -- Resales of Exchange Notes."

Each broker-dealer that receives Exchange Notes for its own account in
exchange for Outstanding Notes, where such Outstanding Notes were acquired by
such broker-dealer as a result of market making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Exchange Offer -- Resales of
Exchange Notes."

EXCHANGE OFFER PROCEDURES

Issuance of the Exchange Notes in exchange for the Outstanding Notes
pursuant to the Exchange Offer will be made only after timely receipt by the
Company of such Outstanding Notes, a properly completed and duly executed Letter
of Transmittal and all other required documents. Therefore, holders of the
Outstanding Notes desiring to tender such Outstanding Notes in exchange for
Exchange Notes should allow sufficient time to ensure timely delivery. The
Company is under no duty to give notification of defects or irregularities with
respect to tenders of Outstanding Notes for exchange.

THE EXCHANGE OFFER

PURPOSE AND EFFECT OF THE EXCHANGE OFFER

In connection with the sale of the Outstanding Notes, the Company entered
into the Registration Agreement with the Initial Purchasers, pursuant to which
the Company agreed to file and to use its best efforts to cause to become
effective with the Commission a registration statement with respect (subject to
certain exceptions) to the exchange of the Outstanding Notes for debt securities
with terms identical in all material respects to the terms of the Outstanding
Notes. A copy of the Registration Agreement has been filed as an Exhibit to the
Registration Statement of which this Prospectus is a part.

The Exchange Offer is being made to satisfy the contractual obligations of
the Company under the Registration Agreement. The form and terms of the Exchange
Notes are the same as the form and terms of the Outstanding Notes except that:
(i) the Exchange Notes have been registered under the Securities Act and
therefore will not be subject to certain restrictions on transfer applicable to
the Outstanding Notes and will not

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<PAGE> 26

be entitled to resale registration under the Registration Agreement, although
the Registration Agreement does provide for prospectus delivery procedures to
assist resales of Exchange Notes, and (ii) the Exchange Notes will not provide
for any increase in the interest rate thereon. In that regard, the Outstanding
Notes provide that if an exchange offer registration statement is (i) not filed
by January 24, 1997 or (ii) not declared effective by March 27, 1997, Special
Interest will accrue and be payable semi-annually until such time as an exchange
offer registration statement is filed or becomes effective, as the case may be.
In addition, (i) if an exchange offer is not consummated or a resale shelf
registration statement is not declared effective by April 25, 1997 or (ii) if
either the exchange offer registration statement or the resale shelf
registration statement has been declared effective and such registration
statement ceases to be effective or usable (subject to certain exceptions),
Special Interest will accrue and be payable semi-annually until such time as an
exchange offer is consummated or a resale shelf registration statement is
declared effective, as the case may be. See "Description of the Outstanding
Notes" and "Risk Factors -- Consequences of a Failure to Exchange Outstanding
Notes."

The Exchange Offer is not being made to, nor will the Company accept
tenders for exchange from, holders of Outstanding Notes in any jurisdiction in
which the Exchange Offer or the acceptance thereof would not be in compliance
with the securities or blue sky laws of such jurisdiction.

Unless the context requires otherwise, the term "holder" with respect to
the Exchange Offer means any person in whose name the Outstanding Notes are
registered on the books of the Company or any other person who has obtained a
properly completed bond power from the registered holder, or any person whose
Outstanding Notes are held of record by The Depository Trust Company who desires
to deliver such Outstanding Notes by book-entry transfer at The Depository Trust
Company.

TERMS OF THE EXCHANGE

The Company hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to $150,000,000 aggregate principal amount of Exchange Notes for a
like aggregate principal amount of Outstanding Notes properly tendered on or
prior to the Expiration Date and not properly withdrawn in accordance with the
procedures described below. The Company will issue, promptly after the
Expiration Date, an aggregate principal amount of up to $150,000,000 of Exchange
Notes in exchange for a like principal amount of Outstanding Notes tendered and
accepted in connection with the Exchange Offer. Holders may tender their
Outstanding Notes in whole or in part in a principal amount of $1,000 and
integral multiples thereof.

The Exchange Offer is not conditioned upon any minimum number of
Outstanding Notes being tendered. As of the date of this Prospectus $150,000,000
aggregate principal amount of the Outstanding Notes is outstanding.

Holders of Outstanding Notes do not have any appraisal or dissenters'
rights in connection with the Exchange Offer. Outstanding Notes that are not
tendered for or are tendered but not accepted in connection with the Exchange
Offer will remain outstanding and be entitled to the benefits of the Indenture,
but will not be entitled to any further registration rights under the
Registration Agreement, except under limited circumstances. See "Risk
Factors -- Consequences of a Failure to Exchange Outstanding Notes,"
"Description of the Exchange Notes -- Registration Rights Agreement" and
"Description of the Outstanding Notes."

If any tendered Outstanding Notes are not accepted for exchange because of
an invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Outstanding Notes will be
returned, without expense, to the tendering holder thereof promptly after the
Expiration Date.

Holders who tender Outstanding Notes in connection with the Exchange Offer
will not be required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with respect to the
exchange of Outstanding Notes in connection with the Exchange Offer. The Company
will pay all charges and expenses, other than certain applicable taxes described
below, in connection with the Exchange Offer. See "-- Fees and Expenses."

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<PAGE> 27

NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR THE COMPANY MAKES ANY
RECOMMENDATION TO HOLDERS OF OUTSTANDING NOTES AS TO WHETHER TO TENDER OR
REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR OUTSTANDING NOTES PURSUANT TO
THE EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH
RECOMMENDATION. HOLDERS OF OUTSTANDING NOTES MUST MAKE THEIR OWN DECISION
WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE
AMOUNT OF OUTSTANDING NOTES TO TENDER AFTER READING THIS PROSPECTUS AND THE
LETTER OF TRANSMITTAL AND CONSULTING WITH THEIR ADVISERS, IF ANY, BASED ON THEIR
OWN FINANCIAL POSITION AND REQUIREMENTS.

EXPIRATION DATE; EXTENSIONS; AMENDMENTS

The term "Expiration Date" means 5:00 p.m., New York City time, on
, 1997 unless the Exchange Offer is extended by the Company (in
which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended).

The Company expressly reserves the right in its sole and absolute
discretion, subject to applicable law, at any time and from time to time, (i) to
delay the acceptance of the Outstanding Notes for exchange, (ii) to terminate
the Exchange Offer (whether or not any Outstanding Notes have theretofore been
accepted for exchange) if the Company determines, in its sole and absolute
discretion, that any of the events or conditions referred to under
"-- Conditions to the Exchange Offer" have occurred or exist or have not been
satisfied, (iii) to extend the Expiration Date of the Exchange Offer and retain
all Outstanding Notes tendered pursuant to the Exchange Offer, subject, however,
to the right of holders of Outstanding Notes to withdraw their tendered
Outstanding Notes as described under "-- Withdrawal Rights," and (iv) to waive
any condition or otherwise amend the terms of the Exchange Offer in any respect.
If the Exchange Offer is amended in a manner determined by the Company to
constitute a material change, or if the Company waives a material condition of
the Exchange Offer, the Company will promptly disclose such amendment by means
of a prospectus supplement that will be distributed to the registered holders of
the Outstanding Notes, and the Company will extend the Exchange Offer to the
extent required by Rule 14e-1 under the Exchange Act.

Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and by
making a public announcement thereof, and such announcement in the case of an
extension will be made no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Without limiting
the manner in which the Company may choose to make any public announcement and
subject to applicable law, the Company shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
issuing a release to an appropriate news agency.

ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF EXCHANGE NOTES

Upon the terms and subject to the conditions of the Exchange Offer, the
Company will exchange, and will issue to the Exchange Agent, Exchange Notes for
Outstanding Notes validly tendered and not withdrawn (pursuant to the withdrawal
rights described under "-- Withdrawal Rights") promptly after the Expiration
Date.

In all cases, delivery of Exchange Notes in exchange for Outstanding Notes
tendered and accepted for exchange pursuant to the Exchange Offer will be made
only after timely receipt by the Exchange Agent of (i) Outstanding Notes or a
book-entry confirmation of a book-entry transfer of Outstanding Notes into the
Exchange Agent's account at The Depositary Trust Company ("DTC"), (ii) the
Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, and (iii) any other documents
required by the Letter of Transmittal.

The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of Outstanding Notes into the Exchange Agent's account at
DTC.

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<PAGE> 28

Subject to the terms and conditions of the Exchange Offer, the Company will
be deemed to have accepted for exchange, and thereby exchanged, Outstanding
Notes validly tendered and not withdrawn as, if and when the Company gives oral
or written notice to the Exchange Agent of the Company's acceptance of such
Outstanding Notes for exchange pursuant to the Exchange Offer. The Exchange
Agent will act as agent for the Company for the purpose of receiving tenders of
Outstanding Notes, Letters of Transmittal and related documents, and as agent
for tendering holders for the purpose of receiving Outstanding Notes, Letters of
Transmittal and related documents and transmitting Exchange Notes to validly
tendering holders. Such exchange will be made promptly after the Expiration
Date. If for any reason whatsoever, acceptance for exchange or the exchange of
any Outstanding Notes tendered pursuant to the Exchange Offer is delayed
(whether before or after the Company's acceptance for exchange of Outstanding
Notes) or the Company extends the Exchange Offer or is unable to accept for
exchange or exchange Outstanding Notes tendered pursuant to the Exchange Offer,
then, without prejudice to the Company's rights set forth herein, the Exchange
Agent may, nevertheless, on behalf of the Company and subject to Rule 14e-1(c)
under the Exchange Act, retain tendered Outstanding Notes and such Outstanding
Notes may not be withdrawn except to the extent tendering holders are entitled
to withdrawal rights as described under "-- Withdrawal Rights."

Pursuant to the Letter of Transmittal, a holder of Outstanding Notes will
warrant and agree in the Letter of Transmittal that it has full power and
authority to tender, exchange, sell, assign and transfer Outstanding Notes, that
the Company will acquire good, marketable and unencumbered title to the tendered
Outstanding Notes, free and clear of all liens, restrictions, charges and
encumbrances, and the Outstanding Notes tendered for exchange are not subject to
any adverse claims or proxies. The holder also will warrant and agree that it
will, upon request, execute and deliver any additional documents deemed by the
Company or the Exchange Agent to be necessary or desirable to complete the
exchange, sale, assignment, and transfer of the Outstanding Notes tendered
pursuant to the Exchange Offer.

PROCEDURES FOR TENDERING OUTSTANDING NOTES

Valid Tender

Except as set forth below, in order for Outstanding Notes to be validly
tendered pursuant to the Exchange Offer, the Exchange Agent must receive, at one
of its addresses set forth under "--Exchange Agent," a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents (collectively, the "Letter
of Transmittal") and either (i) tendered Outstanding Notes, or (ii) Outstanding
Notes tendered pursuant to the procedures for book-entry transfer set forth
below and a book-entry confirmation, in each case on or prior to the Expiration
Date, or (iii) Outstanding Notes tendered in accordance with the guaranteed
delivery procedures set forth below.

If less than all of the Outstanding Notes are tendered, a tendering holder
should fill in the amount of Outstanding Notes being tendered in the appropriate
box on the Letter of Transmittal. The entire amount of Outstanding Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated.

THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER,
AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT REQUESTED,
PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.

Book Entry Transfer

The Exchange Agent will establish an account with respect to the
Outstanding Notes at DTC for purposes of the Exchange Offer within two business
days after the date of this Prospectus. Any financial institution that is a
participant in DTC's book-entry transfer facility system may make a book-entry
delivery of the Outstanding Notes by causing DTC to transfer such Outstanding
Notes into the Exchange Agent's

27
<PAGE> 29

account at DTC in accordance with DTC's procedures for transfers. However,
although delivery of Outstanding Notes may be effected through book-entry
transfer into the Exchange Agent's account at DTC, the Letter of Transmittal
must in any case be delivered to and received by the Exchange Agent at one of
the Exchange Agent's addresses set forth under "-- Exchange Agent" on or prior
to the Expiration Date, or the guaranteed delivery procedure set forth below
must be complied with.

DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. THE LETTER OF TRANSMITTAL MUST BE
RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO , 1997.

Signature Guarantees

Certificates for the Outstanding Notes need not be endorsed and signature
guarantees on the Letter of Transmittal are unnecessary unless (a) a certificate
for the Outstanding Notes is registered in a name other than that of the person
surrendering the certificate or (b) such registered holder completes the box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" in
the Letter of Transmittal. In the case of (a) or (b) above, such certificates
for Outstanding Notes must be duly endorsed or accompanied by a properly
executed bond power, with the endorsement or signature on the bond power and on
the Letter of Transmittal guaranteed by a firm or other entity identified in
Rule 17Ad-15 under the Exchange Act as an "eligible guarantor" institution,
including (as such terms are defined therein): (i) a bank; (ii) a broker,
dealer, municipal securities broker or dealer or government securities broker or
dealer; (iii) a credit union; (iv) a national securities exchange, registered
securities association or clearing agency; or (v) a savings association that is
a participant in a Securities Transfer Association (an "Eligible Institution"),
unless surrendered on behalf of such Eligible Institution. See Instruction 1 to
the Letter of Transmittal.

Guaranteed Delivery

If a holder desires to tender Outstanding Notes pursuant to the Exchange
Offer and the certificates for such Outstanding Notes are not immediately
available or time will not permit the Letter of Transmittal to reach the
Exchange Agent on or before the Expiration Date, or the procedures for
book-entry transfer cannot be completed on a timely basis, such Outstanding
Notes may nevertheless be tendered, provided that all of the following
guaranteed delivery procedures are complied with:

(i) such tenders are made by or through an Eligible Institution;

(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form accompanying the Letter of Transmittal,
is received by the Exchange Agent, as provided below, on or prior to
Expiration Date; and

(iii) the certificates (or a book-entry confirmation) representing all
tendered Outstanding Notes, in proper form for transfer, together with a
properly completed and duly executed Letter of Transmittal, are received by
the Exchange Agent within five New York Stock Exchange trading days after
the date of execution of such Notice of Guaranteed Delivery.

The Notice of Guaranteed Delivery may be delivered by hand, or transmitted
by facsimile or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such notice.

Notwithstanding any other provision hereof, the delivery of Exchange Notes
in exchange for Outstanding Notes tendered and accepted for exchange pursuant to
the Exchange Offer will in all cases be made only after timely receipt by the
Exchange Agent of Outstanding Notes, or of a book-entry confirmation with
respect to such Outstanding Notes, and a properly completed and duly executed
Letter of Transmittal (or facsimile thereof). Accordingly, the delivery of
Exchange Notes might not be made to all tendering holders at the same time, and
will depend upon when Outstanding Notes, book-entry confirmations with respect
to Outstanding Notes and other required documents are received by the Exchange
Agent.

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<PAGE> 30

The Company's acceptance for exchange of Outstanding Notes tendered
pursuant to any of the procedures described above will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions of the Exchange Offer.

Determination of Validity

All questions as to the form of documents, validity, eligibility (including
time of receipt) and acceptance for exchange of any tendered Outstanding Notes
will be determined by the Company, in its sole discretion, whose determination
shall be final and binding on all parties. The Company reserves the absolute
right, in its sole and absolute discretion, to reject any and all tenders
determined by it not to be in proper form or the acceptance of which, or
exchange for, may, in the view of counsel to the Company, be unlawful. The
Company also reserves the absolute right, subject to applicable law, to waive
any of the conditions of the Exchange Offer as set forth under "-- Conditions to
the Exchange Offer" or any condition or irregularity in any tender of
Outstanding Notes of any particular holder whether or not similar conditions or
irregularities are waived in the case of other holders.

The Company's interpretation of the terms and conditions of the Exchange
Offer (including the Letter of Transmittal and the instructions thereto) will be
final and binding. No tender of Outstanding Notes will be deemed to have been
validly made until all irregularities with respect to such tender have been
cured or waived. Neither the Company, any affiliates or assigns of the Company,
the Exchange Agent nor any other person shall be under any duty to give any
notification of any irregularities in tenders or incur any liability for failure
to give any such notification.

If any Letter of Transmittal, endorsement, bond power, power of attorney,
or any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity
such person should so indicate when signing, and unless waived by the Company,
proper evidence satisfactory to the Company, in its sole discretion, of such
person's authority to so act must be submitted.

A beneficial owner of Outstanding Notes that are held by or registered in
the name of a broker, dealer, commercial bank, trust company or other nominee or
custodian is urged to contact such entity promptly if such beneficial holder
wishes to participate in the Exchange Offer.

RESALES OF EXCHANGE NOTES

The Company is making the Exchange Offer in reliance on a position of the
staff of the Division of Corporation Finance of the Commission as set forth in
certain interpretive letters addressed to third parties in other transactions.
However, the Company has not sought its own interpretive letter and there can be
no assurance that the staff of the Division of Corporation Finance of the
Commission would make a determination with respect to the Exchange Offer similar
to that made in such interpretive letters to third parties. Based on these
interpretations by the staff of the Division of Corporation Finance, and subject
to the two immediately following sentences, the Company believes that Exchange
Notes issued pursuant to this Exchange Offer in exchange for Outstanding Notes
may be offered for resale, resold and otherwise transferred by a holder thereof
(other than a holder who is a broker-dealer) without further compliance with the
registration and prospectus delivery requirements of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
holder's business and that such holder is not participating, and has no
arrangement or understanding with any person to participate, in a distribution
(within the meaning of the Securities Act) of such Exchange Notes. However, any
holder of Outstanding Notes who is an "affiliate" of the Company or who intends
to participate in the Exchange Offer for the purpose of distributing Exchange
Notes, or any broker-dealer who purchased Outstanding Notes from the Company to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act, (a) will not be able to rely on the interpretations of the staff
of the Division of Corporation Finance of the Commission set forth in the above-
mentioned interpretive letters, (b) will not be permitted or entitled to tender
such Outstanding Notes in the Exchange Offer and (c) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or other transfer of such Outstanding Notes unless such
sale is

29
<PAGE> 31

made pursuant to an exemption from such requirements. In addition, as described
below, if any broker-dealer holds Outstanding Notes acquired for its own account
as a result of market-making or other trading activities and exchanges such
Outstanding Notes for Exchange Notes, then such broker-dealer must deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resales of such Exchange Notes.

Each holder of Outstanding Notes who wishes to exchange Outstanding Notes
for Exchange Notes in the Exchange Offer will be required to represent that (i)
it is not an Affiliate of the Company, (ii) any Exchange Notes to be received by
it are being acquired in the ordinary course of its business, (iii) it has no
arrangement or understanding with any person to participate in a distribution
(within the meaning of the Securities Act) of such Exchange Notes, and (iv) if
such holder is not a broker-dealer, such holder is not engaged in, and does not
intend to engage in, a distribution (within the meaning of the Securities Act)
of such Exchange Notes. Each broker-dealer that receives Exchange Notes for its
own account pursuant to the Exchange Offer must acknowledge that it acquired the
Outstanding Notes for its own account as the result of market-making activities
or other trading activities and must agree that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such Exchange Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. Based on the
position taken by the staff of the Division of Corporation Finance of the
Commission in the interpretive letters referred to above, the Company believes
that broker-dealers who acquired Outstanding Notes for their own accounts as a
result of market-making activities or other trading activities (Participating
Broker-Dealers) may fulfill their prospectus delivery requirements with respect
to the Exchange Notes received upon exchange of such Outstanding Notes (other
than Outstanding Notes which represent an unsold allotment from the original
sale of the Outstanding Notes) with a prospectus meeting the requirements of the
Securities Act, that may be the prospectus prepared for an exchange offer so
long as it contains a description of the plan of distribution with respect to
the resale of such Exchange Notes. Accordingly, this Prospectus, as it may be
amended or supplemented from time to time, may be used by a Participating
Broker-Dealer during the period referred to below in connection with resales of
Exchange Notes received in exchange for Outstanding Notes where such Outstanding
Notes were acquired by such Participating Broker-Dealer for its own account as a
result of market-making or other trading activities. Subject to certain
provisions set forth in the Registration Agreement, the Company has agreed that
this Prospectus, as it may be amended or supplemented from time to time, may be
used by a Participating Broker-Dealer in connection with resales of such
Exchange Notes for a period ending one year after the consummation of the
Exchange Offer or, if earlier, when all such Exchange Notes have been disposed
of by such Participating Broker-Dealer. See "Plan of Distribution." Any
Participating Broker-Dealer who is an "affiliate" of the Company may not rely on
such interpretive letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction.

In that regard, each Participating Broker-Dealer who surrenders Outstanding
Notes pursuant to the Exchange Offer will be deemed to have agreed, by execution
of the Letter of Transmittal, that, upon receipt of notice from the Company of
the occurrence of any event or the discovery of any fact which makes any
statement contained or incorporated by reference in this Prospectus untrue in
any material respect or which causes this Prospectus to omit to state a material
fact necessary in order to make the statements contained or incorporated by
reference herein, in light of the circumstances under which they were made, not
misleading or of the occurrence of certain other events specified in the
Registration Agreement, such Participating Broker-Dealer will suspend the sale
of Exchange Notes pursuant to this Prospectus until the Company has amended or
supplemented this Prospectus to correct such misstatement or omission and has
furnished copies of the amended or supplemented Prospectus to such Participating
Broker-Dealer or the Company has given notice that the sale of the Exchange
Notes may be resumed, as the case may be. If the Company gives such notice to
suspend the sale of the Exchange Notes, it shall extend the one-year period
referred to above during which Participating Broker-Dealers are entitled to use
this Prospectus in connection with the resale of Exchange Notes by the number of
days during the period from and including the date of the giving of such notice
to and including the date when Participating Broker-Dealers shall have received
copies of the amended or supplemented Prospectus necessary to permit resales of
the Exchange Notes or to and including the date on which the Company has given
notice that the sale of Exchange Notes may be resumed, as the case may be.

30
<PAGE> 32

WITHDRAWAL RIGHTS

Except as otherwise provided herein, tenders of Outstanding Notes may be
withdrawn at any time on or prior to the Expiration Date.

In order for a withdrawal to be effective a written, telegraphic, telex or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at one of its addresses set forth under "-- Exchange Agent"
on or prior to the Expiration Date. Any such notice of withdrawal must specify
the name of the person who tendered the Outstanding Notes to be withdrawn, the
aggregate principal amount of Outstanding Notes to be withdrawn, and (if
certificates for such Outstanding Notes have been tendered) the name of the
registered holder of the Outstanding Notes as set forth on the Outstanding
Notes, if different from that of the person who tendered such Outstanding Notes.
If Outstanding Notes have been delivered or otherwise identified to the Exchange
Agent, then prior to the physical release of such Outstanding Notes, the
tendering holder must submit the serial numbers shown on the particular
Outstanding Notes to be withdrawn and the signature on the notice of withdrawal
must be guaranteed by an Eligible Institution, except in the case of Outstanding
Notes tendered for the account of an Eligible Institution. If Outstanding Notes
have been tendered pursuant to the procedures for book-entry transfer set forth
in "-- Procedures for Tendering Outstanding Notes," the notice of withdrawal
must specify the name and number of the account at DTC to be credited with the
withdrawal of Outstanding Notes, in which case a notice of withdrawal will be
effective if delivered to the Exchange Agent by written, telegraphic, telex or
facsimile transmission. Withdrawals of tenders of Outstanding Notes may not be
rescinded. Outstanding Notes properly withdrawn will not be deemed validly
tendered for purposes of the Exchange Offer, but may be retendered at any
subsequent time on or prior to the Expiration Date by following any of the
procedures described above under "-- Procedures for Tendering Outstanding
Notes."

All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all parties.
Neither the Company, any affiliates or assigns of the Company, the Exchange
Agent nor any other person shall be under any duty to give any notification of
any irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification. Any Outstanding Notes which have been
tendered but which are withdrawn will be returned to the holder thereof promptly
after withdrawal.

INTEREST ON THE EXCHANGE NOTES

Each Exchange Note will bear interest at the rate of 9 1/4% per annum from
the most recent date to which interest has been paid or duly provided for on the
Outstanding Note surrendered in exchange for such Exchange Note or, if no
interest has been paid or duly provided for on such Outstanding Note, from
November 27, 1996 (the date of original issuance of such Outstanding Notes).
Interest on the Exchange Notes will be payable semiannually on May 15 and
November 15 of each year, commencing on the first such date following the
original issuance date of the Exchange Notes.

Holders of Outstanding Notes whose Outstanding Notes are accepted for
exchange will not receive accrued interest on such Outstanding Notes for any
period from and after the last Interest Payment Date to which interest has been
paid or duly provided for on such Outstanding Notes prior to the original issue
date of the Exchange Notes or, if no such interest has been paid or duly
provided for, will not receive any accrued interest on such Outstanding Notes,
and will be deemed to have waived the right to receive any interest on such
Outstanding Notes accrued from and after such Interest Payment Date or, if no
such interest has been paid or duly provided for, from and after November 27,
1996.

CONDITIONS TO THE EXCHANGE OFFER

Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Company will not be required to accept for
exchange, or to exchange, any Outstanding Notes for any Exchange Notes, and, as
described below, may terminate the Exchange Offer (whether or not any
Outstanding Notes have theretofore been accepted for exchange), or may waive any
conditions to or amend the Exchange Offer, if any of the following conditions
have occurred or exist or have not been satisfied:

(a) there shall occur a change in the current interpretation by the
staff of the Commission which permits the Exchange Notes issued pursuant to
the Exchange Offer in exchange for Outstanding Notes to be offered for
resale, resold and otherwise transferred by holders thereof (other than
broker-dealers and

31
<PAGE> 33

any such holder that is an "Affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act provided that such
Exchange Notes are acquired in the ordinary course of such holders'
business and such holders have no arrangement or understanding with any
person to participate in the distribution of such Exchange Notes; or

(b) any action or proceeding shall have been instituted or threatened
in any court or by or before any governmental agency or body with respect
to the Exchange Offer which, in the Company's judgment, would reasonably be
expected to impair the ability of the Company to proceed with the Exchange
Offer; or

(c) any law, statute, rule or regulation shall have been adopted or
enacted which, in the Company's judgment, would reasonably be expected to
impair the ability of the Company to proceed with the Exchange Offer; or

(d) a banking moratorium shall have been declared by United States
federal authorities that, in the Company's judgment, would reasonably be
expected to impair the ability of the Company to proceed with the Exchange
Offer; or

(e) trading on the New York Stock Exchange or generally in the United
States over-the-counter market shall have been suspended by order of the
Commission or any other governmental authority which, in the Company's
judgment, would reasonably be expected to impair the ability of the Company
to proceed with the Exchange Offer; or

(f) a stop order shall have been issued by the Commission suspending
the effectiveness of the Registration Statement or proceedings shall have
been initiated or, to the knowledge of the Company, threatened for that
purpose; or

(g) any governmental approval has not been obtained, which approval
the Company shall, in its sole discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby; or

(h) any change, or any development involving a prospective change, in
the business or financial affairs of the Company or any of its subsidiaries
has occurred that, in the sole judgment of the Company, might materially
impair the ability of the Company to proceed with the Exchange Offer.

If the Company determines in its sole and absolute discretion that any of
the foregoing events or conditions has occurred or exists or has not been
satisfied, the Company may, subject to applicable law, terminate the Exchange
Offer (whether or not any Outstanding Notes have theretofore been accepted for
exchange) or may waive any such condition or otherwise amend the terms of the
Exchange Offer in any respect. If such waiver or amendment constitutes a
material change to the Exchange Offer, the Company will promptly disclose such
waiver by means of a prospectus supplement that will be distributed to the
registered holders of the Outstanding Notes, and the Company will extend the
Exchange Offer to the extent required by Rule 14e-1 under the Exchange Act.

EXCHANGE AGENT

Harris Trust Company of New York, has been appointed as Exchange Agent for
the Exchange Offer. Delivery of the Letters of Transmittal and any other
required documents, questions, requests for assistance, and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent as follows:

<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
Wall Street Station 77 Water Street, 4th Floor Receive Window
P.O. Box 1010 New York, NY 10005 77 Water Street, 5th Floor
New York, NY 10268-1010 New York, NY
By Facsimile Transmission:
(for Eligible Institutions
Only)
(212) 701-7636
(212) 701-7637
Confirm by Telephone:
(212) 701-7624
</TABLE>

Delivery to other than the above addresses or facsimile number will not
constitute a valid delivery.

32
<PAGE> 34

FEES AND EXPENSES

The Company has agreed to pay the Exchange Agent reasonable and customary
fees for its services and will reimburse it for its reasonable out-of-pocket
expenses in connection therewith. The Company will also pay brokerage houses and
other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus and related documents
to the beneficial owners of Outstanding Notes, and in handling or tendering for
their customers.

Holders who tender their Outstanding Notes for exchange will not be
obligated to pay any transfer taxes in connection therewith. If, however,
Exchange Notes are to be delivered to, or are to be issued in the name of, any
person other than the registered holder of the Outstanding Notes tendered, or if
a transfer tax is imposed for any reason other than the exchange of Outstanding
Notes in connection with the Exchange Offer, then the amount of any such
transfer taxes (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.

The Company will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange Offer.

USE OF PROCEEDS

The net proceeds from the sale of the Outstanding Notes, approximately
$144.7 million, were used to retire a portion of the outstanding indebtedness
under the Company's credit facility (as amended, the "Chase Facility") with The
Chase Manhattan Bank ("Chase"). Chase, which is the agent and a lender under the
Chase Facility, is an affiliate of Chase Securities Inc., one of the Initial
Purchasers. At September 30, 1996, $317 million was outstanding under the Chase
Facility, which has a final maturity in June 2001. Borrowings under the Chase
Facility bear interest at either the Base Rate (as defined) plus 0% to 0.5% or
LIBOR plus 0.75% to 1.5%, as determined by the Company. The weighted average
interest rate under the Chase Facility on September 30, 1996, (including the
effects of interest rate hedging arrangements covering $80 million in principal
amount of indebtedness) was 7.63%. The borrowings under the Chase Facility to be
repaid with the proceeds of the Offering were used to finance the Acquisitions
and the Merger and for other corporate purposes. For additional information
regarding the Chase Facility, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources"
and "Description of Other Indebtedness."

The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Agreement. The Company will not receive any
cash proceeds from the issuance of the Exchange Notes in the Exchange Offer. In
consideration for issuing the Exchange Notes as contemplated in this Prospectus,
the Company will receive Outstanding Notes in like principal amount. The form
and terms of the Exchange Notes are identical in all material respects to the
form and terms of the Outstanding Notes, except certain transfer restrictions
and registration rights relating to the Outstanding Notes and except for certain
interest provisions relating to such registration rights. See "Description of
the Exchange Notes." The Outstanding Notes surrendered in exchange for the
Exchange Notes will be retired and cancelled and cannot be reissued.
Accordingly, issuance of the Exchange Notes will not result in any increase in
the outstanding debt of the Company.

33
<PAGE> 35

CAPITALIZATION

The following table sets forth as of September 30, 1996, (i) the historical
capitalization of the Company and (ii) the capitalization of the Company as of
such date, as adjusted to give effect to the sale of the Outstanding Notes and
after the application of the $144.7 million in estimated net proceeds to the
Company therefrom as described in "Use of Proceeds." This table should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's Consolidated Financial Statements
and the related notes thereto, included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt:
Bank facility....................................................... $317,000 $172,302
9 7/8% Senior Subordinated Notes due 2003 (net of unamortized
discount)........................................................ 74,581 74,581
9 1/4% Senior Subordinated Notes due 2006 (net of unamortized
discount)........................................................ -- 149,223
Other............................................................... 735 735
-------- --------
Total long-term debt........................................ 392,316 396,841
-------- --------
Stockholders' equity:
Preferred stock $.001 par value, 15,000,000 shares authorized;
no shares issued................................................. -- --
Common stock, $.001 par value, 30,000,000 shares authorized;
17,117,861 shares issued......................................... 17 17
Additional paid-in capital.......................................... 162,878 162,878
Retained earnings................................................... 25,677 25,677
Treasury stock, at cost, 141,977 shares............................. (1,755) (1,755)
-------- --------
Total stockholders' equity.................................. 186,817 186,817
-------- --------
Total capitalization........................................ $579,133 $583,658
======== ========
</TABLE>

34
<PAGE> 36

SELECTED HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA

The following table sets forth selected consolidated historical and pro
forma financial data for the Company as of the dates and for the periods
indicated. The historical financial data for the years ended December 31, 1991,
1992, 1993, 1994 and 1995, were derived from the Consolidated Financial
Statements of the Company, which have been audited by Arthur Andersen LLP,
independent public accountants. The data for the nine months ended September 30,
1995 and 1996, have been derived from the Company's unaudited consolidated
financial statements, which have been prepared on the same basis as the audited
Consolidated Financial Statements and, in the opinion of management, include all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the information set forth herein. This information is not
necessarily indicative of the Company's future performance. The unaudited pro
forma combined statement of operations data for the year ended December 31,
1995, and for the nine months ended September 30, 1996, give effect to the
Acquisitions and the Merger as if such transactions had occurred at the
beginning of each such period. The data set forth in this table should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the Unaudited Pro Forma Combined Financial
Statements and the Consolidated Financial Statements and the respective related
notes thereto presented elsewhere herein.

<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------------------------------- PRO FORMA COMBINED
NINE MONTHS ---------------------------
ENDED NINE MONTHS
YEARS ENDED DECEMBER 31, SEPTEMBER 30, YEAR ENDED ENDED
----------------------------------------------- ------------------ DECEMBER 31, SEPTEMBER 30,
1991 1992 1993 1994 1995 1995 1996 1995 1996
------- -------- -------- -------- -------- -------- -------- ------------ -------------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Oil revenues.................. $ 5,435 $ 10,321 $ 15,554 $ 24,671 $ 26,127 $ 20,580 $ 27,643 $ 46,571 $ 35,792
Natural gas revenues.......... 7,368 15,629 29,828 34,156 27,267 20,433 39,526 68,608 60,662
Trading and transportation
revenues.................... -- -- -- -- -- -- 19,537 82,927 68,572
Other revenues................ 333 1,683 2,095 1,574 1,946 1,589 2,057 5,301 3,231
------- -------- -------- -------- -------- -------- -------- -------- --------
Total revenues.......... 13,136 27,633 47,477 60,401 55,340 42,602 88,763 203,407 168,257
------- -------- -------- -------- -------- -------- -------- -------- --------
Production taxes.............. 1,108 2,493 4,222 5,134 4,050 3,177 5,059 8,497 7,179
Lease operating expense....... 1,939 2,831 5,470 8,310 9,936 7,546 11,667 21,942 16,416
Cost of trading and
transportation.............. -- -- -- -- -- -- 18,951 80,642 66,175
Depreciation, depletion and
amortization................ 4,388 8,829 15,299 25,079 26,609 20,593 29,523 61,302 43,533
General and administrative
expense..................... 1,753 1,874 3,123 4,228 4,076 2,997 2,923 7,573 4,964
Interest expense and other.... 2,975 4,039 3,118 7,539 10,219 7,575 15,482 27,404 20,739
------- -------- -------- -------- -------- -------- -------- -------- --------
Total expenses.......... 12,163 20,066 31,232 50,290 54,890 41,888 83,605 207,360 159,006
------- -------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before provision
for income taxes and
extraordinary item.......... 973 7,567 16,245 10,111 450 714 5,158 (3,953) 9,251
Income tax expense
(benefit)................... 389 2,883 6,189 3,852 176 277 1,965 (1,506) 3,525
Extraordinary item............ -- 994 -- -- -- -- -- -- --
------- -------- -------- -------- -------- -------- -------- -------- --------
Net income (loss)............. $ 584 $ 3,690 $ 10,056 $ 6,259 $ 274 $ 437 $ 3,193 $ (2,447) $ 5,726
======= ======== ======== ======== ======== ======== ======== ======== ========
EARNINGS PER SHARE:
Income (loss) from continuing
operations before
extraordinary item.......... $ 0.11 $ 0.69 $ 0.93 $ 0.53 $ 0.02 $ 0.04 $ 0.24 $ (0.14) $ 0.33
Extraordinary item............ -- (0.14) -- -- -- -- -- -- --
------- -------- -------- -------- -------- -------- -------- -------- --------
Earnings (loss) per common and
common equivalent
share(1).................... $ 0.11 $ 0.55 $ 0.93 $ 0.53 $ 0.02 $ 0.04 $ 0.24 $ (0.14) $ 0.33
======= ======== ======== ======== ======== ======== ======== ======== ========
Weighted average number of
common and common equivalent
shares...................... 5,320 6,747 10,858 11,713 11,440 11,474 13,546 17,601 17,431
======= ======== ======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA (END OF
PERIOD):
Cash and cash equivalents..... $ 7,402 $ 7,101 $ 21,119 $ 657 $ 117 $ 1,076 $ 5,944 $ -- $ --
Working capital
(deficiency)................ 2,340 3,606 16,221 (2,384) (16,115) (5,943) 3,608 -- --
Oil and natural gas
properties, net............. 68,008 102,517 184,188 242,009 278,811 265,744 652,512 -- --
Total assets.................. 83,026 120,452 228,260 269,070 302,089 287,732 708,690 -- --
Long-term debt................ 36,303 20,640 74,420 103,478 125,537 123,522 392,316 -- --
Stockholders' equity.......... 28,901 78,731 113,299 119,358 119,174 119,595 186,817 -- --
OTHER FINANCIAL DATA:
Net cash provided by operating
activities.................. $ 3,051 $ 20,469 $ 33,745 $ 36,553 $ 31,179 $ 28,358 $ 34,001 $ -- $ --
Capital expenditures(2)....... 16,935 43,968 59,202 72,169 33,529 28,584 34,392 -- --
EBITDA(3)..................... 8,336 20,436 34,662 42,729 37,278 28,881 50,163 84,753 73,523
Ratio of EBITDA to interest
expense(3).................. 2.8x 5.1x 11.1x 5.7x 3.6x 3.8x 3.2x 3.1x 3.5x
As adjusted pro forma ratio of
EBITDA to interest
expense(3)(4)............... -- -- -- -- -- -- -- 2.8x 3.1x
Ratio of earnings to fixed
charges(5)(6)............... -- 2.1x 5.0x 1.9x -- -- 1.2x -- 1.2x
As adjusted pro forma ratio of
earnings to fixed
charges(4)(5)(6)............ -- -- -- -- -- -- -- -- 1.1x
</TABLE>

(See footnotes on following page)

35
<PAGE> 37

- ---------------

(1) Fully diluted earnings per share are the same as primary earnings per share
in all periods except 1993, in which fully diluted earnings per share were
$0.92.

(2) Capital expenditures exclude acquisition costs of $1,674,000, $1,384,000,
$34,697,000, $14,044,000 and $29,357,000 for the years ended December 31,
1991, 1992, 1993, 1994 and 1995, respectively, and $15,360,000 and
$220,549,000 for the nine months ended September 30, 1995 and 1996,
respectively.

(3) EBITDA, or "earnings before interest, income taxes, extraordinary items,
depreciation and amortization," reflects income from operations plus
depreciation, depletion and amortization, impairment of proved oil and
natural gas properties, non-recurring costs and exploration expense. EBITDA
is not a generally accepted accounting principle measure, but provides
supplemental information for evaluating the Company's ability to make
payments in respect of the Notes. It should not be construed as an
alternative to income from operations, net income or cash flow from
operations and is presented solely as a supplemental disclosure.

(4) The unaudited as adjusted pro forma ratio of EBITDA to interest expense and
the unaudited as adjusted pro forma ratio of earnings to fixed charges give
effect to the Offering and the use of proceeds thereof as if the Offering
had been consummated at the beginning of the indicated period. See "Use of
Proceeds."

(5) For purposes of calculating the ratio of earnings to fixed charges and the
unaudited as adjusted pro forma ratio of earnings to fixed charges, earnings
consist of net earnings before income taxes and fixed charges (exclusive of
capitalized interest). Fixed charges consist of interest expense (which
includes amounts capitalized and the amortization of debt discount) and that
portion of rental cost that is equivalent to interest (estimated to be
one-third of rental cost).

(6) Earnings were insufficient to cover fixed charges by $723,000, $1,551,000,
$767,000 and $8,142,000 at December 31, 1991, December 31, 1995, September
30, 1995, and pro forma December 31, 1995, respectively. As adjusted pro
forma earnings were insufficient to cover as adjusted pro forma fixed
charges by $11,567,000 at December 31, 1995.

36
<PAGE> 38

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

GENERAL

Over the past 12 months, the Company has undertaken several strategic
initiatives that have positioned the Company for a period of significant growth
in reserves, production, cash flow and earnings. In 1995, the Company
articulated a strategy that included (i) consolidating in its core geographic
areas, particularly the D-J Basin, (ii) diversifying its asset base outside of
the D-J Basin, (iii) capturing more of the value stream by marketing its
production and (iv) maximizing its financial flexibility. By completing the
Acquisitions and the Merger and by forming two important, exploration-focused
Gulf Coast joint ventures, SouthTech and Chenier, HSR has taken the fundamental
initial steps to implement its strategy. Management's focus for the foreseeable
future will be to continue to execute this strategy with particular emphasis on
activities that maximize the financial returns from HSR's expanded asset base.

The Company now has three significant core areas of operations, the
geologic and geographic diversity of which combine to create an oil and natural
gas company with attractive, long-lived reserves balanced with meaningful
exposure to exploration and technologically-driven upside. The Company has also
created a strategically important and profitable presence in the natural gas
marketing, trading and transportation business, which provides the opportunity
for the Company to increase its operating margins on production from both the
D-J Basin and Mid-Continent areas.

The United States oil and gas industry is subject to large variations in
profitability due to fluctuating commodity prices and related changes in rates
of reinvestment by industry participants. Over the past year the industry has
seen increases in both oil and natural gas prices from the relatively low price
levels experienced in 1995. Several factors have lead to a positive fundamental
outlook for the oil and gas industry and improved economics for production in
the Company's core geographic areas. These include (i) historically low natural
gas storage levels combined with relatively high wellhead capacity utilization,
(ii) increasing overall natural gas demand, (iii) deregulation of distribution
and marketing channels, particularly for D-J Basin and Rocky Mountain production
and (iv) successful application of advanced oil and natural gas exploration,
drilling and production technologies.

NATURAL GAS PRICE CONSIDERATIONS

Approximately 75% of the Company's proved producing reserves consist of
natural gas located in the D-J Basin and Mid-Continent area. The absolute level
and volatility of natural gas prices have a material impact on the Company. See
"Risk Factors -- Volatility of Oil and Natural Gas Prices; Marketability of
Production."

During 1995 and early 1996, prices for Rocky Mountain natural gas were
substantially below prices for natural gas in markets outside the Rocky Mountain
region. This disparity was caused by low demand for Rocky Mountain gas due to an
unusually warm winter season and above-normal availability of hydro-electric
power in the western United States. This resulted in excess natural gas supply
in the Rocky Mountains which led to downward price pressure in the Colorado
Front Range market. However, in recent months, the market for the Company's
natural gas has strengthened due to several factors. First, the excess supply
from Wyoming natural gas producers has declined as a result of increased demand
from West Coast markets. Second, in October 1995, the Colorado Public Utilities
Commission approved tariff changes that effectively eliminated transportation
costs for D-J Basin natural gas sold to the Colorado Front Range market,
resulting in an approximately $0.40 per MMBtu transportation cost advantage for
D-J Basin producers. Third, in the last 18 months, the supply of D-J Basin
natural gas has declined due to reduced drilling in the D-J Basin and natural
production declines. The average natural gas price received by the Company for
its D-J Basin production has increased from $1.28 per Mcf in 1995 to $1.60 per
Mcf in the first nine months of 1996. In addition, expansion of pipeline
capacity has begun, which will, in mid- to late-1997, provide additional
transportation outlets for Wyoming producers to markets other than the Colorado
Front Range (the area from Denver north to Fort Collins and south to Colorado
Springs). The Company believes that these developments will further reduce the
disparity between D-J Basin pricing and pricing generally available elsewhere in
the United States.

37
<PAGE> 39

The D-J Basin provides a significant portion of the Company's natural gas
production. Historically, the price of D-J Basin natural gas (on a
Btu-equivalent basis) has been linked closely to the Colorado Interstate Gas
pipeline ("CIG") Rocky Mountain Index. However, more recently, as a result of
the tariff changes and the seasonal nature of demand in the Colorado Front
Range, the price for D-J Basin natural gas tends to reflect the CIG Rocky
Mountain index during the low demand summer months (generally April through
October) and Mid-Continent indices during the high demand winter periods
(generally November through March).

Gas prices in the Mid-Continent are closely tied to established indices
which are influenced by national supply and demand factors. Average natural gas
prices received by the Company in the Mid-Continent generally fluctuate with
changes in Mid-Continent posted prices, which for the years 1993 through 1995
averaged $0.18 per Mcf less than the Henry Hub price. The average natural gas
price received in the Mid-Continent since the Merger in June 1996 through
October 1996, was $1.98, or $0.29 below the Henry Hub price.

OIL PRICE CONSIDERATIONS

Oil prices are established in a highly liquid international market. Average
oil prices received by the Company in the D-J Basin and Mid-Continent generally
fluctuate with changes in the NYMEX West Texas Intermediate ("NYMEX-WTI") crude
oil closing prices. The Company's average oil price for 1995 was approximately
$1.77 below NYMEX-WTI closing prices. The average oil price for the nine months
ended September 30, 1996, was approximately $0.53 below NYMEX-WTI closing
prices. The increase in the relative value of the Company's oil production
during 1996 is a result of renegotiation of several oil contracts, as well as
the general increase in the market value of the Company's oil production in the
D-J Basin.

RESULTS OF OPERATIONS

The Company's results of operations have been significantly affected by the
Acquisitions, the Merger and its drilling program. Fluctuations in oil and
natural gas prices have also significantly affected the Company's results. The
following table reflects the Company's oil and natural gas production and its
average oil and natural gas prices for the periods presented.

<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------------------------------
NINE MONTHS THREE MONTHS
ENDED SEPTEMBER ENDED
YEARS ENDED DECEMBER 31, 30, SEPTEMBER 30,
------------------------ --------------- ----------------
1993 1994 1995 1995 1996 1995 1996
------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net production:
Oil (MBbls)......................... 967 1,664 1,582 1,263 1,360 349 594
Natural gas (MMcf).................. 14,684 20,108 21,049 16,328 23,221 5,115 11,168
Oil equivalent (MBoe)............... 3,414 5,015 5,090 3,985 5,230 1,202 2,456
Average net daily production:
Oil (Bbls).......................... 2,648 4,559 4,333 4,627 4,965 3,797 6,460
Natural gas (Mcf)................... 40,229 55,090 57,670 59,591 84,750 55,593 121,388
Oil equivalent (Boe)................ 9,353 13,740 13,945 14,559 19,090 13,062 26,691
Average sales price per unit:
Oil ($/Bbls)(1)..................... $16.09 $14.83 $16.52 $16.29 $20.32 $16.06 $ 21.02
Natural gas ($/Mcf)(1).............. 2.03 1.70 1.30 1.25 1.70 1.10 1.77
</TABLE>

- ---------------

(1) Includes the effects of hedging activities.

On June 17, 1996, the Company completed the Merger with Tide West for cash
and stock consideration totalling $187.7 million. The Merger added 1,259 gross
wells, approximately 39.1 MMBoe of net proved reserves and 9,985 Boe of net
daily production to the Company. The geographical location of the acquired
properties and their proximity to the Mid-Continent markets and Henry Hub
provide the Company with increased product market and price diversification.

38
<PAGE> 40

In March and June 1996, the Company completed the Acquisitions, acquiring
all of Basin's D-J Basin properties for aggregate cash consideration of $125.5
million. The acquired properties are in the immediate vicinity of HSR's existing
D-J Basin operations, and HSR has integrated these assets into its property base
with no material increase in overhead, resulting in a substantial decrease in
general and administrative costs per Boe produced. The Acquisitions included a
total of 850 gross wells with approximately 35 MMBoe of net proved reserves and
approximately 5,500 Boe of net daily production.

Comparison of Three Months and Nine Months Ended September 30, 1996 and
September 30, 1995

Oil and Natural Gas Revenues. For the comparative three month periods, oil
production increased from 349 MBbls to 594 MBbls, and natural gas production
increased from 5,115 MMcf to 11,168 MMcf, or 70% and 118%, respectively. These
production increases were the result of additional production from the
properties acquired in the Acquisitions and the Merger and new wells drilled by
the Company in the D-J Basin in early 1996. Oil prices increased by 31%, from
$16.06 to $21.02 per Bbl, and natural gas prices increased 61%, from $1.10 to
$1.77 per Mcf. The net effect of these changes resulted in an increase in oil
and natural gas revenues from $11.2 million to $32.2 million, or 187%. The
Company also recognized $675,553 in other revenues from the sale of tax credits
under its Section 29 tax credit agreements.

For the comparative nine month periods, oil production increased from 1,263
MBbls to 1,360 MBbls and natural gas production increased from 16,328 MMcf to
23,221 MMcf, or 8% and 42%, respectively. Oil prices increased by 25%, from
$16.29 to $20.32 per Bbl, and natural gas prices increased by 36%, from $1.25 to
$1.70 per Mcf. The net effect of these changes resulted in an increase in oil
and natural gas revenues from $41.0 million to $67.2 million, or 64%. The
Company also recognized $1.8 million in other revenues from the sale of tax
credits under its Section 29 tax credit agreements during the nine months ended
September 30, 1996. On a pro forma basis, production decreased by 11%, from
8,465 MBoe to 7,513 MBoe, during the nine months ended September 30, 1995,
compared to the same period in 1996, respectively, primarily as a result of a
natural decline in initial production from certain of the Company's existing
wells and from certain of the wells acquired in the Acquisitions. The decrease
in production was also partially attributable to the fact that the Company
deferred its drilling program in mid-1995 due to low natural gas prices.

The Company, through its natural gas marketing division and wholly owned
subsidiary, Tide West Trading & Transport Company ("TWTT"), actively markets its
own natural gas production, markets natural gas to third parties and supplies
natural gas to end users. Trading and transportation net operating margins were
$464,704 for the third quarter of 1996 and $585,217 for the nine months ended
September 30, 1996, including $563,070 from TWTT from the date of the Merger to
September 30, 1996. There were no comparable revenues in 1995.

Interest Income and Other Income. Interest and other income increased by
$100,774, or 139%, for the three month comparative periods and by $142,244, or
106%, for the nine month comparative periods. The increase in interest and other
income was mainly due to short term investing of the Company's available funds
as well as gain recorded on the sale of assets.

Production Expenses. Lease operating expenses increased by $3.2 million,
or 125%, for the three month comparative periods and by $4.1 million, or 55%,
for the nine month comparative periods due to an increase in the number of
producing wells. On a Boe basis, lease operating expenses increased from $2.12
to $2.33 for the three month comparative periods and from $1.89 to $2.23 for the
nine month comparative periods. Production taxes increased by $2.0 million, or
638%, for the three month comparative periods and increased by $1.9 million, or
59%, for the nine month comparative periods due to increased production and
prices. Production taxes in 1996 reflect an adjustment for a reduction in the
Company's severance tax rate. A cumulative rate adjustment for 1995 was recorded
in the third quarter of 1995.

Depreciation, Depletion and Amortization. Depreciation, depletion and
amortization increased $8.1 million, or 129%, for the three month comparative
periods and by $8.9 million, or 43%, for the nine month comparative periods due
to an increase in production and an increase in the depletion rate. As a result
of the Acquisitions and the Merger, the Company adjusted its depletion rate in
June 1996 from $5.15 to $5.65 per Boe.

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<PAGE> 41

General and Administrative Expense. General and administrative expense
reflects costs incurred net of administrative costs directly attributable to
drilling and well operations. Such costs are included in lease operating
expenses or are capitalized. General and administrative expenses increased
$347,390, or 43%, for the three month comparative periods and decreased by
$74,147, or 2%, for the nine month comparative periods. The increase for the
three month comparative periods is primarily attributable to the Merger and the
retention of former Tide West employees. The decrease for the nine month
comparative periods reflects an increase in COPAS reimbursements for well
operating expenses from third parties in 1996 as a result of the Acquisitions.
These reimbursements have been partially offset by the increase in general and
administrative expenses attributable to the Company's Mid-Continent activities.
On a per Boe basis, general and administrative expenses decreased from $0.68 to
$0.47 for the three month comparative periods and from $0.75 to $0.56 for the
nine month comparative periods.

Interest Expense. Interest expense increased $5.0 million, or 187%, for
the three month comparative periods and by $7.8 million, or 103%, for the nine
month comparative periods due to increased borrowings under the Company's bank
credit facility.

LIQUIDITY AND CAPITAL RESOURCES

Financing Sources

The Company is committed to reducing its debt to total book capitalization
ratio and is currently evaluating various alternatives by which to do so,
including asset divestitures. The Company believes that it will be able to
arrange a favorable combination of financing alternatives to fund its ongoing
capital requirements and reduce its overall financial leverage. Until this debt
ratio has been reduced, the Company currently plans to fund capital expenditures
attributable to exploration and drilling activities primarily out of its
expected cash flow from operations. The Company has financed, and expects to
continue to finance, its acquisition activities, if any, with (i) cash flow from
operations, (ii) borrowings under the Chase Facility, (iii) public offerings of
equity and debt, (iv) divestitures (including asset monetizations) of non-core
assets and (v) the TCW Facility (as defined). See "Risk Factors -- Effects of
Leverage; Existing Indebtedness."

On June 7, 1996, the Company entered into a $180 million revolving and
senior bank credit facility with The Chase Manhattan Bank, as agent. On June 14,
1996, the Company amended the terms of the Chase Facility to increase the
maximum credit amount to $350 million. Under the terms of the Chase Facility, no
principal payments are required until June 14, 2001, assuming the Company
maintains a Borrowing Base sufficient to support the outstanding loan balance.
The Borrowing Base is based on the underlying value of the Company's oil and
natural gas properties. The Chase Facility bears interest at the Base Rate plus
0% to 0.5% or LIBOR plus 0.75% to 1.5%. As part of the amendment to the Chase
Facility, Tide West's senior bank debt in the amount of $39.5 million was fully
repaid.

The Offering was undertaken in order to replace a portion of the Company's
outstanding indebtedness under the Chase Facility with fixed rate term debt.
Upon consummation of the Offering and the application of the estimated net
proceeds therefrom, the borrowing base under the Chase Facility was amended to
$275 million, resulting in an amount available for borrowing of approximately
$100 million.

In August 1995, the Company signed a Term Sheet with a Trust Company of the
West-related entity covering a proposed $90 million non-recourse, volumetric
overriding royalty monetization facility (the "TCW Facility"). The proceeds from
the TCW Facility may be used by the Company at its discretion for a variety of
corporate purposes, including acquisitions of new properties, exploration and
development drilling, monetization of existing corporate properties, or
repayment of bank debt. Effective July 1996, the Company sold certain
non-strategic properties under the TCW Facility for total consideration of $9.4
million. The Company used the sale proceeds, plus internally generated cash, to
repay $12 million of debt.

The Company anticipates that its available borrowing capacity under the
Chase Facility, combined with its operating cash flow and the TCW Facility,
provide the Company with the financial resources and flexibility to fund current
and ongoing development activities and to meet other financial obligations. In
addition, the Company is evaluating certain non-core properties and plans to
divest approximately $65 million of such

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<PAGE> 42

properties in the coming months. The Company anticipates that it will apply the
proceeds of such divestitures to repay outstanding indebtedness. The nature of
the Company's current development strategies and other activities provide the
Company with considerable flexibility in terms of the timing and magnitude of
its capital expenditures. If the Company experiences unforeseen changes in its
working capital position or capital resources, management may revise the capital
expenditure program accordingly or alternatively may supplement the capital
position of the Company through, among other things, the issuance of additional
equity or debt securities or by entering into joint venture arrangements.

In November 1996, the Company issued $150 million of its 9 1/4% senior
subordinated notes due in 2006. The notes are general, unsecured obligations of
the Company, subordinated in right of payment to all existing and any future
senior subordinated indebtedness of the Company. The notes rank pari passu with
existing and any future senior subordinated indebtedness and senior to any
future subordinated indebtedness of the Company. The notes are fully and
unconditionally guaranteed, jointly and severally, on an unsecured, senior
subordinated basis by certain wholly owned subsidiaries of the Company (the
"Subsidiary Guarantors"). At the time of the issuance of the Notes, Orion
Acquisition, Inc. and HSRTW, Inc. were the only Subsidiary Guarantors. There are
no significant contractual restrictions on distributions from each of the
Subsidiary Guarantors to the Company.

Capital Commitments

For the nine months ended September 30, 1996, the Company incurred total
exploration, development and leasehold capital expenditures of $40.3 million.
For the balance of 1996, the Company currently estimates capital expenditures
will be $10 million to $15 million, which will be allocated in varying amounts
primarily to activities in the Company's three core geographic areas: the D-J
Basin of the Rocky Mountains, the Anadarko and Arkoma Basins of the
Mid-Continent and the on-shore Gulf Coast region. The Company continuously
evaluates its inventory of drilling opportunities and adjusts the amount and
allocation of its capital program based on a number of factors, including
seismic results, prospect readiness, product prices, service company
availability and rates, acquisitions and capital positions. See "Risk
Factors -- Replacement of Reserves."

A major component of the Company's capital expenditure program includes
costs associated with the consolidation and development drilling in the D-J
Basin, and, to a lesser extent, the development of its other Rocky Mountain
properties. In the second quarter of 1996, the Company acquired Basin's D-J
Basin properties for a total cash consideration of $125.5 million. The
Acquisitions increased the Company's D-J Basin reserves by 35 MMBoe and
production by 5,500 MMBoe per day. The Company also has incurred approximately
$29.5 million in capital expenditures in the first nine months of 1996 for
drilling and recompleting wells and building gathering systems on the Company's
existing Wattenberg Field area properties, compared to $13 million in the first
nine months of 1995.

The second component of the Company's capital expenditure program is the
continued exploitation of the properties acquired as a result of the Merger with
Tide West. Since the completion of the Merger in June 1996, the Company has
incurred total exploitation and development expenditures in the Mid-Continent
area of $2.6 million. The Company is currently evaluating a variety of
opportunities that include increased density drilling, recompletions and field
extensions.

The final component of the Company's capital expenditure program is to
develop exploitation and exploration prospects in the Gulf Coast. As described
above, the Company has entered into two joint ventures. For the nine months
ended September 30, 1996, the Company incurred total capital expenditures of
$5.5 million in the Gulf Coast.

The Company spent approximately $2.0 million under the SouthTech joint
venture in 1995 for seismic, leasehold and overhead costs. In 1996, the Company
has committed to spend approximately $2.9 million in similar costs and for
drilling, of which $2.8 million was funded as of September 30, 1996. The Company
may incur additional expenditures in SouthTech beyond the minimum commitment.

In June 1996, in connection with Chenier, the Company entered into an
exploration and development agreement with Chenier Exploration, Inc. ("CEI"),
pursuant to which the Company purchased from CEI and

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<PAGE> 43

a third party interests in properties in the Gulf Coast for approximately $1.9
million, of which $1.2 million was paid in cash and the remaining portion was
funded with a promissory note. Under the terms of the agreements, CEI will be
responsible for the generation and development of prospects in the project
areas.

In 1994, the Company entered into an exploration agreement with Union
Pacific Resources Company covering drilling locations in the D-J Basin, pursuant
to which the Company committed to spend $9.3 million during the two years ended
June 1996 and meet certain other minimum obligations. All such commitments were
met. In 1996, the Company elected to extend the agreement and committed to spend
approximately $2.4 million by June 1997. The Company has also entered into a
number of other standard industry arrangements that require the drilling of
wells or other activities. The Company believes that it will meet its
obligations under these arrangements, which individually and in the aggregate
are not material.

Working Capital and Cash Flow

Working capital at September 30, 1996, was $3.6 million. Net cash provided
by operating activities in the nine months ended September 30, 1996, was $34.0
million, up from $28.4 million in the same period in 1995. This increase is
primarily the result of increased oil and natural gas production revenues
attributable to the larger number of producing wells resulting from its drilling
activities and the wells acquired in the Acquisitions and the Merger, as well as
higher product prices. Future cash flows will be influenced by, among other
factors, the number of producing wells on line, product prices and production
constraints, none of which information is presently ascertainable. See "Risk
Factors -- Volatility of Oil and Natural Gas Prices; Marketability of
Production," "-- Estimation of Reserves" and "-- Replacement of Reserves."

Hedging

In support of the Company's ongoing oil and natural gas producing
operations, the Company utilizes various hedging strategies to hedge the price
of portions of future oil and natural gas production, which include swap,
collar, floor and ceiling arrangements. These hedging strategies address the
fluctuations in the price of a commodity at a stated market center, and the
price differential encountered when the point of sale is other than the market
center (the "basis"). Under oil and natural gas hedging agreements, the
difference between the current value for the Company's oil and natural gas,
based upon current market prices, and a fixed price is received or paid by the
Company. The Company records the payments received or made under these
agreements in its oil and natural gas sales. In connection with the Merger, the
Company assumed additional agreements of this type. See "Risk Factors -- Risks
of Hedging and Trading Transactions."

The Company has entered into forward sales and swap arrangements with
respect to approximately one-third of its gas production through the second
quarter of 1997 at an average price of approximately $1.93 per Mcf. For the same
period, the Company has hedged through collar arrangements approximately 70% of
its current oil production at prices between $19.16 and $22.80 per Bbl.

The Company's trading and transport business consists of numerous swap
positions that are entered into to realize the margins available from
dislocation in the natural gas commodity and transportation markets. The Company
generally attempts to balance its positions so that its margins are captured and
exposure to market price movement is minimized. See "Business and
Properties -- Marketing, Trading and Transportation."

The Company, through the Merger, assumed interest rate exchange agreements
with two financial institutions to hedge its interest rate on $40 million of the
Company's borrowings at 8.7% for 1996 and 8.8% for 1997 through 1999. Under the
terms of these agreements, the difference between the Company's fixed rate and
three month LIBOR rate is received or paid by the Company.

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<PAGE> 44

Contingencies

In May 1995, the Company was named as a respondent by the United States
Environmental Protection Agency (the "EPA") in an administrative order brought
under the Resource Conservation and Recovery Act ("RCRA") by the EPA against the
owner/operator of an oilfield production water evaporation facility. The Company
does not believe that its share of reclamation costs will have a material impact
on its financial position or results of operations. See Note 9 to Consolidated
Financial Statements.

FORWARD-LOOKING STATEMENT DISCLOSURE

The foregoing discussion includes statements that are not purely historical
and are "forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act, including statements
regarding the Company's expectations, hopes, beliefs, intentions and strategies
regarding the future. The Company's actual results could differ materially from
its expectations, discussed herein. Certain important factors that could cause
actual results to differ materially from the Company's expectations are
disclosed under "Risk Factors" and elsewhere in this Prospectus. See "Disclosure
Regarding Forward-Looking Statements."

The Company's expectations and plans depend significantly on future product
prices. Oil and natural gas prices are volatile, and there are several
potentially significant adverse effects to the Company that can result if
product prices decline materially. First, lower product prices will adversely
impact the Company's cash flow and could cause the Company to (i) curtail its
capital program, (ii) borrow additional amounts under the Chase Facility or
(iii) issue additional debt or equity securities on terms less favorable than
might otherwise have been available. Second, lower product prices could cause
the Borrowing Base under the Chase Facility to be reduced and certain covenant
tests to be adversely affected. Third, under rules promulgated by the
Commission, companies that follow the full cost accounting method are required
to make quarterly "ceiling test" calculations. Using September prices, the
Company has a ceiling cushion. If product prices remain low or decline further
and cannot be offset by additional reserves, the Company could be required to
write down its oil and gas properties resulting in a charge against earnings.
The likelihood or magnitude of any or all of these potential impacts are
impossible to predict or quantify at this time. See "Risk Factors -- Volatility
of Oil and Natural Gas Prices; Marketability of Production" and "-- Estimation
of Reserves."

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BUSINESS AND PROPERTIES

THE COMPANY

HS Resources, Inc. is a leading United States independent energy company
engaged in the development, acquisition, exploitation, exploration, production
and marketing of oil and natural gas. Through its experienced management and
technical staff, the Company has consistently increased reserves and production
and has established itself as one of the most efficient operators in the
industry. HSR has created a diversified asset base in three core geographic
areas: the D-J Basin of the Rocky Mountains, the Anadarko and Arkoma Basins of
the Mid-Continent and the on-shore Gulf Coast area. It has done so by executing
a large scale development drilling program focused in the Wattenberg Field area
of the D-J Basin and through the Acquisitions, the Merger and the formation of
Gulf Coast joint ventures. The Company believes that each core geographic area
adds operational and financial opportunities, positioning the Company to
maximize the benefits of its more predictable, long-lived production in the D-J
Basin, while providing meaningful exposure to higher return potential
exploitation and exploration projects in the Mid-Continent and Gulf Coast. HSR
has an inventory of growth opportunities that includes in excess of 1,850
infill, development and exploratory drilling locations and over 1.1 million
gross undeveloped acres.

The Company has achieved substantial growth in reserves, production,
revenues and EBITDA over the past five years. HSR has increased reserves from
20.8 MMBoe as of December 31, 1990, to 143.9 MMBoe on a pro forma basis as of
December 31, 1995. HSR also increased production from 0.9 MMBoe for the year
ended December 31, 1991, to 11.1 MMBoe on a pro forma basis for the year ended
December 31, 1995. Oil and natural gas revenues and EBITDA also have grown
significantly over this period, increasing from $12.8 million and $8.3 million,
respectively, for the year ended December 31, 1991, to $115.2 million and $84.8
million, respectively, on a pro forma basis for the year ended December 31,
1995. On a pro forma basis for the nine months ended September 30, 1996, the
Company generated oil and natural gas revenues of $96.5 million and EBITDA of
$73.5 million.

The Company's principal executive office is located at One Maritime Plaza,
Fifteenth Floor, San Francisco, California 94111 and its telephone number at
such address is (415) 433-5795.

BUSINESS STRATEGY

HSR's objective is to maximize its long-term value through aggressive
growth in its oil and natural gas reserves and production. The Company has
successfully achieved its goals through an ongoing strategy of (i) increasing
its diversified long-lived asset base, (ii) building a substantial inventory of
development, exploitation and exploration projects, (iii) utilizing
state-of-the-art exploration, drilling and production techniques, (iv) effecting
consolidation in its core geographic areas, (v) maintaining low operating costs,
(vi) capturing downstream value and (vii) maximizing financial flexibility.

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<PAGE> 46

45
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RECENT DEVELOPMENTS

Basin Property Acquisitions

Tide West Merger

Gulf Coast Joint Ventures

The Company's strategy in establishing operations in the Gulf Coast region
has been to joint venture with experienced Gulf Coast exploration organizations
that have existing projects and positions and are at the forefront of applied
technologies, including advanced imaging applications of 3-D seismic data. To
date, the Company has formed two joint ventures that are complementary in
approach and geographic coverage. As a result, the Company has accelerated its
cycle time in generating, analyzing and exploiting 3-D seismic projects in the
Gulf Coast. Entry into the Gulf Coast is a key component of the Company's
diversification strategy. High rate, shorter-lived production from this area
will complement the Company's existing long-lived production profile.
Furthermore, the higher return potential of the Gulf Coast provides greater
balance to the Company's overall risk profile.

SouthTech. The Company entered into its first Gulf Coast joint venture in
November 1995 by forming SouthTech on an equal ownership basis with Aspect
Resources Limited-Liability Company, a recognized leader in 3-D seismic
technology. SouthTech has acquired approximately 140 square miles of 3-D seismic
data and employs, directly or on a consulting retainer basis, five geotechnical
professionals. At September 30, 1996, SouthTech had identified approximately 60
exploration prospects and leads in four of its ten project areas. Management
believes that this joint venture will expose the Company to significant reserve
potential on a near-term basis and that completed and planned 3-D seismic
surveys will meaningfully expand future growth opportunities.

Chenier. In May 1996, the Company entered into Chenier, a joint venture
arrangement with CEI. The geological and geophysical staff of CEI also makes
extensive use of advanced 3-D seismic imaging techniques in the on-shore Gulf
Coast area. CEI employs, directly or on a full-time retainer basis, five
geotechnical professionals. The Company anticipates that Chenier will engage in
various 3-D seismic surveys covering at

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least 110 square miles in 1997. Geologic and geophysical efforts are underway,
and leases, options and seismic rights are currently being acquired in major
project areas.

OIL AND GAS PROPERTIES.

The following table summarizes certain information with respect to each of
the Company's areas of operations and production. Except as noted, all
information is presented as of September 30, 1996.

<TABLE>
<CAPTION>
PRO FORMA RESERVES(1)
-------------------------------------------
OIL PERCENT OF GROSS 3-D SEISMIC
TOTAL PERCENT OIL GAS EQUIVALENT TOTAL PRODUCTION UNDEVELOPED DATA
WELLS OPERATED (MBBLS) (MMCF) (MBOE) RESERVES (BOE/DAY) ACREAGE(2) (SQUARE MILES)
----- -------- ------- ------- ---------- ---------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
D-J Basin
Wattenberg Field
Area.............. 1,806 88% 27,236 385,000 91,403 63.5% 15,573 75,287 --
Greater D-J Basin... 449 92 2,165 51,827 10,802 7.5 1,274 271,330 70
Mid-Continent
Anadarko Basin...... 835 35 1,791 90,705 16,909 11.8 5,012 23,053 13
Arkoma Basin........ 194 58 35 48,336 8,091 5.6 1,859 8,720 --
Southern Oklahoma... 92 65 2,463 23,185 6,327 4.4 1,372 1,943 --
New Mexico/Texas.... 142 85 1,352 38,601 7,785 5.4 1,372 214 24
Gulf Coast............ -- -- -- -- -- -- -- 100,679 176
Northern Rocky
Mountains........... 26 92 290 13,844 2,598 1.8 228 673,454 193
----- --- ------ ------- ------- --- ------ --------- ---
Total: 3,544 -- 35,332 651,498 143,915 100% 26,690 1,154,680 476
===== === ====== ======= ======= === ====== ========= ===
</TABLE>

- ---------------
(1) As of December 31, 1995.

(2) Includes leasehold, option and seismic rights.

Denver-Julesburg Basin

The D-J Basin is located in Northeastern Colorado, and over recent years
has been the Company's primary producing region. HSR's D-J Basin production and
reserves are largely contained in the Codell and Niobrara formations, with
additional production from the deeper D-Sand, J-Sand and Dakota sandstone and
the shallower Sussex and Shannon sandstones. Drilling success rates are high,
and production from these formations is characterized by strong initial flows
and long-lived reserves. Production also tends to be a combination of oil and
natural gas. Natural gas produced in the central part of the D-J Basin,
including the Wattenberg Field area, has an energy content of approximately
1,250 Btu per Mcf, which enhances wellhead value.

One of the attractive features of D-J Basin geology is its multi-pay
potential. In a section only 3,500 feet thick, there are at least seven major
potentially productive formations. Three of the formations, the Codell, Niobrara
and J-Sand, are "blanket" zones in the area of the Company's Wattenberg Field
holdings, while others, such as the D-Sand and the shallower Shannon and Sussex,
are more localized.

Wattenberg Field Area. The majority of the Company's D-J Basin properties
are concentrated in the Wattenberg Field area, located approximately 35 miles
north of Denver. The primary geologic objectives of the Company's Wattenberg
Field activities are the Codell and Niobrara formations, found at depths ranging
from 6,400 to 7,700 feet. Codell/Niobrara wells usually take five to six days to
drill and are typically brought into production within 20 days from commencement
of drilling. The generally predictable, quick and trouble-free drilling
characteristics of these wells allow multiple-well, multiple-rig development
drilling programs to be conducted efficiently. Codell/Niobrara wells typically
produce approximately 50% of their reserves in the first three to five years.
The remaining reserves are recovered at a declining rate over the next 15 to 20
years. The Codell and Niobrara formations produce both oil and natural gas, with
reserves generally being approximately 70% natural gas and 30% oil.

Greater D-J Basin. The Greater D-J Basin is that portion of the D-J Basin
located generally south and east of the Wattenberg Field area. Production in the
Greater D-J Basin is generally found in D-Sand and J-Sand channels, and can
produce oil, natural gas or both. Within the D-Sand and J-Sand, high porosities
and permeabilities can yield higher flow rates than Codell and Niobrara wells.
D-Sand and J-Sand channels, while not

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<PAGE> 49

"blanket" formations in the Greater D-J Basin, can be prolific when encountered.
The D-Sand and J-Sand are stratigraphically located below the Codell and
Niobrara formations at depths ranging from 6,800 to 7,800 feet.

Mid-Continent

The Company's Mid-Continent properties are primarily located in four
geological areas (i) the Anadarko Basin in western Oklahoma and the Texas
panhandle, (ii) the Arkoma Basin in southeastern Oklahoma, (iii) South Oklahoma
and (iv) southeast New Mexico and South and East Texas.

Anadarko Basin. The Anadarko Basin is a major Mid-Continent oil and
natural gas producing area in western Oklahoma and the Texas panhandle. The
greatest concentration of oil fields occurs on the eastern flank of the basin,
with natural gas fields dominating the shelf to the west, the Texas panhandle
area and the deep basin located in southwestern Oklahoma. The majority of the
Company's production comes from the Red Fork, Springer-Morrow, Chester,
Mississippi and Hunton geological formations. Oil and natural gas are produced
in this basin from depths of only a few hundred feet to over 20,000 feet, and
most of the Company's wells produce from depths between 6,000 and 16,000 feet.

Arkoma Basin. The Arkoma Basin is a crescent-shaped region straddling the
Arkansas-Oklahoma border. The Arkoma Basin is a major natural gas region, with
most wells producing from depths between 5,000 and 12,000 feet. The majority of
the Company's production comes from the Booch, Hartshorne, Atoka, Spiro and
Cromwell geological formations, primarily at depths between 5,000 and 10,000
feet.

South Oklahoma. The South Oklahoma area is a faulted and folded geologic
province that extends across seven counties in south-central Oklahoma. The
Company's production is mainly from the Pennsylvanian Hoxbar, Deese and Springer
sands, the Hunton and Viola carbonates, and the Simpson sand. The Company's
wells in this region produce from depths ranging from 5,000 to 17,000 feet.

New Mexico/Texas. In these areas, the Company's properties are found
principally in the Delaware Basin and South and East Texas. These geologic areas
are oil prone and are comprised of numerous stratigraphic and faulted sandstone
reservoirs. The Company's Delaware Basin properties are located in New Mexico,
with most of its oil production coming from the Delaware formation at depths of
4,000 to 6,000 feet. Natural gas production is principally from the Abo
formation at depths of 4,000 to 5,000 feet. The East Texas Basin properties are
located in Houston, Freestone, Cherokee and Henderson Counties in Texas and
DeSoto Parish in Louisiana. The predominant reservoirs are normally pressured
Cretaceous sandstones and carbonates at depths ranging from 5,000 to 11,000
feet. The Company produces mostly natural gas from the Woodbine, Glen Rose,
Rodessa, Pettet and Hosston reservoirs.

Gulf Coast

The Company has established a core geographic area in the on-shore Gulf
Coast area of South Texas and Louisiana primarily through two joint ventures,
SouthTech and Chenier. Both joint ventures are staffed with explorationists who
are experienced in the integration of interpretive geology and advanced 3-D
seismic techniques. The Company's Gulf Coast activities focus on both shallow
exploitation and deeper exploration targets in the on-shore areas of South
Louisiana and the upper Texas Gulf Coast. Focus areas of SouthTech are Acadia,
Jefferson Davis and Calcasieu Parishes of South Louisiana and Chambers County in
the upper Texas Gulf Coast. The primary focus areas of Chenier are Saint Landry
and Evangeline Parishes of Louisiana. Wells in the area target the Frio,
Vicksburg, Cockfield, Sparta and Wilcox formations at depths ranging from 1,500
to 11,500 feet. The complexity faulted and prolific salt dome dominated region
possesses more than 20 reservoir targets that, in various combinations, provide
attractive multi-zone drilling prospects from as shallow as 6,500 feet to deeper
than 12,000 feet.

Northern Rocky Mountains

HSR produces in two areas of the Northern Rocky Mountains, the Williston
Basin and the Green River Basin. The Company operates wells in two fields in the
Daniels County, Montana portion of the Williston Basin. These wells produce from
the Ratcliffe, McGowan and Mission Canyon formations at depths ranging

48
<PAGE> 50

from 5,900 to 6,500 feet. The Company operates 18 wells in the Blue Forest Unit
on the Moxa Arch portion of the Green River Basin in Wyoming. The Blue Forest
Unit currently produces from the Frontier and Muddy formations found at depths
ranging from 10,500 to 11,000 feet. Although most of HSR's natural gas
production in the Blue Forest Unit has been sold under the TCW Facility, the
Company has retained development, operating and certain marketing rights.

PROJECT INVENTORY

The following table summarizes the Company's inventory of projects
identified on its properties as of September 30, 1996.

<TABLE>
<S> <C>
Development and exploitation drilling (potential drillsites)................. 1,075
Infill (potential drillsites)................................................ 750
Recompletions................................................................ 515
Exploration prospects and leads.............................................. 60
3-D seismic data (square miles).............................................. 476
</TABLE>

Denver-Julesburg Basin Projects

The Company has a significant inventory of investment opportunities in the
D-J Basin. That inventory consists of development drilling on existing spacing,
behind-pipe recompletions, potential increased density drilling, wellbore
extensions, high angle drilling and exploration leads.

Wattenberg Field Area. While the Wattenberg Field area has experienced
high levels of development activity in recent years, management believes
significant untapped reserves remain. HSR has, in its inventory, 800 development
drillsites, of which 675 are included in proved undeveloped reserves. In
addition, the Company has identified approximately 400 recompletion
opportunities in the Wattenberg Field area.

A more significant opportunity may exist in the potential for increased
density or infill drilling in the Codell and Niobrara formations within the
Wattenberg Field area. HSR has undertaken a rigorous analysis to determine the
potential for recovery of additional economic reserves through increased density
drilling. This study included extensive computer simulation to model the
producing characteristics of the formations as well as a pilot field program of
drilling, completion and production. The initial conclusions of the feasibility
study indicate that there is significant potential to recover additional
reserves at reduced costs, both within currently producing fault blocks and by
tapping fault blocks that are isolated from existing wellbores, thereby
minimizing surface disturbance. Five lateral test wells have been successfully
drilled and cased and are producing from existing wellbores. Five additional
pilot wells were drilled during the fourth quarter of 1996 and are being
evaluated. The Company estimates that there are at least 750 potentially
economic infill drillsites on its Wattenberg Field acreage.

Finally, management believes that substantial opportunities may exist to
access additional reserves through existing wellbore extensions and high angle
drilling, and the Company is conducting studies to evaluate these applications.

Greater D-J Basin. The Greater D-J Basin, where the Company owns rights to
more than 270,000 gross undeveloped acres, provides HSR with significant
exploitation and exploration potential through the use of advanced technologies
such as 3-D seismic continuity processing and geostatistical analysis. To date,
the Company has drilled approximately 100 wells in the area, with an estimated
10.8 MMBoe of proved reserves, and has 22 active projects and leads under
refinement by geotechnical staff. Geostatistical analysis using seismic
responses shows significant promise in helping not only to reduce dry-hole risk,
but to also target wells at optimal locations. For example, based on the results
from its application of seismic geostatistical analysis, HSR drilled the
Cervi-Federal #6-29, which has been in production since October 1996 at a
sustained rate of 90 Bbl and 90 Mcf per day.

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<PAGE> 51

Mid-Continent Projects

Prior to the Merger, Tide West had established a reputation as an excellent
acquiror and efficient operator of oil and natural gas properties in the
Mid-Continent region, though it was not focused on aggressive geotechnical
exploitation of its properties. Tide West owned interests in approximately 75
fields located in several Mid-Continent basins. In the Company's opinion, this
presents an opportunity for the Company to apply its expertise to prove-up and
produce new reserves from the properties acquired from Tide West. HSR has added
geological and geophysical staff to the Mid-Continent district and has begun the
process of high-grading opportunities identified at the time of the Merger and
applying technology to uncover new opportunities. In addition, the Company has
drilled six wells, five of which were successfully completed, and has performed
a number of successful recompletions.

The Company has outlined an extensive inventory of exploitation and
exploration projects in the Mid-Continent region, many of which were identified
in the limited time since the Merger. At the present time, HSR has identified
approximately 170 potential development and exploitation drilling opportunities
and 78 recompletion opportunities on its primary focus list. The following are a
few examples of such opportunities.

In the Anadarko Basin, the Company owns interests in 835 wells in numerous
fields, including Mocane-Laverne, Bivins Ranch, Bishop and Watonga, each of
which provides potentially attractive exploitation opportunities. The Company to
date has identified approximately 28 drilling opportunities and six
recompletions in these four fields. Further work is under way, including
processing of 13 square miles of 3-D seismic data on Bivins Ranch, which the
Company anticipates will lead to additional activity in these areas.

In the Arkoma Basin, the Company owns 194 wells in Kinta, Bokoshe,
Russellville and other fields. In those three fields alone, the Company has
identified approximately 18 drilling and 16 recompletion opportunities and a
coalbed methane project that, if successful, could eventually result in as many
as 85 wells.

Other areas present additional opportunities. For example, with the use of
3-D seismic, the Company has identified further drilling opportunities at La
Reforma Field in northwestern Hidalgo County, Texas, where the Company owns
interests in a 5,100 acre contiguous block.

Gulf Coast Projects

Through its SouthTech and Chenier joint ventures, the Company has assembled
a growing inventory of both exploitation and exploration projects. These joint
ventures have 14 active major projects areas and are aggressively pursuing
others. Six large 3-D seismic surveys have been acquired or are planned and are
being integrated into extensive subsurface mapping.

SouthTech has assembled seismic rights, options and leasehold interests in
approximately 78,000 gross acres and intends to expand this position in 1997.
SouthTech also has acquired over 140 square miles of 3-D seismic data and has
identified approximately 60 exploration prospects and leads in four of its ten
Gulf Coast project areas. Chenier has assembled seismic rights, options and
leases in over 20,000 gross acres. South Devillier prospect is typical of the
opportunities available to the Company through SouthTech and Chenier. South
Devillier is the first of the Company's Gulf Coast project areas to be
identified, imaged by advanced 3-D seismic technology and fully interpreted.
This interpretation has allowed the Company to image several potentially
untested fault blocks associated with an old and highly productive salt feature.
HSR has drilled its first well on the salt feature based on 3-D interpretation.
The objective Lox "B" sand was encountered as anticipated, although the well is
not capable of production in paying quantities. Based on the 3-D interpretation,
there could be as many as 12 more exploration opportunities on South Devillier
alone. The Company anticipates similar opportunities on many of its other Gulf
Coast projects.

Management believes that its expanding Gulf Coast activities will generate
a substantial inventory of exploitation and exploration opportunities in 1997
and beyond.

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<PAGE> 52

Northern Rocky Mountain Projects

The Company has a significant inventory of undeveloped acreage and 3-D
seismic data in the northern Rocky Mountain area. In the Williston Basin, HSR
has approximately 344,000 gross (185,000 net) undeveloped acres and nearly 150
square miles of 3-D seismic data. In the Sand Wash Basin the Company has
approximately 123,000 gross (50,000 net) undeveloped acres and has entered into
agreements with two major oil companies that include 3-D seismic survey
commitments (18 square miles of which have been recently acquired) and options
to spend exploration capital on additional 3-D seismic surveys and exploratory
wells over the next 18 months. HSR also has approximately 96,000 gross (69,000
net) undeveloped acres in the Greater Green River Basin. The combination of
large acreage positions, high-quality reservoirs, 3-D seismic and geostatistical
applications and, with respect to the Williston Basin, horizontal drilling gives
HSR exposure to significant potential in the Rocky Mountain area.

OIL AND NATURAL GAS RESERVES

The following table sets forth estimates of the pro forma proved oil and
natural gas reserves of the Company at December 31, 1995. That portion of the
reserves attributable to HSR (exclusive of the Acquisitions and the Merger) were
prepared by the Company and reviewed by Williamson Petroleum Consultants, Inc.,
the Company's independent petroleum reserve engineer. See "Risk
Factors -- Estimation of Reserves" and "-- Replacement of Reserves."

<TABLE>
<CAPTION>
OIL (MBBLS) NATURAL GAS (MMCF) OIL EQUIVALENTS (MBOE)
------------------------------ ------------------------------- -------------------------------
DEVELOPED UNDEVELOPED TOTAL DEVELOPED UNDEVELOPED TOTAL DEVELOPED UNDEVELOPED TOTAL
--------- ----------- ------ --------- ----------- ------- --------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
D-J Basin
Wattenberg Field Area..... 14,935 12,301 27,236 278,335 106,665 385,000 61,324 30,079 91,403
Greater D-J Basin......... 1,326 839 2,165 31,462 20,365 51,827 6,569 4,233 10,802
Mid-Continent
Anadarko Basin............ 1,782 9 1,791 82,714 7,991 90,705 15,568 1,341 16,909
Arkoma Basin.............. 35 0 35 34,159 14,177 48,336 5,728 2,363 8,091
Southern Oklahoma......... 2,327 136 2,463 22,416 769 23,185 6,063 264 6,327
New Mexico/Texas.......... 1,286 66 1,352 34,059 4,542 38,601 6,962 823 7,785
Northern Rocky Mountains.... 265 25 290 12,376 1,468 13,844 2,328 270 2,598
------ ------ ------ ------- ------- ------- ------- ------ -------
Total................... 21,956 13,376 35,332 495,521 155,977 651,498 104,542 39,373 143,915
====== ====== ====== ======= ======= ======= ======= ====== =======
</TABLE>

PRODUCTIVE OIL AND GAS WELLS

The following table sets forth the Company's productive oil and gas wells,
operated and non-operated, as of September 30, 1996.

<TABLE>
<CAPTION>
GROSS PRODUCTIVE WELLS NET PRODUCTIVE WELLS
----------------------------- -------------------------------
NON- NON-
OPERATED OPERATED TOTAL OPERATED OPERATED TOTAL
-------- -------- ----- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Oil............................ 2,035 316 2,351 1,893.9 84.2 1,978.1
Gas............................ 569 624 1,193 417.9 137.3 555.2
----- --- ----- ------- ----- -------
Total................ 2,604 940 3,544 2,311.8 221.5 2,533.3
===== === ===== ======= ===== =======
</TABLE>

ACREAGE

The following table sets forth the Company's developed and undeveloped
gross and net acreage as of September 30, 1996.

<TABLE>
<CAPTION>
DEVELOPED UNDEVELOPED
------------------ --------------------
GROSS NET GROSS NET
------- ------- --------- -------
<S> <C> <C> <C> <C>
D-J Basin.................................... 178,557 143,554 346,617 311,985
Mid-Continent................................ 464,350 179,275 33,930 25,663
Gulf Coast................................... 867 169 100,679 44,119
Northern Rocky Mountains..................... 13,141 4,244 673,454 407,385
------- ------- --------- -------
Total.............................. 656,915 327,242 1,154,680 789,152
======= ======= ========= =======
</TABLE>

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<PAGE> 53

DRILLING ACTIVITY

The following table sets forth the net wells drilled and completed by the
Company during the periods indicated.

<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED
-------------------------- SEPTEMBER 30,
1993 1994 1995 1996
---- ---- ---- -------------
<S> <C> <C> <C> <C>
DEVELOPMENT
Productive................................. 219 185 70 114
Non-Productive............................. -- 6 5 --
--- --- --- ---
Total.............................. 219 191 75 114
EXPLORATORY
Productive................................. -- 19 21 1
Non-Productive............................. -- 5 13 --
--- --- --- ---
Total.............................. -- 24 34 1
--- --- --- ---
Total Wells........................ 219 215 109 115
=== === === ===
</TABLE>

PRODUCTION

The following table sets forth the Company's oil and natural gas production
data during the periods indicated.

<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED
-------------------------- SEPTEMBER 30,
1993 1994 1995 1996
------ ------ ------ -------------
<S> <C> <C> <C> <C>
Net production:
Oil (MBbls)................................. 967 1,664 1,582 1,360
Natural gas (MMcf).......................... 14,684 20,108 21,049 23,221
Oil equivalent (MBoe)....................... 3,414 5,015 5,090 5,230
Average net daily production:
Oil (Bbls).................................. 2,648 4,559 4,333 4,965
Natural gas (Mcf)........................... 40,229 55,090 57,670 84,750
Oil equivalent (MBoe)....................... 9,353 13,740 13,945 19,090
Average sales price per unit:
Oil ($/Bbls)................................ $16.09 $14.83 $16.52 $ 20.32
Natural gas ($/Mcf)......................... 2.03 1.70 1.30 1.70
</TABLE>

MARKETING, TRADING AND TRANSPORTATION

Gas Marketing

The Company directly markets about 50% of its natural gas production from
the D-J Basin and the Mid-Continent to a variety of purchasers, including
intrastate and interstate pipelines, their marketing affiliates, independent
marketing companies and other purchasers. These sales are primarily arranged on
a monthly or daily basis or under market-sensitive agreements usually with a
term of less than one year.

In addition, the Company sells approximately 10% of its production pursuant
to a marketing strategy that capitalizes on its ability to deliver its D-J Basin
natural gas to Colorado Front Range commercial and industrial end user
customers. The proximity of the Company's D-J Basin natural gas reserves to the
local markets and its ability to deliver product to over 400 commercial and
industrial end user customers at times of peak demand provide it with a
competitive advantage over natural gas suppliers who do not have significant
local reserves. These factors enable the Company to provide superior service at
competitive prices. The Company believes that its marketing strategy provides it
with the ability to increase its margins from those

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<PAGE> 54

available on bulk sales to wholesale remarketers. In addition, the Company
believes its ability to deliver product during peak demand periods enables it to
negotiate annual contracts at prices consistently in excess of annual average
spot market prices, generally resulting in premium weighted average annual
pricing and a more stabilized sales portfolio. As a result of its implementation
of this strategy, the Company anticipates that it will deliver approximately 5
Bcf in 1996 pursuant to these arrangements.

The remaining 40% of the Company's D-J Basin and Mid-Continent natural gas
production is sold to gathering and/or processing companies on a
percent-of-proceeds or a percent-of-index basis. Under the terms of the
percent-of-proceeds contracts, the Company receives a fixed percentage of the
resale price received by the purchaser for sales of residue natural gas and
natural gas liquids recovered after gathering and processing. The revenue
received by the Company from the sale of natural gas liquids is included in
natural gas prices. Under the terms of the percent-of-index contracts, the
Company receives a fixed percentage of a natural gas index price.

In May 1996, the Company acquired TWTT through the Merger. TWTT is a wholly
owned subsidiary of HSRTW, Inc., which in turn is wholly owned by the Company.
TWTT is responsible for natural gas marketing services, including commodity
price structuring and contract administration for the Company's operations in
the Mid-Continent and Gulf Coast regions. In addition to marketing the Company's
natural gas, TWTT also purchases third party natural gas for resale. The Company
generally attempts to balance its positions so that its margins are captured and
that exposure to market price movement is minimized.

See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Natural Gas Price Considerations."

Oil Marketing

Substantially all of the Company's oil production is sold at crude
oil-based prices under contracts having a term of one year or less. Oil is sold
to 12 different purchasers at generally market sensitive rates. The most
significant purchaser of the Company's oil production currently is Amoco
Production Company, which purchases 38% of the Company's oil production. The
loss of any one particular customer would not have an adverse effect on the
Company.

FORWARD-LOOKING STATEMENT DISCLOSURE

The foregoing Business and Properties discussion includes statements that
are not purely historical and are "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act, including statements regarding the Company's expectations, hopes, beliefs,
intentions and strategies regarding the future. The Company's actual results
could differ materially from its expectations, discussed herein. Certain
important factors that could cause actual results to differ materially from the
Company's expectations are disclosed under "Risk Factors" and elsewhere in this
Prospectus.

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<PAGE> 55

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The names of the directors and executive officers of the Company and a
description of their experience and certain other information are listed below
(ages provided are as of September 30, 1996). Executive officers are appointed
by the Company's Board of Directors.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------ ---- ---------------------------------------------------------
<S> <C> <C>
Nicholas J. Sutton(1)... 51 Chairman of the Board and Chief Executive Officer
P. Michael Highum....... 46 Director and President
James E. Duffy.......... 46 Director, Vice President -- Finance and Chief Financial
Officer
Kenneth A.
Hersh(1)(2)........... 33 Director
Michael J. Savage(2).... 61 Director
Philip B. Smith......... 45 Director
Theodore Gazulis........ 42 Vice President -- Planning and Analysis
Ronald B. Jacobs........ 47 Vice President -- Government and Environmental Affairs
Annette M. Montoya...... 40 Vice President -- Accounting and Controller
James M. Piccone........ 46 Vice President, General Counsel and Secretary
George H. Solich........ 35 Vice President -- Acquisitions and Divestitures
</TABLE>

- ---------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee

Nicholas J. Sutton is a founder of the Company and has been employed
exclusively in activities relating to the Company and its oil and natural gas
business since 1978. Mr. Sutton is an attorney and practiced with the San
Francisco law firm of Pillsbury, Madison & Sutro before founding the Company.
Prior to that time, he served as a law clerk to the Chief Justice of the
California Supreme Court. He earned his law degree from the University of
California -- Hastings College of Law, and his engineering undergraduate degree
from Iowa State University. Mr. Sutton is a graduate of the Harvard Business
School's Executive Education OPM Program, is a member of the Society of
Petroleum Engineers and is a Director of the Colorado Oil and Gas Association.
He has served as Chairman of the Board and as Chief Executive Officer of the
Company since its inception in 1987.

P. Michael Highum is a founder of the Company and for the past 18 years has
been employed exclusively in activities relating to the Company and its oil and
natural gas business. Mr. Highum is an attorney and, prior to founding the
Company, practiced with the San Francisco law firm of Pillsbury, Madison &
Sutro. He earned his undergraduate degree from the University of California at
Berkeley and his law degree from the University of California -- Hastings
College of Law. He has served as a Director and as President of the Company
since its inception.

James E. Duffy has been a Director since 1990 and has been Vice
President -- Finance and Chief Financial Officer since April 1991. From 1985 to
1990, Mr. Duffy was a general partner of J.L. Feshbach & Co., an investment
banking firm specializing in the oil and natural gas business and was
responsible for acquisitions and special investments for an affiliate of that
firm. Prior to that time, he was the Chief Financial Officer of Hilliard Oil and
Gas and was a director and co-founder of several affiliated companies.
Previously, he was a manager with Arthur Young & Co. Mr. Duffy earned his
undergraduate degree from San Jose State University.

Kenneth A. Hersh has been a Director of the Company since 1990. Mr. Hersh
has been a limited partner of the general partner of Natural Gas Partners, L.P.
since 1989. Natural Gas Partners, L.P. beneficially owns approximately 20% of
the Company's common stock. Previously, he was employed by the investment
banking

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<PAGE> 56

division of Morgan Stanley & Co. Incorporated where he was a member of the
firm's energy group specializing in oil and natural gas financing and
acquisition transactions. Mr. Hersh also served as a director of Tide West prior
to the Merger. Mr. Hersh earned his MBA from the Stanford University Graduate
School of Business and his undergraduate degree from Princeton University.

Michael J. Savage has been a Director of the Company since January 1996.
Mr. Savage has been the Managing Director of the San Francisco Opera since 1994.
He was the founder of Savage Petroleum Company and served as its President from
1988 to 1995. From 1983 to 1988, Mr. Savage served as President of Merlin
Petroleum, of which he was also the founder. From 1978 to 1982, he served as
President of Sohio Petroleum Company. Prior to 1978, he served as President of
BP Alaska, and in 1982 he was Director for Africa of BP in London, and also
served as personnel director for the BP Group. He received his undergraduate
degree in Business Management from the Manchester Business School in Manchester,
England, and his masters degree in Law and Economics from Cambridge University.
Mr. Savage serves on the Board of Directors of the San Francisco Opera,
Woodward-Clyde Group, Inc. and the San Francisco Conservatory of Music.

Philip B. Smith has been a Director of the Company since June 1996. Mr.
Smith served as President, Chief Executive Officer and director of Tide West
from November 1992 until the time of the Merger. He was President and director
of Draco Petroleum, Inc., a wholly owned subsidiary of Tide West from April 1992
until the time of the Merger, and of Tide West Trading & Transport Company,
formerly Draco Production Company, a wholly owned subsidiary of Tide West, from
July 1989 until the time of the Merger. From May 1986 until April 1991, Mr.
Smith was a Senior Vice President of Mega Natural Gas Company, a natural gas
gathering company and the former parent company of Tide West Trading & Transport
Company and its predecessor companies. Prior to that time, he held various
technical and management positions at other independent and major oil and
natural gas companies.

Theodore Gazulis has served in his current capacity since 1991 and has
primary responsibility for economic and project analyses, systems applications
and planning functions. Prior to joining the Company in 1984, Mr. Gazulis was an
exploration economist for Sohio Petroleum Company where he evaluated exploration
plays, prospects and acquisitions and implemented computer-based financial and
economic models to facilitate such economic analysis. From 1978 to 1981, he
served in a similar capacity for Amoco Production Company. Mr. Gazulis received
an MBA from the University of California at Los Angeles and his undergraduate
degree from Stanford University. Mr. Gazulis is a member of the American
Association of Petroleum Geologists.

Ronald B. Jacobs has been a member of the Company's management team since
1982 and has served as Vice President -- Government and Environmental Affairs
since May of 1995. Prior to attending law school, Mr. Jacobs was the controller
of the equipment leasing subsidiary of a large conglomerate. Mr. Jacobs is
responsible for all of the Company's governmental and environmental affairs. Mr.
Jacobs is a member of the Board of Directors of the Rocky Mountain Oil and Gas
Association, RMOGA -- Colorado and Colorado Oil and Gas Association and
co-chairs its legal, legislative and regulatory committee. He has served by
appointment on several legislative committees in the State of Colorado. Mr.
Jacobs earned his law degree from the University of Mississippi, where he
concentrated on oil and natural gas law, and his undergraduate degree from
Georgia State University.

Annette M. Montoya heads the Company's accounting staff and has served in
her current capacity since 1991. Prior to joining the Company in 1987, Ms.
Montoya was the accounting manager for MidCon Central Exploration Company
("MidCon Central"). Prior to her employment with MidCon Central, Ms. Montoya was
an auditor with Price Waterhouse & Co. Ms. Montoya earned her undergraduate
degree from Regis College and is a member of the Council of Petroleum
Accountants Society.

James M. Piccone has served as the Company's Vice President, General
Counsel and Secretary since he joined the Company in May 1995. From 1983 to May
1995, Mr. Piccone was a partner at the law firm of

55
<PAGE> 57

Davis, Graham & Stubbs LLP where he served in various capacities including the
head of the firm's Transactions Department and Practice Group Leader of the
firm's Energy Group. From 1980 through 1983 he was an associate at the firm, and
from 1978 to 1980 he was an associate at the law firm of Kutak, Rock & Huie. Mr.
Piccone earned his law degree from the University of Colorado School of Law and
his undergraduate degree from the University of Colorado.

George H. Solich has served the Company as Vice President -- Acquisitions &
Divestitures since he joined the Company in December 1996. From 1983 to November
1996, Mr. Solich served in various capacities for Apache Corporation, most
recently as Director, Business Development where he was responsible for the
company's acquisition and divestiture of producing oil and gas properties. Prior
to his employment with Apache Corporation, Mr. Solich worked for Belco Petroleum
Corporation. Mr. Solich earned his undergraduate degree from the University of
Colorado at Boulder and his graduate degree in marketing and finance from the
University of Colorado at Denver.

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<PAGE> 58

DESCRIPTION OF OTHER INDEBTEDNESS

The following summaries of the Chase Facility and the Existing Indenture do
not purport to be complete and are subject to and qualified in their entirety by
reference to the applicable credit agreement and indenture, which are filed as
exhibits with the Commission.

CHASE FACILITY

On June 14, 1996, the Company entered into an Amended and Restated Credit
Agreement pursuant to the Chase Facility with Chase, as agent (the "Agent"), and
the lenders signatory thereto (the "Lenders") maturing on June 14, 2001. Amounts
borrowed under the Chase Facility are secured by a first lien on certain of the
Company's Wattenberg Field properties. Loans under the Chase Facility are
unconditionally guaranteed by Orion Acquisition, Inc., a Delaware corporation,
and HSRTW, Inc., a Delaware corporation, wholly owned subsidiaries of the
Company.

Interest and Fees

Outstanding borrowings under the Chase Facility bear interest at the option
of the Company at either (i) the Base Rate (defined as the higher of one-half of
one percent over the applicable federal funds rate, or the prime rate as
announced by Chase) plus the Applicable Margin or (ii) LIBOR plus the Applicable
Margin. The Applicable Margin ranges from 0.75% to 1.5% on EuroDollar loans and
0% to 0.5% on Base Rate loans depending on the percentage of the Threshold
Amount (as defined in the Chase Facility) utilized by the Company from time to
time. As of September 30, 1996, the Company had utilized 93.33% of the Threshold
Amount, and therefore, the Applicable Margin was 1.25% for EuroDollar loans and
0.25% for Base Rate loans. The weighted average interest rate under the Chase
Facility on September 30, 1996, (including the effects of interest rate hedging
arrangements covering $80 million in principal amount of indebtedness) was
7.63%. Commitment fees under the Chase Facility range from 0.3% to 0.5% of the
unutilized portion of the available Borrowing Base (as defined in the Chase
Facility), depending upon the percentage of the Threshold Amount utilized. As of
September 30, 1996, the applicable commitment fee was 0.375%.

Borrowing Base

The amount of credit available at any time under the Chase Facility is the
lesser of the Aggregate Maximum Credit Amount (initially $350 million) or the
Borrowing Base. As of September 30, 1996, the Borrowing Base was $335 million.
The Borrowing Base was redetermined as of November 27, 1996, to be $275 million
and the Threshhold Amount provision removed from the Chase Facility. The
Borrowing Base may be redetermined by the Agent and each Lender from time to
time.

Covenants

The Chase Facility contains customary affirmative and restrictive covenants
that, among other things, limit the Company and its subsidiaries with respect to
indebtedness, liabilities, liens, dividends, loans, investments and purchases
and sales of assets, unless certain consents are received from the Lenders
holding two-thirds of the outstanding borrowings under the Chase Facility.

Events of Default

The Chase Facility contains customary events of default, including, among
other things, and subject to applicable grace periods, payment defaults,
material misrepresentations, covenant defaults, certain bankruptcy events and
judgment defaults.

9 7/8% SENIOR SUBORDINATED NOTES DUE 2003

In November 1993, the Company publicly offered and sold $75,000,000
aggregate principal amount at maturity of 9 7/8% Senior Subordinated Notes due
2003 (the "9 7/8% Notes"). Interest on the 9 7/8% Notes is payable on June 1 and
December 1 of each year, and such payments commenced on June 1, 1994. The 9 7/8%

57
<PAGE> 59

Notes are redeemable at the option of the Company, in whole or in part, at any
time on or after December 1, 1998, at the redemption prices set forth in the
Existing Indenture, plus accrued interest to the date of redemption. The 9 7/8%
Notes are not subject to any mandatory sinking fund.

Each holder of the 9 7/8% Notes may require the Company to repurchase such
holder's 9 7/8% Notes in the event of a Change of Control (as defined in the
Existing Indenture) at 101% of the principal amount thereof, plus accrued
interest to the date of repurchase.

The 9 7/8% Notes are general unsecured obligations of the Company
subordinated in right of payment to all existing and future senior indebtedness
of the Company. The 9 7/8% Notes are unconditionally guaranteed on a joint and
several basis by the Initial Subsidiary Guarantors. As of September 30, 1996,
there was approximately $75.0 million principal amount outstanding and
approximately $2.5 million accrued interest payable on the 9 7/8% Notes.

The Existing Indenture contains certain covenants that, among other things,
limit the ability of the Company and certain of its subsidiaries to pay
dividends or make certain other restricted payments, incur additional
indebtedness, enter into transactions with affiliates, incur liens, engage in
certain sale and leaseback arrangements, make certain asset dispositions and
merge or consolidate with, or transfer substantially all of their assets to, any
other person. The Existing Indenture also contains certain covenants that limit
the ability of certain subsidiaries to incur additional indebtedness, issue
preferred stock and restrict their ability to make payments to the Company. In
addition, the Company is obligated, under certain circumstances, to offer to
repurchase the 9 7/8% Notes at a price equal to 100% of the principal amount
thereof, plus accrued and unpaid interest to the date of repurchase, with the
net cash proceeds of certain sales or other dispositions of assets. Such
repurchase obligation is required to be satisfied prior to the satisfaction of
any similar obligation contained in the Indenture.

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<PAGE> 60

DESCRIPTION OF THE EXCHANGE NOTES

The Exchange Notes will be issued under an indenture (the "Indenture")
entered into among the Company, the Initial Subsidiary Guarantors and Harris
Trust and Savings Bank, as trustee (the "Trustee"). The Exchange Notes will be
issued under the same Indenture as the Outstanding Notes and the Exchange Notes
and the Outstanding Notes will constitute a single series of debt securities
under the Indenture. In the event that the Exchange Offer is consummated, any
Outstanding Notes that remain outstanding after consummation of the Exchange
Offer and the Exchange Notes issued in the Exchange Offer will vote together as
a single class for purposes of determining whether holders of the requisite
percentage in outstanding principal amount of Notes (as defined herein) have
taken certain actions or exercised certain rights under the Indenture. The
Exchange Notes and the Outstanding Notes are sometimes collectively referred to
herein as the "Notes."

The terms of the Notes will include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (the "1939 Act"). The following summary of certain terms and provisions
of the Notes and the Indenture does not purport to be complete and is qualified
in its entirety by reference to the 1939 Act, the Notes and the Indenture,
including the definitions therein of certain terms used below. A copy of the
Indenture and the form of Notes is available upon request to the Company at the
address set forth below under "Available Information."

The definitions of certain capitalized terms used in the following summary
are set forth below under "-- Certain Definitions." Capitalized terms used in
this summary and not otherwise defined below have the meanings assigned to them
in the Indenture. For purposes of this Section, references to the "Company"
shall mean HS Resources, Inc., excluding its Subsidiaries.

GENERAL

The Notes will mature on November 15, 2006, and will be limited to an
aggregate principal amount of $150,000,000. The Notes will bear interest at a
rate of 9 1/4% per annum from November 27, 1996 (the "Issue Date"), or from the
most recent interest payment date to which interest has been paid, payable
semiannually on May 15 and November 15 of each year, beginning on May 15, 1997,
to the person in whose name the Note (or any predecessor Note) is registered at
the close of business on the immediately preceding May 1 or November 1, as the
case may be.

Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes will be exchangeable and transferable, at an office or agency of
the Company, one of which will be maintained for such purpose in The City of New
York (which initially will be the Corporate Trust Office of the Trustee) or such
other office or agency permitted under the Indenture. At the option of the
Company, payment of interest may be made by check mailed to the person entitled
thereto as shown on the Security Register. The Notes will be issued in
denominations of $1,000 and integral multiples thereof.

The payment of principal, premium, if any, and interest on the Notes is
unconditionally guaranteed on a senior subordinated and unsecured basis by the
Subsidiary Guarantors. Any Restricted Subsidiary that is a Significant
Subsidiary is required to be a Subsidiary Guarantor. See "-- Subsidiary
Guaranties."

SUBORDINATION

The Notes will be subordinated in right of payment to the prior payment in
full in cash of all existing and future Senior Indebtedness, pari passu in right
of payment with existing and any future Pari Passu Indebtedness (including the
9 7/8% Notes and amounts owed for goods, materials and services purchased in the
ordinary course of business), and senior in right of payment to any future
Subordinated Indebtedness of the Company. The Notes will be structurally
subordinated to all existing and future liabilities of Subsidiaries of the
Company other than the Subsidiary Guarantors. The Subsidiary Guaranties will be
subordinated in right of payment to the prior payment in full of all Senior
Indebtedness of Subsidiary Guarantors, pari passu in right of payment with
existing and any future Pari Passu Indebtedness of Subsidiary Guarantors
(including any guaranties of the 9 7/8% Notes), and senior in right of payment
to any future Subordinated Indebtedness of the

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Subsidiary Guarantors. The Subsidiary Guaranties will be structurally
subordinated to all existing and future liabilities of Subsidiaries of
Subsidiary Guarantors that are not also Subsidiary Guarantors.

As of September 30, 1996, after giving effect to the consummation of the
Offering and the application of the estimated net proceeds therefrom, the
Company's outstanding Senior Indebtedness was approximately $173.0 million, the
Company's outstanding Pari Passu Indebtedness (not including approximately $2.5
million of accrued interest on the 9 7/8% Notes) was approximately $225.0
million (including $75.0 aggregate principal amount of outstanding 9 7/8%
Notes), the Company had no outstanding Subordinated Indebtedness, the total
consolidated indebtedness of the Company would have aggregated approximately
$398.0 million and the total liabilities and indebtedness of the Company's
Subsidiaries other than the Initial Subsidiary Guarantors (including trade
payables, deferred taxes and accrued liabilities) was approximately $8.4
million. The Company and its Subsidiaries have other liabilities, including
contingent liabilities, which may be significant. Although the Indenture
contains limitations on the amount of additional Indebtedness that the Company
and its Restricted Subsidiaries may Incur, the amounts of such Indebtedness
could be substantial and, in any case, such Indebtedness may be Senior
Indebtedness or Pari Passu Indebtedness. See "Risk Factors -- Subordination of
the Notes and the Subsidiary Guaranties" and "-- Certain Covenants -- Limitation
on Indebtedness."

Upon any payment or distribution to creditors (whether in cash, property,
debt, equity or other securities, a combination thereof or otherwise) of the
Company in a voluntary or involuntary liquidation or dissolution of the Company,
whether total or partial, or in a bankruptcy, reorganization, insolvency,
receivership, assignment for the benefit of creditors, marshalling of assets or
similar proceeding relating to the Company or its property:

(i) holders of Senior Indebtedness shall be entitled to receive
payment in full in cash of all amounts due or to become due on or in
respect of all Senior Indebtedness before holders of the Notes shall be
entitled to receive any Note Payment (as defined); and

(ii) until all Senior Indebtedness is paid in full in cash, any Note
Payment to which holders of the Notes would be entitled but for the
subordination provisions of the Indenture shall be made to holders of
Senior Indebtedness, as their interests may appear.

Upon any Senior Indebtedness becoming due and payable, whether at the
Stated Maturity thereof or by acceleration or otherwise, such Senior
Indebtedness shall be paid in full in cash, or the immediate payment thereof
duly provided for in cash, before the Company or any Person acting on behalf of
the Company shall directly or indirectly pay, prepay, redeem, retire, repurchase
or otherwise acquire for value, or make any deposits in respect of the discharge
or defeasance of, or make other payment or distribution (whether in cash,
property, securities or a combination thereof) on account of principal of (or
premium, if any) or interest on, any Notes (collectively, a "Note Payment").

No Note Payment shall be made if at the time of such Note Payment there
exists a default in payment of all or any portion of any Senior Indebtedness,
and such default shall not have been cured or waived in writing or the benefits
of this provision waived in writing by or on behalf of the holders of such
Senior Indebtedness. In addition, during the continuance of any event of default
(other than a default in payment of all or any portion of any Senior
Indebtedness) with respect to any Specified Senior Indebtedness, as such event
of default is defined therein or in the instrument under which it is
outstanding, permitting the holders of such Specified Senior Indebtedness to
accelerate the maturity thereof, and upon written notice thereof given by the
Principal Agent to the Trustee, with a copy to the Company (the delivery of
which shall not affect the validity of the notice thereof to the Trustee), then,
unless and until such event of default shall have been cured or waived or shall
have ceased to exist, no Note Payment shall be made; provided that if the
holders of the Specified Senior Indebtedness to which the default related have
not declared such Specified Senior Indebtedness to be immediately due and
payable within 179 days after the occurrence of such default (or have declared
such Specified Senior Indebtedness to be immediately due and payable and within
such period have rescinded such declaration of acceleration), then the Company
shall resume making any and all unpaid scheduled Note Payments. In no event
shall such a payment blockage period described in the preceding sentence extend
beyond 179 days from the date on which such payment blockage period commenced.
Not more than one payment blockage period may be commenced within any
consecutive 365-day period with respect to the Notes. No event of default that
existed or was continuing on the date of the commencement of any payment

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blockage period with respect to the Specified Senior Indebtedness initiating
such payment blockage period shall be, or be made, the basis for the
commencement of a second payment blockage period by the holder or holders of
such Specified Senior Indebtedness at any time after the 365-day period referred
to in the preceding sentence unless such event of default shall have been cured
or waived for a period of not less than 90 consecutive days. A failure to make
any payment with respect to the Notes as a result of the rights of the holders
of Senior Indebtedness described in this paragraph will not have any effect on
the right of the holders of the Notes to accelerate the maturity thereof as a
result of such payment default.

The Subsidiary Guaranties will be subordinated to Senior Indebtedness of a
Subsidiary Guarantor to the same extent and in the same manner as the Notes are
subordinated to Senior Indebtedness. In addition, the holders of Specified
Senior Indebtedness of a Subsidiary Guarantor will have rights corresponding to
those of holders of Specified Senior Indebtedness of the Company.

As a result of the subordination provisions described above, in the event
of insolvency of the Company, funds that would otherwise be payable to Holders
of Notes will be paid or turned over to the holders of Senior Indebtedness or
Senior Indebtedness of a Subsidiary Guarantor, as applicable, to the extent
necessary to pay such Senior Indebtedness or Senior Indebtedness of a Subsidiary
Guarantor, as applicable, in full.

The Indenture will provide that the subordination provisions of the
Indenture applicable to the Notes and the Subsidiary Guaranties may not be
amended, waived or modified in a manner that would adversely affect the rights
of the holders of any Specified Senior Indebtedness of the Company or any
Specified Senior Indebtedness of a Subsidiary Guarantor unless the holders of
such Indebtedness consent in writing (in accordance with the provisions of such
Indebtedness) to such amendment, waiver or modification.

SUBSIDIARY GUARANTIES

Under the circumstances described below, the Company's payment obligations
under the Notes will be jointly and severally guaranteed by the Subsidiary
Guarantors. The Subsidiary Guaranty of each Subsidiary Guarantor will be an
unsecured, senior subordinated obligation of such Subsidiary Guarantor. See
"-- Subordination." The only Subsidiary Guarantors of the Notes will be the
Initial Subsidiary Guarantors.

The Indenture will require the Company to cause any Restricted Subsidiary
that becomes a Significant Subsidiary (and any Significant Subsidiary that was
previously an Unrestricted Subsidiary which becomes a Restricted Subsidiary)
after the issuance of the Notes to execute and deliver to the Trustee a
supplemental indenture pursuant to which such Significant Subsidiary will become
a Subsidiary Guarantor. Subject to the preceding sentence, any Subsidiary
Guarantor that is no longer a Significant Subsidiary may, by execution and
delivery to the Trustee of a supplemental indenture satisfactory to the Trustee,
be released from its Subsidiary Guaranty and cease to be a Subsidiary Guarantor.
In addition, certain mergers, consolidations and dispositions of Property may
result in the addition of additional Subsidiary Guarantors and/or the release of
Subsidiary Guarantors. See "-- Merger, Consolidation and Sale of Substantially
All Assets." Any Subsidiary Guarantor that is designated an Unrestricted
Subsidiary in accordance with the terms of the Indenture shall be released from
and relieved of its obligations under its Subsidiary Guaranty pursuant to a
supplemental indenture satisfactory to the Trustee.

The obligations of each Subsidiary Guarantor will be limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor under
its Subsidiary Guaranty or pursuant to its contribution obligations under the
Indenture, result in the obligations of such Subsidiary Guarantor under its
Subsidiary Guaranty not constituting a fraudulent conveyance or fraudulent
transfer under federal, state or foreign law. Each Subsidiary Guarantor that
makes a payment or distribution under a Subsidiary Guaranty shall be entitled to
a contribution from each other Subsidiary Guarantor in a pro rata amount based
on the Adjusted Net Assets of each Subsidiary Guarantor. See "Risk
Factors -- Fraudulent Conveyance."

Each Subsidiary Guarantor may merge or consolidate with or dispose of its
assets to the Company or a Wholly Owned Restricted Subsidiary that is a
Subsidiary Guarantor except to the extent any such transaction

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is limited by the covenant described under "-- Merger, Consolidation and Sale of
Substantially All Assets." In addition, each Subsidiary Guarantor may merge or
consolidate with or dispose of its assets to any Person (other than the Company
or a Wholly Owned Restricted Subsidiary that is a Subsidiary Guarantor),
regardless of whether such Person is an Affiliate of such Subsidiary Guarantor,
if (i) immediately after such transaction, and giving effect thereto, no Default
or Event of Default has occurred and is continuing;(ii) such transaction was
subject to, and consummated in compliance with, as appropriate, either the
covenant described under the caption "Certain Covenants -- Limitation on Asset
Sales" or the covenant described under the caption "Merger, Consolidation and
Sale of Substantially All Assets"; and (iii) the Company shall have delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that such transaction complies with the above provisions and that all conditions
precedent relating to such transaction have been complied with.

OPTIONAL REDEMPTION

The Notes are not redeemable prior to November 15, 2001. At any time on or
after November 15, 2001, the Notes are redeemable at the option of the Company,
in whole or in part, on not less than 30 nor more than 60 days' notice, at the
following redemption prices (expressed as percentages of principal amount), plus
accrued and unpaid interest (if any) to the date of redemption.

If redeemed during the 12-month period commencing November 15 of the years
indicated:

<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
-------------------------------------------------------------------------- ----------
<S> <C>
2001...................................................................... 104.625%
2002...................................................................... 103.083%
2003...................................................................... 101.542%
2004 and thereafter....................................................... 100.000%
</TABLE>

Notwithstanding the foregoing, prior to November 15, 1999, the Company may
redeem up to 33 1/3% of the aggregate principal amount of the Notes originally
outstanding at a redemption price of 109.25% of the principal amount thereof,
plus accrued and unpaid interest (if any) thereon to the redemption date, with
the net proceeds of one or more Equity Offerings of the Company; provided that
at least 66 2/3% of the aggregate principal amount of the Notes originally
issued remains outstanding immediately after the occurrence of such redemption;
and provided, further, that such redemption shall occur not later than 75 days
after the date of the closing of any such Equity Offering. The redemption shall
be made in accordance with procedures set forth in the Indenture.

SINKING FUND

There will be no mandatory sinking fund payments for the Notes.

REPURCHASE AT THE OPTION OF HOLDERS UPON A CHANGE OF CONTROL

Upon the occurrence of a Change of Control, each Holder of Notes shall have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such holder's Exchange Notes pursuant to the
offer described below (the "Change of Control Offer") at a purchase price in
cash equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, thereon to the purchase date (the "Change of Control
Payment").

Within 30 days following any Change of Control, the Company shall mail a
notice to each Holder stating, among other things: (i) that a Change of Control
has occurred and a Change of Control Offer is being made pursuant to the
Indenture and that all Notes (or portions thereof) properly tendered will be
accepted for payment; (ii) the purchase price and the purchase date, which shall
be, subject to any contrary requirements of applicable law, no fewer than 30
days nor more than 60 days from the date the Company notifies the Holders of the
occurrence of the Change of Control (the "Change of Control Payment Date");
(iii) that any Notes (or portions thereof) accepted for payment (and duly paid
on the Change of Control Payment Date)

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pursuant to the Change of Control Offer shall cease to accrue interest after the
Change of Control Payment Date; (iv) that any Notes (or portions thereof) not
properly tendered will continue to accrue interest; (v) a description of the
transaction or transactions constituting the Change of Control; (vi) the
procedures that Holders of Notes must follow in order to tender their Notes (or
portions thereof) for payment and the procedures that Holders of Notes must
follow in order to withdraw an election to tender Notes (or portions thereof)
for payment; and (vii) all other instructions and materials necessary to enable
Holders to tender Notes pursuant to the Change of Control Offer.

The Company will comply, to the extent applicable, with the requirements of
Rules 13e-4 and 14e-1 under the Exchange Act, and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable in
connection with the purchase of Notes in connection with a Change of Control. To
the extent that the provisions of any securities laws or regulations conflict
with the provisions relating to the Change of Control Offer, the Company will
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations described above by virtue thereof.

There can be no assurance that the Company will be able to fund any such
repurchase of the Notes. Certain existing credit agreements (including the Bank
Credit Facility) contain and any future credit agreements or other agreements
relating to indebtedness of the Company may contain prohibitions or restrictions
on the Company's ability to effect a Change of Control Payment. In the event a
Change of Control occurs at a time when such prohibitions or restrictions are in
effect, the Company could seek the consent of its lenders to the purchase of
Notes or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will be effectively prohibited from purchasing Notes. In
addition, the indenture governing the 9 7/8% Notes contains a provision that
grants to each holder of the 9 7/8% Notes, upon the occurrence of a change of
control as defined in such indenture, the right to require the Company to
repurchase all or any part of such holder's 9 7/8% Notes at a purchase price
equal to 101% of the principal amount thereof, plus accrued and unpaid interest,
if any, thereon to the purchase date. Under the terms of the Indenture and the
indenture governing the 9 7/8% Notes, the Change of Control Offer and a change
of control offer under the 9 7/8% Notes might be made substantially
contemporaneously, which could negatively impact the Company's ability to fund
the Change of Control Offer. The Company's failure to purchase tendered Notes
would constitute an Event of Default under the Indenture that would, in turn,
constitute a default under the Bank Credit Facility and the 9 7/8% Notes. In
such circumstances, the subordination provisions in the Indenture would likely
restrict payments to the Holders of the Notes. See "Risk Factors -- Effects of
Leverage; Existing Indebtedness" and "-- Subordination."

A "Change of Control" shall be deemed to occur if (i) any "person" or
"group" (within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange
Act or any successor provision to either of the foregoing, including any group
acting for the purpose of acquiring, holding or disposing of securities within
the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than any one or
more of the Permitted Holders, becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act) of 40% or more of the total voting power of
all classes of the Voting Stock of the Company and/or warrants or options to
acquire such Voting Stock, calculated on a fully diluted basis, (ii) the sale,
lease, conveyance or transfer of all or substantially all of the assets of the
Company and its Restricted Subsidiaries taken as a whole (other than to any
Wholly Owned Restricted Subsidiary) shall have occurred, (iii) the stockholders
of the Company shall have approved any plan of liquidation or dissolution of the
Company, (iv) the Company consolidates with or merges into another Person or any
Person consolidates with or merges into the Company in any such event pursuant
to a transaction in which the outstanding Voting Stock of the Company is
reclassified into or exchanged for cash, securities or other property, other
than any such transaction where (A) the outstanding Voting Stock of the Company
is reclassified into or exchanged for Voting Stock of the surviving corporation
that is Capital Stock and (B) the holders of the Voting Stock of the Company
immediately prior to such transaction own, directly or indirectly, not less than
a majority of the Voting Stock of the surviving corporation immediately after
such transaction or (v) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Company's Board of Directors
(together with any new directors whose election or appointment by such board or
whose nomination for election by the stockholders of the Company was approved by
a vote of a majority of the directors then still in office who were either
directors at

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the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Company's Board of Directors then in office.

The definition of Change of Control includes a phrase relating to the sale,
lease, conveyance or transfer of "all or substantially all" of the Company's
assets. The Indenture will be governed by New York law, and there is no
established quantitative definition under New York law of "substantially all" of
the assets of a corporation. Accordingly, if the Company and its Restricted
Subsidiaries were to engage in a transaction in which they disposed of less than
all of the assets of the Company and its Restricted Subsidiaries taken as a
whole, a question of interpretation could arise as to whether such disposition
was of "substantially all" of their assets and whether the Company was required
to make a Change of Control Offer.

Except as described above with respect to a Change of Control, the
Indenture will not contain any other provisions that permit the Holders of the
Notes to require that the Company repurchase or redeem the Notes in the event of
a takeover, recapitalization or similar restructuring. See "Risk
Factors -- Risks Relating to a Change of Control."

BOOK-ENTRY SYSTEM

The Outstanding Notes (other than those referred to in the next succeeding
paragraph) have been and the Exchange Notes will initially be issued in the form
of one or more Global Securities (as defined in the Indenture) held in
book-entry form. Such Notes will be deposited with the Trustee as custodian for
the Depository, and the Depository or its nominee will initially be the sole
registered holder of the Notes for all purposes under the Indenture. Except as
set forth below, a Global Security may not be transferred except as a whole by
the Depository to a nominee of the Depository or by a nominee of the Depository
to the Depository.

The Outstanding Notes that were originally issued to institutional
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act) who are not QIBs were issued in definitive form. Upon the tender
of an Outstanding Note in definitive form, such Note will, unless the Global
Security has previously been exchanged for Exchange Notes in definitive form, be
exchanged for an interest in the Global Security representing the principal
amount of the Exchange Notes being exchanged. The Exchange Notes that are issued
as described below under "-- Certificated Notes" will be issued in definitive
form. Upon the transfer of an Exchange Note in definitive form, such Note will,
unless the Global Security has been exchanged for Exchange Notes in definitive
form, be exchanged for an interest in the Global Security representing the
principal amount of the Exchange Notes being transferred.

Upon the issuance of a Global Security in the Exchange Offer, the
Depository or its nominee will credit, on its internal system, the accounts of
persons holding through it with the respective principal amounts of the
individual beneficial interests represented by such Global Security exchanged in
the Exchange Offer. Ownership of beneficial interests in a Global Security will
be limited to persons that have accounts with the Depository ("participants") or
persons that may hold interests through participants. Ownership of beneficial
interests by participants in a Global Security will be shown on, and the
transfer of that ownership interest will be effected only through, records
maintained by the Depository or its nominee for such Global Security. Ownership
of beneficial interests in such Global Security by persons that hold through
participants will be shown on, and the transfer of that ownership interest
within such participant will be effected only through, records maintained by
such participant. The laws of some jurisdictions require that certain purchasers
of securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Security.

Payment of principal of, premium, if any, on and interest on Notes
represented by any such Global Security will be made to the Depository or its
nominee, as the case may be, as the sole registered owner and the sole Holder of
the Notes represented thereby for all purposes under the Indenture. None of the
Company, the Trustee, any agent of the Company or the Initial Purchasers will
have any responsibility or liability for any aspect of the Depository's reports
relating to or payments made on account of beneficial ownership interests in a
Global Security representing any Notes or for maintaining, supervising or
reviewing any of the Depository's records relating to such beneficial ownership
interests.

The Company has been advised by the Depository that upon receipt of any
payment of principal of, premium, if any, on or interest on, any Global
Security, the Depository will immediately credit, on its book-

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<PAGE> 66

entry registration and transfer system, the accounts of participants with
payments in amounts proportionate to their respective beneficial interests in
the principal or face amount of such Global Security, as shown on the records of
the Depository. The Company expects that payments by participants to owners of
beneficial interests in a Global Security held through such participants will be
governed by standing instructions and customary practices as is now the case
with securities held for customer accounts registered in "street name" and will
be the sole responsibility of such participants.

So long as the Depository or its nominee, is the registered owner or holder
of such Global Security, the Depository or such nominee, as the case may be,
will be considered the sole owner or holder of the Notes represented by such
Global Security for the purposes of receiving payment on the Notes, receiving
notices and for all other purposes under the Indenture and the Notes. Beneficial
interests in Notes will be evidenced only by, and transfers thereof will be
effected only through, records maintained by the Depository and its
participants. Except as provided above, owners of beneficial interests in a
Global Security will not be entitled to and will not be considered the holders
of such Global Security for any purposes under the Indenture. Accordingly, each
person owning a beneficial interest in a Global Security must rely on the
procedures of the Depository and, if such person is not a participant, on the
procedures of the participant through which such person owns its interest, to
exercise any rights of a holder under the Indenture. The Company understands
that under existing industry practices, in the event that the Company requests
any action of holders or that an owner of a beneficial interest in a Global
Security desires to give or take any action that a Holder is entitled to give or
take under the Indenture, the Depository would authorize the participants
holding the relevant beneficial interest to give or take such action, and such
participants would authorize beneficial owners owning through such participants
to give or take such action or would otherwise act upon the instructions of
beneficial owners owning through them.

The Depository has advised the Company that it will take any action
permitted to be taken by a Holder of Notes (including the presentation of Notes
for exchange as described below) only at the direction of one or more
participants to whose account with the Depository interests in the Global
Security are credited and only in respect of such portion of the aggregate
principal amount of the Notes as to which such participant or participants has
or have given such direction.

The Depository has advised the Company that the Depository is a
limited-purpose trust company organized under the Banking Law of the State of
New York, a "banking organization" within the meaning of New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered under the Exchange Act. The Depository was created to hold the
securities of its participants and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depository's participants include securities brokers and dealers (including the
Initial Purchasers), banks, trust companies, clearing corporations and certain
other organizations some of whom (and/or their representatives) own the
Depository. Access to the Depository's book-entry system is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly.

CERTIFICATED NOTES

The Exchange Notes represented by a Global Security are exchangeable for
certificated Exchange Notes only if (i) the Depository notifies the Company that
it is unwilling or unable to continue as a depository for such Global Security
or if at any time the Depository ceases to be a clearing agency registered under
the Exchange Act, and a successor depository is not appointed by the Company
within 90 days, (ii) the Company executes and delivers to the Trustee a notice
that such Global Security shall be so transferable, registrable and
exchangeable, and such transfer shall be registrable or (iii) there shall have
occurred and be continuing an Event of Default or an event which, with the
giving of notice or lapse of time or both, would constitute an Event of Default
with respect to the Notes represented by such Global Security. Any Global
Security that is exchangeable for certificated Notes pursuant to the preceding
sentence will be transferred to, and registered and exchanged for, certificated
Notes in authorized denominations and registered in such names as the

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Depository or its nominee holding such Global Security may direct. Subject to
the foregoing, a Global Security is not exchangeable for certificated Exchange
Notes, except for a Global Security of like denomination to be registered in the
name of the Depository or its nominee. In the event that a Global Security
becomes exchangeable for certificated Exchange Notes, (i) certificated Exchange
Notes will be issued only in fully registered form in denominations of $1,000 or
integral multiples thereof, (ii) payment of principal, any repurchase price, and
interest on the certificated Notes will be payable, and the transfer of the
certificated Notes will be registrable, at the office or agency of the Company
maintained for such purposes and (iii) no service charge will be made for any
issuance of the certificated Notes, although the Company may require payment of
a sum sufficient to cover any tax or governmental charge imposed in connection
therewith.

CERTAIN COVENANTS

Limitation on Indebtedness

The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, Incur any
Indebtedness (including Acquired Indebtedness) unless, after giving pro forma
effect to the application of the proceeds thereof, no Default or Event of
Default would occur as a consequence of such Incurrence or be continuing
following such Incurrence and either (i) after giving pro forma effect to the
Incurrence of such Indebtedness and the receipt and application of the proceeds
thereof, the Consolidated Interest Coverage Ratio would be at least 2.5 to 1.0
or (ii) such Indebtedness is Permitted Indebtedness.

"Permitted Indebtedness" means any and all of the following: (i)
Indebtedness under the Bank Credit Facility, provided that the aggregate
principal amount of all such Indebtedness under the Bank Credit Facility at any
one time outstanding does not exceed the greater of (A) $275 million and (B) an
amount equal to the sum of (1) $170 million and (2) 15% of Adjusted Consolidated
Net Tangible Assets determined as of the date of the Incurrence of such
Indebtedness; provided, however, that the maximum amount available to be
outstanding under the Bank Credit Facility shall be permanently reduced by the
amount of Net Available Cash from Asset Sales used to permanently repay
Indebtedness under the Bank Credit Facility and not subsequently reinvested in
Additional Assets or used to permanently reduce other Indebtedness to the extent
permitted pursuant to the "Limitation on Asset Sales" covenant; (ii)
Indebtedness arising under the Indenture, including without limitation the Notes
and the Subsidiary Guaranties; (iii) Indebtedness owed to the Company or any of
its Wholly Owned Restricted Subsidiaries by any of its Restricted Subsidiaries
or Indebtedness owed by the Company to any of its Wholly Owned Restricted
Subsidiaries (but only so long as such Indebtedness is held by the Company or a
Wholly Owned Restricted Subsidiary); (iv) Indebtedness under Permitted Hedging
Agreements of the Company and its Restricted Subsidiaries (including guaranties
thereof by the Company or another Restricted Subsidiary, as applicable); (v)
Indebtedness in connection with one or more standby letters of credit,
Guarantees, performance bonds or other reimbursement obligations issued in the
ordinary course of business of the Company and its Restricted Subsidiaries and
not in connection with the borrowing of money or the obtaining of advances or
credit (other than advances or credit on open account, includable in current
liabilities, for goods and services in the ordinary course of business of the
Company and its Restricted Subsidiaries and on terms and conditions which are
customary in the Oil and Gas Business and other than the extension of credit
represented by such letter of credit, Guarantee or performance bond itself);
(vi) obligations relating to net oil or gas balancing positions arising in the
ordinary course of business of the Company and its Restricted Subsidiaries which
are customary in the Oil and Gas Business; (vii) Permitted Non-Recourse
Indebtedness of the Company or any of its Restricted Subsidiaries; (viii)
Indebtedness outstanding on the Issue Date that is not repaid with the proceeds
of the Offering and not otherwise permitted in clauses (i) through (vii) above;
(ix) Indebtedness not otherwise permitted to be Incurred pursuant to this
paragraph, provided that the aggregate principal amount of all Indebtedness
incurred pursuant to this clause (ix), together with all Indebtedness Incurred
pursuant to clause (x) of this paragraph in respect of Indebtedness previously
Incurred pursuant to this clause (ix), at any one time outstanding does not
exceed $25 million; (x) Permitted Refinancing Indebtedness Incurred in exchange
for, or the proceeds of which are used to refinance, (A) Indebtedness referred
to in clauses (ii), (viii) and (ix) of this paragraph (including Indebtedness
previously incurred pursuant to this clause (x)) or (B) Indebtedness Incurred

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pursuant to clause (i) of the first paragraph of the "Limitation on
Indebtedness" covenant; and (xi) accounts payable or other obligations of the
Company or any Restricted Subsidiary to trade creditors created or assumed by
the Company or such Restricted Subsidiary in the ordinary course of business in
connection with the obtaining of goods or services.

Limitation on Liens

The Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, enter into, create, incur,
assume or suffer to exist any Lien on or with respect to any Property of the
Company or such Restricted Subsidiary, whether owned on the Issue Date or
acquired after the Issue Date, or any interest therein or any income or profits
therefrom, unless the Notes (and, in the case of a Restricted Subsidiary, a
Subsidiary Guaranty from such Subsidiary) are secured equally and ratably with
(or prior to) any and all other obligations secured by such Lien, except that
the Company and its Restricted Subsidiaries may enter into, create, incur,
assume or suffer to exist Liens securing Senior Indebtedness, Liens securing
Senior Indebtedness of a Subsidiary Guarantor, Liens securing Indebtedness of a
Restricted Subsidiary that is not a Subsidiary Guarantor and Permitted Liens.

Limitation on Issuance and Sale of Capital Stock of Restricted Subsidiaries

The Indenture provides that the Company will not (i) permit any Restricted
Subsidiary to issue any Capital Stock (including, without limitation, pursuant
to any merger, consolidation, recapitalization or similar transaction) other
than to the Company or a Wholly Owned Restricted Subsidiary or (ii) permit any
Person other than the Company or a Restricted Subsidiary to own any Capital
Stock of any other Restricted Subsidiary (other than directors' qualifying
shares), except for (A) a sale to a Person of the Capital Stock of a Restricted
Subsidiary, which sale was made by the Company or a Restricted Subsidiary
subject to, and in compliance with, as appropriate, either the "Limitation on
Asset Sales" covenant or the "Limitation on Restricted Payments" covenant, and
such Person's subsequent ownership of such Capital Stock of such Restricted
Subsidiary, (B) the issuance of Capital Stock by a Restricted Subsidiary to a
Person other than the Company or a Wholly Owned Restricted Subsidiary, which
issuance was made subject to and in compliance with the "Limitation on Asset
Sales" covenant, and such Person's subsequent ownership of such Capital Stock
and (C) the ownership of Capital Stock of a Restricted Subsidiary owned by a
Person at the time such Restricted Subsidiary became a Restricted Subsidiary or
acquired by such Person in connection with the formation of the Restricted
Subsidiary (and in the case of the formation of such Restricted Subsidiary, the
issuance of such Capital Stock). If a Person (other than a Material Restricted
Subsidiary) whose Capital Stock was issued or sold in a transaction described in
this paragraph is, as a result of such transaction, no longer a Restricted
Subsidiary, then any Capital Stock of such Person retained by the Company or a
Restricted Subsidiary shall be treated as a Restricted Payment made at the time
of such transaction in an amount equal to that portion of the Fair Market Value
of such Person represented by such retained Capital Stock.

Limitation on Restricted Payments

(i) The Indenture provides that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, make any
Restricted Payment if, at the time of and after giving effect to the proposed
Restricted Payment (A) any Default or Event of Default would have occurred and
be continuing, (B) the Company could not incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the "Limitation on
Indebtedness" covenant or (C) the aggregate amount expended or declared for all
Restricted Payments from the Issue Date would exceed the sum (without
duplication) of the following:

(1) 50% of the aggregate Consolidated Net Income of the Company
accrued on a cumulative basis commencing on the last day of the fiscal
quarter immediately preceding the Issue Date, and ending on the last day of
the fiscal quarter ending on or immediately preceding the date of such
proposed Restricted Payment (or, if such aggregate Consolidated Net Income
shall be a loss, minus 100% of such loss), plus

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(2) the aggregate net cash proceeds or the Fair Market Value of
Property other than cash received by the Company on or after the Issue
Date, from the issuance or sale (other than to a Subsidiary of the Company)
of Capital Stock of the Company or any options, warrants or rights to
purchase Capital Stock of the Company, plus

(3) the aggregate net cash proceeds received by the Company as capital
contributions to the Company (other than from a Subsidiary of the Company)
on or after the Issue Date, plus

(4) the aggregate net cash proceeds received by the Company upon the
exercise of any options, warrants or rights to purchase shares of Capital
Stock of the Company (other than from a Subsidiary of the Company) on or
after the Issue Date, plus

(5) the aggregate net cash proceeds received on or after the Issue
Date by the Company from the issuance or sale (other than to any Subsidiary
of the Company) of convertible debt or convertible Redeemable Stock that
has been converted into or exchanged for Capital Stock of the Company,
together with the aggregate cash received by the Company at the time of
such conversion or exchange, plus

(6) to the extent not otherwise included in the Company's Consolidated
Net Income, an amount equal to the net reduction in any Investment made by
the Company and its Restricted Subsidiaries subsequent to the Issue Date in
any Person resulting from (a) payments of interest on debt, dividends,
repayments of loans or advances, or other transfers or distributions of
Property, in each case to the Company or any Restricted Subsidiary from any
Person, and in an amount not to exceed the book value of such Investment
previously made in such Person that were treated as Restricted Payments, or
(b) the designation of any Unrestricted Subsidiary as a Restricted
Subsidiary, in each case in an amount not to exceed the lesser of (x) the
book value of such Investment previously made in such Unrestricted
Subsidiary that were treated as Restricted Payments, and (y) the Fair
Market Value of such Unrestricted Subsidiary, plus

(7) $15 million.

(ii) The limitations set forth in paragraph (i) above do not prevent the
Company or any Restricted Subsidiary from making the following Restricted
Payments so long as, at the time thereof, no Default or Event of Default shall
have occurred and be continuing (except in the case of clause (A) below under
which a Restricted Payment may be made even if a Default or Event of Default has
occurred and is continuing):

(A) the payment of any dividend on Capital Stock of the Company or any
Restricted Subsidiary within 60 days after the declaration thereof, if at
such declaration date such dividend could have been paid in compliance with
paragraph (i) above;

(B) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company or any Restricted Subsidiary, in
exchange for, or out of the aggregate net cash proceeds of, a substantially
concurrent issuance and sale (other than to a Subsidiary of the Company) of
Capital Stock of the Company;

(C) the making of any principal payment on or the repurchase,
redemption, defeasance or other acquisition or retirement for value, prior
to any scheduled principal payment, scheduled sinking fund payment or
maturity, of any Pari Passu Indebtedness or Subordinated Indebtedness
(other than Redeemable Stock) in exchange for, or out of the aggregate net
cash proceeds of, a substantially concurrent issuance and sale (other than
to a Subsidiary of the Company) of Capital Stock of the Company;

(D) the making of any principal payment on or the repurchase,
redemption, defeasance or other acquisition or retirement for value of Pari
Passu Indebtedness or Subordinated Indebtedness in exchange for, or out of
the aggregate net cash proceeds of, a substantially concurrent Incurrence
(other than a sale to a Subsidiary of the Company) of Pari Passu
Indebtedness or Subordinated Indebtedness so long as such new Indebtedness
is Permitted Refinancing Indebtedness and such new Indebtedness (1) has an
Average Life to Stated Maturity that is longer than the Average Life to
Stated Maturity of the Notes and

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(2) has a Stated Maturity for its final scheduled principal payment that is
at least 91 days later than the Stated Maturity of the final scheduled
principal payment of the Notes; and

(E) loans made to officers, directors and employees of the Company or
any Restricted Subsidiary approved by the Board of Directors (or a duly
authorized officer), the proceeds of which are used (1) to purchase common
stock of the Company in connection with a restricted stock or employee
stock purchase plan, or to exercise stock options received pursuant to an
employee or director stock option plan or other incentive plan, in a
principal amount not to exceed the exercise price of such stock options and
(2) to refinance loans, together with accrued interest thereon, made
pursuant to item (1) of this clause (E), provided, however, that such loans
do not exceed $7.5 million at any one time outstanding.

The actions described in clauses (A), (B), (C) and (E) of this paragraph
(ii) shall be Restricted Payments that shall be permitted to be taken in
accordance with this paragraph (ii) but shall reduce the amount that would
otherwise be available for Restricted Payments under paragraph (i) (provided
that any dividend paid pursuant to clause (A) of this paragraph (ii) shall
reduce the amount that would otherwise be available under paragraph (i) when
declared, but not also when subsequently paid pursuant to such clause (A)), and
the actions described in clause (D) of paragraph (ii) shall be Restricted
Payments that shall be permitted to be taken in accordance with this paragraph
(ii) but shall not reduce the amount that would otherwise be available for
Restricted Payments under paragraph (i).

"Permitted Investments" means any and all of the following: (i) Permitted
Short-Term Investments; (ii) Investments in property, plant and equipment used
in the ordinary course of business and Permitted Business Investments; (iii)
Investments by a Restricted Subsidiary in the Company; (iv) Investments by the
Company or any Restricted Subsidiary in any Restricted Subsidiary; (v)
Investments by the Company or any Restricted Subsidiary in a Person, if such
Person or a Subsidiary of such Person will, as a result of the making of such
Investment and all other contemporaneous related transactions, become a
Restricted Subsidiary or be merged or consolidated with or transfer or convey
all or substantially all of its assets to the Company or a Restricted
Subsidiary; (vi) Investments in Persons in the Oil and Gas Business (other than
Restricted Subsidiaries) intended to promote the Company's strategic business
objectives in an amount not to exceed $20 million at any one time outstanding
(which Investments shall be deemed to be no longer outstanding only upon the
return of capital thereof); (vii) Investments in the form of securities received
from Asset Sales, provided that such Asset Sales are made in compliance with the
"Limitation on Asset Sales" covenant; (viii) Investments in negotiable
instruments held for collection, lease, utility and other similar deposits, and
stock, obligations or other securities received in settlement of debts
(including, without limitation, under any bankruptcy or other similar
proceeding) owing to the Company or any of its Restricted Subsidiaries as a
result of foreclosure, perfection or enforcement of any Liens or Indebtedness,
in each of the foregoing cases in the ordinary course of business of the Company
or such Restricted Subsidiary; (ix) Investments in the form of Permitted Hedging
Agreements of the Company and its Restricted Subsidiaries; (x) relocation
allowances, advances and loans to officers, directors and employees of the
Company or any of its Restricted Subsidiaries in the ordinary course of
business, provided such items do not exceed $2.5 million at any one time
outstanding; and (xi) Investments not otherwise permitted to be made pursuant to
this paragraph in an amount not to exceed $5 million at any one time
outstanding.

Limitation on Asset Sales

The Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, consummate any Asset Sale unless (i) the Company or
such Restricted Subsidiary, as the case may be, receives consideration at the
time of such Asset Sale at least equal to the Fair Market Value of the Property
subject to such Asset Sale and (ii) all of the consideration paid to the Company
or such Restricted Subsidiary in connection with such Asset Sale is in the form
of cash, Permitted Short-Term Investments, Exchanged Properties, Liquid
Securities or the assumption by the purchaser of liabilities of the Company
(other than liabilities of the Company that are by their terms subordinated to
the Notes), liabilities of any Subsidiary Guarantor that made such Asset Sale
(other than liabilities of a Subsidiary Guarantor that are by their terms
subordinated to such Subsidiary Guarantor's Subsidiary Guaranty), or liabilities
of any Restricted Subsidiary that made such Asset Sale and which is not a
Subsidiary Guarantor, in each case as a result of which the

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Company and its Restricted Subsidiaries are no longer liable ("Permitted
Consideration"); provided, however, that the Company and its Restricted
Subsidiaries shall be permitted to receive Property other than Permitted
Consideration if, after giving pro forma effect to such Asset Sale, the
aggregate Fair Market Value (evaluated at the time of such Asset Sale) of all
such Property other than Permitted Consideration received from Asset Sales made
after the Issue Date, which Property is held by the Company or any Restricted
Subsidiary at the time of such Asset Sale, shall not exceed 10% of Adjusted
Consolidated Net Tangible Assets.

The Net Available Cash from Asset Sales may be applied by the Company or a
Restricted Subsidiary, to the extent the Company or such Restricted Subsidiary
elects (or is required by the terms of any Senior Indebtedness), (i) to prepay,
repay or purchase Senior Indebtedness of the Company or a Subsidiary Guarantor
or Indebtedness of a Restricted Subsidiary (in each case excluding Indebtedness
owed to the Company or an Affiliate of the Company) in a manner that results in
the permanent reduction in the balance of such Indebtedness and, if applicable,
a permanent reduction in any outstanding commitment for future Incurrences of
Indebtedness thereunder; (ii) to reinvest in Additional Assets (including by
means of an Investment in Additional Assets by a Restricted Subsidiary with Net
Available Cash received by the Company or another Restricted Subsidiary); (iii)
to purchase Notes or 9 7/8% Notes pursuant to a 9 7/8% Notes Asset Sale Offer
(as defined) (excluding Notes or 9 7/8% Notes owned by the Company or an
Affiliate of the Company); or (iv) in such other manner as the Company or such
Restricted Subsidiary may elect in compliance with the other provisions of the
Indenture.

Any Net Available Cash from an Asset Sale not applied in accordance with
clauses (i), (ii) and (iii) of the preceding paragraph within 360 days from the
date of such Asset Sale shall constitute "Excess Proceeds." When the aggregate
amount of Excess Proceeds exceeds $10 million, the Company will be required to
make an offer to purchase Exchange Notes having an aggregate principal amount
equal to the aggregate amount of Excess Proceeds (the "Prepayment Offer") at a
purchase price equal to 100% of the principal amount of such Notes plus accrued
and unpaid interest thereon (if any) to the Purchase Date (as defined) in
accordance with the procedures (including prorating in the event of
oversubscription) set forth in the Indenture, but, if the terms of any Pari
Passu Indebtedness require that a Pari Passu Offer (as defined) be made
contemporaneously with the Prepayment Offer, then the Excess Proceeds shall be
prorated between the Prepayment Offer and such Pari Passu Offer in accordance
with the aggregate outstanding principal amounts of the Notes and such Pari
Passu Indebtedness, and the aggregate principal amount of Notes for which the
Prepayment Offer is made shall be reduced accordingly. If the aggregate
principal amount of Notes tendered by Holders thereof exceeds the amount of
available Excess Proceeds, then such Excess Proceeds will be allocated pro rata
according to the principal amount of the Notes tendered and the Trustee will
select the Notes to be purchased in accordance with the Indenture. To the extent
that any portion of the amount of Excess Proceeds remains after compliance with
the second sentence of this paragraph and provided that all Holders of Notes
have been given the opportunity to tender their Notes for purchase as described
in the following paragraph in accordance with the Indenture, the Company or such
Restricted Subsidiary may use such remaining amount for general corporate
purposes otherwise permitted under the Indenture and the amount of Excess
Proceeds will be reset to zero.

To the extent required by any Pari Passu Indebtedness, and provided there
is a permanent reduction in the principal amount of such Pari Passu
Indebtedness, the Company may make an offer to purchase the 9 7/8% Notes (a
"9 7/8% Notes Asset Sale Offer") or any other such Pari Passu Indebtedness (a
"Pari Passu Offer") using Net Available Cash. The indenture governing the 9 7/8%
Notes requires the Company to make an offer to purchase the 9 7/8% Notes in the
event of certain types of asset sales. Although similar in concept to the
Prepayment Offer, the specific terms of the 9 7/8% Notes asset sale purchase
offer differ materially from the terms of the Prepayment Offer, including,
without limitation, the requirement that reinvestment or repayment of
Indebtedness must be completed within 180 days after the asset sale giving rise
to such obligation. Accordingly, it is likely that any 9 7/8% Notes Asset Sale
Offer would be made prior to the Prepayment Offer. In addition, future Pari
Passu Indebtedness could provide for Pari Passu Offers to be made simultaneously
with the Prepayment Offer. In the event of a Pari Passu Offer made
simultaneously with the Prepayment Offer, the Excess Proceeds shall be prorated
between the Pari Passu Offer and the Prepayment Offer in accordance with the
outstanding principal amount of the Notes and such Pari Passu Indebtedness as
noted

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above. In either case, the existence of a Pari Passu Offer could result in a
decrease in the amount of Excess Proceeds available for the Prepayment Offer.
See "Risk Factors -- Effects of Leverage; Existing Indebtedness."

The Company will comply, to the extent applicable, with the requirements of
Rules 13e-4 and 14e-1 under the Exchange Act and any other securities laws or
regulations thereunder to the extent such laws and regulations are applicable in
connection with the purchase of Notes as described above. To the extent that the
provisions of any securities laws or regulations conflict with the provisions
relating to the Prepayment Offer, the Company will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations described above by virtue thereof.

Incurrence of Layered Indebtedness

The Indenture provides that (i) the Company will not Incur any Indebtedness
that is subordinated or junior in right of payment to any Senior Indebtedness
unless such Indebtedness constitutes Indebtedness that is junior to, or pari
passu with, the Notes in right of payment, and (ii) no Subsidiary Guarantor
shall Incur any Indebtedness that is subordinated or junior in right of payment
to any other Indebtedness of such Subsidiary Guarantor unless such Indebtedness
is, by its terms, pari passu with or subordinated in right of payment to such
Subsidiary Guarantor's Subsidiary Guaranty.

Limitation on Transactions with Affiliates

The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, enter into or suffer
to exist any transaction or series of related transactions (including, without
limitation, the sale, purchase, exchange or lease of assets, property or
services) with any Affiliate of the Company unless (i) such transaction or
series of related transactions is on terms that are no less favorable to the
Company or such Restricted Subsidiary, as the case may be, than would be
available in a comparable transaction in arm's-length dealings with an unrelated
third party, (ii) with respect to a transaction or series of related
transactions involving payments in excess of $1 million in the aggregate, the
Company delivers an Officers' Certificate to the Trustee certifying that such
transaction complies with clause (i) above, and (iii) with respect to a
transaction or series of transactions involving payments in excess of $5 million
in the aggregate, the Company delivers an Officers' Certificate to the Trustee
certifying that (A) such transaction complies with clause (i) above and (B) such
transaction or series of related transactions has been approved by a majority of
the disinterested directors of the Board of Directors of the Company.

The limitations of the preceding paragraph do not apply to:

(i) the payment of reasonable and customary regular fees to directors
of the Company or any of its Restricted Subsidiaries who are not employees
of the Company or any of its Restricted Subsidiaries;

(ii) indemnities of officers and directors of the Company or any
Subsidiary consistent with such Person's bylaws and applicable statutory
provisions;

(iii) any employee compensation and other benefit arrangements entered
into by the Company or any of its Subsidiaries in the ordinary course of
business;

(iv) relocation allowances, advances and loans made to officers,
directors and employees of the Company and its Restricted Subsidiaries
provided such items do not exceed $2.5 million in the aggregate at any one
time outstanding;

(v) transactions among the Company and its Restricted Subsidiaries;

(vi) loans constituting Restricted Payments made pursuant to and in
compliance with paragraph (ii), clause (E) of the "Limitation on Restricted
Payments" covenant; and

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of the Company and its Restricted Subsidiaries so long as such operating
agreements are in a form customary in the Oil and Gas Business.

Limitation on Payment Restrictions Affecting Restricted Subsidiaries

The Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, create, assume or otherwise cause or suffer to exist
or to become effective any consensual encumbrance or restriction on the ability
of any Restricted Subsidiary to (i) pay dividends or make any other
distributions on its Capital Stock or Redeemable Stock held by the Company or a
Restricted Subsidiary, (ii) make payments in respect of any Indebtedness owed to
the Company or any of its Restricted Subsidiaries, (iii) make loans or advances
to the Company or any of its Restricted Subsidiaries or (iv) transfer any of its
assets to the Company or any of its Restricted Subsidiaries, other than (A)
consensual encumbrances or restrictions required by the Bank Credit Facility
that are not more restrictive than those in effect under the Bank Credit
Facility on the Issue Date, (B) with respect to clause (iv) above, customary
provisions restricting subletting, assignment, pledging or transfer of any
Property that is a lease, license, contract or similar type of Property, (C)
consensual encumbrances or restrictions in instruments governing Indebtedness of
a Person acquired by the Company or any Restricted Subsidiary at the time of
such acquisition, provided that such Indebtedness was not Incurred in
anticipation of such acquisition, (D) with respect to clause (iv) above,
purchase money obligations for property acquired in the ordinary course of
business, (E) with respect to clause (iv) above, customary restrictions
contained in asset sale agreements limiting the transfer of such assets pending
the closing of such sale and (F) consensual encumbrances or restrictions in
instruments governing Indebtedness Incurred to refinance, refund, extend or
renew Indebtedness referred to in clauses (C) and (D) above, provided that the
payment restrictions contained therein are not more restrictive taken as a whole
than those provided for in the Indebtedness being refinanced, refunded, extended
or renewed.

MERGER, CONSOLIDATION AND SALE OF SUBSTANTIALLY ALL ASSETS

The Indenture provides that (i) the Company will not merge or consolidate
with or into any other Person (whether or not the Company is the surviving
entity), and (ii) the Company will not and will not permit its Restricted
Subsidiaries to, directly or indirectly, sell, transfer, assign, lease, convey
or otherwise dispose of all or substantially all of the Property of the Company
and its Restricted Subsidiaries taken as a whole in any one transaction or a
series of transactions (including, without limitation, dispositions pursuant to
mergers, consolidations, Investments and Production Payments and Reserve Sales),
in each case unless: (A) the Surviving Entity shall be a corporation organized
and existing under the laws of the United States of America or a State thereof
or the District of Columbia; (B) if the Company is not the Surviving Entity, the
Surviving Entity expressly assumes, by supplemental indenture satisfactory to
the Trustee, executed and delivered to the Trustee by the Surviving Entity, the
due and punctual payment of the principal of, premium, if any, and interest on
all the Notes, according to their tenor, and the due and punctual performance
and observance of all of the covenants and conditions of the Indenture to be
performed by the Company (and in the case of clause (ii) above, the Company and
the Surviving Entity shall both be considered as the issuer of the Notes); (C)
in the case of the sale, transfer, assignment, lease, conveyance or other
disposition of all or substantially all of the Property of the Company and its
Restricted Subsidiaries taken as a whole, such Property shall have been
transferred as an entirety or virtually as an entirety to one Person; (D)
immediately before and after giving effect to such transaction or series of
transactions on a pro forma basis, no Default or Event of Default shall have
occurred and be continuing; (E) except in the case of a merger of the Company
with a Restricted Subsidiary, immediately after giving effect to such
transaction or series of transactions on a pro forma basis, the Surviving Entity
would be able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under the "Limitation on Indebtedness" covenant; (F)
except in the case of a merger of the Company with a Restricted Subsidiary,
immediately after giving effect to such transaction or series of transactions on
a pro forma basis, the Surviving Entity shall have a Consolidated Net Worth
equal to or greater than the Consolidated Net Worth of the Company immediately
prior to the transaction or series of transactions; (G) if the Company is not
the Surviving Entity, then (1) each Subsidiary Guarantor (unless it is the
Surviving Entity) shall have executed and delivered to the Trustee a
supplemental indenture satisfactory to the Trustee confirming that such
Subsidiary Guarantor's Subsidiary Guaranty remains in full force and

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effect and guarantees the Surviving Entity's obligations under the Indenture and
the Exchange Notes, (2) each Significant Subsidiary of the Surviving Entity
(determined immediately after giving effect to such transaction or series of
transactions on a pro forma basis) shall have executed and delivered to the
Trustee a supplemental indenture satisfactory to the Trustee pursuant to which
such Person becomes a Subsidiary Guarantor and guarantees the Notes pursuant to
the terms of a Subsidiary Guaranty and (3) in the case of clause (ii) above, the
Company shall have executed and delivered to the Trustee a supplemental
indenture satisfactory to the Trustee pursuant to which the Company confirms its
obligations for the due and punctual payment of the principal of, premium, if
any, and interest on all the Notes, according to their tenor, and the due and
punctual performance and observance of all of the covenants and conditions of
the Indenture to be performed by the Company; and (H) the Company and, if the
Company is not the Surviving Entity, the Surviving Entity, each shall have
delivered to the Trustee Officers' Certificates (attaching the calculations to
demonstrate compliance with clauses (E) and (F) above) and an Opinion of
Counsel, each stating that such merger, consolidation or disposition and any
such supplemental indentures comply with the above provisions and that all
conditions precedent relating to such transaction or transactions have been
complied with. The term "Surviving Entity" shall mean the Person referred to in
clauses (i) and (ii) above (1) formed by or surviving any such merger or
consolidation involving the Company or (2) to which any such sale, transfer,
assignment, lease, conveyance or other disposition is made.

In addition to, and not in limitation of the preceding paragraph, the
Indenture further provides that (i) the Company will not permit any Material
Restricted Subsidiary to merge or consolidate with or into any other Person
(whether or not such Material Restricted Subsidiary survives such merger or
consolidation) and (ii) the Company will not permit any Material Restricted
Subsidiary to directly or indirectly issue Capital Stock or Redeemable Stock in
a single transaction or a series of transactions (including, without limitation,
engaging in any recapitalization or similar transaction) if, after giving effect
to such issuance (and all possible conversions, exercises and similar events
with respect to any such stock (whether or not then convertible or exercisable)
in order to reach a fully diluted, fully converted basis), such Material
Restricted Subsidiary would no longer be a Subsidiary of the Company, in each
case unless: (A) immediately before and after giving effect to such transaction
or series of transactions on a pro forma basis, no Default or Event of Default
shall have occurred and be continuing; (B) except in the case of a merger of a
Material Restricted Subsidiary with the Company or a Wholly Owned Restricted
Subsidiary, immediately after giving effect to such transaction or series of
transactions on a pro forma basis, the Company would be able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) under the
"Limitation on Indebtedness" covenant; (C) except in the case of a merger of a
Material Restricted Subsidiary with the Company or a Wholly Owned Restricted
Subsidiary, immediately after giving effect to such transaction or series of
transactions on a pro forma basis, the Company shall have a Consolidated Net
Worth equal to or greater than the Consolidated Net Worth of the Company
immediately prior to the transaction or series of transactions; (D) the Material
Restricted Subsidiary Survivor shall have executed and delivered to the Trustee,
as appropriate, either (1) a supplemental indenture satisfactory to the Trustee
confirming that such Material Restricted Subsidiary Survivor's Subsidiary
Guaranty remains in full force and effect and guarantees the Company's
obligations under the Indenture and the Notes, or (2) a supplemental indenture
satisfactory to the Trustee pursuant to which such Material Restricted
Subsidiary Survivor becomes a Subsidiary Guarantor and guarantees the Notes
pursuant to the terms of a Subsidiary Guaranty, and (E) the Company and such
Material Restricted Subsidiary Survivor each shall have delivered to the Trustee
Officers' Certificates (in the case of the Company, attaching the calculations
to demonstrate compliance with clauses (B) and (C) above) and an Opinion of
Counsel, each stating that such merger, consolidation or issuance and any such
supplemental indentures comply with the above provisions and that all conditions
precedent relating to such transaction or transactions have been complied with.
The term "Material Restricted Subsidiary Survivor" shall mean (1) in the case of
clause (i) above, the Person surviving any such merger or consolidation or (2)
in the case of clause (ii) above, such Material Restricted Subsidiary.

With respect to each transaction or series of transactions described above,
giving effect to such transaction or series of transactions on a pro forma basis
shall include, without limitation, (i) treating any Indebtedness not previously
the obligation of the Company or any of its Restricted Subsidiaries which
becomes an obligation of the Company or any of its Restricted Subsidiaries in
connection with or as a result of

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such transaction or series of transactions as having been Incurred at the time
of such transaction or series of transactions, and (ii) giving effect to any
Indebtedness Incurred or anticipated to be Incurred in connection with such
transaction or series of transactions.

REGISTRATION RIGHTS AGREEMENT

The Company entered into the Registration Agreement on November 27, 1996,
which required the Company, among other things, to commence this Exchange Offer
and maintain its effectiveness on the terms set forth herein. In addition to its
obligations in connection herewith (and assuming the Exchange Offer is
consummated prior to April 25, 1997), the Company will have a continuing
obligation to register Outstanding Notes or Exchange Notes for resale under Form
S-3 (the "Shelf Registration") in the following circumstances: (i) upon the
request of an Initial Purchaser following consummation of the Exchange Offer,
(ii) upon the request of any other holder of Outstanding Notes that is
ineligible to participate in the Exchange Offer (see "Exchange Offer -- Resales
of Exchange Notes") or (iii) upon the request of an Initial Purchaser that
received Exchange Notes pursuant to the Exchange Offer or otherwise that are not
freely tradeable. If the Company is required to file a Shelf Registration, it
must keep such registration statement effective to permit resales thereunder for
three years (or one year if filed at the request of an Initial Purchaser).

CERTAIN DEFINITIONS

Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other capitalized terms used herein for which no
definition is provided.

"Acquired Indebtedness" means, with respect to the Company, Indebtedness of
a Person existing at the time such Person becomes a Restricted Subsidiary.

"Additional Assets" means (i) any Property (other than cash, Permitted
Short-Term Investments or securities) used in the Oil and Gas Business or any
business ancillary thereto, (ii) Investments in any other Person engaged in the
Oil and Gas Business or any business ancillary thereto (including the
acquisition from third parties of Capital Stock of such Person) as a result of
which such other Person becomes a Restricted Subsidiary made in compliance with
the definition of the term "Restricted Subsidiary" and the "Limitation on
Restricted Payments" covenant, (iii) the acquisition from third parties of
Capital Stock of a Restricted Subsidiary, (iv) the costs of acquiring,
exploiting, developing, exploring, producing or operating in respect of oil and
gas properties or (v) Permitted Business Investments.

"Adjusted Consolidated Net Tangible Assets" means, without duplication, as
of the date of determination, (i) the sum of (A) discounted future net cash
flows from proved oil and gas reserves of the Company and its Restricted
Subsidiaries, calculated in accordance with Commission guidelines (before any
state or Federal income tax), as estimated by the Company and reviewed by
independent petroleum engineers as of a date no earlier than the date of the
Company's latest annual consolidated financial statements (or, in the case that
the date of determination is after the end of the first fiscal quarter of the
fiscal year of the Company, as estimated by the Company's engineers as of a date
no earlier than the end of the most recent fiscal quarter, which estimates shall
be confirmed by independent petroleum engineers in accordance with Commission
guidelines in the event of a Material Change), (B) the Net Working Capital on a
date no earlier than the date of the Company's latest consolidated annual or
quarterly financial statements and (C) with respect to each other tangible asset
(including undeveloped acreage) of the Company or its Restricted Subsidiaries,
the greater of (1) the net book value of such other tangible asset on a date no
earlier than the date of the Company's latest consolidated annual or quarterly
financial statements and (2) the appraised value, as estimated by a qualified
independent appraiser, of such other tangible asset, as of a date no earlier
than the date of the Company's latest audited financial statements, minus (ii)
minority interests and, to the extent not otherwise taken into account in
determining Adjusted Consolidated Net Tangible Assets, any gas balancing
liabilities of the Company and its Restricted Subsidiaries.

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limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date), but excluding
liabilities under the Subsidiary Guaranty, of such Subsidiary Guarantor at such
date.

"Affiliate" of any specified Person means any other Person (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person or (ii)
which beneficially owns or holds directly or indirectly 10% or more of any class
of the Voting Stock of such specified Person or of any Subsidiary of 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 Stock, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.

"Asset Sale" means (i) any direct or indirect sale, transfer, assignment,
lease, conveyance or other disposition (including, without limitation,
dispositions pursuant to any merger, consolidation, Investment or Production
Payment and Reserve Sale) by the Company or any of its Restricted Subsidiaries
in any single transaction or series of transactions having a Fair Market Value
in excess of $1 million of (A) shares of Capital Stock or other ownership
interests of another Person (including Capital Stock of Unrestricted
Subsidiaries) or (B) any other Property of the Company or any of its Restricted
Subsidiaries, and (ii) the issuance of Capital Stock (including, without
limitation, pursuant to any merger, consolidation, recapitalization or similar
transaction) by a Restricted Subsidiary to a Person other than the Company or a
Wholly Owned Restricted Subsidiary in any single transaction or series of
transactions having a Fair Market Value in excess of $1 million. Notwithstanding
the preceding sentence, the term "Asset Sale" shall not include: (i) the sale or
transfer of Permitted Short-Term Investments, inventory, accounts receivable or
other Property (excluding the sale or transfer of oil and gas in place and other
interests in real property) in the ordinary course of business; (ii) the lease,
farm-out or abandonment of any oil and gas property in the ordinary course of
business of the Company and its Restricted Subsidiaries and in a manner
customary in the Oil and Gas Business; (iii) the disposition of Property
received in settlement of debts (including, without limitation, under any
bankruptcy or similar proceeding) owing to the Company or any Restricted
Subsidiary as a result of foreclosure, perfection or enforcement of any Lien or
debt, which debts were owing to the Company or any Restricted Subsidiary in the
ordinary course of business of the Company or such Restricted Subsidiary; (iv)
the transfer of Property to an Unrestricted Subsidiary or other Person to the
extent that such transfer constitutes a Restricted Payment made pursuant to and
in compliance with the "Limitation on Restricted Payments" covenant; (v) any
disposition of all or substantially all of the Property of the Company and its
Restricted Subsidiaries taken as a whole made subject to and in compliance with
the "Merger, Consolidation and Sale of Substantially All Assets" covenant; (vi)
the disposition of any Property by the Company or a Restricted Subsidiary to the
Company or a Restricted Subsidiary; (vii) any issuance of Capital Stock made by
a Material Restricted Subsidiary that results in such Material Restricted
Subsidiary no longer being a Subsidiary of the Company, which issuance was made
subject to and in compliance with the "Merger, Consolidation and Sale of
Substantially All Assets" covenant; and (viii) any Production Payment and
Reserve Sale created, incurred, issued, assumed or guaranteed in connection with
the financing of, and within 60 days after, the acquisition of the Property that
is subject thereto.

"Assigned Restricted Subsidiary Indebtedness" means Indebtedness of a
Restricted Subsidiary to the Company that the Company has assigned to the
lenders under the Bank Credit Facility, as collateral securing Indebtedness of
the Company under the Bank Credit Facility.

"Average Life" means, with respect to any Indebtedness, as at any date of
determination, the quotient obtained by dividing (i) the sum of the products of
(A) the number of years (and any portion thereof) from the date of determination
to the date or dates of each successive scheduled principal payment (including,
without limitation, any sinking fund or mandatory redemption payment
requirements) of such Indebtedness multiplied by (B) the amount of each such
principal payment by (ii) the sum of all such principal payments.

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Chase Manhattan Bank, as Agent, and certain banks), together with any security
and related documents, as all such credit facilities and documents may be
amended, supplemented, extended, increased, refinanced or replaced from time to
time. For purposes of determining whether Indebtedness under the Bank Credit
Facility constitutes Permitted Indebtedness and only for such purposes,
Indebtedness Incurred in reliance on clause (i) of the first paragraph of the
"Limitation on Indebtedness" covenant shall not be deemed to constitute
Indebtedness Incurred in reliance on clause (i) of the definition of the term
"Permitted Indebtedness."

"Capitalized Lease Obligation" of any Person means the obligation of such
Person to pay rent or other amounts under a lease of property, real or personal,
that is required to be capitalized for financial reporting purposes in
accordance with GAAP, and the amount of such obligation shall be the capitalized
amount thereof determined in accordance with GAAP. For purposes of the
"Limitation on Liens" covenant, a Capitalized Lease Obligation shall be deemed
to be secured by a Lien on the Property being leased.

"Capital Stock" in any Person means any and all shares, interests,
participations or other equivalents in the equity interest (however designated)
in such Person and any rights (other than debt securities convertible into an
equity interest), warrants or options to subscribe for or to acquire an equity
interest in such Person; provided, however, that "Capital Stock" shall not
include Redeemable Stock.

"Commission" means the Securities and Exchange Commission.

"Consolidated Interest Coverage Ratio" means, as of the date of the
transaction giving rise to the need to calculate the Consolidated Interest
Coverage Ratio (the "Transaction Date"), the ratio of (i) the aggregate amount
of EBITDA of the Company and its consolidated Restricted Subsidiaries for the
four full fiscal quarters immediately prior to the Transaction Date to (ii) the
aggregate Consolidated Interest Expense of the Company and its Restricted
Subsidiaries that is anticipated to accrue during a period consisting of the
fiscal quarter in which the Transaction Date occurs and the three fiscal
quarters immediately subsequent thereto (based upon the pro forma amount and
maturity of, and interest payments in respect of, Indebtedness of the Company
and its Restricted Subsidiaries expected by the Company to be outstanding on the
Transaction Date), assuming for the purposes of this measurement the
continuation of market interest rates prevailing on the Transaction Date and
base interest rates in respect of floating interest rate obligations equal to
the base interest rates on such obligations in effect as of the Transaction
Date, provided, that if the Company or any of its Restricted Subsidiaries is a
party to any Interest Rate Protection Agreement which would have the effect of
changing the interest rate on any Indebtedness of the Company or any of its
Restricted Subsidiaries for such four quarter period (or a portion thereof), the
resulting rate shall be used for such four quarter period or portion thereof;
provided, further, that any Consolidated Interest Expense with respect to
Indebtedness incurred or retired by the Company or any of its Restricted
Subsidiaries during the fiscal quarter in which the Transaction Date occurs
shall be calculated as if such Indebtedness was so incurred or retired on the
first day of the fiscal quarter in which the Transaction Date occurs. In
addition, if since the beginning of the four full fiscal quarter period
preceding the Transaction Date, (i) the Company or any of its Restricted
Subsidiaries shall have engaged in any Asset Sale, EBITDA for such period shall
be reduced by an amount equal to the EBITDA (if positive), or increased by an
amount equal to the EBITDA (if negative), directly attributable to the assets
which are the subject of such Asset Sale for such period calculated on a pro
forma basis as if such Asset Sale and any related retirement of Indebtedness had
occurred on the first day of such period or (ii) the Company or any of its
Restricted Subsidiaries shall have acquired any material assets, EBITDA shall be
calculated on a pro forma basis as if such asset acquisitions had occurred on
the first day of such four fiscal quarter period.

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period; (B) Preferred Stock and Redeemable Stock dividends of such Person and of
its Restricted Subsidiaries (if such dividends are paid to a Person other than
such Person or its Wholly Owned Restricted Subsidiaries) declared and payable
other than in kind; (C) the portion of any rental obligation of such Person or
its Restricted Subsidiaries in respect of any Capitalized Lease Obligation
allocable to interest expense in accordance with GAAP; (D) the portion of any
rental obligation of such Person or its Restricted Subsidiaries in respect of
any Sale and Leaseback Transaction that is Indebtedness allocable to interest
expense (determined as if such obligation were treated as a Capitalized Lease
Obligation); and (E) to the extent any Indebtedness of any other Person (other
than Restricted Subsidiaries) is Guaranteed by such Person or any of its
Restricted Subsidiaries, the aggregate amount of interest paid, accrued or
scheduled to be paid or accrued by such other Person during such period
attributable to any such Indebtedness; less (ii) to the extent included in (i)
above, amortization or write-off of deferred financing costs of such Person and
its Restricted Subsidiaries during such period; in the case of both (i) and (ii)
above, after elimination of intercompany accounts among such Person and its
Restricted Subsidiaries and as determined in accordance with GAAP.

"Consolidated Net Income" of any Person means, for any period, the
aggregate net income (or net loss, as the case may be) of such Person and its
Restricted Subsidiaries for such period on a consolidated basis, determined in
accordance with GAAP; provided that there shall be excluded therefrom, without
duplication, (i) items classified as extraordinary (other than the tax benefit
of the utilization of net operating loss carry-forwards and alternative minimum
tax credits); (ii) any gain or loss, net of taxes, on the sale or other
disposition of assets (including the Capital Stock of any other Person) in
excess of $1 million, from any sale or disposition, or series of related sales
or dispositions (but in no event shall this clause (ii) apply to the sale of oil
and gas inventories in the ordinary course of business); (iii) the net income of
any Subsidiary of such specified Person to the extent the transfer to that
Person of that income is restricted by contract or otherwise, except for any
cash dividends or cash distributions actually paid by such Subsidiary to such
Person during such period; (iv) the net income (or net loss) of any other Person
in which such specified Person or any of its Restricted Subsidiaries has an
ownership interest (which ownership interest does not cause the net income of
such other Person to be consolidated with the net income of such specified
Person in accordance with GAAP or is an interest in a consolidated Unrestricted
Subsidiary), except to the extent of the amount of cash dividends or other cash
distributions actually paid to such Person or its Restricted Subsidiaries by
such other Person during such period; (v) the net income (or net loss) of any
Person acquired by such specified Person or any of its Restricted Subsidiaries
in a pooling-of-interests transaction for any period prior to the date of such
acquisition; (vi) any gain or loss, net of taxes, realized on the termination of
any employee pension benefit plan; (vii) any adjustments of a deferred tax
liability or asset pursuant to Statement of Financial Accounting Standards No.
109 which result from changes in enacted tax laws or rates; and (viii) the
cumulative effect of a change in accounting principles.

"Consolidated Net Worth" of any Person means the stockholders' equity of
such Person and its Restricted Subsidiaries, as determined on a consolidated
basis in accordance with GAAP, less (to the extent included in stockholders'
equity) amounts attributable to Redeemable Stock of such Person or its
Restricted Subsidiaries.

"Default" means any event, act or condition the occurrence of which is, or
after notice or the passage of time or both would be, an Event of Default.

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statement of such Person and its Restricted Subsidiaries for such period from
which Consolidated Net Income is determined and added in the determination of
such Consolidated Net Income, without duplication, (A) income tax recovery (but
excluding income tax recovery relating to (1) sales or other dispositions of
assets (including the Capital Stock of any other Person) resulting in a net loss
in excess of $1 million and (2) the redemption or retirement of any Indebtedness
prior to its Stated Maturity), (B) any gain, net of taxes, in connection with
the redemption or retirement of any Indebtedness prior to its Stated Maturity
and (C) unrealized foreign exchange gains.

"Equity Offering" means a bona fide underwritten sale to the public of
Capital Stock of the Company pursuant to a registration statement (other than a
Form S-8 or any other form relating to securities issuable under any employee
benefit plan of the Company) that is declared effective by the Commission
following the Issue Date and resulting in aggregate gross proceeds to the
Company of at least $30 million.

"Event of Default" has the meaning set forth under the caption "-- Events
of Default and Notice."

"Exchanged Properties" means oil and gas properties received by the Company
or a Restricted Subsidiary in trade or as a portion of the total consideration
for other such properties.

"Exchange Rate Contract" means, with respect to any Person, any currency
swap agreements, forward exchange rate agreements, foreign currency futures or
options, exchange rate collar agreements, exchange rate insurance and other
agreements or arrangements, or any combination thereof, designed and entered
into in order to provide protection against fluctuations in currency exchange
rates, and entered into in the ordinary course of business of such Person.

"Existing Unrestricted Subsidiary" means Resource Gathering Systems, Inc.,
a California corporation.

"Fair Market Value" means, with respect to any assets to be transferred
pursuant to any Asset Sale or Sale and Leaseback Transaction or any non-cash
consideration or property transferred or received by any Person, the fair market
value of such consideration or property as determined in good faith by (i) any
officer of the Company if such fair market value is less than $10 million and
(ii) the Board of Directors of the Company as evidenced by a certified
resolution delivered to the Trustee if such fair market value is equal to or in
excess of $10 million.

"GAAP" means United States generally accepted accounting principles as in
effect on the date of the Indenture, unless stated otherwise.

"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, and including, without limitation, any Lien on the
assets of such Person securing obligations of the primary obligor and any
obligation of such Person (i) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or to purchase (or to advance or
supply funds for the purchase or payment of) any security for the payment of
such Indebtedness, (ii) to purchase Property, securities or services for the
purpose of assuring the holder of such Indebtedness of the payment of such
Indebtedness, or (iii) to maintain working capital, equity capital or other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness (and "Guaranteed,"
"Guaranteeing" and "Guarantor" shall have meanings correlative to the
foregoing); provided, however, that a Guarantee by any Person shall not include
(A) endorsements by such Person for collection or deposit, in either case, in
the ordinary course of business or (B) a contractual commitment by one Person to
invest in another Person for so long as such Investment is reasonably expected
to constitute a Permitted Investment under clause (ii) of the definition of
Permitted Investments.

"Holder" means the Person in whose name a Note is registered on the
Security Register.

"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), extend,
assume, Guarantee or become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness or other obligation on the balance sheet of such Person (and
"Incurrence," "Incurred," "Incurrable" and "Incurring" shall have meanings
correlative to the foregoing); provided, however, that a

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change in GAAP that results in an obligation of such Person that exists at such
time, and is not theretofore classified as Indebtedness, becoming Indebtedness
shall not be deemed an Incurrence of such Indebtedness. For purposes of this
definition, Indebtedness of the Company or a Restricted Subsidiary held by a
Wholly Owned Restricted Subsidiary shall be deemed to be Incurred by the Company
or such Restricted Subsidiary in the event such Wholly Owned Restricted
Subsidiary ceases to be a Wholly Owned Restricted Subsidiary or in the event
such Indebtedness is transferred to a Person other than the Company or a Wholly
Owned Restricted Subsidiary. For purposes of this definition, any non-interest
bearing or other discount Indebtedness shall be deemed to have been Incurred
only on the date of the original issuance thereof.

"Indebtedness" means at any time (without duplication), with respect to any
Person, whether recourse is to all or a portion of the assets of such Person,
and whether or not contingent, (i) any Obligation of such Person for borrowed
money, (ii) any Obligation of such Person evidenced by bonds, debentures, notes,
Guarantees or other similar instruments, including, without limitation, any such
Obligations incurred in connection with the acquisition of Property, assets or
businesses, (iii) any reimbursement obligation of such Person with respect to
letters of credit, bankers' acceptances or similar facilities issued for the
account of such Person, (iv) any Obligation of such Person issued or assumed as
the deferred purchase price of Property or services, (v) any Capital Lease
Obligation of such Person, (vi) the maximum fixed redemption or repurchase price
of Redeemable Stock of such Person at the time of determination, (vii) any
payment obligation of such Person under Permitted Hedging Agreements at the time
of determination, (viii) any obligation to pay rent or other payment amounts of
such Person with respect to any Sale and Leaseback Transaction to which such
Person is a party and (ix) any obligation of the type referred to in clauses (i)
through (viii) of this paragraph of another Person and all dividends of another
Person the payment of which, in either case, such Person has Guaranteed or is
responsible or liable, directly or indirectly, as obligor, Guarantor or
otherwise; provided that Indebtedness shall not include Production Payments and
Reserve Sales. For purposes of this definition, the maximum fixed repurchase
price of any Redeemable Stock that does not have a fixed repurchase price shall
be calculated in accordance with the terms of such Redeemable Stock as if such
Redeemable Stock were repurchased on any date on which Indebtedness shall be
required to be determined pursuant to the Indenture; provided, however, that if
such Redeemable Stock is not then permitted to be repurchased, the repurchase
price shall be the book value of such Redeemable Stock. The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional Obligations as described above and the maximum
liability at such date in respect of any contingent Obligations described above.

Notwithstanding the foregoing, so long as any principal of, premium, if
any, on or interest on the 9 7/8% Notes remains outstanding, for purposes of the
subordination provisions of the Indenture, the Notes and any Subsidiary
Guaranties (and to the extent used therein, any applicable definitions and other
provisions, if any), and only for such purposes, "Indebtedness" means (without
duplication), with respect to any Person, (i) any liability or obligation,
contingent or otherwise, of such Person (A) for borrowed money, (B) evidenced by
bonds, notes, debentures or similar instruments, (C) with respect to the
reimbursement of any letter of credit or banker's acceptance, (D) representing
the balance deferred and unpaid of the purchase price of any property (except
any such balance that constitutes a trade payable or accrued liability in the
ordinary course of business that is not overdue by more than 120 days or is
being contested in good faith), (E) for the payment of money relating to a
Capitalized Lease Obligation or (F) in respect of Interest Rate Protection
Agreements; (ii) direct and indirect Guarantees or similar agreements,
contingent or otherwise, in respect of any Obligation of others of the types
described in the preceding clause (i); (iii) any Obligation or liability secured
by a consensual Lien to which the property or assets of such Person are subject,
regardless of whether the Obligations secured thereby shall have been assumed by
or shall otherwise be such Person's legal liability; (iv) with respect to such
Person, the liquidation preference and any mandatory redemption payment
obligations in respect of Redeemable Stock; and (v) any and all deferrals,
renewals, extensions and refundings of, or amendments, modifications or
supplements to, any liability of the kind described in any of the preceding
clauses (i), (ii), (iii) and (iv).

"Initial Subsidiary Guarantors" means HSRTW, Inc., a Delaware corporation,
and Orion Acquisition Inc., a Delaware corporation.

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"Interest Rate Protection Agreement" means, with respect to any Person, any
interest rate swap agreement, forward rate agreement, interest rate cap or other
rate hedge arrangement to or under which such Person is a party or a
beneficiary, and, in the case of the Company and its Restricted Subsidiaries,
only to the extent such agreements are related to payment obligations on
Indebtedness of the Company and its Restricted Subsidiaries permitted by the
terms of the "Limitation on Indebtedness" covenant and are entered into in the
ordinary course of business of the Company and its Restricted Subsidiaries.

"Investment" means, with respect to any Person (i) any amount paid by such
Person, directly or indirectly (such amount to be the Fair Market Value of such
Capital Stock, securities or Property at the time of transfer), to any other
Person for Capital Stock or other securities of, or as a capital contribution
to, any other Person or (ii) any direct or indirect loan or advance to any other
Person (other than accounts receivable of such Person arising in the ordinary
course of business); provided, however, that Investments shall not include
extensions of trade credit on commercially reasonable terms in accordance with
normal trade practices and any increase in the equity ownership in any Person
resulting from retained earnings of such Person.

"Issue Date" means the date upon which the Outstanding Notes first were
issued and authenticated under the Indenture.

"Lien" means, with respect to any Property, any mortgage or deed of trust,
pledge, hypothecation, assignment, deposit arrangement, security interest, lien
(statutory or other), charge, easement, encumbrance, preference, priority or
other security or similar agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such Property (including, without
limitation, any conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing). For purposes of
the "Limitation on Liens" covenant, a Capitalized Lease Obligation shall be
deemed to be secured by a Lien on the property being leased.

"Liquid Securities" means securities (i) of an issuer that is not an
Affiliate of the Company, (ii) that are publicly traded on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market and (iii) as
to which the Company is not subject to any restrictions on sale or transfer
(including any volume restrictions under Rule 144 under the Securities Act or
any other restrictions imposed by the Securities Act) or as to which a
registration statement under the Securities Act covering the resale thereof is
in effect for as long as the securities are held; provided that securities
meeting the requirements of clauses (i), (ii) and (iii) above shall be treated
as Liquid Securities from the date of receipt thereof until and only until the
earlier of (x) the date on which such securities are sold or exchanged for cash
or Permitted Short-Term Investments and (y) 180 days following the date of
receipt of such securities. In the event such securities are not sold or
exchanged for cash or cash equivalents within 180 days of receipt thereof, for
purposes of determining whether the transaction pursuant to which the Company or
a Restricted Subsidiary received the securities was in compliance with the
"Limitation on Asset Sales" covenant, such securities shall be deemed not to
have been Liquid Securities at any time.

"Material Change" means an increase or decrease (excluding changes that
result solely from changes in prices) of more than 20% during a fiscal quarter
in the estimated discounted future net cash flows from proved oil and gas
reserves of the Company and its Restricted Subsidiaries, calculated in
accordance with clause (i)(A) of the definition of Adjusted Consolidation Net
Tangible Assets; provided, however, that the following will be excluded from the
calculation of Material Change: (i) any acquisitions during the quarter of oil
and gas reserves with respect to which the Company's estimate of the discounted
future net cash flows from proved oil and gas reserves has been confirmed by
independent petroleum engineers and (ii) any dispositions of Properties existing
at the beginning of such quarter that have been disposed of in compliance with
the "Limitation on Asset Sales" covenant.

"Material Restricted Subsidiary" means any Restricted Subsidiary that
directly or indirectly (including through its Subsidiaries) owns or controls
Property constituting all or substantially all of the Property of the Company
and its Restricted Subsidiaries taken as a whole.

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otherwise, but only as and when received, and (ii) the Fair Market Value of
Liquid Securities and Permitted Short-Term Investments, and excluding (A) any
consideration received in the form of assumption of Indebtedness of the Company
or any Restricted Subsidiary, and (B) except to the extent subsequently
converted to cash, Liquid Securities or Permitted Short-Term Investments,
consideration constituting Exchanged Properties or consideration other than
Permitted Consideration), in each case net of (i) all legal, title and recording
expenses, commissions and other fees and expenses incurred, and all Federal,
state, foreign and local taxes required to be paid or accrued as a liability
under GAAP as a consequence of such Asset Sale, (ii) all payments (which
payments are made in a manner that results in the permanent reduction in the
balance of such Indebtedness and, if applicable, a permanent reduction in any
outstanding commitment for future Incurrences of Indebtedness thereunder) made
by the Company and its Restricted Subsidiaries on any Indebtedness (but
specifically excluding Indebtedness of the Company and its Restricted
Subsidiaries assumed in connection with such Asset Sale) which is secured by any
assets subject to such Asset Sale, in accordance with the terms of any Lien upon
such assets, or which must by its terms, or in order to obtain a necessary
consent to such Asset Sale or by applicable law, be repaid out of the proceeds
from such Asset Sale, (iii) all distributions and other payments required to be
made to minority interest holders in Restricted Subsidiaries or joint ventures
as a result of such Asset Sale, and (iv) the deduction of appropriate amounts to
be provided by the seller as a reserve, in accordance with GAAP, against any
liabilities associated with the assets disposed of in such Asset Sale and
retained by the Company or any Restricted Subsidiary after such Asset Sale (to
the extent such reserves are not subsequently reversed); provided, however, that
(A) in the event that any consideration for an Asset Sale (which would otherwise
constitute Net Available Cash) is required to be held in escrow pending
determination of whether a purchase price adjustment will be made, such
consideration (or any portion thereof) shall become Net Available Cash only at
such time as it is released to the Company or its Restricted Subsidiaries from
escrow; and (B) any Exchanged Properties and any consideration other than
Permitted Consideration received in connection with an Asset Sale which are
subsequently converted to cash, Liquid Securities or Permitted Short-Term
Investments shall be deemed to be Net Available Cash at such time and shall
thereafter be applied in accordance with the "Limitation on Asset Sales"
covenant.

"Net Working Capital" means (i) all current assets of the Company and its
Restricted Subsidiaries, less (ii) all current liabilities of the Company and
its Restricted Subsidiaries, except current liabilities included in
Indebtedness, in each case as set forth in financial statements of the Company
prepared in accordance with GAAP.

"Obligation" means any principal, interest, premium, penalty, fee and any
other liability payable under the documentation governing any Indebtedness.

"Oil and Gas Business" means the business of exploiting, exploring for,
developing, acquiring, producing, processing, gathering, marketing, storing,
transporting, selling, hedging or swapping hydrocarbons or trading positions
with respect thereto and/or with respect to transportation rates or basis
differentials and other related energy businesses.

"Oil and Gas Liens" means (i) Liens on a specific oil or gas property or
any interest therein, construction thereon or improvement thereto to secure all
or any part of the costs incurred for surveying, exploration, drilling,
extraction, development, operation, production, construction, alteration, repair
or improvement of, in, under or on such property and the plugging and
abandonment of wells located thereon (it being understood that, in the case of
oil and gas producing properties, or any interest therein, costs incurred for
"development" shall include costs incurred for all facilities relating to such
properties or to projects, ventures or other arrangements of which such
properties form a part or which relate to such properties or interests); (ii)
Liens on an oil and/or gas producing property to secure obligations incurred or
guarantees of obligations incurred in connection with or necessarily incidental
to commitments for the purchase or sale of, or the transportation or
distribution of, the products derived from such property; (iii) Liens arising
under partnership agreements, oil and gas leases, overriding royalty agreements,
net profits agreements, production payment agreements, royalty trust agreements,
partnership agreements, limited liability company agreements, farm-out
agreements, division orders, contracts for the sale, purchase, exchange,
transportation, gathering or processing of oil, gas or other hydrocarbons,
unitizations and pooling designations, declarations, orders and agreements,
development

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agreements, operating agreements, production sales contracts, area of mutual
interest agreements, gas balancing or deferred production agreements, injection,
repressuring and recycling agreements, salt water or other disposal agreements,
seismic or geophysical permits or agreements, and other agreements which are
customary in the Oil and Gas Business, provided in all instances that such Liens
are limited to the assets that are the subject of the relevant agreement; (iv)
Liens arising in connection with Production Payments and Reserve Sales; and (v)
Liens on pipelines or pipeline facilities that arise by operation of law.

"Oil and Gas Purchase, Sale and/or Swap Contract" means, with respect to
any Person, any oil and gas purchase, sale and/or swap agreements and other
agreements or arrangements, or any combination thereof, financially tied to oil
and gas prices, transportation or basis fluctuations or differentials that are
customary in the Oil and Gas Business and, in the case of the Company and its
Restricted Subsidiaries, which are entered into by the Company and its
Restricted Subsidiaries in the ordinary course of their business.

"Pari Passu Indebtedness" means any Indebtedness of the Company (or a
Subsidiary Guarantor) that is pari passu in right of payment with the Notes (or
a Subsidiary Guaranty, as appropriate).

"Permitted Business Investments" means Investments and expenditures made in
the ordinary course of, and of a nature that is or shall have become customary
in, the Oil and Gas Business as a means of actively exploiting, exploring for,
acquiring, developing, processing, gathering, storing, marketing or transporting
oil and gas through agreements, transactions, interests or arrangements which
permit one to share risks or costs, comply with regulatory requirements
regarding local ownership or satisfy other objectives customarily achieved
through the conduct of Oil and Gas Business jointly with third parties,
including, without limitation, (i) ownership interests in oil and gas properties
or gathering, transportation, processing, storage or related systems and (ii)
Investments and expenditures in the form of or pursuant to operating agreements,
process agreements, farm-in agreements, farm-out agreements, development
agreements, area of mutual interest agreements, unitization agreements, pooling
arrangements, joint bidding agreements, service contracts, joint venture
agreements, partnership agreements, limited liability company agreements,
subscription agreements, stock purchase agreements and other similar agreements
with third parties (including Unrestricted Subsidiaries).

"Permitted Consideration" has the meaning assigned to such term in the
"Limitation on Asset Sales" covenant.

"Permitted Designee" means (i) a spouse or a child of a Permitted Holder,
(ii) trusts whose sole beneficiaries are Permitted Holders or spouses or
children of Permitted Holders, (iii) in the event of the death or incompetence
of a Permitted Holder, his estate, heirs, executor, administrator, committee or
other personal representative or (iv) any Person so long as a Permitted Holder
owns at least 51% of the voting power of all classes of the Voting Stock of such
Person.

"Permitted Hedging Agreements" means Interest Rate Protection Agreements,
Exchange Rate Contracts and Oil and Gas Purchase, Sale and/or Swap Contracts.

"Permitted Holders" means Nicholas J. Sutton, P. Michael Highum and their
Permitted Designees.

"Permitted Liens" means any and all of the following: (i) Liens existing as
of the Issue Date; (ii) Liens securing the Notes, the Subsidiary Guaranties and
other obligations arising under the Indenture; (iii) any Lien existing on any
Property of a Person at the time such Person is merged or consolidated with or
into the Company or a Subsidiary Guarantor or becomes a Restricted Subsidiary
that is a Subsidiary Guarantor (and not incurred in anticipation of such
transaction), provided that such Liens are not extended to other Property of the
Company or the Subsidiary Guarantors; (iv) any Lien existing on any Property at
the time of the acquisition thereof (and not incurred in anticipation of such
transaction), provided that such Liens are not extended to other Property of the
Company or the Subsidiary Guarantors; (v) any Lien incidental to the normal
conduct of the business of the Company or the Subsidiary Guarantors, the
ownership of their Property or the conduct in the ordinary course of their
business (including, without limitation, (A) easements, rights of way and
similar encumbrances, (B) rights or title of lessors under leases (other than
Capitalized Lease Obligations), (C) rights of collecting banks having rights of
setoff, revocation, refund or chargeback with respect to money or instruments of
the Company or the Subsidiary Guarantors or on deposit with or in the

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possession of such banks, (D) Liens imposed by law, including without
limitation, Liens under workers' compensation or similar legislation and
mechanics', carriers', warehousemen's, materialmen's, suppliers' and vendors'
Liens, (E) Liens incurred to secure performance of obligations with respect to
statutory or regulatory requirements, performance or return-of-money bonds,
surety bonds or other obligations of a like nature and incurred in a manner
consistent with industry practice, and (F) Liens on deposits made in the
ordinary course of business), in each case which are not incurred in connection
with the borrowing of money, the obtaining of advances or credit or the payment
of the deferred purchase price of Property and which do not in the aggregate
impair in any material respect the use of Property in the operation of the
business of the Company and its Restricted Subsidiaries taken as a whole; (vi)
Liens for taxes, assessments and governmental charges not yet due or the
validity of which are being contested in good faith by appropriate proceedings,
promptly instituted and diligently conducted, and for which adequate reserves
have been established to the extent required by GAAP; (vii) judgment and
attachment Liens not giving rise to an Event of Default or Liens created by or
existing from any litigation or legal proceeding that are currently being
contested in good faith by appropriate proceedings, promptly instituted and
diligently conducted, and for which adequate reserves have been made to the
extent required by GAAP; (viii) Liens securing Permitted Hedging Agreements of
the Company and its Restricted Subsidiaries; (ix) Oil and Gas Liens Incurred in
the ordinary course of the business of the Company and its Restricted
Subsidiaries; (x) purchase money security interests (including, without
limitation, Capitalized Lease Obligations) granted in connection with the
acquisition of fixed assets in the ordinary course of business of the Company
and its Restricted Subsidiaries, provided, that (A) such Liens attach only to
the Property so acquired with the purchase money Indebtedness secured thereby
and (B) such Liens secure only Indebtedness that is not in excess of the
purchase price of such Property; (xi) Liens to secure Permitted Non-Recourse
Indebtedness; (xii) Liens resulting from the deposit of funds or evidences of
Indebtedness in trust for the purpose of decreasing Indebtedness of the Company
or any of its Subsidiaries so long as such deposit of funds is permitted under
the "Limitation on Restricted Payments" covenant; (xiii) Liens resulting from a
pledge of Capital Stock of a Person that is not a Restricted Subsidiary; (xiv)
Liens to secure any permitted extension, renewal, refinancing, refunding or
exchange (or successive extensions, renewals, refinancings, refundings or
exchanges), in whole or in part, of or for any Indebtedness secured by Liens
referred to in clauses (i), (ii), (iii), (iv) and (x) above; provided, however,
that (A) such new Lien shall be limited to all or part of the same Property that
secured the original Lien, plus improvements on such Property and (B) the
Indebtedness secured by such Lien at such time is not increased to any amount
greater than the sum of (1) the outstanding principal amount of the Indebtedness
secured by such original Lien immediately prior to such extension, renewal,
refinancing, refunding or exchange and (2) an amount necessary to pay any fees
and expenses, including premiums, related to such refinancing, refunding,
extension, renewal or replacement; and (xv) Liens in favor of the Company.
Notwithstanding anything in this paragraph to the contrary, the term "Permitted
Liens" does not include Liens resulting from the creation, incurrence, issuance,
assumption or Guarantee of any Production Payment and Reserve Sale other than
(1) Production Payments and Reserve Sales in connection with the acquisition of
Properties after the Issue Date, provided that any such Liens created in
connection therewith are created, incurred, issued, assumed or guaranteed in
connection with the financing of, and within 60 days after, the acquisition of
the Property that is subject thereto, or (2) Production Payments and Reserve
Sales other than those described in clause (1) of this sentence to the extent
such Production Payments and Reserve Sales constitute Asset Sales made pursuant
to and in compliance with the "Limitation on Asset Sales" covenant.

"Permitted Non-Recourse Indebtedness" means Indebtedness of the Company or
any Restricted Subsidiary Incurred in connection with the acquisition by the
Company or such Restricted Subsidiary of any Property with respect to which (i)
the holders of such Indebtedness agree that they will look solely to the
Property so acquired and securing such Indebtedness, and neither the Company nor
any Restricted Subsidiary (A) provides direct or indirect credit support,
including any undertaking, agreement or instrument that would constitute
Indebtedness (other than the grant of a Lien on such acquired Property) or (B)
is directly or indirectly liable for such Indebtedness, and (ii) no default with
respect to such Indebtedness would cause, or permit (after notice or passage of
time or otherwise), according to the terms thereof, any holder (or any
representative of any such holder) of any other Indebtedness of the Company or a
Restricted Subsidiary to declare, a default on such other Indebtedness or cause
the payment, repurchase, redemption, defeasance or

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other acquisition or retirement for value thereof to be accelerated or payable
prior to any scheduled principal payment, scheduled sinking fund payment or
maturity.

"Permitted Refinancing Indebtedness" means Indebtedness ("new
Indebtedness") Incurred in exchange for, or the proceeds of which are used to
refinance, other Indebtedness ("old Indebtedness"), provided, however, that (i)
such new Indebtedness is in an aggregate principal amount not in excess of the
sum of (A) the aggregate principal amount then outstanding of the old
Indebtedness (or, if such old Indebtedness provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration thereof, such lesser amount as of the date of determination), and
(B) an amount necessary to pay any fees and expenses, including premiums related
to such exchange or refinancing, (ii) such new Indebtedness has a Stated
Maturity no earlier than the Stated Maturity of the old Indebtedness, (iii) such
new Indebtedness has an Average Life to Stated Maturity at the time such new
Indebtedness is Incurred that is equal to or greater than the Average Life to
Stated Maturity of the old Indebtedness at such time and (iv) such new
Indebtedness is subordinated in right of payment to Senior Indebtedness of the
Company (or, if applicable, a Subsidiary Guarantor) and the Notes to at least
the same extent, if any, as the old Indebtedness.

"Permitted Short-Term Investments" means (i) Investments in U.S. Government
Obligations maturing within one year of the date of acquisition thereof, (ii)
Investments in demand accounts, time deposit accounts, certificates of deposit,
bankers acceptances and money market deposits maturing within one year of the
date of acquisition thereof issued by a bank or trust company which is organized
under the laws of the United States of America or any State thereof that is a
member of the Federal Reserve System having capital, surplus and undivided
profits aggregating in excess of $500 million and whose long-term indebtedness
is rated "A" (or higher) according to Moody's Investors Service Inc., (iii)
Investments in demand accounts, time deposit accounts, certificates of deposit,
bankers acceptances and money market deposits maturing within one year of the
date of acquisition thereof issued by a Canadian bank to which the Bank Act
(Canada) applies having capital, surplus and undivided profits aggregating in
excess of U.S. $500 million, (iv) investments in deposits available for
withdrawal on demand with any commercial bank which is organized under the laws
of any country in which the Company or any Restricted Subsidiary maintains an
office or is engaged in the Oil and Gas Business, provided that (A) all such
deposits have been made in such accounts in the ordinary course of business and
(B) such deposits do not at any one time exceed $10 million in the aggregate,
(v) repurchase and reverse repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clause (i)
entered into with a bank meeting the qualifications described in either clause
(ii) or (iii), (vi) Investments in commercial paper, maturing not more than 270
days after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any State thereof with a rating at the time as of
which any Investment therein is made of "P-1" (or higher) according to Moody's
Investors Service Inc. or "A-1" (or higher) according to Standard & Poor's
Ratings Group, and (vii) Investments in any money market mutual fund having
assets in excess of $250 million substantially all of which consist of
obligations of the types described in clauses (i), (ii), (v) and (vi) hereof.

"Person" means any individual, corporation, partnership, joint venture,
trust, limited liability company, unincorporated organization or government or
any agency or political subdivision thereof or other entity.

"Preferred Stock" of any Person means Capital Stock of such Person of any
class or classes (however designated) that ranks prior, as to the payment of
dividends and/or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding up of such Person, to shares of
capital stock of at least one other class of such Person; provided, however,
that "Preferred Stock" shall not include Redeemable Stock.

"Principal Agent" means, on any date, (i) if the Bank Credit Facility shall
remain in effect on such date, the administrative agent(s) (or the
institution(s) performing similar functions) under the Bank Credit Facility and
(ii) if the Bank Credit Facility is no longer in effect on such date, the
administrative agent(s) (or the institution(s) performing similar functions)
with respect to the Specified Senior Indebtedness (or, if applicable, Specified
Senior Indebtedness of such Subsidiary Guarantor) having the highest principal
amount (including all revolving credit, letter of credit and other working
capital commitments) on such date.

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"Production Payments and Reserve Sales" means the grant or transfer to any
Person of a royalty, overriding royalty, net profits interest, production
payment (whether volumetric or dollar denominated), partnership interest or
other interest in oil and gas properties, reserves or the right to receive all
or a portion of the production or the proceeds from the sale of production
attributable to such properties where the holder of such interest has recourse
solely to such production or proceeds of production, subject to the obligation
of the grantor or transferor to operate and maintain, or cause the subject
interests to be operated and maintained, in a reasonably prudent manner or other
customary standard or subject to the obligation of the grantor or transferor to
indemnify for environmental, title or other matters customary in the Oil and Gas
Business.

"Property" means, with respect to any person, any interest of such Person
in any kind of property or asset, whether real, personal or mixed or tangible or
intangible, including, without limitation, Capital Stock and other securities
issued by any other Person (but excluding Capital Stock or other securities
issued by such first mentioned Person).

"Redeemable Stock" of any Person means any equity security of such Person
that by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable), or otherwise (including on the happening of an
event), is or could become required to be redeemed for cash or other Property or
is or could become redeemable for cash or other Property at the option of the
holder thereof, in whole or in part, on or prior to the first anniversary of the
Stated Maturity of the Notes; or is or could become exchangeable at the option
of the holder thereof for Indebtedness at any time in whole or in part, on or
prior to the first anniversary of the Stated Maturity of the Notes; provided,
however, that Redeemable Stock shall not include any security by virtue of the
fact that it may be exchanged or converted at the option of the holder for
Capital Stock of the Company having no preferences as to dividends or
liquidation over any other Capital Stock of the Company.

"Restricted Payment" means any or all of the following actions: (i) the
declaration or payment of any dividend on, or any distribution to holders of,
any shares of the Company's Capital Stock or Redeemable Stock (other than
dividends or distributions payable solely in shares of Capital Stock of the
Company or in options, warrants or other rights to purchase or acquire Capital
Stock of the Company); (ii) the purchase, redemption or other acquisition or
retirement for value of any Capital Stock or Redeemable Stock of the Company or
any Affiliate thereof (other than a Restricted Subsidiary) or any options,
warrants or other rights to acquire such Capital Stock or Redeemable Stock;
(iii) any principal payment on or repurchase, redemption, defeasance or other
acquisition or retirement for value, prior to any scheduled principal payment,
scheduled sinking fund payment or maturity, of any Pari Passu Indebtedness or
Subordinated Indebtedness, except (A) a 9 7/8% Notes Asset Sale Offer, (B) a
Pari Passu Offer other than a 9 7/8% Notes Asset Sale Offer, (C) to the extent
of Excess Proceeds remaining after compliance with the "Limitation on Asset
Sales" covenant, and to the extent required by the indenture or other agreement
or instrument pursuant to which any Subordinated Indebtedness was issued, an
offer to purchase such Subordinated Indebtedness upon a disposition of assets,
and (D) upon a "Change of Control" (even if such event is not a Change of
Control under the Indenture) to the extent required by the indenture or other
agreement or instrument pursuant to which any Pari Passu Indebtedness or
Subordinated Indebtedness was issued, provided the Company is then in compliance
with the covenant described under "--Repurchase at the Option of Holders Upon a
Change of Control"; (iv) the making of any Investment (other than any Permitted
Investment); or (v) the occurrence of any deemed Restricted Payment under (A)
the "Limitation on Issuance and Sale of Capital Stock of Restricted
Subsidiaries" covenant, or (B) the definition of the term "Unrestricted
Subsidiary."

"Restricted Subsidiary" means any Subsidiary of the Company, whether
existing on or after the date of the Indenture, unless such Subsidiary of the
Company is an Unrestricted Subsidiary or is designated as an Unrestricted
Subsidiary pursuant to the terms of the Indenture. The Company will not, and
will not permit any of its Restricted Subsidiaries to, take any action or enter
into any transaction or series of transactions that would result in a Person
becoming a Restricted Subsidiary (whether through an acquisition or otherwise)
unless immediately after giving effect to such transaction or transactions on a
pro forma basis, (i) no Default or Event of Default shall have occurred and be
continuing and (ii) the Company could incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) under the "Limitation on Indebtedness"
covenant.

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"Sale and Leaseback Transaction" means, with respect to any Person, any
direct or indirect arrangement (excluding, however, any such arrangement between
such Person and a Wholly Owned Restricted Subsidiary of such Person or between
one or more Wholly Owned Restricted Subsidiaries of such Person) pursuant to
which Property is sold or transferred by such Person or a Restricted Subsidiary
of such Person and is thereafter leased back from the purchaser or transferee
thereof by such Person or one of its Restricted Subsidiaries.

"Senior Indebtedness" means the Obligations of the Company with respect to
(i) Indebtedness of the Company under the Bank Credit Facility and any renewal,
refunding, refinancing, replacement or extension thereof and (ii) any other
Indebtedness of the Company (other than the Notes), whether outstanding on the
date of the Indenture or thereafter created, incurred or assumed, and any
renewal, refunding, refinancing, replacement or extension thereof, unless, in
the case of any particular Indebtedness, the instrument creating or evidencing
the same or pursuant to which the same is outstanding expressly provides that
such Indebtedness shall not be senior in right of payment to the Notes.
Notwithstanding the foregoing, Senior Indebtedness shall not include (i)
Indebtedness of the Company to a Subsidiary of the Company, (ii) amounts owed
for goods, materials or services purchased in the ordinary course of business,
(iii) Indebtedness (other than Indebtedness under the Bank Credit Facility)
incurred in violation of the Indenture, (iv) amounts payable or any other
Indebtedness to employees of the Company or any Subsidiary of the Company, (v)
any liability for Federal, state, local or other taxes owed or owing by the
Company, (vi) any Indebtedness of the Company that, when incurred and without
regard to any election under Section 1111(b) of the United States Bankruptcy
Code, was without recourse to the Company, (vii) Indebtedness evidenced by the
9 7/8% Notes and (viii) Indebtedness evidenced by the Notes.

"Senior Indebtedness of a Subsidiary Guarantor" means the Obligations of a
Subsidiary Guarantor with respect to (i) Indebtedness under the Bank Credit
Facility and any renewal, refunding, refinancing, replacement or extension
thereof, (ii) Assigned Restricted Subsidiary Indebtedness and (iii) any other
Indebtedness of a Subsidiary Guarantor (other than the Subsidiary Guaranties),
whether outstanding on the date of the Indenture or thereafter created, incurred
or assumed, and any renewal, refunding, refinancing, replacement or extension
thereof, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the Subsidiary Guaranties. Notwithstanding the foregoing, Senior
Indebtedness of a Subsidiary Guarantor shall not include (i) Indebtedness of a
Subsidiary Guarantor to the Company or a Subsidiary of the Company, (ii) amounts
owed for goods, materials or services purchased in the ordinary course of
business, (iii) Indebtedness (other than Indebtedness under the Bank Credit
Facility) incurred in violation of the Indenture, (iv) amounts payable or any
other Indebtedness to employees of the Company or any Subsidiary of the Company,
(v) any liability for Federal, state, local or other taxes owed or owing by such
Subsidiary Guarantor, (vi) any Indebtedness of a Subsidiary Guarantor that, when
incurred and without regard to any election under Section 1111(b) of the United
States Bankruptcy Code, was without recourse to such Subsidiary Guarantor, (vii)
Indebtedness evidenced by the 9 7/8% Notes and any guaranties thereof and (viii)
Indebtedness evidenced by the Notes and the Subsidiary Guaranties.

"Significant Subsidiary" means, at any date of determination, (i) any
Subsidiary (other than TWTTC) of a Person that, together with its Subsidiaries,
(A) for the most recent fiscal year of the Company, accounted for more than 5%
of the consolidated revenues of such Person and its Subsidiaries or (B) as of
the end of such fiscal year, was the owner of more than 5% of the consolidated
assets of such Person and its Subsidiaries, and (ii) TWTTC if TWTTC, together
with its Subsidiaries, as of the end of the most recent fiscal year of the
Company, was the owner of more than 10% of the consolidated assets of the
Company and its Subsidiaries, in each case all as set forth on the most recently
available consolidated financial statements of such Person for such fiscal year.

"Specified Senior Indebtedness" means (i) Indebtedness of the Company under
the Bank Credit Facility and (ii) so long as no Indebtedness under the Bank
Credit Facility is outstanding, on any date of determination, any Senior
Indebtedness if the sum of (A) the outstanding principal amount of all Senior
Indebtedness plus (B) the amount of unused revolving credit, letter of credit
and working capital commitments of lenders included in such Senior Indebtedness,
is not less than $20 million on such date.

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"Specified Senior Indebtedness of a Subsidiary Guarantor" means (i)
Assigned Restricted Subsidiary Indebtedness of such Subsidiary Guarantor, (ii)
Indebtedness of such Subsidiary Guarantor under the Bank Credit Facility and
(iii) so long as no Assigned Restricted Subsidiary Indebtedness of such
Subsidiary Guarantor under the Bank Credit Agreement is outstanding, on any date
of determination, any Senior Indebtedness of such Subsidiary Guarantor if the
sum of (A) the outstanding principal amount of all such Senior Indebtedness of
such Subsidiary Guarantor plus (B) the amount of unused revolving credit, letter
of credit and working capital commitments of lenders included in such Senior
Indebtedness of such Subsidiary Guarantor, is not less than $20 million on such
date.

"Stated Maturity," when used with respect to any security or any
installment of principal thereof or interest thereon, means the date specified
in such security as the fixed date on which the principal of such security or
such installment of principal or interest is due and payable, including pursuant
to any mandatory redemption provision (but excluding any provision providing for
the repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).

"Subordinated Indebtedness" means Indebtedness of the Company (or a
Subsidiary Guarantor) that is expressly subordinated in right of payment to the
Notes (or a Subsidiary Guaranty, as appropriate).

"Subsidiary" of a Person means (i) another Person which is a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned or
controlled by (A) the first Person, (B) the first Person and one or more of its
Subsidiaries or (C) one or more of the first Person's Subsidiaries or (ii)
another Person which is not a corporation (A) at least 50% of the ownership
interest of which and (B) the power to elect or direct the election of a
majority of the directors or other governing body of which are controlled by
Persons referred to in clause (i)(A), (i)(B) or (i)(C) above.

"Subsidiary Guarantor" means (i) as of the Issue Date, the Initial
Subsidiary Guarantors, and (ii) thereafter, unless released from such Subsidiary
Guaranties as permitted by the Indenture, the Initial Subsidiary Guarantors and
any other Restricted Subsidiary that becomes a guarantor of the Notes in
compliance with the provisions of the Indenture and executes a supplemental
indenture agreeing to be bound by the terms of the Indenture.

"Subsidiary Guaranty" means an unconditional guaranty of the Notes given by
any Restricted Subsidiary pursuant to the terms of the Indenture.

"TWTTC" means Tide West Trading & Transport Company, an Oklahoma
corporation.

"Unrestricted Subsidiary" means (i) the Existing Unrestricted Subsidiary,
(ii) any Subsidiary of the Company that at the time of determination shall be
designated an Unrestricted Subsidiary by the Board of Directors in the manner
provided below and (iii) any Subsidiary of an Unrestricted Subsidiary. The Board
of Directors may designate any Subsidiary of the Company (including any newly
acquired or newly formed Subsidiary of the Company) to be an Unrestricted
Subsidiary unless such Subsidiary (i) owns any Capital Stock, Redeemable Stock
or Indebtedness of, or owns or holds any Lien on any Property of, the Company or
any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary
to be so designated or (ii) is obligated, directly or indirectly, with respect
to any Indebtedness other than Unrestricted Subsidiary Indebtedness; provided,
however, that either (A) the Subsidiary to be so designated has total assets of
$1,000 or less or (B) if such Subsidiary has assets greater than $1,000, then
such designation would be permitted under "Limitation on Restricted Payments" as
a "Restricted Payment." The designation of a Restricted Subsidiary as an
Unrestricted Subsidiary shall be deemed to cause a Restricted Payment to be made
at the time of such designation in an amount equal to that portion of the Fair
Market Value of such Restricted Subsidiary represented by the Company's direct
and indirect ownership interest in such Subsidiary. Unless so designated as an
Unrestricted Subsidiary, any Person that becomes a Subsidiary of the Company or
of any Restricted Subsidiary will be classified as a Restricted Subsidiary.
Notwithstanding the foregoing sentence, the Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that
immediately after giving pro forma effect to such designation (i) the Company
could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness)
under the "Limitation on Indebtedness" covenant, and (ii) no Default shall have
occurred and be continuing. Any such designation by the Board

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of Directors shall be evidenced to the Trustee by promptly filing with the
Trustee a copy of a resolution of the Board of Directors giving effect to such
designation and an Officers' Certificate certifying such resolution and
certifying that such designation complies with the foregoing provisions.

"Unrestricted Subsidiary Indebtedness" means Indebtedness of an
Unrestricted Subsidiary (i) as to which neither the Company nor any Restricted
Subsidiary is directly or indirectly liable (by virtue of the Company or any
such Restricted Subsidiary being the primary obligor on, guarantor of, or
otherwise liable in any respect for such Indebtedness) and (ii) which, upon the
occurrence of a default with respect thereto, does not result in, or permit any
holder (or any representative of any such holder) of any Indebtedness of the
Company or a Restricted Subsidiary to declare (with the passage of time or the
giving of notice or otherwise), a default on any Indebtedness of the Company or
any Restricted Subsidiary or cause the payment, repurchase, redemption,
defeasance or other acquisition or retirement for value thereof to be
accelerated or payable prior to any scheduled principal payment, scheduled
sinking fund payment or maturity.

"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.

"Wholly Owned Restricted Subsidiary" means, at any time, a Restricted
Subsidiary all of the Voting Stock of which (except directors' qualifying
shares) is at the time owned, directly or indirectly, by the Company and its
other Wholly Owned Restricted Subsidiaries.

DEFEASANCE AND COVENANT DEFEASANCE

The Indenture provides that the Company and the Subsidiary Guarantors will
be discharged from all their obligations with respect to the Notes (except for
certain obligations to exchange or register the transfer of Notes, to replace
stolen, lost or mutilated Notes, to maintain paying agencies and to hold moneys
for payment in trust) upon the deposit in trust for the benefit of the Holders
of the Notes of money or U.S. Government Obligations, or a combination thereof,
which, through the payment of principal, premium, if any, and interest in
respect thereof in accordance with their terms, will provide money in an amount
sufficient to pay the principal of and any premium and interest on the Notes at
Stated Maturity or on earlier redemption in accordance with the terms of the
Indenture and the Notes. Such defeasance or discharge may occur only if, among
other things, the Company has delivered to the Trustee an Opinion of Counsel to
the effect that (i) the Company has received from, or there has been published
by, the United States Internal Revenue Service a ruling or (ii) since the date
of the Indenture there has been a change in the applicable Federal income tax
law, in either case to the effect that Holders of the Notes will not recognize
gain or loss for Federal income tax purposes as a result of such deposit,
defeasance and discharge and will be subject to Federal income tax on the same
amount, in the same manner and at the same times as would have been the case if
such deposit, defeasance and discharge were not to occur; and that the resulting
trust will not be an "Investment Company" within the meaning of the Investment
Company Act of 1940 unless such trust is qualified thereunder or exempt from
regulation thereunder.

The Indenture provides that the Company may omit to comply with certain
covenants, including those described under "-- Certain Covenants" and in clauses
(E) and (F) under the first paragraph of "-- Merger, Consolidation and Sale of
Substantially All Assets," and that the occurrence of certain Events of Default,
which are described below in clause (iii) (with respect to such covenants) and
clauses (iv) and (v) under "-- Events of Default and Notice" will be deemed not
to be or result in an Event of Default. The Company, in order to exercise such
option, will be required to deposit, in trust for the benefit of the Holders of
the Notes, money or U.S. Government Obligations, or a combination thereof,
which, through the payment of principal, premium, if any, and interest in
respect thereof in accordance with their terms, will provide money in an amount
sufficient to pay the principal of and any premium and interest on the Notes at
Stated Maturity or on earlier redemption in accordance with the terms of the
Indenture and the Notes. The Company will also be required, among other things,
to deliver to the Trustee an Opinion of Counsel to the effect that Holders of
the Notes will not recognize gain or loss for Federal income tax purposes as a
result of such deposit and defeasance of certain obligations and will be subject
to Federal income tax on the same amount, in the same

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manner and at the same times as would have been the case if such deposit and
defeasance were not to occur; and that the resulting trust will not be an
"Investment Company" within the meaning of the Investment Company Act of 1940
unless such trust is qualified thereunder or exempt from regulation thereunder.
In the event the Company were to exercise this option and the Notes were
declared due and payable because of the occurrence of any Event of Default, the
amount of money and U.S. Government Obligations so deposited in trust would be
sufficient to pay amounts due on the Notes at the time of their Stated Maturity
but may not be sufficient to pay amounts due on the Notes upon any acceleration
resulting from such Event of Default. In such case, the Company would remain
liable for such payments.

EVENTS OF DEFAULT AND NOTICE

The following are summaries of Events of Default under the Indenture with
respect to the Notes: (i) failure to pay any interest on the Notes when due,
continued for 30 days; (ii) failure to pay principal of (or premium, if any, on)
the Notes when due; (iii) failure to perform any other covenant of the Company
or any Subsidiary Guarantor in the Indenture, continued for 60 days after
written notice as provided in the Indenture; (iv) the occurrence and
continuation beyond any applicable grace period of any default in the payment of
the principal of (or premium, if any, on) or interest on any Indebtedness (other
than Permitted Non-Recourse Indebtedness) of the Company (other than the Notes)
or any Restricted Subsidiary for money borrowed when due (whether resulting from
maturity, acceleration, mandatory redemption or otherwise), or any other default
causing acceleration of any Indebtedness (other than Permitted Non-Recourse
Indebtedness) of the Company or any Restricted Subsidiary for money borrowed,
provided that the aggregate principal amount of such Indebtedness shall exceed
$5 million; and specifically including, without limitation, any such default
under or acceleration of any Indebtedness (other than Permitted Non-Recourse
Indebtedness) directly or indirectly resulting or derived from, or caused by, a
default under or acceleration of any Permitted Non-Recourse Indebtedness; or (v)
one or more final judgments or orders by a court of competent jurisdiction are
entered against the Company or any Restricted Subsidiary in an uninsured or
unindemnified aggregate amount in excess of $5 million and such judgments or
orders are not discharged, waived, stayed, satisfied or bonded for a period of
60 consecutive days; (vi) certain events of bankruptcy, insolvency or
reorganization; or (vii) a Subsidiary Guaranty ceases to be in full force and
effect (other than in accordance with the terms of the Indenture and such
Subsidiary Guaranty) or a Subsidiary Guarantor denies or disaffirms its
obligations under its Subsidiary Guaranty.

The Indenture provides that if an Event of Default (other than an Event of
Default described in clause (vi) above) with respect to the Notes at the time
outstanding shall occur and be continuing, either the Trustee or the Holders of
at least 25% in aggregate principal amount of the Notes then outstanding by
notice as provided in the Indenture may declare the principal amount of the
Notes to be due and payable immediately. If an Event of Default described in
clause (vi) above with respect to the Notes at the time Outstanding shall occur,
the principal amount of all the Notes will automatically, and without any action
by the Trustee or any Holder, become immediately due and payable. After any such
acceleration, but before a judgment or decree based on acceleration, the Holders
of a majority in aggregate principal amount of the Notes then outstanding may,
under certain circumstances, rescind and annul such acceleration if all Events
of Default, other than the nonpayment of accelerated principal (or other
specified amount), have been cured or waived as provided in the Indenture.

Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders of the Notes, unless
such Holders shall have offered to the Trustee reasonable indemnity. Subject to
such provisions for the indemnification of the Trustee, the Holders of a
majority in aggregate principal amount of the Notes then outstanding will have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee or exercising any trust or power conferred
on the Trustee with respect to the Notes.

No Holder of Notes will have any right to institute any proceeding with
respect to the Indenture, or for the appointment of a receiver or a trustee, or
for any other remedy thereunder, unless (i) such Holder has previously given to
the Trustee written notice of a continuing Event of Default with respect to the
Notes,

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(ii) the Holders of at least 25% in aggregate principal amount of the then
outstanding Notes have made written request, and such Holder or Holders have
offered reasonable indemnity, to the Trustee to institute such proceeding as
trustee and (iii) the Trustee has failed to institute such proceeding, and has
not received from the Holders of a majority in aggregate principal amount of the
then outstanding Notes a direction inconsistent with such request, within 60
days after such notice, request and offer. However, such limitations do not
apply to a suit instituted by a Holder of Notes for the enforcement of payment
of the principal of or any premium or interest on such Notes on or after the
applicable due date specified in such Notes.

MODIFICATION OF THE INDENTURE; WAIVER

The Indenture provides that modifications and amendments of the Indenture
may be made by the Company, the Subsidiary Guarantors and the Trustee without
the consent of any Holders of Notes in certain limited circumstances, including
(i) to cure any ambiguity, omission, defect or inconsistency, (ii) to provide
for the assumption of the obligations of the Company under the Indenture upon
the merger, consolidation or sale or other disposition of all or substantially
all of the assets of the Company and its Restricted Subsidiaries taken as a
whole and certain other events specified in the "Merger, Consolidation and Sale
of Substantially All Assets" covenant, (iii) to provide for uncertificated Notes
in addition to or in place of certificated Notes, (iv) to comply with any
requirement of the Commission in order to effect or maintain the qualification
of the Indenture under the 1939 Act, (v) to make any change that does not
adversely affect the rights of any Holder of Notes in any material respect, (vi)
to add or remove Subsidiary Guarantors pursuant to the procedure set forth in
the Indenture, and (vii) certain other modifications and amendments as set forth
in the Indenture.

The Indenture contains provisions permitting the Company and the Trustee,
with the written consent of the Holders of not less than a majority in aggregate
principal amount of the Notes then outstanding, to execute supplemental
indentures or amendments adding any provisions to or changing or eliminating any
of the provisions of the Indenture or modifying the rights of the Holders of the
Notes, except that no such supplemental indenture, amendment or waiver may,
without the consent of all the Holders of Notes then outstanding, among other
things, (i) reduce the principal amount of Notes whose Holders must consent to
an amendment or waiver, (ii) reduce the rate of or change the time for payment
of interest on any Notes, (iii) change the currency in which any amount due in
respect of the Notes is payable, (iv) reduce the principal of or any premium on
or change the Stated Maturity of any Notes or alter the redemption or repurchase
provisions with respect thereto, (iv) reduce the relative ranking of any Notes
(vi) release any security that may have been granted in respect of the Notes or
(v) make certain other significant amendments or modifications as specified in
the Indenture.

The Holders of a majority in principal amount of the Notes then outstanding
may waive compliance by the Company with certain restrictive provisions of the
Indenture. The Holders of a majority in principal amount of the Notes then
outstanding may waive any past default under the Indenture, except a default in
the payment of principal, premium or interest and certain covenants and
provisions of the Indenture that cannot be amended without the consent of the
Holders of each Note then outstanding.

REPORTS

The Indenture provides that, whether or not required by the rules and
regulations of the Commission so long as any Notes are outstanding, the Company
will file with the Commission and furnish to the holders of Notes all quarterly
and annual financial information required to be contained in a filing with the
Commission on Forms 10-Q and 10-K, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual consolidated financial statements only, a report thereon by the
Company's independent auditors.

NOTICES

Notices to Holders of the Notes will be given by mail to the addresses of
such Holders as they may appear in the Security Register.

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GOVERNING LAW

The Indenture and the Notes are governed by and construed in accordance
with the internal laws of the State of New York without reference to principles
of conflicts of law.

TRUSTEE

The Trustee is the Trustee under the Indenture. The Trustee maintains
normal banking relationships with the Company and its Subsidiaries and may
perform certain services for and transact other business with the Company and
its Subsidiaries from time to time in the ordinary course of business.

DESCRIPTION OF THE OUTSTANDING NOTES

The terms of the Outstanding Notes are identical in all material respects
to the Exchange Notes, except that the Outstanding Notes have not been
registered under the Securities Act, are subject to certain restrictions on
transfer and are entitled to certain registration rights under the Registration
Agreement (which rights terminate upon the consummation of the Exchange Offer,
except under limited circumstances) (see "Description of the Exchange
Note -- Registration Agreement") the Exchange Notes will not provide for any
increase in the interest rate thereon. In that regard, the Outstanding Notes
provide that if an exchange offer registration statement is (i) not filed by
January 24, 1997 or (ii) not declared effective by March 27, 1997, Special
Interest will accrue and be payable semi-annually until such time as an exchange
offer registration statement is filed or becomes effective, as the case may be.
In addition, (i) if an exchange offer is not consummated or a resale shelf
registration statement is not declared effective by April 25, 1997 or (ii) if
either the exchange offer registration statement or the resale shelf
registration statement has been declared effective and such registration
statement ceases to be effective or usable (subject to certain exceptions) in
connection with resale of Exchange Notes or Outstanding Notes during periods
specified in the Registration Agreement, Special Interest will accrue and be
payable semi-annually until such time as an exchange offer is consummated or a
resale shelf registration statement is declared effective, as the case may be,
or until the exchange offer registration statement or resale registration
statement may again be used. Special Interest will accrue at a rate of 0.5% per
annum during the 90-day period immediately following the occurrence of any
failure to comply with the requirements set forth above and shall increase by
0.25% per annum at the end of each subsequent 90-day period, but in no event
shall such rate exceed 1.50% per annum. The Exchange Notes are not entitled to
any such Special Interest. In addition, the Outstanding Notes and the Exchange
Notes will constitute a single series of debt securities under the Indenture.
See "Description of the Exchange Notes."

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following summary describes certain United States Federal income tax
consequences generally applicable to a holder that exchanges Outstanding Notes
for Exchange Notes in the Exchange Offer. This discussion is based on the
Internal Revenue Code of 1986, as amended to the date hereof (the "Code"),
existing and proposed Treasury regulations, and judicial and administrative
determinations, all of which are subject to change at any time, possibly on a
retroactive basis. It relates only to persons who hold their Outstanding Notes,
and will hold Exchange Notes exchanged therefor, as "capital assets" within the
meaning of Section 1221 of the Code. It does not discuss state, local or foreign
tax consequences, nor, except as otherwise noted, does it discuss tax
consequences to categories of holders that are subject to special rules, such as
foreign persons, tax-exempt organizations, insurance companies, banks and
dealers in stocks and securities. Tax consequences may vary depending on the
particular status of an investor. No rulings will be sought from the Internal
Revenue Service ("IRS") with respect to the Federal income tax consequences of
the Exchange Offer.

THIS SECTION DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO AN INVESTOR'S DECISION TO PARTICIPATE IN THE
EXCHANGE OFFER. EACH INVESTOR SHOULD CONSULT WITH ITS OWN TAX ADVISOR CONCERNING
THE APPLICATION OF THE FEDERAL INCOME TAX

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LAWS AND OTHER TAX LAWS TO ITS PARTICULAR SITUATION BEFORE DETERMINING WHETHER
TO EXCHANGE ITS OUTSTANDING NOTES FOR EXCHANGE NOTES.

THE EXCHANGE OFFER

Under recently-issued Treasury regulations, the exchange of Outstanding
Notes for Exchange Notes pursuant to the Exchange Offer should not constitute a
significant modification of the terms of the Outstanding Notes and, accordingly,
such exchange should be treated as a "nonevent" for Federal income tax purposes.
Therefore, such exchange should have no Federal income tax consequences to
holders of Outstanding Notes who participate in the exchange, and each such
holder would continue to be required to include interest on the Exchange Notes
in its gross income in accordance with its method of accounting for Federal
income tax purposes.

TREATMENT OF INTEREST

In general, interest on an Outstanding Note or Exchange Note will be
taxable to a beneficial owner who or which is (i) a citizen or resident of the
United States, (ii) a corporation created or organized under the laws of the
United States or any State thereof (including the District of Columbia) or (iii)
a person otherwise subject to United States Federal income taxation on its
worldwide income (a "U.S. Holder") as ordinary income at the time it is received
or accrued, depending on the U.S. Holder's method of accounting for tax
purposes.

Under the tax rules relating to original issue discount, holders of debt
instruments issued at a discount that exceeds a nominal amount may be required
to recognize taxable interest income prior to the receipt or accrual of stated
interest. The Outstanding Notes were treated by the Company as issued without
taxable original issue discount. In the case of a debt instrument issued that
provides for contingent payments, Treasury Regulations provide that such
payments will not be taken into account in computing original issue discount if
there is a remote likelihood that the payments will occur. Had the Company
failed to effect the Exchange Offer on a timely basis, special interest (the
"Special Interest") would have accrued on the Outstanding Notes. Because the
Company determined that, when the Outstanding Notes were issued, there was only
a remote possibility that events would occur which would cause the Special
Interest to accrue on the Outstanding Notes, the Company determined that the
Special Interest should not be taken into account in concluding that the
Outstanding Notes were issued without original issue discount. The IRS could
disagree with this determination. Each U.S. Holder should consult his own tax
advisor with respect to the possible accrual of original issue discount on the
Outstanding Notes.

OPTIONAL REDEMPTION OR REPURCHASE

The Outstanding Notes and the Exchange Notes are subject to (i) redemption
at the option of the Company, on or before November 15, 2001, at a predetermined
redemption price plus any accrued and unpaid interest, and (ii) repurchase at
the option of each Holder thereof upon a Change of Control for 101% of the
principal amount plus any accrued and unpaid interest. See "Description of the
Exchange Notes" and "Description of the Outstanding Notes." Upon the optional
redemption or repurchase of an Outstanding Note or an Exchange Note, it is
expected that the amount received by a Holder in excess of the Holder's adjusted
tax basis in the Outstanding Note or Exchange Note will be taxable as capital
gain, if the Outstanding Note or the Exchange Note is held as a capital asset
(except to the extent that such amount received is attributable to accrued but
unpaid interest or market discount, which will be treated as ordinary income).

PAYMENTS OF PRINCIPAL; DISPOSITIONS

Upon the sale, exchange, redemption, retirement at maturity or other
disposition of an Outstanding Note or an Exchange Note, a U.S. Holder will
generally recognize taxable gain or loss equal to the difference between the sum
of cash plus the fair market value of all other property received on such
disposition (except to the extent such cash or property is attributable to
accrued but unpaid interest or market discount, which will be taxable as
ordinary income) and such U.S. Holder's adjusted tax basis in the Outstanding
Note or the

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Exchange Note. A U.S. Holder's adjusted tax basis in an Outstanding Note or an
Exchange Note generally will equal the cost of the Outstanding Note or the
Exchange Note to such U.S. Holder (increased for accrued original issue
discount, if any), less any principal payment received by such U.S. Holder. Gain
or loss realized by a U.S. Holder on the sale, redemption or other disposition
of an Outstanding Note or an Exchange Note generally will be long-term capital
gain or loss if, at the time of the disposition, the Outstanding Note or the
Exchange Note has been held for more than one year.

AMORTIZABLE BOND PREMIUM

If a U.S. Holder pays an amount (exclusive of accrued and unpaid interest
through the acquisition date) in excess of the Outstanding Note's or the
Exchange Note's stated redemption price at maturity at the time of its
acquisition ("Bond Premium"), the U.S. Holder will not be required to include
original issue discount, if any, in his income and may elect to amortize Bond
Premium. If Bond Premium is amortized, the amount of interest that must be
included in the U.S. Holder's income from each period ending on an interest
payment date or stated maturity, as the case may be, will be reduced by the
portion of the Bond Premium allocable to such period based on the Outstanding
Note's or the Exchange Note's yield to maturity and the U.S. Holder's adjusted
basis in the Outstanding Notes or the Exchange Notes will be reduced
accordingly. This election applies to all notes acquired by the U.S. Holder
during the year of election and thereafter.

MARKET DISCOUNT

A U.S. Holder, other than an initial holder, will be treated as holding an
Outstanding Note or an Exchange Note at a market discount (a "Market Discount
Note") if the amount for which such U.S. Holder purchased the Outstanding Note
or the Exchange Note is less than the Outstanding Note's or the Exchange Note's,
respectively, stated redemption price at maturity, or, in the case of an
Outstanding Note issued with original issue discount, the "revised issue price,"
as defined in Section 1278 of the Code, subject in both cases to a de minimis
rule. An initial holder of an Outstanding Note will be treated as holding a
Market Discount Note if the initial holder purchased such Outstanding Note for
less than its issue price.

In general, any partial payment of principal on, or gain recognized on the
maturity, optional redemption or repurchase, or disposition of, a Market
Discount Note will be treated as ordinary interest income to the extent of
accrued market discount on such Market Discount Note. Alternatively, a U.S.
Holder of a Market Discount Note may elect to include market discount in income
currently over the life of the Market Discount Note. Such an election applies to
all debt instruments with market discount acquired by the electing U.S. Holder
on or after the first day of the first taxable year to which the election
applies and may not be revoked without the consent of the IRS.

Market discount accrues on a straight-line basis, unless the U.S. Holder
elects to accrue such discount on a constant yield to maturity basis. Such an
election is applicable only to the Market Discount Note with respect to which it
is made and is irrevocable. A U.S. Holder of a Market Discount Note that does
not elect to include market discount in income currently generally will be
required to defer deductions for interest on borrowings allocable to such Market
Discount Note, in an amount not exceeding the accrued market discount on such
Market Discount Note, until the maturity or disposition of such Market Discount
Note. If such Market Discount Note is disposed of in a non-taxable transaction
(other than a nonrecognition transaction described in Section 1276(c) of the
Code) accrued market discount will be includable as ordinary income to the U.S.
Holder as if such U.S. Holder had sold the Market Discount Note at its then fair
market value.

NON-U.S. HOLDERS

Under present United States Federal income and estate tax law and subject
to the discussion of backup withholding below:

(a) payments of interest on an Outstanding Note or Exchange Note by
the Company or any agent of the Company to any holder of an Outstanding
Note or an Exchange Note that is not a U.S. Holder (a "Non-U.S. Holder")
will not be subject to United States federal withholding tax, provided that
(i) the Non-U.S. Holder does not actually or constructively own 10% or more
of the total combined voting power

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of all classes of stock of the Company entitled to vote, (ii) the Non-U.S.
Holder is not a controlled foreign corporation that is related to the
Company through stock ownership, and (iii) either (A) the beneficial owner
of the Outstanding Notes or the Exchange Notes certifies to the Company or
its agent, under penalties of perjury, that it is not a "United States
person" (as defined in the Code) and provides its name and address or (B) a
securities clearing organization, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business
(a "financial institution") and holds the Outstanding Notes on behalf of
the beneficial owner certifies to the Company or its agent, under penalties
of perjury, that such statement has been received from the beneficial owner
and furnishes the payor with a copy thereof;

(b) a Non-U.S. Holder will not be subject to United States Federal
withholding tax on gain realized on the sale, exchange or redemption of an
Outstanding Note or an Exchange Note; and

(c) an Outstanding Note or an Exchange Note held by an individual who
at the time of death is not a citizen or resident of the United States will
not be subject to United States Federal estate tax as a result of such
individual's death if, at the time of such death, the individual did not
actually or constructively own 10% or more of the total combined voting
power of all classes of stock of the Company entitled to vote and the
income on the Outstanding Notes or the Exchange Notes would not have been
effectively connected with the conduct of a trade or business by the
individual in the United States.

Recently proposed regulations that would be effective January 1, 1998,
provide for several alternative methods for Non-U.S. Holders or "qualified
intermediaries" who hold the Outstanding Notes or the Exchange Notes on behalf
of Non-U.S. Holders to obtain an exemption from withholding on interest
payments.

If a Non-U.S. Holder is engaged in a trade or business in the United States
and interest on the Outstanding Notes or the Exchange Notes is effectively
connected with the conduct of such trade or business, the Non-U.S. Holder,
although exempt from the withholding tax discussed in the preceding paragraph
(provided that such Non-U.S. Holder furnishes a properly executed IRS Form 4224
on or before any payment date to claim such exemption), may be subject to U.S.
Federal income tax on such interest in the same manner as if it were a U.S.
Holder.

BACKUP WITHHOLDING

Under the Code, a holder of an Outstanding Note or Exchange Note may be
subject, under certain circumstances, to "backup withholding" at a 31% rate with
respect to payments in respect of interest thereon or the gross proceeds from
the disposition thereof. This withholding generally applies only if the holder
(i) fails to furnish his or her social security or other taxpayer identification
number ("TIN") after request therefor, (ii) furnishes an incorrect TIN, (iii) is
notified by the IRS that he or she has failed to report properly payments of
interest and dividends and the IRS has notified the Company that he or she is
subject to backup withholding, or (iv) fails, under certain circumstances, to
provide a certified statement, signed under penalty of perjury, that the TIN
provided is his or her correct number and that he or she is not subject to
backup withholding. Any amount withheld from a payment to a holder under the
backup withholding rules is allowable as a credit against such holder's Federal
income tax liability, provided that the required information is furnished to the
IRS. Corporations, Non-U.S. Holders and certain other entities described in the
Code and Treasury regulations are generally exempt from such withholding if
their exempt status is properly established.

PLAN OF DISTRIBUTION

Based on interpretations of the staff of the Corporate Finance Division of
the Commission set forth in no-action letters issued to third parties, the
Company believes that, except as described below, Exchange Notes issued pursuant
to the Exchange Offer may be offered for resale, resold and otherwise
transferred by respective holders thereof without further compliance with the
registration and prospectus delivery requirements of the Securities Act,
provided that (i) such Exchange Notes are acquired in the ordinary course of
such holder's business and (ii) such holder does not intend to participate in,
and is not engaged in and does not intend to

94
<PAGE> 96

engage in, a distribution of the Exchange Notes. A holder of Outstanding Notes
that is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act or that is a broker-dealer that purchased Outstanding Notes from
the Company to resell pursuant to an exemption from registration (a) cannot rely
on such interpretations by the staff of the Division of Corporate Finance of the
Commission, (b) will not be permitted or entitled to tender such Outstanding
Notes in the Exchange Offer and (c) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
sale or transfer of such Outstanding Notes. Any holder who tenders Outstanding
Notes in the Exchange Offer with the intention or for the purpose of
participating in a distribution of the Exchange Notes cannot rely on such
interpretation by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. Unless an exemption from
registration is otherwise available, any such resale transaction should be
covered by an effective registration statement containing selling security
holders information required by Item 507 of Regulation S-K under the Securities
Act. To date, the staff of the Commission has taken the position that a
broker-dealer that has acquired securities in exchange for securities that were
acquired by such broker-dealer as a result of market making activities or other
trading activities (a "Participating Broker-Dealer") may fulfill its prospectus
delivery requirements with the prospectus contained in an exchange offer
registration statement.

Each holder of Outstanding Notes who wishes to exchange its Outstanding
Notes for Exchange Notes in the Exchange Offer will be required to make certain
representations to the Company set forth in "The Exchange Offer -- Procedures
for Tendering."

Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Outstanding Notes where such Outstanding Notes were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, starting on the date the Exchange Offer is consummated and ending
on the close of business on the first anniversary of such date, it will make
this Prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale.

The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit from any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.

For a period of one year after the date the Exchange Offer is consummated,
the Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer (including the expenses of one counsel
for the holders of the Outstanding Notes, but excluding any expenses relating to
the printing of this Prospectus, which printing expenses will be paid by the
Initial Purchasers) other than commissions or concessions of any brokers or
dealers and will indemnify the holders of the Outstanding Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.

95
<PAGE> 97

LEGAL MATTERS

The validity of the Exchange Notes issued in the Exchange Offer will be
passed upon for the Company by Davis, Graham & Stubbs LLP, Denver, Colorado.

EXPERTS

The Consolidated Financial Statements of the Company included in this
Prospectus to the extent and for the periods indicated in their report have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report dated February 29, 1996, with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in giving said
report.

Estimates of historical oil and natural gas reserves of the Company as of
December 31, 1993, 1994 and 1995, appearing or incorporated by reference herein
are based upon engineering studies prepared by the Company and reviewed by the
independent petroleum engineering firm of Williamson Petroleum Consultants, Inc.
Such estimates are included herein in reliance upon the authority of such firm
as experts in such matters.

96
<PAGE> 98

GLOSSARY OF OIL AND NATURAL GAS TERMS

The terms defined in this section are used throughout this Prospectus.

Bbl. One stock tank barrel, or 42 U.S. gallons liquid volume, used herein
in reference to crude oil or other liquid hydrocarbons.

Bcf. Billion cubic feet of natural gas.

Behind-pipe reserves. Proved reserves in a formation through which
production casing has already been set in the wellbore, but from which
production has not commenced.

Boe. Barrels of oil equivalent, determined using the ratio of six Mcf of
natural gas (including natural gas liquids) to one Bbl of crude oil or
condensate.

Btu. British thermal unit, which is the heat required to raise the
temperature of a one pound mass of water from 58.5 to 59.5 degrees Fahrenheit.

COPAS charge. A charge made by the operator of a well for the account of
all working interests, the payment of which constitutes reimbursement for the
operator's administrative costs attributable to operating the well.

Development location. A location on which a development well can be
drilled.

Development well, development drilling. Drilling of a well within the
proved area of an oil or gas reservoir to the stratigraphic depth of a horizon
known to be productive in an attempt to recover proved undeveloped reserves.

Dry hole. A well found to be incapable of producing either oil or natural
gas in sufficient quantities to justify completion as an oil or gas well.

Estimated future net revenues. Revenues from production of oil and natural
gas, net of all production-related taxes, lease operating expenses and capital
costs.

Exploitation well or exploitation drilling. Drilling of wells in areas of
known production. However, because of geologic, reservoir and other
characteristics it is possible that an exploitation well may not encounter
commercial quantities of reserves. Therefore such wells carry somewhat greater
risk than development drilling. Oil and gas reserves associated with
exploitation wells are not typically considered to be proved.

Exploratory well or exploratory drilling. A well drilled to find and
produce oil or gas 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 beyond existing defined limits.

Farmout. An assignment of an interest in a drilling location and related
acreage, typically conditional upon the drilling of a well on that drilling
location.

Finding Cost. The capital costs associated with finding and developing oil
and natural gas reserves.

Gross acre. An acre in which a working interest is owned.

Gross well. A well in which a working interest is owned.

Held by production. Acreage covered by an oil and gas lease which has a
producing well on it, or which is pooled with a lease or leases having one or
more producing wells on them, so the lease is maintained in effect for the
duration of such production.

Henry Hub. The delivery point of the NYMEX natural gas contract, located
in southern Louisiana.

Horizontal drilling. Horizontal drilling involves deviating the angle of a
wellbore approximately 90m from vertical to near horizontal in the formation of
interest. Horizontal drilling permits the wellbore to contact and intersect a
larger portion of the producing horizon than is permitted by conventional
vertical drilling techniques and can result in increased production rates and
greater ultimate recovery of hydrocarbons.

97
<PAGE> 99

Hydraulic fracturing. A mechanical technique used to enhance productivity
and ultimate reserve recovery. Fluids and a proppant are injected into a
particular reservoir at rates and pressure sufficient to create a series of
fractures or cracks in that reservoir.

Increased density, or infill, drilling. Somewhat similar to development
drilling, increased density drilling involves wells drilled within the proved
area of an oil or gas reservoir to a zone known to be productive. However,
infill drilling generally involves an increase in well density based on
engineering and geological studies which demonstrate that the existing well
density does not adequately drain the reservoir.

Lease operating expense. All direct costs associated with and necessary to
operate a producing property.

MBbl. One thousand barrels of crude oil or other liquid hydrocarbons.

MBoe. One thousand barrels of oil equivalent.

MBtu. One thousand Btus.

Mcf. One thousand cubic feet of natural gas.

MMBbl. One million barrels of crude oil or other liquid hydrocarbons.

MMBoe. One million barrels of oil equivalent.

MMBtu. One million Btus.

MMcf. One million cubic feet of natural gas.

Multi-pay horizons. A well bore with more than one zone that may
potentially produce oil and/or gas.

Net acres or net wells. The sum of the working interests owned in gross
acres or gross wells.

Present value of estimated future net revenues, pretax present value at
constant prices of estimated future net revenues. Estimated future net revenues
before income taxes, discounted by a factor of ten percent per annum and with no
price or cost escalation or de-escalation in accordance with guidelines
promulgated by the Commission.

Productive well. A well that is producing or that is capable of producing
oil or natural gas.

Proved developed reserves. Reserves that can be expected to be recovered
through existing wells with existing equipment and operating methods.

Proved reserves. The estimated quantities of crude oil, natural gas and
natural gas liquids which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions.

Proved undeveloped location. A site on which a development well can be
drilled consistent with local spacing rules for the purpose of recovering proved
reserves.

Proved undeveloped reserves. 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.

Recompletions. Within an existing wellbore, a recompletion involves
completion for production of a formation other than those which have previously
been productive. It is the mechanism by which behind-pipe reserves become
productive.

Reserve replacement costs. Total costs incurred for exploration and
development, divided by reserves added from all sources, including reserve
discoveries, extensions and improved recovery additions, net of revisions to
reserve estimates and purchases of reserves in place.

Royalty interest, overriding royalty interest. An interest in an oil and
natural gas property entitling the owner to a share of oil and gas production
free of costs of drilling, completion and production.

Tcf. One trillion cubic feet of natural gas.

98
<PAGE> 100

3-D seismic projects. 3-D seismic projects involve the use of seismic
reflections to assist in mapping in three dimensions the structural and
stratigraphic aspects of certain reservoirs lending themselves to the
application of this advanced technology. Particularly when coupled with advanced
processing, interpretation, geostatistical techniques and interpretive geology,
this technology can materially reduce the risk associated with some types of
drilling.

Undeveloped acreage. Lease acreage on which wells have not been drilled or
completed to a point that would permit the production of commercial quantities
of oil and natural gas regardless of whether such acreage contains proved
reserves.

Waterflood. A waterflood is the injection of water into a reservoir to (i)
fill pores vacated by produced fluids or (ii) push hydrocarbons from the
injector well to another wellbore from which reserves can be produced.
Waterfloods are intended to maintain reservoir pressure, assist production and
enhance reservoir recovery rates.

Wattenberg Field area. The geographic region in the D-J Basin located
approximately 35 miles north of Denver, where the J-Sand formation is
productive, as well as adjacent areas where the Codell, Niobrara, Sussex and
Shannon formations are productive.

Wellbore extension. A wellbore extension involves deepening an existing
wellbore to a new and deeper formation.

Working interest. The operating interest which gives the owner the right
to drill, produce and conduct operating activities on the property and entitles
it to ownership of a share of production.

99
<PAGE> 101

HS RESOURCES, INC.

INDEX TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Unaudited Pro Forma Combined Statements of Operations for the Year Ended December 31,
1995................................................................................ P-2
Unaudited Pro Forma Combined Statements of Operations for the Nine Months Ended
September 30, 1996.................................................................. P-3
Notes to Unaudited Pro Forma Combined Financial Statements............................ P-4
</TABLE>

P-1
<PAGE> 102

UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS

The accompanying Unaudited Pro Forma Combined Statements of Operations for
the year ended December 31, 1995, and for the nine months ended September 30,
1996, include pro forma adjustments that give effect to the Acquisitions and the
Merger as if such transactions had occurred at the beginning of each such
period. The Unaudited Pro Forma Combined Statements of Operations are based on
the assumptions set forth in the notes to such statements. Such pro forma
information should be read in conjunction with the Consolidated Financial
Statements and related notes thereto and is not necessarily indicative of the
results that actually would have occurred had the transactions been in effect on
the date or for the periods indicated, or of results that may occur in the
future.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
--------------------------------------------------------------------------
PRO FORMA
COMPANY ACQUISITIONS MERGER ADJUSTMENTS PRO FORMA
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Oil and natural gas sales..................... $53,394,029 $25,277,214 $ 36,508,000 $ $115,179,243
Other natural gas revenues.................... 1,782,349 -- -- 2,051,944(A) 3,834,293
Trading and transportation.................... -- -- 82,927,000 82,927,000
Interest income............................... 95,361 -- 305,000 400,361
Other......................................... 68,149 -- 961,000 37,125(B) 1,066,274
----------- ----------- ------------ ------------ ------------
Total revenues.............................. 55,339,888 25,277,214 120,701,000 2,089,069 203,407,171
----------- ----------- ------------ ------------ ------------
EXPENSES:
Production taxes.............................. 4,050,483 1,929,195 2,517,000 8,496,678
Lease operating............................... 9,935,809 4,259,531 7,747,000 21,942,340
Cost of trading and transportation............ -- -- 80,642,000 80,642,000
Depreciation, depletion and amortization...... 26,608,885 -- 11,365,000 (11,365,000)(C) 61,302,536
34,693,651(C)
General and administrative.................... 4,075,581 -- 4,557,000 (1,060,000)(D) 7,572,581
Interest...................................... 10,218,555 -- 3,186,000 13,999,191(E) 27,403,746
----------- ----------- ------------ ------------ ------------
Total expenses.............................. 54,889,313 6,188,726 110,014,000 36,267,842 207,359,881
----------- ----------- ------------ ------------ ------------
Income (loss) before income taxes............. 450,575 19,088,488 10,687,000 (34,178,773) (3,952,710)
Provision (benefit) for income taxes.......... 176,419 -- 4,016,000 (5,698,402)(F) (1,505,983)
----------- ----------- ------------ ------------ ------------
Net income (loss)............................. $ 274,156 $19,088,488 $ 6,671,000 $(28,480,371) $ (2,446,727)
=========== =========== ============ ============ ============
EARNINGS (LOSS) PER SHARE:
Earnings (loss) per share..................... $ 0.02 $ (0.14)
=========== ============
Earnings (loss) per share, assuming full
dilution.................................... $ 0.02 $ (0.14)
=========== ============
Weighted average number of common and common
equivalent shares............................. 11,440,000 6,161,312(G) 17,601,312
=========== ============ ============
Weighted average number of common and common
equivalent shares assuming
full dilution................................. 11,450,000 6,161,312(G) 17,611,312
=========== ============ ============
</TABLE>

The accompanying notes are an integral part of the Unaudited
Pro Forma Combined Statements of Operations.

P-2
<PAGE> 103

HS RESOURCES, INC.

UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996
-------------------------------------------------------------------------
PRO FORMA
COMPANY ACQUISITIONS MERGER ADJUSTMENTS PRO FORMA
----------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Oil and natural gas sales...................... $67,168,879 $7,161,191 $22,123,709 $ 96,453,779
Other natural gas revenues..................... 1,780,257 -- -- 822,533(A) 2,602,790
Trading and transportation..................... 19,536,574 -- 49,035,299 68,571,873
Interest income................................ 164,397 -- 105,541 269,938
Other.......................................... 112,471 -- 246,344 358,815
----------- ---------- ----------- ------------ ------------
Total revenues........................... 88,762,578 7,161,191 71,510,893 822,533 168,257,195
----------- ---------- ----------- ------------ ------------
EXPENSES
Production taxes............................... 5,059,394 668,037 1,451,733 7,179,164
Lease operating................................ 11,667,023 886,193 3,862,938 16,416,154
Cost of trading and transportation............. 18,951,357 -- 47,223,300 66,174,657
Other expenses................................. 93,713 -- -- 93,713
Depreciation, depletion and amortization....... 29,522,582 -- 5,425,149 (34,947,731)(C)
43,533,031(C) 43,533,031
General and administrative..................... 2,922,600 -- 2,041,180 4,963,780
Interest....................................... 15,387,809 -- 1,402,519 3,855,213(E) 20,645,541
----------- ---------- ----------- ------------ ------------
Total expenses........................... 83,604,478 1,554,230 61,406,819 12,440,513 159,006,040
----------- ---------- ----------- ------------ ------------
Income (loss) before income taxes.............. 5,158,100 5,606,961 10,104,074 (11,617,980) 9,251,155
Provision for income taxes..................... 1,965,359 1,559,331(F) 3,524,690
----------- ---------- ----------- ------------ ------------
Net income (loss).............................. $ 3,192,741 $5,606,961 $10,104,074 $(13,177,311) $ 5,726,465
=========== ========== =========== ============ ============
EARNINGS PER SHARE:
Earnings per share............................. $ 0.24 $ 0.33
=========== ============
Earnings per share, assuming full dilution..... $ 0.24 $ 0.33
=========== ============
Weighted average number of common and equivalent
shares......................................... 13,546,000 3,885,000(G) 17,431,000
=========== ============ ============
Weighted average number of common and common
equivalent shares assuming full dilution....... 13,549,000 3,893,000(G) 17,442,000
=========== ============ ============
</TABLE>

The accompanying notes are an integral part of the Unaudited
Pro Forma Combined Statements of Operations.

P-3
<PAGE> 104

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

(A) Record estimated income from the monetization of Section 29 tax credits
generated from the assets acquired in the Acquisitions. The estimated
qualifying production is approximately 4,725,000 Mcf and 1,894,000 Mcf for
the Acquisitions for the year ended December 31, 1995, and the nine months
ended September 30, 1996, respectively. No tax credits were generated by or
anticipated from Tide West production. The adjustment is based on the
monetization of the Section 29 tax credits available from the Acquisitions
pursuant to arrangements the Company has with two financial institutions
under the same terms as currently apply to the monetization of the Company's
other Section 29 tax credits. Tax credit income is accrued monthly based on
production sold. Cash payments are made quarterly as stipulated in the
applicable agreement.

(B) Adjust for Tide West successful efforts expenses capitalized under full
cost accounting.

(C) Record the elimination of Tide West's depreciation, depletion and
amortization ("DD&A") expense and record consolidated DD&A expense on the
assets acquired. Pro forma DD&A expense on proved oil and natural gas
properties is computed by combining the Company's net unamortized costs of
proved properties plus the portion of the purchase price and transaction
costs allocated to proved properties and using the units-of-production
amortization method based on estimates of total pro forma proved reserves.
The combined DD&A rate per BOE for the assets acquired is $5.70 and $5.65
for the year ended December 31, 1995 and the nine months ended September 30,
1996, respectively. The depreciation expense recorded for the Tide West
corporate fixed assets is $332,000 and $318,452 for the year ended December
31, 1995 and the nine months ended September 30, 1996, respectively.

(D) General and administrative expenses have been adjusted to reflect savings in
salary and bonus expense that would have occurred if the Merger had taken
place at the beginning of the period. The adjustment reflects the salary and
bonuses paid to three senior executives of Tide West who were terminated
effective upon the closing of the Merger and who were not replaced.

(E) Record elimination of Tide West interest expense and record interest
expense related to debt necessary to finance the Merger and the
Acquisitions, using the Company's average LIBOR rates of 7.32% and 6.88%
for the year ended December 31, 1995 and the nine months ended September
30, 1996, respectively. Interest was calculated on new debt of
approximately $218,000,000, which is composed of $125,100,000 for the
Acquisitions, and $92,900,000 for the Merger. Interest was capitalized on
undeveloped property costs as appropriate.

(F) Record the tax effect of the Merger and the Acquisitions assuming a
combined federal and state effective tax rate of 38.1%.

(G) To reflect the impact of the issuance of additional shares of HSR Common
Stock on the weighted average number of common and common equivalent shares
as if such additional shares had been issued at the beginning of the period.

P-4
<PAGE> 105

HS RESOURCES, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Independent Public Accountants.............................................. F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and September 30, 1996
(unaudited)......................................................................... F-3
Consolidated Statements of Operations for the years ended December 31, 1993, 1994 and
1995 and the nine months ended September 30, 1995 (unaudited) and 1996
(unaudited)......................................................................... F-4
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1993,
1994 and 1995 and the nine months ended September 30, 1996 (unaudited).............. F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994 and
1995 and the nine months ended September 30, 1995 (unaudited) and 1996
(unaudited)......................................................................... F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>

F-1
<PAGE> 106

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders of HS Resources, Inc.:

We have audited the accompanying consolidated balance sheets of HS
Resources, Inc. (a Delaware corporation) and subsidiaries as of December 31,
1994 and 1995, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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 financial statements referred to above present fairly,
in all material respects, the financial position of HS Resources, Inc. and
subsidiaries as of December 31, 1994 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.

/s/ ARTHUR ANDERSEN LLP

Denver, Colorado
February 29, 1996

F-2
<PAGE> 107

HS RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- SEPTEMBER 30,
1994 1995 1996
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents........................................................... $ 657,383 $ 116,581 $ 5,944,246
Margin deposits..................................................................... -- -- 555,859
Accounts receivable
Oil and natural gas sales......................................................... 6,383,054 6,344,672 23,405,637
Trade............................................................................. 3,941,331 1,300,244 2,602,915
Other............................................................................. 895,798 2,461,966 5,496,155
Lease and well equipment inventory, at cost......................................... 1,205,245 709,613 1,650,988
Prepaid expenses and other.......................................................... 337,179 152,569 562,970
------------ ------------ ------------
Total current assets.......................................................... 13,419,990 11,085,645 40,218,770
------------ ------------ ------------
OIL AND NATURAL GAS PROPERTIES, at cost, using the full cost method
Undeveloped acreage................................................................. 25,833,370 26,778,702 58,036,033
Costs subject to depreciation, depletion and amortization........................... 280,233,049 341,382,375 712,196,567
Less accumulated depreciation, depletion and amortization........................... (64,057,874) (89,350,067) (117,720,959)
------------ ------------ ------------
Net oil and natural gas properties............................................ 242,008,545 278,811,010 652,511,641
------------ ------------ ------------
NATURAL GAS GATHERING AND TRANSPORTATION FACILITIES, at cost, net of accumulated
depreciation of $470,098 and $739,010 at December 31, 1994 and 1995, respectively,
and $957,632 at September 30, 1996.................................................. 4,533,135 4,913,692 5,146,038
------------ ------------ ------------
OTHER ASSETS
Deferred charges and other.......................................................... 4,257,597 3,652,769 5,140,813
Office and transportation equipment and other property, net of accumulated
depreciation of $1,473,652 and $2,457,070 at December 31, 1994 and 1995,
respectively, and $3,265,309 at September 30, 1996................................ 4,850,659 3,626,149 4,696,436
Investment in Oil and Natural Gas Limited Partnership............................... -- -- 975,835
------------ ------------ ------------
Total other assets............................................................ 9,108,256 7,278,918 10,813,084
------------ ------------ ------------
TOTAL ASSETS.................................................................. $269,069,926 $302,089,265 $708,689,533
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable
Trade............................................................................. $ 5,008,882 $ 4,638,286 $ 11,918,766
Revenue........................................................................... 3,475,526 2,091,073 6,216,370
Natural gas purchases............................................................. -- -- 7,738,607
Accrued expenses
Ad valorem and production taxes................................................... 2,884,781 4,386,969 3,445,999
Interest.......................................................................... 1,121,219 1,494,667 5,072,653
Other............................................................................. 2,077,858 2,159,324 2,187,940
Unearned income..................................................................... 1,206,154 -- --
Short-term note..................................................................... -- 12,400,000 --
Current portion of long-term debt................................................... 30,000 30,000 30,000
------------ ------------ ------------
Total current liabilities..................................................... 15,804,420 27,200,319 36,610,335
------------ ------------ ------------
ACCRUED AD VALOREM TAXES AND OTHER................................................... 6,997,461 6,574,405 11,292,785
LONG-TERM OIL AND NATURAL GAS PRODUCTION NOTE PAYABLE................................ -- -- 734,696
LONG-TERM BANK DEBT, net of current portion.......................................... 29,000,000 51,000,000 317,000,000
9 7/8% SENIOR SUBORDINATED NOTES, due 2003, net of unamortized discount of $521,625
and $463,125 at December 31, 1994 and 1995, respectively, and $419,250 at September
30, 1996............................................................................ 74,478,375 74,536,875 74,580,750
DEFERRED INCOME TAXES................................................................ 23,432,058 23,603,540 81,653,770
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY
Series A convertible participating preferred stock, $.001 par value; $13.50 stated
value; $1.00 per share liquidation preference; 15,000,000 shares authorized; no
shares issued and outstanding at December 31, 1994 and 1995 and September 30,
1996.............................................................................. -- -- --
Common stock, $.001 par value, 30,000,000 shares authorized; 10,948,680 shares
issued and outstanding at December 31, 1994 and 1995, respectively and 17,117,861
at September 30, 1996............................................................. 10,949 10,949 17,118
Additional paid-in capital.......................................................... 97,720,356 97,717,908 162,877,883
Retained earnings................................................................... 22,210,416 22,484,572 25,677,313
Treasury stock, at cost, 40,313 shares and 75,077 shares at December 31, 1994 and
1995, respectively and 141,977 shares at September 30, 1996....................... (584,109) (1,039,303) (1,755,117)
------------ ------------ ------------
Total stockholders' equity.................................................... 119,357,612 119,174,126 186,817,197
------------ ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................................... $269,069,926 $302,089,265 $708,689,533
============ ============ ============
</TABLE>

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

F-3
<PAGE> 108

HS RESOURCES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER
30,
---------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Oil and natural gas sales................. $45,381,828 $58,827,315 $53,394,029 $41,012,737 $67,168,879
Other natural gas revenues................ 1,964,006 1,334,755 1,782,349 1,454,343 1,780,257
Trading and transportation................ -- -- -- -- 19,536,574
Interest income........................... 116,378 188,910 95,361 74,679 164,397
Other..................................... 14,905 50,441 68,149 59,945 112,471
----------- ----------- ----------- ----------- -----------
Total revenues...................... 47,477,117 60,401,421 55,339,888 42,601,704 88,762,578
----------- ----------- ----------- ----------- -----------
EXPENSES
Production taxes.......................... 4,222,431 5,133,851 4,050,483 3,176,935 5,059,394
Lease operating........................... 5,469,963 8,310,409 9,935,809 7,546,731 11,667,023
Cost of trading and transportation........ -- -- -- -- 18,951,357
Other expenses............................ -- -- -- -- 93,713
Depreciation, depletion and
amortization............................ 15,298,954 25,079,222 26,608,885 20,592,741 29,522,582
General and administrative................ 3,122,962 4,228,472 4,075,581 2,996,747 2,922,600
Interest.................................. 3,117,947 7,538,611 10,218,555 7,575,040 15,387,809
----------- ----------- ----------- ----------- -----------
Total expenses...................... 31,232,257 50,290,565 54,889,313 41,888,194 83,604,478
----------- ----------- ----------- ----------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES.... 16,244,860 10,110,856 450,575 713,510 5,158,100
PROVISION FOR INCOME TAXES.................. 6,189,291 3,852,236 176,419 276,597 1,965,359
----------- ----------- ----------- ----------- -----------
NET INCOME.................................. $10,055,569 $ 6,258,620 $ 274,156 $ 436,913 $ 3,192,741
=========== =========== =========== =========== ===========
EARNINGS PER SHARE
Net income per share...................... $ 0.93 $ 0.53 $ 0.02 $ 0.04 $ 0.24
=========== =========== =========== =========== ===========
Net income per share, assuming full
dilution................................ $ 0.92 $ 0.53 $ 0.02 $ 0.04 $ 0.24
=========== =========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON AND
EQUIVALENT SHARES......................... 10,858,000 11,713,000 11,440,000 11,474,000 13,546,000
=========== =========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES ASSUMING FULL
DILUTION.................................. 10,938,000 11,724,000 11,450,000 11,474,000 13,549,000
=========== =========== =========== =========== ===========
</TABLE>

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

F-4
<PAGE> 109

HS RESOURCES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK
-------------------- PAID-IN RETAINED ----------------------
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT
---------- ------- ------------ ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992.......... 9,508,856 $ 9,509 $ 72,976,479 $ 5,896,227 (30,362) $ (151,635)
Proceeds from offering............ 1,195,000 1,195 24,212,643 -- -- --
Exercise of warrants.............. 215,507 216 (216) -- -- --
Common stock options exercised,
including income tax benefit... 29,317 29 389,087 -- -- --
Employee stock grant.............. -- -- 135,620 -- 15,022 72,650
Purchase from HS Institutional
Funds.......................... -- -- -- -- (13,573) (298,606)
Net income........................ -- -- -- 10,055,569 -- --
---------- ------- ----------- ----------- -------- -----------
Balance, December 31, 1993.......... 10,948,680 10,949 97,713,613 15,951,796 (28,913) (377,591)
Common stock options exercised,
including income tax benefit... -- -- 5,945 -- 1,500 19,590
Purchase of treasury stock........ -- -- -- -- (13,500) (233,962)
Exercise of options by issuance of
treasury stock, including
income tax benefit............. -- -- 798 -- 600 7,854
Net income........................ -- -- -- 6,258,620 -- --
---------- ------- ----------- ----------- -------- -----------
Balance, December 31, 1994.......... 10,948,680 10,949 97,720,356 22,210,416 (40,313) (584,109)
Purchase of treasury stock........ -- -- -- -- (63,700) (846,625)
Transfer of treasury stock to
401(k) Plan.................... -- -- 3,328 -- 26,536 358,287
Exercise of options by issuance of
treasury stock, including
income tax benefit............. -- -- (5,776) -- 2,400 33,144
Net income........................ -- -- -- 274,156 -- --
---------- ------- ----------- ----------- -------- -----------
Balance, December 31, 1995.......... 10,948,680 10,949 97,717,908 22,484,572 (75,077) (1,039,303)
Purchase of treasury stock.......... -- -- -- -- (77,867) (850,945)
Issuance of common stock for Tide
West acquisition.................. 6,169,181 6,169 65,158,796 -- -- --
Exercise of options by issuance of
treasury stock, including income
tax benefit....................... -- -- 1,179 -- 10,967 135,131
Net income.......................... -- -- -- 3,192,741 -- --
---------- ------- ----------- ----------- -------- -----------
Balance, September 30, 1996
(Unaudited)....................... 17,117,861 $17,118 $162,877,883 $25,677,313 (141,977) $(1,755,117)
========== ======= =========== =========== ======== ===========
</TABLE>

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

F-5
<PAGE> 110

HS RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------ ----------------------------
1993 1994 1995 1995 1996
------------ ------------ ------------ ------------ -------------
UNAUDITED
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income........................................... $ 10,055,569 $ 6,258,620 $ 274,156 $ 436,913 $ 3,192,741
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation, depletion and amortization........... 15,298,954 25,079,222 26,608,885 20,592,741 29,522,582
Amortization of deferred charges and debenture
issue costs...................................... 453,905 1,131,548 615,368 583,188 621,193
Transfer of treasury stock to 401(k) Plan.......... -- -- 378,141 378,141 --
Gain on sale of fixed assets....................... -- (65,386) (52,545) (52,545) (12,175)
Deferred income tax provision...................... 5,995,719 3,843,198 171,482 272,810 1,960,486
Change in assets and liabilities, net of effect from
purchase of Energy Minerals Corporation, in 1993
and Tide West, in 1996
Decrease (increase) in accounts receivable......... (4,361,237) (1,465,832) 1,113,301 3,414,523 (5,019,888)
Increase in accounts payable and accrued
expenses......................................... 6,532,481 1,252,290 2,596,066 2,999,871 3,367,125
Increase (decrease) in unearned income, net........ (24,601) 500,488 (1,206,154) (1,055,321) --
Other.............................................. (206,148) 19,330 680,242 788,171 369,191
------------ ------------ ------------ ------------ -------------
Net cash provided by operating activities.......... 33,744,642 36,553,478 31,178,942 28,358,492 34,001,255
------------ ------------ ------------ ------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Exploration, development and leasehold costs......... (70,809,619) (81,900,942) (62,094,658) (30,797,115) (40,329,316)
Purchase of unproved and proved properties........... -- -- -- (12,542,071) (128,391,646)
Cash payments for the purchase of Energy Minerals
Corporation and Tide West, net of cash acquired.... (20,343,471) -- -- -- (85,125,084)
Gas gathering and transportation facilities
additions.......................................... (1,893,793) (706,611) (649,469) (514,221) (450,968)
Other property additions............................. (851,783) (3,605,825) (141,881) (90,372) (644,219)
Proceeds from the sale of properties................. -- -- -- -- 9,678,851
Proceeds from the sale of fixed assets and other
property........................................... -- -- 419,116 419,116 12,175
Increase (decrease) in property related payables..... 2,488,875 119,507 (2,817,069) (3,836,625) 5,582,656
Other................................................ -- 300,868 -- -- --
------------ ------------ ------------ ------------ -------------
Net cash used in investing activities.............. (91,409,791) (85,793,003) (65,283,961) (47,361,288) (239,667,551)
------------ ------------ ------------ ------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt................................... 123,721,896 29,000,000 48,400,000 30,000,000 364,093,596
Repayments of debt................................... (75,883,060) (22,570) (14,000,000) (10,000,000) (149,258,900)
Tide West acquisition costs.......................... -- -- -- -- (2,696,021)
Net proceeds from stock offerings.................... 24,213,838 -- -- -- --
Exercise of options.................................. 597,386 34,187 10,842 -- 136,310
Debt issuance costs.................................. (698,651) -- -- -- --
Purchase of treasury stock........................... (298,606) (233,962) (846,625) (577,745) (850,945)
Other................................................ 30,201 -- -- -- 69,921
------------ ------------ ------------ ------------ -------------
Net cash provided by financing activities.......... 71,683,004 28,777,655 33,564,217 19,422,255 211,493,961
------------ ------------ ------------ ------------ -------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.......................................... 14,017,855 (20,461,870) (540,802) 419,459 5,827,665
CASH AND CASH EQUIVALENTS, beginning of year........... 7,101,398 21,119,253 657,383 657,383 116,581
------------ ------------ ------------ ------------ -------------
CASH AND CASH EQUIVALENTS, end of year................. $ 21,119,253 $ 657,383 $ 116,581 $ 1,076,842 $ 5,944,246
=========== =========== =========== =========== ============
SUPPLEMENTAL CASH FLOW DISCLOSURE
Interest paid, net of capitalized interest........... $ 2,339,449 $ 6,507,063 $ 9,072,167 $ 4,884,909 $ 11,202,129
=========== =========== =========== =========== ============
</TABLE>

During July 1993 the Company purchased all of the capital stock of BMR
Corporation, the parent holding company of Energy Minerals Corporation, for
$20,452,804 in cash, including transaction expenses of $440,000. In connection
with the acquisition, net liabilities of $3,112,040 were assumed. The fair
market value of the assets acquired totalled $23,564,844 (net of related
deferred taxes of $3,725,167 and current assets of $1,081,976).

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

F-6
<PAGE> 111

HS RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- THE COMPANY

HS Resources, Inc., a Delaware corporation (the "Company") was organized in
January 1987. The Company, directly or through subsidiaries, acquires, develops
and exploits oil and natural gas properties. The interim financial data are
unaudited; however, all adjustments (which are of a normal and recurring nature)
have been made which are, in the opinion of management, necessary for a fair
statement of the financial position of the Company at September 30, 1996, and
its results of operations and cash flows for the interim periods presented.
Because of various factors, results of operations for these periods are not
necessarily indicative of results to be expected for the full year. For a more
complete understanding of the Company's operations and financial position the
interim financial data should be read in conjunction with the Company's audited
financial statements and notes included herein.

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Oil and Natural Gas Properties. The Company accounts for its oil and
natural gas activities using the full cost method of accounting. Under the full
cost method of accounting, all costs of exploration for and development of oil
and natural gas reserves, including costs of surrendered and abandoned
leaseholds, delay lease rentals, dry hole costs, geological and geophysical
costs and direct overhead related to exploration and development activities are
capitalized. Payroll and other internal costs capitalized include salaries and
related fringe benefits paid to employees directly engaged in the acquisition,
exploration, and development of oil and natural gas properties, as well as all
other directly identifiable internal costs associated with these activities,
such as rentals, utilities, and insurance. Payroll and other internal costs
associated with production, operation and general corporate activities are
expensed in the period incurred. Future development, site restoration,
dismantlement and abandonment costs, net of salvage values, are estimated on a
property-by-property basis based on prevailing prices and are amortized to
expense, along with the capitalized costs discussed above, using the
unit-of-production method based upon production and estimates of proved reserve
quantities. Accumulated depreciation, depletion and amortization is recorded on
the balance sheets as a reduction to net property, plant and equipment costs.

Capitalized costs associated with undeveloped properties are excluded from
amortization until a determination has been made as to the existence of proved
reserves or an impairment has occurred. At December 31, 1995 and 1994, the
Company excluded costs aggregating $26,778,702 and $25,833,370, respectively,
from capitalized costs being amortized. Of the costs excluded at December 31,
1995, $5,951,489 were incurred in 1995, $13,477,886 in 1994, $6,641,361 in 1993,
and $707,966 in 1990. The Company capitalizes interest related to its
undeveloped properties. During 1995, 1994, and 1993, the Company capitalized
$2,001,436, $1,852,633, and $601,248 of interest, respectively.

Net capitalized costs of oil and natural gas properties less related
deferred income taxes may not exceed an amount equal to the present value
discounted at 10% of estimated future net revenue from proved oil and natural
gas reserves plus the lower of costs or estimated fair market value of unproved
properties (the "full cost ceiling"). Should capitalized costs exceed the full
cost ceiling, an impairment would be provided. The full cost ceiling may be
particularly sensitive to changes in the near term in pricing and production
rates. The above limitation is applied on a quarterly basis using current prices
at the end of the quarter. No gains or losses are recognized upon the sale or
other disposition of oil and natural gas properties unless a significant portion
of the reserves are sold.

Income Taxes. The Company follows the liability method of accounting for
income taxes as prescribed by SFAS 109. Accordingly, appropriate deferred tax
provisions or benefits are recognized in the financial statements for the change
in deferred tax liabilities or assets during each year. The deferred liabilities
or assets represent taxes payable or refundable in future years, as measured by
the provisions of enacted tax laws, or as a result of temporary differences
between the bases of assets and liabilities for financial reporting and tax

F-7
<PAGE> 112

HS RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

reporting purposes. Such differences relate mainly to depreciable and depletable
properties and intangible drilling costs.

Cash Equivalents. Cash and cash equivalents include cash on hand, amounts
held in banks and highly liquid investments purchased with an original maturity
of three months or less.

Hedging Activities. During 1995, the Company entered into five agreements
with a financial institution to hedge a portion of its monthly oil production.
Under the agreements the difference between the current value for the Company's
oil, based upon the daily closing price of crude oil futures, and a fixed price
was received or paid by the Company. The Company hedged production of 500,000
barrels for prices ranging from $18.00 to $19.92 during the period February 1,
1995 to September 1, 1995. The Company recorded payments received or made under
these agreements in its oil and natural gas sales. No hedging agreements were in
effect as of year-end.

In support of the Company's ongoing oil and gas producing operations, the
Company enters into various gas and oil product price hedging agreements. Under
the agreements the difference between the current value for the Company's oil
and gas, based upon current market prices, and a fixed price is received or paid
by the Company. The Company records the payments received or made under these
agreements in its oil and natural gas sales. In connection with the merger with
Tide West, the Company acquired additional agreements of this type.

Earnings Per Share. Earnings per share is computed based on the weighted
average number of common shares actually outstanding plus the shares that would
be outstanding assuming exercise of dilutive stock options and warrants, which
are considered to be common stock equivalents. The number of shares that would
be issued from the assumed exercise of stock options and warrants has been
reduced by the number of shares that could have been repurchased from the
proceeds at the assumed fair market value price of the Company's stock.

Accrued Ad Valorem Taxes. The Company considers ad valorem taxes payable
within one year to be current. Other ad valorem taxes are classified as
non-current because the required payment dates are not within one year.

Deferred Charges. Legal and accounting fees, printing costs and other
expenses associated with the issuance of the Company's debt have been
capitalized and are being amortized over the remaining term of the debt.

Natural Gas Gathering and Transportation Facilities. Depreciation of
natural gas gathering and transportation facilities is provided using the
straight-line method over estimated useful lives of 20 years.

Office and Transportation Equipment. Depreciation of office and
transportation equipment is provided using the straight-line method over
estimated useful lives which range from three to ten years.

Stock Options and Warrants. Proceeds from the exercise of common stock
options and warrants are credited to common stock and additional paid-in capital
at the time of exercise.

Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Reclassification of Prior Year Amounts. Certain prior year amounts have
been reclassified to conform with the 1995 presentation.

F-8
<PAGE> 113

HS RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 3 -- ACQUISITION OF PROPERTIES FROM FREEDOM ENERGY, INC.

On December 29, 1995, the Company purchased from Freedom Energy, Inc. its
interests in 175 gross wells and its development acreage in the D-J Basin for
approximately $12.2 million. The purchase was financed with a short-term note
which was repaid subsequent to year-end. As a result of the purchase, the
Company added 2.9 million barrels of oil and 29.8 billion cubic feet of natural
gas, or 7.9 million Boe to its reserves as of December 31, 1995.

NOTE 4 -- COMMON STOCK OFFERINGS

In November 1993, the Company sold 1,195,000 shares of its common stock at
an offering price of $21.75 per share. The Company received net proceeds of
$24,213,838 after deducting underwriting commissions and offering costs. The net
proceeds were used to repay indebtedness.

NOTE 5 -- LONG-TERM DEBT

Debt at December 31, 1994 and 1995 consists of the following:

<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
LONG-TERM BANK AND OTHER DEBT
Bank debt................................................... $29,000,000 $51,000,000
Other debt.................................................. 30,000 12,430,000
----------- -----------
29,030,000 63,430,000
Less -- current portion..................................... (30,000) (12,430,000)
----------- -----------
Long-term bank debt and other debt, net of current
portion................................................... $29,000,000 $51,000,000
=========== ===========
9 7/8% SENIOR SUBORDINATED NOTES, due 2003, net of
unamortized discount of $521,625 and $463,125 at December
31, 1994 and 1995, respectively........................... $74,478,375 $74,536,875
=========== ===========
</TABLE>

Bank Debt. On June 7, 1996, the Company entered into a $180 million
revolving and senior term credit facility with The Chase Manhattan Bank, N.A.,
as Agent. On June 14, 1996, the Company amended the terms of its senior credit
facility to increase the maximum credit amount to $350 million. Under the terms
of the credit facility, no principal payments are required until June 14, 2001,
assuming the Company maintains a borrowing base sufficient to support the
outstanding loan balance. The borrowing base, currently $335 million, is based
on the underlying value of the Company's oil and gas properties. This facility
bears interest at a base rate plus 0% to 0.5% or LIBOR plus 0.75% to 1.5%. As
part of the senior credit financing, Tide West's senior bank debt in the amount
of $39.5 million was fully repaid.

During the second quarter of 1995, the Company entered into an interest
rate exchange agreement with a financial institution to hedge its interest rate
on $40 million of the Company's borrowings at 7.76% through May 2002. Under the
terms of the agreement, the difference between the Company's fixed rate at 7.76%
and the three-month LIBOR rate plus 1.125% is received or paid by the Company.
The Company, through the merger with Tide West, was assigned interest rate
exchange agreements with two financial institutions to hedge its interest rate
on $40 million of the Company's borrowings at 8.7% for 1996 and 8.8% for 1997
through 1999. Under the terms of the agreement, the difference between the
Company's fixed rate and three month LIBOR rate is received or paid by the
Company.

Senior Subordinated Notes. In November 1993, the Company issued $75 million
of its 9 7/8% senior subordinated notes due in 2003. The notes were priced to
yield 10% and the Company received net proceeds of $71,930,929 after
underwriting commissions and offering costs. The proceeds of the notes were used
to repay

F-9
<PAGE> 114

HS RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

all outstanding indebtedness under the Company's bank credit facility and for
working capital purposes. Under the terms of the notes, there are no sinking
fund requirements and the Company is limited as to certain additional
indebtedness beyond its existing credit facility if certain financial covenants
are not maintained.

Short-Term Note. In December 1995, the Company signed a $12.4 million
non-interest bearing short-term note for the purchase of certain oil and natural
gas properties as more fully discussed in Note 3. This note was repaid in 1996
with proceeds from and additional draw on the Company's bank debt.

Carrying Value. At December 31, 1995, the carrying amount of the Company's
long-term debt was $75 million and the estimated fair value was $73.5 million.
The fair value of the Company's long-term debt is estimated based on the quoted
market prices for the same or similar issues, or on the current rates offered to
the Company for debt of the same remaining maturity.

Based on borrowing rates available for bank loans with similar collateral,
the fair values of the borrowings under the bank debt and other debt at December
31, 1995, are estimated to be their carrying value of $51 million and $12.4
million, respectively.

NOTE 6 -- STOCKHOLDERS' EQUITY

Series A Convertible Participating Preferred Stock. During 1990 and 1991,
the Company issued 1,203,705 shares of its Series A convertible participating
preferred stock, along with warrants to purchase 384,000 shares of common stock
at an initial exercise price of $10.67 per share subject to adjustment.

In connection with the Company's initial public offering of common stock in
1992, the Series A preferred stock converted into 1,805,556 shares of the
Company's common stock. The warrants issued with respect to the Series A sales
have been exercised.

Warrants. The following table summarizes activity with respect to
outstanding warrants for the years 1993, 1994 and 1995:

<TABLE>
<CAPTION>
SHARES OPTION PRICE
--------- ------------
<S> <C> <C>
Outstanding at December 31, 1992 (1,130,262 shares
exercisable).............................................. 1,130,262 $6.67-10.67
Granted..................................................... -- --
Exercised................................................... (215,507) 10.67
Canceled.................................................... (168,493) 10.67
--------- -----------
Outstanding at December 31, 1993 (746,262 shares
exercisable).............................................. 746,262 6.67- 9.00
Granted..................................................... -- --
Exercised................................................... -- --
--------- -----------
Outstanding at December 31, 1994 (746,262 shares
exercisable).............................................. 746,262 6.67- 9.00
Granted..................................................... -- --
Exercised................................................... -- --
--------- -----------
Outstanding at December 31, 1995 (746,262 shares
exercisable).............................................. 746,262 $6.67- 9.00
========= ===========
</TABLE>

F-10
<PAGE> 115

HS RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 7 -- PROVISION FOR INCOME TAXES

The income tax provisions for the years ended December 31, 1993, 1994 and
1995 were entirely deferred. The deferred income tax expense during the years
ended December 31, 1993, 1994 and 1995 results from the following:

<TABLE>
<CAPTION>
1993 1994 1995
------------ ----------- -----------
<S> <C> <C> <C>
TYPE OF TEMPORARY DIFFERENCE
Depletion, depreciation, and amortization........ $ 634,740 $ 636,192 $ 32,871
Intangible drilling costs........................ 15,571,945 4,601,741 4,873,778
Sales of properties.............................. -- -- (8,268,363)
Operating loss carryforwards..................... (10,017,394) (1,385,697) 3,533,383
------------ ----------- -----------
Deferred tax provision........................... $ 6,189,291 $ 3,852,236 $ 171,669
============ =========== ===========
</TABLE>

The components of the net deferred tax liability are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
1993 1994 1995
------------ ----------- -----------
<S> <C> <C> <C>
DEFERRED TAX LIABILITIES
Depreciation and basis difference................ $37,445,165 $42,674,060 $39,312,159
----------- ----------- -----------
Deferred tax liability........................... 37,445,165 42,674,060 39,312,159
DEFERRED TAX ASSETS
Tax effect of regular net operating loss......... 15,240,000 16,625,697 13,092,314
Alternative minimum tax credit................... -- -- --
Statutory depletion carryforwards................ 2,320,290 2,320,290 2,320,290
Investment tax credit carryforwards.............. 522,826 522,826 323,776
All other........................................ 296,015 296,015 296,015
----------- ----------- -----------
18,379,131 19,764,828 16,032,395
Valuation allowance.............................. (522,826) (522,826) (323,776)
----------- ----------- -----------
Deferred tax assets, net......................... 17,856,305 19,242,002 15,708,619
----------- ----------- -----------
Net deferred tax liability....................... $19,588,860 $23,432,058 $23,603,540
=========== =========== ===========
</TABLE>

The Company recorded $7,549,107 of deferred tax liabilities and $3,823,940
of deferred tax assets in connection with its acquisition of Energy Minerals
Corporation ("EMC") (see Note 13).

The effective tax rate during 1993, 1994 and 1995 differs from the
statutory rate of 34% principally because of the effects of state income taxes,
net of federal tax benefit.

The Company has net tax operating loss carryforwards aggregating
approximately $34.3 million available at December 31, 1995, to offset future
taxable income. These carryforwards, if not previously utilized, expire in 1999
through 2010. Included in these carryforwards are approximately $4 million of
losses acquired in the purchase of EMC. The Company's ability to utilize these
losses is subject to the "ownership change" limitation. The ownership change
rules will limit to approximately $1.1 million annually the amount of EMC's
losses that can be used.

The Company has a percentage depletion carryforward of approximately $6
million and investment tax credit carryforwards (acquired in its purchase of
EMC) of approximately $300,000 which expire from 1996 through 1998. The Company
has established a valuation allowance to reserve fully for the investment tax
credits due to the uncertainty that these credits will be applied against future
tax liabilities.

F-11
<PAGE> 116

HS RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8 -- EMPLOYEE BENEFIT PLANS

401(k) and Profit Sharing Plans. Effective June 30, 1989, the Company
adopted two qualified defined contribution plans, the HS Resources, Inc.
Employee Investment 401(k) Plan (the "401(k) Plan") and the HS Resources, Inc.
Profit Sharing Plan (the "Profit Sharing Plan"). Employees are eligible to
participate in both plans after one year of service. Under the 401(k) Plan,
participants may make regular pretax contributions of up to 10% of their
compensation and receive matching contributions from the Company in an amount
determined by the Board of Directors. All contributions are vested 100% upon
participation. Under the Profit Sharing Plan only the Company can make
contributions. Company contributions are determined by the Board of Directors
and are vested to participants over five years of service. Company contributions
to both plans are included in general and administrative expenses in the
accompanying statements of operations.

Contributions to these plans were $254,025, $378,141, and $211,596, in
1993, 1994, and 1995, respectively.

Stock Option Plan. The Company has an Employee Stock Incentive Plan (the
"Plan") whereby directors, officers, key employees, and consultants of the
Company are entitled to receive incentive stock options, non-qualified stock
options, and stock appreciation rights. One million five hundred thousand shares
of the Company's common stock are subject to such Plan. Additionally, the
Company may grant restricted stock pursuant to the Plan. Options granted
pursuant to the Plan shall be exercisable for no more than ten years at no less
than fair market value (85% of fair market value in the case of non-qualified
stock options) on the date of the grant.

The following table summarizes activity with respect to outstanding stock
options for the years 1993, 1994 and 1995:

<TABLE>
<CAPTION>
SHARES OPTION PRICE
------- ------------
<S> <C> <C>
Outstanding at December 31, 1992 (448,087 shares
exercisable).............................................. 484,087 $ 6.67-10.00
Granted................................................... 258,500 12.00-25.00
Exercised................................................. (29,317) 6.67
Forfeited................................................. (6,000) 14.50
------- ------------
Outstanding at December 31, 1993 (497,770 shares
exercisable).............................................. 707,270 6.67-25.00
Granted................................................... 75,000 20.25
Exercised................................................. (2,100) 12.00-14.50
Forfeited................................................. -- --
------- ------------
Outstanding at December 31, 1994 (565,070 shares
exercisable).............................................. 780,170 6.67-25.00
Granted................................................... 14,000 17.00
Exercised................................................. (2,400) 12.00
Forfeited................................................. (47,333) 12.00-25.00
------- ------------
Outstanding at December 31, 1995 (613,369 shares
exercisable).............................................. 744,437 $ 6.67-25.00
======= ============
</TABLE>

NOTE 9 -- COMMITMENTS AND CONTINGENCIES

Environmental Matters. In May 1995, the Company was named by the EPA
pursuant to a RCRA administrative order as one of two respondents in addition to
the owner/operator of an oilfield production water evaporation facility. The
order requires that work be performed to abate a perceived endangerment to
wildlife, the environment or public welfare. The Company and other non-operator
respondents are working together with the EPA to develop interim plans and
characterization studies, and have caused the facility to be permanently closed.
Based on the Company's current knowledge and estimated costs of reclamation
along with its efforts to obtain proportionate reimbursement from other numerous
non-named parties who utilized

F-12
<PAGE> 117

HS RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the facility, the Company does not believe that its share of the reclamation
costs will have a material adverse impact on its financial position or results
of operations.

Operating Leases. The Company is obligated under noncancelable operating
leases for office space and certain equipment. Total rental expense related to
these leases was $516,679, $992,509, and $1,263,930 for December 31, 1993, 1994,
and 1995, respectively. Future minimum lease payments as of December 31, 1995
are:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1996........................................ $1,282,869
1997........................................ 1,100,235
1998........................................ 1,000,932
1999........................................ 627,931
2000........................................ 508,152
Thereafter.................................. 1,664,388
----------
Total minimum lease payments..................... $6,184,507
==========
</TABLE>

NOTE 10 -- UNEARNED INCOME

During the twelve months ended December 31, 1993, 1994, and 1995, the
Company received $2,300,000, $2,300,000, and $575,000 respectively from an
unaffiliated third party as payment for tax credits associated with natural gas
production from certain of the Company's oil and natural gas properties. The
unaffiliated third party was entitled to these tax credits as natural gas
production occurred. The Company recorded the proceeds as unearned income and
amortized the amount to other natural gas revenues as the natural gas was
produced and the credits were generated. The agreement was terminated as of
December 1, 1995. The Company recognized approximately $2,000,000, $1,300,000,
and $1,600,000 of other natural gas revenues during the years ended December 31,
1993, 1994, and 1995 respectively, related to the amortization of this unearned
income.

NOTE 11 -- OTHER NATURAL GAS REVENUES

On December 1, 1995, the Company sold to an unaffiliated third party its
right, title and interest in certain of its oil and natural gas leases and
mineral interests. The sale will enable the third party to earn tax credits
associated with future oil and natural gas production. The Company reserved a
volumetric production payment that entitles it to 100% of the net cash flows
from the properties. The Company will receive periodic payments from the third
party based on tax credits generated from the natural gas production on the sold
properties. The Company recognized approximately $177,000 of other natural gas
revenues associated with the tax credits during the year ended December 31,
1995.

F-13
<PAGE> 118

HS RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 12 -- OIL AND NATURAL GAS ACTIVITIES

Major Purchasers. In 1995, sales to Amoco Production Company and K N
Marketing, Inc. accounted for approximately $24,600,000 and $6,120,000 or 46%
and 11.5%, respectively. In 1993 and 1994, sales to a major purchaser accounted
for approximately $37,931,000 and $46,548,000 or 84% and 79% of total oil and
natural gas sales, respectively.

Costs Incurred. Costs incurred in oil and natural gas operations and the
related depreciation, depletion and amortization per equivalent
unit-of-production are as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Property acquisition costs
Unproved..................................... $ 8,653,381 $11,443,820 $ 4,342,722
Proved....................................... $26,044,044 $ 2,600,005 $25,014,756
=========== =========== ===========
Exploration costs.............................. $ 1,357,511 $ 3,293,367 $ 2,747,920
=========== =========== ===========
Development costs.............................. $60,449,059 $64,563,750 $29,989,260
=========== =========== ===========
Depreciation, depletion and amortization....... $14,832,782 $24,080,619 $25,292,193
=========== =========== ===========
Depreciation, depletion and amortization per
equivalent unit-of-production................ $ 4.34 $ 4.80 $ 4.97
=========== =========== ===========
</TABLE>

NOTE 13 -- ENERGY MINERALS ACQUISITION

In July 1993, the Company acquired all of the outstanding stock of BMR
Corporation ("BMR") for an aggregate consideration of approximately $23,565,000,
consisting of $20,013,000 in cash, the assumption of $3,112,000 of net
liabilities and $440,000 in transaction expenses. BMR is the parent holding
company of EMC. EMC and its subsidiary, Pantera Energy Corporation, own various
producing and non-producing oil and gas properties in northern Colorado,
including properties in the D-J Basin. Immediately after the acquisition, BMR
was merged with and into the Company. The Company accounted for the acquisition
as a purchase and began consolidating EMC's results as of July 1, 1993. In 1994,
EMC was merged with and into the Company.

NOTE 14 -- RELATED PARTY TRANSACTIONS

In December 1993, the Company purchased oil and natural gas working
interests from affiliated limited partnerships for $2,105,000. The Company
believes that the acquisition of these working interests was at fair market
value. In connection with such purchases, for total consideration of $298,606
(which was the then-current market price), the Company also acquired 13,573
shares of its common stock from certain affiliated limited partnerships.

NOTE 15 -- BASIN ACQUISITIONS AND TIDE WEST MERGER (UNAUDITED)

The Company acquired a portion of Basin Exploration, Inc.'s ("Basin")
Denver-Julesburg ("D-J") Basin oil and gas properties as of March 1996 for $38
million. Subsequently, the Company sold $23.5 million of such assets to a
limited liability company (the "Third Party") under an arrangement whereby the
Third Party assumed all of the Company's liability for (and the Company was
fully released from) $23.5 million of the Company's debt (the "Chase Asset
Monetization Arrangement"). On November 1, 1996, the Company exercised its
option to repurchase the properties and assumed the debt of the Third Party. The
assumed debt has been reflected as long term bank debt in the September 30, 1996
financial statements.

F-14
<PAGE> 119

HS RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On June 7, 1996, the Company completed the acquisition of the remaining D-J
Basin assets of Basin comprised of certain oil and natural gas properties
located in the Wattenberg field area near Denver, Colorado for approximately
$87.5 million. The acquisition was accounted for using the purchase method of
accounting. The Company began consolidating the results of these operations as
of June 1, 1996.

On June 17, 1996, the Company completed the merger of Tide West Oil Company
("Tide West") into a wholly owned subsidiary of the Company. Pursuant to the
merger, Tide West shareholders received 0.6295 shares of HS Resources common
stock and $8.704 cash for each outstanding share of Tide West common stock for
an aggregate consideration of $187.7 million. HS Resources issued 6,169,181
shares of common stock, bringing its total shares outstanding to 17.1 million
shares. Tide West was an independent oil and natural gas company with principal
operations in portions of the Anadarko and Arkoma geologic basins located within
Oklahoma and Texas, as well as additional operations located in Southern
Oklahoma, Texas and New Mexico. The Company accounted for the merger using the
purchase method of accounting and began consolidating Tide West's results as of
June 17, 1996

NOTE 16 -- SUPPLEMENTAL OIL AND NATURAL GAS INFORMATION (UNAUDITED)

Oil and Gas Net Reserves. The following unaudited tables set forth the
estimated quantities of proved oil and natural gas reserves for the Company and
the changes in total proved reserves as of December 31, 1993, 1994 and 1995. All
such reserves are located in the United States. The amounts as of December 31,
1993, 1994 and 1995, were prepared by the Company and were reviewed by
Williamson Petroleum Consultants, Inc.

ANALYSIS OF CHANGES IN PROVED RESERVES

<TABLE>
<CAPTION>
OIL NATURAL GAS
---------- -------------
(BARRELS) (THOUSANDS OF
CUBIC FEET)
<S> <C> <C>
Proved developed and undeveloped reserves
Balance, December 31, 1992.............................. 11,358,230 198,278,200
Revision of previous estimates.......................... (877,548) (22,565,879)
Extensions, discoveries and other additions............. 5,309,971 48,405,525
Production.............................................. (966,575) (14,683,695)
Purchases of reserves in place.......................... 1,476,372 42,978,449
---------- -----------
Balance, December 31, 1993................................ 16,300,450 252,412,600
Revision of previous estimates.......................... (415,407) (12,096,649)
Extensions, discoveries and other additions............. 4,037,122 43,451,028
Production.............................................. (1,663,745) (20,107,559)
Purchases of reserves in place.......................... 42,800 1,618,380
---------- -----------
Balance, December 31, 1994................................ 18,301,220 265,277,800
Revision of previous estimates.......................... (1,293,758) (1,363,766)
Extensions, discoveries and other additions............. 1,127,196 11,851,415
Production.............................................. (1,581,586) (21,049,484)
Purchases of reserves in place.......................... 3,124,140 45,353,782
Sales of reserves in place.............................. (89,452) (1,292,347)
---------- -----------
Balance, December 31, 1995................................ 19,587,760 298,777,400
========== ===========
Proved developed reserves
December 31, 1993....................................... 8,268,984 164,955,800
========== ===========
December 31, 1994....................................... 10,852,870 187,358,100
========== ===========
December 31, 1995....................................... 11,557,200 219,262,100
========== ===========
</TABLE>

F-15
<PAGE> 120

HS RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Standardized Measure. The standardized measure of discounted future net
cash flows, and changes therein related to proved oil and natural gas reserves
are as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1993 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
Future cash inflows...................... $ 748,643,000 $ 755,941,800 $ 857,074,500
Future production costs.................. (205,899,300) (201,204,540) (219,076,680)
Future development costs................. (110,683,700) (91,434,640) (105,043,800)
------------- ------------- -------------
Undiscounted future pre-tax cash flows... 432,060,000 463,302,620 532,954,020
Undiscounted future income taxes......... (97,195,359) (85,709,360) (129,776,984)
------------- ------------- -------------
Discounted future pre-tax cash flows, net
of future income taxes................. 334,864,641 377,593,260 403,177,036
10% discount factor...................... (169,079,020) (183,339,959) (203,918,587)
------------- ------------- -------------
Standardized measure of discounted future
net cash flows......................... $ 165,785,621 $ 194,253,301 $ 199,258,449
============= ============= =============
</TABLE>

The estimate of future income taxes is based on the future net cash flows
from proved reserves adjusted for the tax basis of the oil and natural gas
properties. For standardized measure purposes, future income taxes are estimated
using the "year-by-year" method. However, for ceiling test purposes, future
income taxes are estimated using the "short-cut" method.

The following are the principal sources of change in the standardized
measure of discounted future net cash flows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1993 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
Standardized measure of discounted future
net cash flows, beginning of the
year................................... $ 132,512,311 $ 165,785,621 $ 194,253,301
Sales and transfers of oil and natural
gas produced, net of production
costs.................................. (34,215,225) (43,962,756) (38,528,808)
Sales of reserves in place............... -- -- (1,338,530)
Net changes in prices and production
costs.................................. (20,926,052) (15,045,652) 3,996,469
Extensions, discoveries and improved
recovery, less related costs........... 25,038,322 37,157,649 11,194,559
Changes in future development costs...... 235,532 4,812,549 (14,744,408)
Development costs incurred during the
period that reduced future development
costs.................................. 54,790,086 45,086,667 33,402,053
Revisions of previous quantity
estimates.............................. (20,614,015) (10,390,834) (6,918,919)
Purchase of reserves in place............ 28,315,709 1,451,166 36,213,033
Accretion of discount.................... 17,397,080 21,053,690 23,033,140
Net change in income taxes............... (3,292,790) 8,673,180 (21,708,352)
Changes in production rates (timing) and
other.................................. (13,455,337) (20,367,979) (19,595,089)
------------ ------------ ------------
Standardized measure of discounted future
net cash flows, end of the
year................................... $ 165,785,621 $ 194,253,301 $ 199,258,449
============ ============ ============
</TABLE>

Estimated future cash inflows are computed by applying year-end prices of
oil and natural gas to year-end quantities of proved reserves. Future price
changes are considered only to the extent provided by contractual arrangements.
Estimated future development and production costs are determined by estimating
the expenditures to be incurred in developing and producing the proved oil and
natural gas reserves held by the

F-16
<PAGE> 121

HS RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company as of the end of the year, based on year-end costs and assuming
continuation of existing economic conditions. Estimated future income tax
expenses are calculated by applying year-end statutory tax rates (adjusted for
permanent differences) to estimated future pretax net cash flows related to
proved oil and natural gas reserves, less the tax basis of the properties
involved. No deductions were made for general overhead, depreciation and other
indirect costs. The average year-end prices used in the projections were
$18.59/Bbl of oil and $1.65/Mcf of natural gas at December 31, 1995, $15.65/Bbl
of oil and $1.77/Mcf of natural gas at December 31, 1994, and $12.04/Bbl of oil
and $2.19/Mcf of natural gas at December 31, 1993.

These estimates were determined in accordance with SFAS No. 69. Because of
unpredictable variances in expenses and capital forecasts, crude oil and natural
gas price changes largely influenced by U.S. and foreign governmental actions,
and the fact that the basis for such estimates vary significantly, management
believes the usefulness of these projections of cash flow is limited. Estimates
of future net cash flows do not represent management's assessment of future
profitability or future cash flow to the Company. Management's investment and
operating decisions may be based upon reserve estimates that include different
price and cost assumptions from those used here.

Applying current costs and prices and a 10% standard discount rate allows
for comparability but does not convey absolute value. The discounted amounts
arrived at are only one measure of financial quantification of proved reserves.
Reservoir engineering is a process of making educated estimates of underground
accumulations of oil and natural gas and the amounts and timing of recovery
thereof, which cannot be measured with precision. The accuracy of any reserve
estimate is a function of the quality of available data and of engineering and
geological interpretation and judgment. Accordingly, reserve estimates are often
materially different from the quantities of oil and natural gas which are
ultimately recovered. Future development of the properties in which the Company
has an interest, including additional drilling activities, production results
from wells not yet producing, and additional production results from currently
producing wells, may provide information which justify revisions, either upward
or downward, of reserve estimates. Such adjustments may be material.

NOTE 17 -- QUARTERLY FINANCIAL DATA (UNAUDITED)

The Company's quarterly results of operations are summarized as follows (in
thousands, except per share data):

<TABLE>
<CAPTION>
1995
-----------------------------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31
------- ------- -------- -------
<S> <C> <C> <C> <C>
Oil and natural gas revenues................... $15,737 $14,810 $ 11,921 $12,709
Operating expenses............................. 4,029 3,825 2,870 3,263
------- ------- ------- -------
Operating income............................... 11,708 10,985 9,051 9,446
------- ------- ------- -------
Net income (loss).............................. $ 640 $ 180 $ (383) $ (163)
======= ======= ======= =======
Net income (loss) per common and common
equivalent share assuming full dilution...... $ 0.06 $ 0.02 $ (0.03) $ (0.01)
======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
1994
-----------------------------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31
------- ------- -------- -------
<S> <C> <C> <C> <C>
Oil and natural gas revenues................... $13,977 $14,927 $ 15,738 $15,520
Operating expenses............................. 3,145 3,274 3,496 3,529
------- ------- ------- -------
Operating income............................... 10,832 11,653 12,242 11,991
------- ------- ------- -------
Net income..................................... $ 1,729 $ 1,592 $ 1,682 $ 1,256
======= ======= ======= =======
Net income per common and common equivalent
share assuming full dilution................. $ 0.15 $ 0.14 $ 0.14 $ 0.11
======= ======= ======= =======
</TABLE>

F-17
<PAGE> 122

HS RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 18 -- SUMMARY OF GUARANTEES ON 9 1/4% SENIOR SUBORDINATED NOTES (UNAUDITED)

In November 1996, the Company issued $150 million of its 9 1/4% senior
subordinated notes due in 2006. The notes are general, unsecured obligations of
the Company, subordinated in right of payment to all existing and any future
senior indebtedness of the Company. The notes rank pari passu with existing and
any future senior subordinated indebtedness and senior to any future
subordinated indebtedness of the Company. The notes are fully and
unconditionally guaranteed, jointly and severally, on an unsecured, senior
subordinated basis by certain wholly owned subsidiaries of the Company (the
"Subsidiary Guarantors"). At the time of the issuance of the notes, Orion
Acquisition, Inc. and HSRTW, Inc. were the only Subsidiary Guarantors.

Sections 13 and 15(d) of the Securities Exchange Act of 1934 require
presentation of the following unaudited supplemental condensed consolidating
financial statements of the Subsidiary Guarantors. Separate complete financial
statements of the respective Subsidiary Guarantors are not material to
investors. There are no significant contractual restrictions on distributions
from each of the Subsidiary Guarantors to the Company.

Investments in subsidiaries are accounted for by the parent on the equity
method for purposes of the unaudited supplemental condensed consolidating
financial statement presentation. Under this method, investments are recorded at
cost and adjusted for the parent company's ownership share of the subsidiaries'
cumulative results of operations. In addition, investments increase in the
amount of contributions to subsidiaries and decrease in the amount of
distributions from subsidiaries. The elimination entries eliminate the equity
method investment in subsidiaries and equity in earnings of subsidiaries,
intercompany payables and receivables and other transactions between
subsidiaries including contributions and distributions.

CONDENSED CONSOLIDATING BALANCE SHEETS

SEPTEMBER 30, 1996

ASSETS

<TABLE>
<CAPTION>
SUBSIDIARY GUARANTORS NON-
---------------------------- GUARANTOR ELIMINATION
HSR HSRTW ORION SUBSIDIARIES ENTRIES CONSOLIDATED
------------ ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents......... $ 1,885,921 $ 416,929 $ 3,641,396 $ 5,944,246
Intercompany receivables.......... 12,584,976 5,054,248 1,069,204 21,201,340 (39,909,768)
Other current assets.............. 13,573,360 3,422,412 3,504,712 13,774,040 34,274,524
------------ ------------ ------------ ----------- ------------- ------------
Total current assets...... 28,044,257 8,893,589 4,573,916 38,616,776 (39,909,768) 40,218,770
------------ ------------ ------------ ----------- ------------- ------------
Oil and gas properties, net....... 281,866,512 230,511,008 125,478,704 14,655,417 652,511,641
Gas gathering and transportation
facilities, net................. 5,146,038 5,146,038
Office and transportation
equipment and other
property, net................... 3,363,757 1,201,311 131,368 4,696,436
Investments in subsidiaries and
other investments............... 343,037,869 11,704,965 (353,766,999) 975,835
Other noncurrent assets........... 4,617,568 365,681 157,564 5,140,813
------------ ------------ ------------ ----------- ------------- ------------
Total assets.............. $660,929,963 $252,310,873 $130,418,301 $58,707,163 $(393,676,767) $708,689,533
============ ============ ============ =========== ============= ============
LIABILITIES, STOCKHOLDERS' EQUITY AND PARTNERS' CAPITAL
Current liabilities............... $ 22,965,195 $ 4,015,896 $ 552,984 $ 9,076,260 $36,610,335
Intercompany payables............. 24,878,742 4,604,299 10,426,727 (39,909,768)
Long-term bank debt and other
debt, net of current portion.... 317,734,696 317,734,696
9 7/8% subordinated notes, due
2003............................ 74,580,750 74,580,750
Other noncurrent liabilities...... 11,277,638 15,147 11,292,785
Deferred income taxes............. 22,675,745 57,045,921 772,538 1,159,566 81,653,770
Stockholders' equity and partners'
capital......................... 186,817,197 186,629,610 129,092,779 38,044,610 (353,766,999) 186,817,197
------------ ------------ ------------ ----------- ------------- ------------
Total liabilities,
stockholders' equity and
partners' capital....... $660,929,963 $252,310,873 $130,418,301 $58,707,163 $(393,676,767) $708,689,533
============ ============ ============ =========== ============= ============
</TABLE>

F-18
<PAGE> 123

HS RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
SUBSIDIARY GUARANTORS NON-
------------------------- GUARANTOR ELIMINATION
HSR HSRTW ORION SUBSIDIARIES ENTRIES CONSOLIDATED
----------- ----------- ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Oil and gas sales..................... $36,296,134 $11,430,612 $8,577,104 $10,865,029 $67,168,879
Trading and transportation............ 3,465,388 16,071,186 19,536,574
Other revenues........................ 1,911,194 32,997 112,934 2,057,125
----------- ----------- ---------- ----------- ----------- -----------
Total revenues.................. 41,672,716 11,463,609 8,577,104 27,049,149 88,762,578
----------- ----------- ---------- ----------- ----------- -----------
Expenses
Production taxes and lease
operating........................... 8,318,512 2,414,683 2,975,065 3,018,157 16,726,417
Cost of trading and transportation.... 3,443,241 15,508,116 18,951,357
Depreciation, depletion and
amortization........................ 15,654,754 5,089,078 2,520,702 6,258,048 29,522,582
General and administrative............ 2,324,272 354,167 244,161 2,922,600
Interest and other expenses........... 14,331,830 9,532 1,053,678 86,482 15,481,522
----------- ----------- ---------- ----------- ----------- -----------
Total expenses.................. 44,072,609 7,867,460 6,549,445 25,114,964 83,604,478
----------- ----------- ---------- ----------- ----------- -----------
Income (loss) before provision for
income taxes.......................... (2,399,893) 3,596,149 2,027,659 1,934,185 5,158,100
Provision (benefit) for income taxes.... (914,236) 1,370,133 772,538 736,924 1,965,359
----------- ----------- ---------- ----------- ----------- -----------
(1,485,657) 2,226,016 1,255,121 1,197,261 3,192,741
Equity in earnings of subsidiaries...... 4,678,398 709,071 (5,387,469)
----------- ----------- ---------- ----------- ----------- -----------
Net income.............................. $ 3,192,741 $ 2,935,087 $1,255,121 $ 1,197,261 $(5,387,469) $ 3,192,741
=========== =========== ========== =========== =========== ===========
</TABLE>

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
SUBSIDIARY GUARANTORS NON-
---------------------------- GUARANTOR ELIMINATION
HSR HSRTW ORION SUBSIDIARIES ENTRIES CONSOLIDATED
------------- ------------ ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Cash flows provided by (used in)
operating activities............ $ 26,012,065 $ 11,393,573 $ 119,913 $(3,524,296) $ 34,001,255
------------- ------------ ------------- ----------- ------------- -------------
Cash flows from investing
activities
Exploration, development and
leasehold costs................. (35,626,433) (3,389,169) (730,429) (583,285) (40,329,316)
Purchase of proved and unproved
properties...................... (1,122,669) (127,268,977) (128,391,646)
Cash payment for the purchase of
Tide West, net of cash
acquired........................ (85,125,084) (85,125,084)
Contributions to subsidiaries..... (252,637,973) 252,637,973
Other............................. 14,635,626 (96,814) 41,835 (402,152) 14,178,495
------------- ------------ ------------- ----------- ------------- -------------
Net cash used in investing
activities.............. (274,751,449) (88,611,067) (127,957,571) (985,437) 252,637,973 (239,667,551)
------------- ------------ ------------- ----------- ------------- -------------
Cash flows from financing
activities
Proceeds from debt................ 364,093,596 364,093,596
Repayments of debt................ (109,758,900) (39,500,000) (149,258,900)
Contributions from equity
holders......................... 117,064,502 127,837,658 7,735,813 (252,637,973)
Other............................. (3,410,656) 69,921 (3,340,735)
------------- ------------ ------------- ----------- ------------- -------------
Net cash provided by
financing
activities.............. 250,924,040 77,634,423 127,837,658 7,735,813 (252,637,973) 211,493,961
------------- ------------ ------------- ----------- ------------- -------------
Net increase (decrease) in cash
and cash equivalents............ 2,184,656 416,929 3,226,080 5,827,665
Cash and cash equivalents,
beginning of the year........... (298,735) 415,316 116,581
------------- ------------ ------------- ----------- ------------- -------------
Cash and cash equivalents, end of
the period...................... $ 1,885,921 $ 416,929 $ 3,641,396 $ 5,944,246
============= ============ ============= =========== ============= =============
</TABLE>

Certain non cash transactions have taken place between HSR and its subsidiaries
related to the equity contributions. Accordingly, these transactions
are not reflected in the statements of cash flows.

F-19
<PAGE> 124

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law ("Delaware Law")
permits, subject to certain conditions, a corporation to indemnify its
directors, officers, employees and agents against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such director, officer, employee or agent in connection with
threatened, pending or completed actions, suits and proceeding (other than
actions by or in the right of the corporation) in or to which any of such
persons is a party or is threatened to be made a party.

Article 12 of the Company's Amended and Restated Certificate of
Incorporation and Article VI, Section 2 of the Company's Third Amended and
Restated Bylaws provide that HSR may indemnify its directors, officers,
employees and agents to the fullest extent permitted by Delaware Law.

The Company currently maintains a policy insuring, subject to certain
exceptions, its directors and officers [and the directors and officers of its
subsidiaries] against liabilities that may be incurred by such persons acting in
such capacities.

Pursuant to indemnification agreements, the Company has agreed to indemnify
its directors and certain officers against all costs, charges and expenses
incurred by reason of being a director or officer of the Company, provided that
indemnification is not prohibited in whole or in part under applicable law.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ ------------------------------------------------------------------------------------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of the Company. (Incorporated
herein by reference to Exhibit 3.1 to the Company's Registration Statement on Form
S-1, No. 33-52774, filed October 2, 1992.)
3.2* Third Amended and Restated Bylaws of the Company adopted December 16, 1996.
4.1 Form of Indenture dated December 1, 1993, entered into between the Company and the
Trustee. (Incorporated by reference to Exhibit 4.7 to Amendment No. 3 to the
Company's Registration Statement on Form S-3, No. 33-70354, filed November 23,
1993.)
4.2* Indenture dated November 27, 1996, among the Company, Orion Acquisition, Inc.,
HSRTW, Inc., and Harris Trust and Savings Bank as Trustee.
4.3* First Supplemental Indenture dated November 25, 1996 among the Company, Orion
Acquisition, Inc., HSRTW, Inc., and Harris Trust and Savings Bank as Trustee.
10.1 Amended Note and Warrant Purchase Agreement dated January 15, 1991, among NGP,
Resolute Resources, Inc., and the Company. (Incorporated by reference to Exhibit
4.4.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended December
31, 1990, filed February 14, 1991.)
10.1.1 Amendment No. 1 to Note and Warrant Purchase Agreement dated June 28, 1991, between
the Company and NGP. (Incorporated by reference to Exhibit 4.4.2 to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1991, filed September
30, 1991.)
10.1.2 Second Amendment to Note and Warrant Purchase Agreement dated August 17, 1992,
between the Company and NGP. (Incorporated by reference to Exhibit 4.2.2 to
Amendment No. 2 to the Company's Registration Statement on Form S-1, No. 33-52774,
filed November 19, 1992.)
10.1.3 Third Amendment to Note and Warrant Purchase Agreement dated October 21, 1993,
between the Company and NGP. (Incorporated by reference to Exhibit 4.1.3 to
Amendment No. 2 to the Company's Registration Statement on Form S-3, No. 33-70354,
filed November 23, 1993.)
</TABLE>

II-1
<PAGE> 125

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ ------------------------------------------------------------------------------------
<C> <S>
10.2 Amended and Restated Warrant Agreement dated January 15, 1991, between NGP and the
Company. (Incorporated by reference to Exhibit 4.5.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended December 31, 1990, filed February 14,
1991.)
10.3 Amended Warrant No. W-1, dated January 15, 1991, and issued by the Company to NGP.
(Incorporated by reference to Exhibit 4.6.1 to the Form 8, Second Amendment to Form
10, filed April 8, 1991.)
10.3.1 Amendment No. 1 to Amended Warrant No. W-1, dated December 30, 1991, and issued by
the Company to NGP. (Incorporated by reference to Exhibit 4.6.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended December 31, 1991, filed on
February 14, 1991.)
10.4 Form of Warrant No. W-10, dated January 28, 1992, and issued by the Company to NGP.
(Incorporated by reference to Exhibit 4.16 to Amendment No. 1 to the Company's
Registration Statement on Form S-1, No. 33-52774, filed November 9, 1992.)
10.5+ 1987 Stock Incentive Plan, as amended December 2, 1996.
10.6 Common Stock Purchase Warrant dated July 12, 1990 by the Company to James E. Duffy.
(Incorporated by reference to Exhibit 10.5 to the Form 8, Second Amendment to Form
10, filed April 8, 1991.)
10.7 HS Resources, Inc. Rule 701 Compensatory Benefit Plan. (Incorporated by reference to
Exhibit 10.5.2 to the Form 8, Second Amendment to Form 10 filed April 8, 1991.)
10.8 1992 Directors' Stock Option Plan. (Incorporated by reference to Exhibit 10.10 to
Amendment No. 1 to the Company's Registration Statement on Form S-1, No. 33-52774,
filed November 9, 1992.)
10.8.1 1993 Directors' Stock Option Plan. (Incorporated by reference to Exhibit 10.8.1 to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1993, filed March 31, 1994 (as amended by Form 10-K/A-1 on April 8, 1994.))
10.9 Form of Indemnification Agreement for Directors of the Company. (Incorporated by
reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, filed March 25, 1996.)
10.10 Lease Agreement dated October 6, 1993, between the Company and JMB Group Trust IV
and Endowment and Foundation Realty, Ltd. -- JMB III for the premises at One
Maritime Plaza, San Francisco, California. (Incorporated by reference to Exhibit
10.13 to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1993, filed March 31, 1994 (as amended by Form 10-K/A-1 on April 8, 1994.))
10.11 Lease Agreement dated March 28, 1994, between the Company and 1999 Broadway
Partnership for the premises at 1999 Broadway, Denver, Colorado. (Incorporated by
reference to Exhibit 10.15 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994, filed August 12, 1994.)
10.12 Interest exchange agreement between The Chase Manhattan Bank, N.A. and the Company
dated May 9, 1995. (Incorporated by reference to Exhibit 10.19 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995, filed August 14,
1995.)
10.13 Amended and Restated Agreement and Plan of Merger, dated as of April 29, 1996, among
the Company, HSR Acquisition, Inc. and Tide West Oil Co. (Incorporated by reference
as Annex A to Amendment No. 2 to the Company's Registration Statement on Form S-4,
No. 333-01991, filed on May 2, 1996.)
10.14 Agreement for Purchase and Sale of Assets [Monetization], dated as of February 24,
1996, among the Company, Basin Exploration, Inc. ("Basin") and Orion Acquisition,
Inc. ("Orion"). (Incorporated by reference to Exhibit 2.3 to the Company's Form 8-K,
filed March 12, 1996.)
</TABLE>

II-2
<PAGE> 126

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ ------------------------------------------------------------------------------------
<C> <S>
10.15 Agreement for Purchase and Sale of Assets [Wattenberg], dated as of February 24,
1996, among the Company, Orion and Basin. (Incorporated by reference to Exhibit A to
the Company's Schedule 13D relating to Basin Exploration, Inc. filed on March 6,
1996.)
10.16 Purchase and Sale Agreement, dated December 1, 1995, between the Company and
Wattenberg Gas Investments, LLC. (Incorporated by reference to Exhibit 10.26 to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995,
filed March 25, 1996.)
10.17 Rights Agreement, dated as of February 28, 1996, between the Company and Harris
Trust Company of California as Rights Agent. (Incorporated by reference to Exhibit 1
to the Company's Form 8-A, filed March 11, 1996.)
10.18 Purchase and Sale Agreement dated March 25, 1996 between Orion Acquisition, Inc.,
the Company and Wattenberg Resources Land, L.L.C. (Incorporated by reference to
Exhibit 10.28 to the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996, filed May 15, 1996.)
10.19 Credit Agreement, dated as of June 7, 1996, among the Company and The Chase
Manhattan Bank, N.A. ("Chase"), as agent of the Banks signatory thereto.
(Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996, filed August 14, 1996.)
10.20 Amended and Restated Credit Agreement dated as of June 14, 1996, among the Company,
Chase as agent, and the Banks signatory thereto. (Incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996, filed
August 14, 1996.)
10.21 First Amendment to Amended and Restated Credit Agreement dated as of June 17, 1996,
by and among the Company and Chase in its individual capacity and as agent for the
Lenders. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996, filed August 14, 1996.)
10.22* Second Amendment to Amended and Restated Credit Agreement dated as of November 27,
1996 among the Company and Chase in its individual capacity and as agent for the
Lenders.
10.23 Assignment of Liens and Amendment of Amended, Restated and Consolidated Mortgage,
Assignment of Production, Security Agreement and Financing Statement, dated June 14,
1996, among Chase (Assignor), Chase (Assignee) and the Company. (Incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1996, filed August 14, 1996.)
10.24 Guaranty Agreement by HSR Acquisition, Inc. in favor of Chase, as Agent, dated June
14, 1996. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996, filed August 14, 1996.)
10.25 Guaranty Agreement by Orion Acquisition, Inc. in favor of Chase, as Agent, dated
June 14, 1996. (Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1996, filed August 14, 1996.)
10.26 First Amendment to Guaranty Agreement dated as of June 17, 1996, by and among Orion
Acquisition, Inc. and Chase, in its individual capacity and as agent for the
Lenders. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996, filed August 14, 1996.)
10.27 First Amendment to Guaranty Agreement dated as of June 17, 1996, by and among HSRTW,
Inc. (formerly HSR Acquisition, Inc.) and Chase, in its individual capacity and as
agent for the Lenders. (Incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1996, filed August 14, 1996.)
</TABLE>

II-3
<PAGE> 127

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ ------------------------------------------------------------------------------------
<C> <S>
10.28 Third Amendment and Supplement to Amended, Restated and Consolidated Mortgage,
Assignment of Production, Security Agreement and Financing Statement, dated as of
July 15, 1996, by and between the Company and Chase. (Incorporated by reference to
the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996,
filed August 14, 1996.)
10.29 Hedging Agreement between Chase and the Company dated May 1, 1996. (Incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1996, filed August 14, 1996.)
10.30 Hedging Agreement between Chase and the Company dated May 1, 1996. (Incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1996, filed August 14, 1996.)
10.31 Hedging Agreement between Chase and the Company dated June 1, 1996. (Incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1996, filed August 14, 1996.)
10.32 Purchase and Sale Agreement between the Company and Wattenberg Gas Investments, LLC
dated April 25, 1996. (Incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1996, filed August 14, 1996.)
10.33 Purchase and Sale Agreement between Wattenberg Resources Land L.L.C. and Wattenberg
Gas Investments, LLC dated May 21, 1996. (Incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996, filed August 14,
1996.)
10.34 Purchase and Sale Agreement between Orion Acquisition, Inc. and Wattenberg Gas
Investments, LLC dated June 14, 1996. (Incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996, filed August 14,
1996.)
10.35 Purchase and Sale Agreement between Wattenberg Resources Land L.L.C. and Wattenberg
Gas Investments, LLC dated June 14, 1996. (Incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996, filed
August 14, 1996.)
10.36 Purchase and Sale Agreement between Orion Acquisition, Inc. and Wattenberg Gas
Investments, LLC dated June 14, 1996. (Incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996, filed August 14,
1996.)
10.37 Purchase and Sale Agreement between the Company and Wattenberg Gas Investments, LLC
dated June 28, 1996. (Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996, filed August 14, 1996.)
10.38 Purchase and Sale Agreement between HSRTW, Inc. and Westtide Investments, LLC dated
August 9, 1996. (Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1996, filed November 7, 1996.)
10.39 Acquisition Agreement between the Company and TCW Portfolio No. 1555 DR V
Sub-Custody Partnership, L.P. dated August 30, 1996. (Incorporated by reference to
the Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1996, filed November 7, 1996.)
10.40* Purchase Agreement dated November 27, 1996 among the Company, Orion Acquisition,
Inc., HSRTW, Inc., Salomon Brothers Inc, Chase Securities Inc., Lehman Brothers
Inc., and Prudential Securities Incorporated.
10.41* Registration Agreement dated November 27, 1996 among the Company, Orion Acquisition,
Inc., HSRTW, Inc. and Salomon Brothers Inc in its individual capacity and as agent
for Chase Securities Inc., Lehman Brothers Inc., and Prudential Securities
Incorporated.
23.1* Consent of Arthur Andersen LLP.
23.2* Consent of Williamson Petroleum Consultants Inc.
25.1+ Statement of Eligibility of Trustee on Form T-1 with respect to the Exchange Notes.
</TABLE>

II-4
<PAGE> 128

- ---------------
* Filed herewith

+ To be filed by amendment

ITEM 22. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form (Form S-4), within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.

The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.

The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Company's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

II-5
<PAGE> 129

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, each of the
registrants has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San
Francisco, California, on this 8th day of January, 1997.

HS Resources, Inc.
a Delaware corporation

By: /s/ NICHOLAS J. SUTTON
----------------------------------
Nicholas J. Sutton
Chairman of the Board and Chief
Executive Officer

HSRTW, Inc.
a Delaware corporation

By: /s/ NICHOLAS J. SUTTON
----------------------------------
Nicholas J. Sutton
Chairman of the Board and Chief
Executive Officer

Orion Acquisition, Inc.
a Delaware corporation

By: /s/ NICHOLAS J. SUTTON
----------------------------------
Nicholas J. Sutton
Chairman of the Board and Chief
Executive Officer

II-6
<PAGE> 130

HS RESOURCES, INC.

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Nicholas J. Sutton, P. Michael Highum and
James E. Duffy, and each of them his true and lawful attorneys-in-fact and
agents with full power and substitution and resubstitution, for such person and
in his name, place and stead, in any and all capacities, to sign any and all
amendments (including without limitation post-effective amendments) to this
registration statement, and to file the same with the Securities and Exchange
Commission, together with any exhibits thereto and other documents therewith,
granting unto said attorneys-in-fact and agents and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
and advisable to enable the Registrant to comply with the Securities Act and any
rules, regulations and requirements of the Securities and Exchange Commission in
respect thereof to be done in and about the premises, as fully to all intents
and purposes and he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, or their, or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act, this registration
statement on Form S-4 has been signed by the following persons in the capacities
and on the date indicated.

<TABLE>
<S> <C>
January 8, 1997 By: /s/ NICHOLAS J. SUTTON
Date -------------------------------------------
Nicholas J. Sutton
Chairman of the Board and Chief Executive
Officer (Principal Executive Officer)

January 8, 1997 By: /s/ P. MICHAEL HIGHUM
Date -------------------------------------------
P. Michael Highum
President and Director (Principal Executive
Officer)

January 8, 1997 By: /s/ JAMES E. DUFFY
Date -------------------------------------------
James E. Duffy
Vice President -- Finance and Chief
Financial Officer and Director (Principal
Financial Officer)

January 8, 1997 By: /s/ ANNETTE M. MONTOYA
Date -------------------------------------------
Annette M. Montoya
Vice President -- Accounting and Controller
(Principal Accounting Officer)

January 8, 1997 By: /s/ KENNETH A. HERSH
Date -------------------------------------------
Kenneth A. Hersh
Director

January 8, 1997 By: /s/ MICHAEL J. SAVAGE
Date -------------------------------------------
Michael J. Savage
Director

January 8, 1997 By: /s/ PHILIP B. SMITH
Date -------------------------------------------
Philip B. Smith
Director
</TABLE>

II-7
<PAGE> 131

HSRTW, INC.

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act, this registration
statement on Form S-4 has been signed by the following persons in the capacities
and on the date indicated.

January 8, 1997 By: /s/ P. MICHAEL HIGHUM
Date -------------------------------------------
P. Michael Highum
President and Director (Principal Executive
Officer)

January 8, 1997 By: /s/ JAMES E. DUFFY
Date -------------------------------------------
James E. Duffy
Vice President -- Finance and Chief
Financial Officer and Director (Principal
Financial Officer)

January 8, 1997 By: /s/ ANNETTE M. MONTOYA
Date -------------------------------------------
Annette M. Montoya
Vice President -- Accounting and Controller
(Principal Accounting Officer)
</TABLE>

II-8
<PAGE> 132

ORION ACQUISITION, INC.

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act, this registration
statement on Form S-4 has been signed by the following persons in the capacities
and on the date indicated.

January 8, 1997 By: /s/ P. MICHAEL HIGHUM
Date -------------------------------------------
P. Michael Highum
President and Director (Principal Executive
Officer)

January 8, 1997 By: /s/ JAMES E. DUFFY
Date -------------------------------------------
James E. Duffy
Vice President -- Finance and Chief
Financial Officer and Director (Principal
Financial Officer)

January 8, 1997 By: /s/ ANNETTE M. MONTOYA
Date -------------------------------------------
Annette M. Montoya
Vice President -- Accounting and Controller
(Principal Accounting Officer)
</TABLE>

II-9
<PAGE> 133
EXHIBIT INDEX

Exhibit
Number Description of Exhibits
- ------- -----------------------

3.2 Third Amended and Restated Bylaws of the Company adopted December 16,
1996.

4.2 Indenture dated November 27, 1996, among the Company, Orion
Acquisition, Inc., HSRTW, Inc., and Harris Trust and Savings Bank as
Trustee.

4.3 First Supplemental Indenture dated November 25, 1996 among the Company,
Orion Acquisition, Inc., HSRTW, Inc., and Harris Trust and Savings
Bank as Trustee.

10.22 Second Amendment to Amended and Restated Credit Agreement dated as of
November 27, 1996 among the Company and Chase in its individual
capacity and as agent for the Lenders.

10.40 Purchase Agreement dated November 27, 1996 among the Company, Orion
Acquisition, Inc., HSRTW, Inc., Salomon Brothers Inc, Chase Securities
Inc., Lehman Brothers Inc., and Prudential Securities Incorporated.

10.41 Registration Agreement dated November 27, 1996 among the Company,
Orion Acquisition, Inc., HSRTW, Inc. and Salomon Brothers Inc in its
individual capacity and as agent for Chase Securities Inc., Lehman
Brothers Inc., and Prudential Securities Incorporated.

23.1 Consent of Arthur Andersen LLP.

23.2 Consent of Williamson Petroleum Consultants Inc.

<PAGE> 1
EXHIBIT 3.2

THIRD AMENDED AND RESTATED

BYLAWS OF

HS RESOURCES, INC.

A DELAWARE CORPORATION

(AS ADOPTED DECEMBER 16, 1996)
<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
ARTICLE I. OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. REGISTERED OFFICE AND PRINCIPAL OFFICE . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. OTHER OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. REGISTERED AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE II. MEETING OF STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. PLACE OF MEETINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. ANNUAL MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 4. NOTICE OF STOCKHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. . . . . . . . . . . . . . . . . . . 2
Section 6. QUORUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 7. ADJOURNED MEETING; NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 8. VOTING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 9. WAIVER OF NOTICE OR CONSENT BY ABSENT STOCKHOLDERS. . . . . . . . . . . . . . . . 3
Section 10. STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. . . . . . . . . . . . . 4
Section 11. RECORD DATE FOR STOCKHOLDER NOTICE, VOTING, AND GIVING CONSENTS. . . . . . . . . 4
Section 12. PROXIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 13. INSPECTORS OF ELECTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

ARTICLE III. DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1. POWERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2. NUMBER AND QUALIFICATION OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . . 5
Section 3. ELECTION AND TERM OF OFFICE OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 6
Section 4. VACANCIES; RESIGNATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 5. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE . . . . . . . . . . . . . . . . . . 6
Section 6. ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 7. OTHER REGULAR MEETINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 8. SPECIAL MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 9. QUORUM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 10. WAIVER OF NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 11. ADJOURNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 12. NOTICE OF ADJOURNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 13. ACTION WITHOUT MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
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Section 14. FEES AND COMPENSATION OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . . 8
Section 15. LOANS TO OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

ARTICLE IV. COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1. COMMITTEES OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2. MEETINGS AND ACTION OF COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . 9

ARTICLE V. OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 1. OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2. ELECTION OF OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. SUBORDINATE OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. . . . . . . . . . . . . . . . . . . . . . . 10
Section 5. VACANCIES IN OFFICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 6. CHAIRMAN OF THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 7. PRESIDENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 8. VICE PRESIDENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 9. SECRETARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 10. TREASURER OR CHIEF FINANCIAL OFFICER. . . . . . . . . . . . . . . . . . . . . . 11

ARTICLE VI. INDEMNIFICATION OF BOARD OF DIRECTORS,
OFFICERS, EMPLOYEES AND OTHER AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 1. LIMITED PERSONAL LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

ARTICLE VII. RECORDS AND REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1. MAINTENANCE AND INSPECTION OF RECORD OF STOCKHOLDERS. . . . . . . . . . . . . . 12
Section 2. MAINTENANCE AND INSPECTION OF BYLAWS. . . . . . . . . . . . . . . . . . . . . . 12
Section 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS. . . . . . . . . . . . . 12
Section 4. INSPECTION BY DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5. ANNUAL REPORT TO STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 6. FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7. ANNUAL STATEMENT OF GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . 13

ARTICLE VIII. GENERAL CORPORATE MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING. . . . . . . . . . . . . . 13
Section 2. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. . . . . . . . . . . . . . . . . . . . 14

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Section 3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED. . . . . . . . . . . . . . . 14
Section 4. CERTIFICATES FOR SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5. LOST CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. . . . . . . . . . . . . . . . . 14
Section 7. CONSTRUCTION AND DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 8. EMERGENCY PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

ARTICLE IX. AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 1. AMENDMENT BY STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2. AMENDMENT BY DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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THIRD AMENDED AND RESTATED

BYLAWS OF

HS RESOURCES, INC.

A DELAWARE CORPORATION

(AS ADOPTED DECEMBER 16, 1996)

ARTICLE I.

OFFICES

Section 1. REGISTERED OFFICE AND PRINCIPAL OFFICE. The
registered office of the corporation in the State of Delaware shall be c/o The
Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware, or such
other place as the board of directors may designate from time to time. The
board of directors shall fix the location of the principal executive office of
the corporation at any place within or outside the State of Delaware.

Section 2. OTHER OFFICES. The board of directors may at any
time establish branch or subordinate offices at any place or places in this
state or otherwise.

Section 3. REGISTERED AGENT. The registered agent of the
corporation in the State of Delaware is Corporation Service Company.

ARTICLE II.

MEETING OF STOCKHOLDERS

Section 1. PLACE OF MEETINGS. Meetings of Stockholders shall be
held at any place within or outside the State of Delaware designated by the
board of directors. In the absence of any such designation, Stockholders'
meetings shall be held at the principal executive office of the corporation.

Section 2. ANNUAL MEETING. The annual meeting of Stockholders
shall be held each year on the second Wednesday in May at 10:00 a.m., or at
such other date and time designated by the board of directors, which shall be
not more than thirteen months after its last annual meeting. At each annual
meeting, directors shall be elected, and any other proper business which is
within the powers of the Stockholders may be transacted.

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Section 3. SPECIAL MEETING.

a. A special meeting of the Stockholders may be called
at any time by the board of directors, or by the chairman of the board of
directors, or by the president of the corporation, or by one or more
Stockholders holding shares in the aggregate representing not less than fifty
(50) percent of the votes at that meeting.

b. If a special meeting is called by any person or
persons other than the board of directors, the request shall be in writing,
specifying the time of such meeting and the general purpose or purposes for
which the meeting is called, and shall be delivered personally or sent by
registered mail or by telegraphic or other facsimile transmission to the
chairman of the board of directors, the president, any vice president, or the
secretary of the corporation. The officer receiving the request shall cause
notice to be promptly given to the Stockholders entitled to vote, in accordance
with the provisions of Sections 4 and 5 of this Article II, that a meeting will
be held at the time requested by the person or persons calling the meeting, not
less than thirty-five (35) nor more than sixty (60) days after the receipt of
the request. If the notice is not given within twenty (20) days after receipt
of the request, the person or persons requesting the meeting may give the
notice. Nothing contained in this subparagraph b. of this Section 3 shall be
construed as limiting, fixing or affecting the time when a meeting of
Stockholders called by action of the board of directors may be held.

Section 4. NOTICE OF STOCKHOLDERS' MEETINGS. All notices of
meetings of Stockholders shall be sent or otherwise given in accordance with
Section 5 of this Article II and, except as set forth in subparagraph b. of
Section 3 of this Article II, shall be sent or otherwise given not less than
ten (10) nor more than sixty (60) days before the date of the meeting. The
notice shall specify the place, date and hour of the meeting and (i) in the
case of a special meeting, the purpose or purposes for which the meeting is
called, or (ii) in the case of the annual meeting, those matters which the
board of directors, at the time of giving the notice, intends to present for
action by the Stockholders. The notice of any meeting at which directors are
to be elected shall include the name of any nominee or nominees whom, at the
time of the notice, management intends to present for election.

Section 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.
Notice of any meeting of Stockholders shall be given either personally or by
first-class mail or telegraphic or other written communication, charges
prepaid, addressed to the Stockholder at the address of that Stockholder
appearing on the books of the corporation or given by the Stockholder to the
corporation for the purpose of notice. If no such address appears on the
corporation's books or is given, notice shall be deemed to have been given if
sent to that Stockholder by first-=class mail or telegraphic or other written
communication to the corporation's principal executive office, or if published
at least once in a newspaper of general circulation in the county where that
office is located. Notice shall be deemed to have been given at the time when
delivered personally or deposited in the mail or sent by telegram or other
means of written communication. An affidavit of the secretary or an assistant
secretary or the transfer agent of the corporation that the notice has been
given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein.

Section 6. QUORUM. The presence in person or by proxy of the
holders of a majority of the shares entitled to vote at any meeting of
Stockholders shall constitute a quorum

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for the transaction of business. The Stockholders present at a duly called or
held meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough Stockholders to leave
less than a quorum, if any action taken (other than adjournment) is approved by
holders of at least a majority of the shares required to constitute a quorum.

Section 7. ADJOURNED MEETING; NOTICE. Any Stockholders'
meeting, annual or special, whether or not a quorum is present, may be
adjourned from time to time by the vote of the majority of the shares
represented at that meeting, either in person or by proxy, but in the absence
of a quorum, no other business may be transacted at that meeting except as
provided in Section 6 of this Article II. When any meeting of Stockholders,
either annual or special, is adjourned to another time and place, notice need
not be given of the adjourned meeting if the time and place are announced at a
meeting at which the adjournment is taken unless a new record date for the
adjourned meeting is fixed or unless the adjournment is for more than thirty
(30) days from the date set for the original meeting, in which case the board
of directors shall set a new record date. If the adjournment is for more than
thirty (30) days, or if a new record date is fixed for the adjourned meeting, a
notice of any such adjourned meeting shall be given to each Stockholder of
record entitled to vote at the adjourned meeting in accordance with the
provisions of Sections 4 and 5 of this Article II. At any adjourned meeting,
the corporation may transact any business which might have been transacted at
the original meeting.

Section 8. VOTING. The Stockholders entitled to vote at any
meeting of Stockholders shall be determined in accordance with the provisions
of Section 10 of this Article II, subject to the provisions of Sections 217 and
218 of the General Corporation Law of Delaware (relating to voting shares held
by a fiduciary, by pledgors, in joint ownership, or bound by voting trusts or
voting agreements). The Stockholders' vote amy be by voice or ballot;
provided, however, that any election for directors must be by ballot. On any
matter other than election of directors, any Stockholder may vote all or part
of his/her shares in favor of the proposal and refrain from voting the
remaining shares or vote the remaining shares against the proposal but, if the
Stockholder fails to specify the number of shares which the Stockholder is
voting affirmatively, it will be conclusively presumed that the Stockholder's
approving vote is with respect to all shares that the Stockholder is entitled
to vote. If a quorum is present, the affirmative vote of the majority of the
shares represented at the meeting and entitled to vote on any matter (other
than the election of directors) shall be the act of the Stockholders, unless
the vote of a greater number or voting by classes is required by General
Corporation Law of Delaware or by the Certificate of Incorporation or by these
bylaws.

Section 9. WAIVER OF NOTICE OR CONSENT BY ABSENT STOCKHOLDERS.
The transactions of any meeting of Stockholders, either annual or special,
however called and noticed, and wherever held, shall be as valid as though had
a meeting duly held after regular call and notice, if a quorum be present
either in person or by proxy and if, either before or after the meeting, each
person entitled to vote who was not present in person or by proxy, signs a
written waiver of notice. The waiver of notice need not specify either the
business to be transacted or the purpose of any annual or special meeting of
Stockholders, except that if action is taken or proposed to be taken for
approval of any of those matters specified in subparagraph b. of Section 3 of
this Article II, the waiver of notice or consent shall state the general nature
of the proposal. All such waivers shall be filed with the corporate records or
made a part of the minutes of the

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meeting. Attendance by a person at a meeting shall also constitute a waiver of
notice of that meeting, except when the person objects, at the beginning of a
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Attendance at a meeting is not a waiver of any right to
object to the consideration of matters not included in the notice of the
meeting if that objection is expressly made at the meeting.

Section 10. STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A
MEETING.

a. Any action which may be taken at any annual or
special meeting of Stockholders may be taken without a meeting and without
prior notice, if a consent in writing, setting forth the action so taken, is
signed by the holders of not less than seventy-five (75) percent of the
outstanding shares entitled to vote at a meeting of Stockholders on that
action. All such consents shall be filed with the secretary of the corporation
and shall be maintained in the corporate records. Any Stockholder giving a
written consent, or the Stockholder's proxy holder, or a transferee of the
shares or a personal representative of the Stockholder or his or her respective
proxy holder, may revoke the consent by a writing received by the secretary of
the corporation before written consents of the number of shares required to
authorize the proposed action have been filed with the secretary.

b. If in the case of action taken pursuant to
subparagraph a. of Section 10 of this Article II the consents of all
Stockholders entitled to vote have not been solicited in writing, or if the
unanimous written consent of all such Stockholders shall not have been
received, the secretary shall give prompt notice of the corporate action
approved by the Stockholders without a meeting. This notice shall be given in
the manner specified in Section 5 of this Article II.

Section 11. RECORD DATE FOR STOCKHOLDER NOTICE, VOTING, AND
GIVING CONSENTS. For purposes of determining the Stockholders entitled to
notice any meeting or to vote or entitled to give consent to corporate action
without a meeting, the board of directors may fix, in advance, a record date,
which shall not be more than sixty (60) days not less than ten (10) days before
any such action without a meeting, and in this event only Stockholders of
record on the date so fixed are entitled to notice and to vote or to give
consents, as the case may be, notwithstanding any transfer of any shares on the
books of the corporation after the record date, except as otherwise provided in
the General Corporation Law of Delaware. If the board of directors does not so
fix a record date:

a. The record date for determining Stockholders entitled
to receive notice of or to vote at a meeting of Stockholders shall be at the
close of business on the business day next preceding the day on which notice is
given or, if notice is waived, at the close of business on the business day
next preceding the day on which the meeting is held.

b. The record date for determining Stockholders entitled
to give consent to corporate action in writing without a meeting when no prior
action by the board of directors is necessary shall be the day on which the
first written consent is given.

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c. A determination of Stockholders of record entitled to
notice or to vote at a meeting of Stockholders shall apply to an adjournment of
the meeting; provided, however, that the board of directors may fix a new
record date for the adjourned meeting.

Provisions governing record dates for other purposes are located in
Section 1 of Article VIII.

Section 12. PROXIES. Every person entitled to vote for directors
or on any other matter shall have the right to do so either in person or by one
or more agents authorized by a written proxy signed by the person and filed
with the secretary of the corporation. A proxy shall be deemed signed if the
Stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission, or otherwise) by the Stockholder or the
Stockholder's attorney-in-fact. A validly executed proxy which does not state
that it is irrevocable shall continue in full force and effect unless (i)
revoked by the person executing it before the vote pursuant to that proxy by a
writing delivered to the corporation stating that the proxy is revoked, or by a
subsequent proxy executed by, or attendance at the meeting and voting in person
by, the person executing the proxy; or (ii) written notice of the death or
incapacity of the maker of that proxy is received by the corporation before the
vote pursuant to that proxy is counted; provided, however, that no proxy shall
be valid after the expiration of eleven (11) months from the date of the proxy,
unless otherwise provided in the proxy. The revocability of the proxy that
states on its face that it is irrevocable shall be governed by the provisions
of Section 212 of the General Corporation Law of Delaware.

Section 13. INSPECTORS OF ELECTION. Before any meeting of
Stockholders, the board of directors may appoint any person other than nominees
for office to act as inspectors of election at the meeting or its adjournment.
If no inspectors of election are so appointed or if any person so appointed
should fail or refuse to appear, the chairman of the meeting may, and on the
request of any Stockholder or a Stockholder's proxy shall, appoint inspectors
of election at the meeting. The number of inspectors shall be either one or
three. If appointed at a meeting on the request of one or more Stockholders or
proxies, the majority of shares represented in person or by proxy shall
determine whether one or three inspectors are appointed.

ARTICLE III.

DIRECTORS

Section 1. POWERS. Subject to the provisions of the General
Corporation Law of Delaware and any limitations in the Certificate of
Incorporation and these bylaws relating to action required to be approved by
the Stockholders or by the outstanding shares, the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised by or
under the direction of the board of directors.

Section 2. NUMBER AND QUALIFICATION OF DIRECTORS. The number of
directors of the corporation shall not be less than five (5) nor more than nine
(9). The exact number of directors shall be five (5) until changed, within the
limits specified above, by a resolution duly approved by the board of directors
or approved by the Stockholders. The

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indefinite number of directors may be changed, or a definite number fixed
without provision for an indefinite number, by a duly adopted amendment to this
bylaw approved by the board of directors or the Stockholders.

Section 3. ELECTION AND TERM OF OFFICE OF DIRECTORS. The board
of directors shall be divided into three classes, each as nearly equal in
numbers as the then total number of directors constituting the entire board of
directors permits and with the term of office of one class expiring each year.
At the first annual meeting of the Stockholders, directors of the first class
shall be elected to hold office for a term expiring at the next succeeding
annual meeting of Stockholders, directors of the second class shall be elected
to hold office for a term expiring at the second succeeding annual meeting of
Stockholders, and directors of the third class shall be elected to hold office
for a term expiring at the third succeeding annual meeting of Stockholders.
Any vacancy in the board of directors for any reason, and any created
directorships resulting from any increase in the directors, may be filled by
the board of directors acting by a majority of the directors then in office,
although less than a quorum, and any directors so chosen shall hold office
until the next election of the class for which such directors have been chosen
and until their successors have been elected and qualified. No decrease in the
number of directors shall shorten the term of any incumbent director. Subject
to the foregoing, at each annual meeting of Stockholders, the successors to the
class of directors whose term shall then expire shall be elected to hold office
for a term expiring at the third succeeding annual meeting of Stockholders.

Section 4. VACANCIES; RESIGNATION.

a. A vacancy or vacancies in the board of directors
shall be deemed to exist in the event of the death, resignation, or removal of
any director, or if the board of directors by resolution declares vacant the
office of a director who has been declared of unsound mind by an order of court
or who has been convicted of a felony, or if the authorized number of directors
is increased, or if the Stockholders fail at any meeting of Stockholders at
which any director or directors are elected to elect the number of directors to
be voted for at that meeting, or if any director duly elected shall refuse in
writing to accept the position.

b. Vacancies in the board of directors may be filled by
a majority of the remaining directors, though less than a quorum, or by a sole
remaining director, except that a vacancy created by the removal of a director
may be filled in accordance with Section 141(k) of the General Corporation Law
of Delaware. Each director elected to fill a vacancy shall hold office until
his term of office shall expire and until a successor has been elected and
qualified. Any director may resign effective on giving written notice to the
chairman of the board of directors, the president, the secretary, or the board
of directors, unless the notice specifies a later time for that resignation to
become effective. If the resignation of a director is effective at a future
time, the board of directors may elect a successor to take office when the
resignation becomes effective. No reduction of the authorized number of
directors shall have the effect of removing any director before that director's
term of office expires.

Section 5. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. Regular
meetings of the board of directors may be held at any place within or outside
the State of Delaware that has been designated from time to time by resolution
of the board of directors. In

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the absence of such a designation, regular meetings shall be held at the
principal executive office of the corporation. Special meetings of the board
of directors shall be held at any place within or outside the State of Delaware
that has been designated in the notice of the meeting or, if not stated in the
notice or if there is no notice, at the principal executive office of the
corporation. Any meeting, regular or special, may be held by conference
telephone or similar communication equipment, so long as all directors
participating in the meeting can hear one another, and all such directors shall
be deemed to be present in person at the meeting.

Section 6. ANNUAL MEETING. Immediately following each annual
meeting of Stockholders, the board of directors shall hold a regular meeting
for the purpose of organization, any desired election of officers, and the
transaction of other business. Notice of this meeting shall not be required.

Section 7. OTHER REGULAR MEETINGS. Other regular meetings of
the board of directors shall be held without call at such time as shall from
time to time be fixed by the board of directors. Such regular meetings may be
held without notice.

Section 8. SPECIAL MEETINGS. Special meetings of the board of
directors for any purpose or purposes may be called at any time by the chairman
of the board of directors or the president or any vice president or the
secretary or any two (2) directors. Notice of the time and place of special
meetings shall be delivered personally or by telephone to each director or sent
by first-class mail or telegram, charges prepaid, addressed to each director at
that director's address as shown on the records of the corporation. In case
the notice is mailed, it shall be deposited in the United States mail at least
four (4) days before the time of the holding of the meeting. In case the
notice is delivered personally, or by telephone or telegram, it shall be
delivered personally or by telephone or to the telegraph company at least
forty-eight (48) hours before the time of the holding of the meeting. Any oral
notice given personally or by telephone may be communicated either to the
director or to a person at the office of the director who the person giving the
notice has reason to believe wail promptly communicate it to the director. The
notice need not specify the purpose of the meeting.

Section 9. QUORUM. A majority of the authorized number of
directors shall constitute a quorum for the transaction of business, except to
adjourn as provided in Section 11 of this Article III. Every act or decision
done or made by the majority of the directors present at a meeting duly held at
which a quorum is present shall be regarded as the act of the board of
directors, subject to the provisions of the General Corporation Law of Delaware
and these bylaws which require Stockholder approval. A meeting at which a
quorum is initially present may continue to transact business notwithstanding
the withdrawal of directors, if any action taken is approved by at least a
majority of the required quorum for that meeting.

Section 10. WAIVER OF NOTICE. The transactions of any meeting of
the board of directors, however called and noticed or wherever held, shall be
as valid as though had at a meeting duly held after regular call and notice if
a quorum is present and if, either before or after the meeting, each of the
directors not present signs a written waiver of notice. The waiver of notice
need not specify the purpose of the meeting. All such waivers shall be filed
with the corporate records or made a part of the minutes of the meeting.
Notice of a meeting shall also be deemed given to any director who attends the
meeting except when the director attends such

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<PAGE> 12
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called
or convened.

Section 11. ADJOURNMENT. A majority of the directors present at
a meeting of the board of directors, whether or not constituting a quorum, may
adjourn any meeting to another time and place.

Section 12. NOTICE OF ADJOURNMENT. Notice of the time and place
of holding an adjourned meeting need not be given, unless the meeting is
adjourned for more than twenty-four (24) hours, in which case notice of the
time and place shall be given before the time of the adjourned meeting, in the
manner specified in Section 8 of this Article III, to the directors who were
not present at the time of the adjournment.

Section 13. ACTION WITHOUT MEETING. Any action required or
permitted to be taken by the board of directors may be taken without a meeting,
if all members of the board of directors shall individually or collectively
consent in writing to that action. Such consent in writing may be delivered to
the corporation either by first-class mail, personal delivery, telegraphic,
facsimile, or other written communication. Such action by written consent
shall have the same force and effect as a unanimous vote of the board of
directors, and any resolution so adopted may be certified as having been
adopted at a meeting of the board of directors held on the date of the last
signature to consent at the principal executive office of the corporation.
Such written consent or consents shall be filed with the minutes of the
proceedings of the board of directors.

Section 14. FEES AND COMPENSATION OF DIRECTORS. Directors and
members of committees may receive such compensation, if any, for their
services, and such reimbursement of expenses as may be fixed or determined by
resolution of the board of directors. This Section 14 shall not be construed
to preclude any director from serving the corporation in any other capacity as
an officer, agent, employee, or otherwise, and receiving compensation for those
services.

Section 15. LOANS TO OFFICERS. Notwithstanding anything to the
contrary contained herein, the board of directors may, without additional
approval, approve (by a vote sufficient without counting the vote of any
interested director or directors) a loan or guarantee to an officer, whether or
not a director, of the corporation or its parent or any subsidiary, or an
employee benefit plan authorizing such loan or guarantee to an officer, if the
board of directors determines that the loan or guarantee or plan may reasonably
be expected to benefit the corporation.

ARTICLE IV.

COMMITTEES

Section 1. COMMITTEES OF DIRECTORS. The board of directors may,
by resolution adopted by a majority of the authorized number of directors,
designate one or more committees, each consisting of one or more directors, to
serve at the pleasure of the board of

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<PAGE> 13
directors. The board of directors may designate one or more directors as
alternate members of any committee, who may replace any absent member at any
meeting of the committee. The appointment of members or alternate members of
any committee requires the vote of a majority of the authorized number of
directors. Any committee, to the extent provided in the resolution of the
board of directors, shall have all the authority of the board of directors,
except with respect to:

a. the approval of any action which, under these bylaws
or the General Corporation Law of Delaware, also requires Stockholders'
approval or approval of the outstanding shares;

b. the amendment or repeal of bylaws or the adoption of
new bylaws.

Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and
action of committees shall be governed by, and held and taken in accordance
with, the provisions of Article III of these bylaws, including Sections 5
(place of meetings), 7 (regular meetings), 8 (special meetings and notice), 9
(quorum), 10 (waiver of notice), 11 (adjournment), 12 (notice of adjournment),
and 13 (action without meeting), with such changes in the context of those
bylaws as are necessary to substitute the committee and its members for the
board of directors and its members, except that the time of regular meetings of
committees may be determined either by resolution of the board of directors or
by resolution of the committee; special meetings of committees may also be
called by committee. The board of directors may adopt rules for the government
of any committee not inconsistent with the provisions of these bylaws.

ARTICLE V.

OFFICERS

Section 1. OFFICERS. The officers of the corporation shall be a
president, a secretary, and a treasurer or chief financial officer. The
corporation may also have, at the discretion of the board of directors, a
chairman of the board, one or more vice presidents, one or more assistant
secretaries, one or more assistant treasurers, and such other officers as may
be appointed in accordance with the provisions of Section 3 of this Article V.
Any number of offices may be held by the same person.

Section 2. ELECTION OF OFFICERS. The officers of the
corporation, except such officers as may be appointed in accordance with the
provisions of Section 3 or Section 5 of this Article V, shall be chosen by the
board of directors, and each shall serve at the pleasure of the board of
directors, subject to the rights, if any, of an officer under any contract of
employment.

Section 3. SUBORDINATE OFFICERS. The board of directors may
appoint, and may empower the president to appoint, such other officers as the
business of the corporation may require, each of whom shall hold office for
such period, have such authority and perform such duties as are provided in the
bylaws or as the board of directors may from time to time determine.

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<PAGE> 14
Section 4. REMOVAL AND RESIGNATION OF OFFICERS.

a. Subject to the rights, if any, of an officer under
any contract of employment, any officer may be removed, either with or without
cause, by the board of directors, at any regular or special meeting of the
board of directors, or, except in the case of an officer chosen by the board of
directors, by any officer upon whom such power of removal may be conferred by
the board of directors.

b. Any officer may resign at any time by giving written
notice to the corporation. Any resignation shall take effect at the date of
the receipt of that notice or at any later time specified in that notice; and,
unless otherwise specified in that notice, the acceptance of the resignation
shall not be necessary to make it effective. Any resignation is without
prejudice to the rights, if any, of the corporation under any contract to which
the officer is a party.

Section 5. VACANCIES IN OFFICE. A vacancy in any office because
of death, resignation, removal, disqualification, or any other cause shall be
filled in the manner prescribed in the bylaws for regular appointments to that
office.

Section 6. CHAIRMAN OF THE BOARD. The chairman of the board of
directors, if such an officer be elected, shall, if present, preside at
meetings of the board of directors and exercise and perform such other powers
and duties as may be from time to time assigned to him by the board of
directors or prescribed by the bylaws. If there is no president, the chairman
of the board of directors shall in addition be the chief executive officer of
the corporation and shall have the powers and duties prescribed in Section 7 of
this Article V.

Section 7. PRESIDENT. Subject to such supervisory powers, if
any, as may be given by the board of directors to the chairman of the board of
directors, if there be such an officer, the president shall be the general
manager and the chief executive officer of the corporation and shall, subject
to the control of the board of directors, have general supervision, direction,
and control of the business and the officers of the corporation. He shall
preside at all meetings of the Stockholders and, in the absence of the chairman
of the board of directors, or if there be none, at all meetings of the board of
directors. He shall have the general powers and duties of management usually
vested in the office of president of a corporation, and shall have such other
powers and duties as may be prescribed by the board of directors or the bylaws.

Section 8. VICE PRESIDENTS. In the absence or disability of the
president, the vice presidents, if any, in order of their rank as fixed by the
board of directors or, if not ranked, a vice president designated by the board
of directors, shall perform all the powers of, and be subject to all the
restrictions upon, the president. The vice presidents shall have such other
powers and perform such other duties as from time to time may be prescribed for
them respectively by the board of directors, the bylaws, the president, or the
chairman of the board of directors.

Section 9. SECRETARY. The secretary shall keep or cause to be
kept, at the principal executive office or such other place as the board of
directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and Stockholders, with the time and place
of holding, whether regular or special, and, if special, how authorized, the

10
<PAGE> 15
notice given, the names of those present at directors' meetings or committee
meetings, the number of shares present or represented at Stockholders'
meetings, and the proceedings. The secretary shall also keep, or cause to be
kept, at the principal executive office or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a record of Stockholders, or a duplicate record of Stockholders,
showing the names of all Stockholders and their addresses, the number and
classes of shares held by each, the number and date of certificates issued for
the same, and the number and date of cancellation of every certificate
surrendered for cancellation. The secretary shall also give, or cause to be
given, notice of all meetings of the Stockholders and of the board of directors
required by the bylaws or by law to be given, and he shall keep the seal of the
corporation if one be adopted, in safe custody, and shall have such other
powers and perform such other duties as may be prescribed by the board of
directors, the president, or the bylaws.

Section 10. TREASURER OR CHIEF FINANCIAL OFFICER. The treasurer
or chief financial officer shall keep and maintain, or cause to be kept and
maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The treasurer or chief financial officer shall
deposit all moneys and other valuables in the name and to the credit of the
corporation with such depositaries as may be designated by the board of
directors. He shall disburse the funds of the corporation as may be ordered by
the board of directors, shall render to the president and directors, whenever
they request it, an account of all of his transactions as treasurer or chief
financial officer and of the financial condition of the corporation, and shall
have other powers and perform such other duties as may be prescribed by the
board of directors, the president or the bylaws.

ARTICLE VI.

INDEMNIFICATION OF BOARD OF DIRECTORS,
OFFICERS, EMPLOYEES AND OTHER AGENTS

Section 1. LIMITED PERSONAL LIABILITY. To the fullest extent
permitted by the General Corporation Law of Delaware, a director of the
corporation shall not be personally liable to the corporation or its
Stockholders for monetary damages for breach of fiduciary duty as a director.

Section 2. INDEMNIFICATION.

a. The corporation shall indemnify each person who was
or is made a party or is threatened to be made a party to any threatened,
pending or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative by reason of the fact that he, or a person of
whom he is the legal representative, is or was a director, officer, employee,
or agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee, or agent of another corporation
or of a partnership, joint venture, trust, or other enterprise, including
service with respect to employee benefit plans, whether the basis of such
proceeding is alleged action in an official capacity as a director, officer,
employee or agent or

11
<PAGE> 16
in any other capacity while serving as a director, officer, employee, or agent,
shall be indemnified and held harmless by the corporation to the fullest extent
authorized by the General Corporation Law of Delaware.

b. The corporation may purchase and maintain insurance,
at its expense, on behalf of any person who is or was a director, officer,
employee, or agent of the corporation or any person who is serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, or other enterprise against any
liability, whether or not the corporation would have the power to indemnify
such person against such liability under the General Corporation Law of
Delaware.

ARTICLE VII.

RECORDS AND REPORTS

Section 1. MAINTENANCE AND INSPECTION OF RECORD OF STOCKHOLDERS.
The corporation shall keep at its principal executive officer, or at the office
of its transfer agent or registrar, if either be appointed and as determined by
resolution of the board of directors, a record of its Stockholders, giving the
names and addresses of all Stockholders and the number and class of shares held
by each Stockholder. Any Stockholder of record shall, upon written demand
under oath stating the purpose thereof, have the right during the usual
business hours to inspect for any proper purpose the corporation's stock
ledger, a list of Stockholders, and its other books and records. A proper
purpose shall mean a purpose reasonably related to such person's interest as a
Stockholder. The demand under oath shall be directed to the corporation at its
registered office in Delaware or at its principal place of business.

Section 2. MAINTENANCE AND INSPECTION OF BYLAWS. The
corporation shall keep at its principal executive office, or if its principal
executive office is not in the State of Delaware, at its principal business
office in this state, if any, the original or a copy of the bylaws as amended
to date, which shall be open to inspection by the Stockholders at all
reasonable times during office hours. If the principal executive office of the
corporation is outside the State of Delaware and the corporation has no
principal business office in this state, the Secretary shall, upon the written
request of any Stockholder, furnish to that Stockholder a copy of the bylaws as
amended to date.

Section 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE
RECORDS. The accounting books and records and minutes of proceedings of the
Stockholders and the board of directors and any committee or committees of the
board of directors shall be kept at such place or places designated by the
board of directors or, in the absence of such designation, at the principal
executive office of the corporation. The minutes shall be kept in written form
and the accounting books and records shall be kept either in written form or in
any other form capable of being converted into written form. The minutes and
accounting books and records shall be open to inspection upon the written
demand of any Stockholder or holder of a voting trust certificate, at any
reasonable time during usual business hours, for a purpose reasonably related
to the holder's interests as a Stockholder or as the holder of a voting trust
certificate. The inspection may be made in person or by an agent or attorney,
and shall include

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<PAGE> 17
the right to copy and make extracts. These rights of inspection shall extend
to the records of each subsidiary corporation of the corporation.

Section 4. INSPECTION BY DIRECTORS. Every director shall have
the absolute right for a purpose reasonably related to his position as director
to inspect all books, records, and documents of every kind and the physical
properties of the corporation and each of its subsidiary corporations at any
reasonable time. This inspection by a director may be made in person or by an
agent or attorney, and the right of inspection includes the right to copy and
make extracts of documents.

Section 5. ANNUAL REPORT TO STOCKHOLDERS. The board of
directors may cause an annual report to be sent, postage prepaid, to the
Stockholders not later than 120 days after the close of the fiscal year and at
least 15 days prior to the annual meeting of Stockholders to be held during the
next fiscal year.

Section 6. FINANCIAL STATEMENTS. A copy of any annual financial
statement and any income statement of the corporation for each quarterly period
of each fiscal year and any accompanying balance sheet of the corporation as of
the end of each such period that has been prepared by the corporation shall be
kept on file in the principal executive office of the corporation for 12 months
and each such statement shall be open to inspection by the Stockholders at all
reasonable times during office hours or, upon written request of any
Stockholder, a copy of such statement shall be mailed to said Stockholder.

Section 7. ANNUAL STATEMENT OF GENERAL INFORMATION. The
corporation shall timely file with the Secretary of State of Delaware, on the
prescribed forms, periodic reports, filings, and statements as required by the
General Corporation Law of Delaware.

ARTICLE VIII.

GENERAL CORPORATE MATTERS

Section 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND
VOTING. For purposes of determining the Stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or
entitled to exercise any rights with respect to any other lawful action (other
than action by Stockholders by written consent without a meeting), the board of
directors may fix, in advance, a record date, which shall not be more than
sixty (60) days before any such action, and only Stockholders of record on the
date so fixed shall be entitled to receive the dividend, distribution, or
allotment of rights, or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation
after the record date so fixed, except as otherwise provided in the General
Corporation Law of Delaware. If the board of directors does not so fix a
record date, the record date for determining Stockholders for any such purpose
shall be at the close of business on the day on which the board of directors
adopts the resolution relating thereto.

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<PAGE> 18
Section 2. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All
checks, drafts, or other orders for payment of money, notes, or other evidences
or indebtedness, issued in the name of or payable to the corporation, shall be
signed or endorsed by such person or persons and in such manner as shall be
determined, from time to time, by resolution of the board of directors.

Section 3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED.
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, agent or agents, to enter into any contract
or execute any instrument in the name of and on behalf of the corporation, and
this authority may be general or confined to specific instances and, unless so
authorized or ratified by the board of directors or within the agency power of
an officer, no officer, agent, or employee shall have any power or authority to
bind the corporation by any contract or engagement or to pledge its credit or
to render it liable for any purpose or for any amount.

Section 4. CERTIFICATES FOR SHARES. A certificate or
certificates for shares of the capital stock of the corporation shall be issued
to each Stockholder when any of these shares are fully paid, and the board of
directors may authorize the issuance of certificates for shares as partly paid
provided that these certificates shall state the amount of the consideration to
be paid for them and the amount paid. All certificates shall be signed in the
name of the corporation by the chairman or vice-chairman of the board of
directors or the president or vice president and by the treasurer or an
assistant treasurer or the secretary or any assistant secretary, certifying the
number of shares and the class or series of shares owned by the Stockholder.
Any or all of the signatures on the certificate may be facsimile. In case any
officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed on a certificate shall have ceased to be that
officer, transfer agent, or registrar before that certificate is issued, it may
be issued by the corporation with the same effect as if that person were an
officer, transfer agent, or registrar at the date of issue.

Section 5. LOST CERTIFICATES. Except as provided in this
Section 5, no new certificates for shares shall be issued to replace an old
certificate unless the latter is surrendered to the corporation and cancelled
at the same time. The board of directors may, in the event that any share
certificate or certificates for any other security is lot, stolen, or
destroyed, authorize the issuance of a replacement certificate on such terms
and conditions as the board of directors may deem necessary, including a
provision for indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft, or destruction of the certificate or the issuance of the
replacement certificate.

Section 6. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
chairman of the board of directors, the president, or any vice president, or
any other person authorized by resolution of the board of directors or by any
of the foregoing designated officers, is authorized to vote on behalf of the
corporation any and all shares of any other corporation or corporations,
foreign or domestic, standing in the name of the corporation. The authority
granted to these officers to vote or represent on behalf of the corporation any
and all shares held by the corporation in any other corporation or corporations
may be exercised by any of these officers in person or by any person authorized
to do so by a proxy duly executed by these officers.

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<PAGE> 19
Section 7. CONSTRUCTION AND DEFINITIONS. Unless the context
requires otherwise, the general provisions, rules of construction, and
definitions in the General Corporation Law of Delaware shall govern the
construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, the term "person" includes both a corporation and a natural
person and pronouns of the masculine gender include pronouns of the feminine
gender.

Section 8. EMERGENCY PROVISIONS. During any emergency resulting
from an attack on the United States or on a locality in which the corporation
conducts its business or customarily holds meetings of its board of directors
or its Stockholders, or during any nuclear or atomic disaster, or during the
existence of any catastrophe, or other similar emergency condition, as a result
of which a quorum of the board of directors or a standing committee, if any,
cannot readily be convened for action, a meeting of the board of directors or
of said committee may be called for by any officer or director. Such notice
may be given only to such of the directors or members of the committee, as the
case may be, as it may be feasible to reach at the time and by such means as
may be feasible at the time including, without limitation, publication or
radio. The director or directors in attendance at the meeting of the board of
directors and the member or members of the executive committee, if any, in
attendance at the meeting of the committee, shall constitute a quorum. If none
are in attendance at the meeting, the officers or other persons designated on a
list approved by the board of directors before the emergency, all in such order
of priority and subject to such conditions and for such order of priority and
subject to such conditions and for such period of time (not longer than
reasonably necessary after the termination of the emergency) as may be provided
in the resolution approving the list shall, to the extent required to provide a
quorum at any meeting of the board of directors or of the executive committee,
be deemed directors or members of the committee, as the case may be, for such
meeting. In the absence of a designation by the board of directors, the order
of priority of such officers shall be as follows: president, vice president,
chief financial officer, secretary, assistant treasurer, controller and
assistant secretary. The board of directors, either before or during any such
emergency, may provide, and from time to time modify, lines of succession in
the event that during such emergency any or all officers or agents of the
corporation shall for any reason be rendered incapable of discharging their
duties. The board of directors, either before or during any such emergency,
may, effective in the emergency, change the principal executive office or
designate several alternative offices, or may authorize the officers so to do.

ARTICLE IX.

AMENDMENTS

Section 1. AMENDMENT BY STOCKHOLDERS. New bylaws may be adopted
or these bylaws may be amended or repealed by the vote or written consent of
holders of not less than two-thirds of the outstanding shares entitled to vote
thereon.

Section 2. AMENDMENT BY DIRECTORS. Notwithstanding the above,
new bylaws may be adopted or these bylaws may be amended or repealed by a vote
or written consent of the

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<PAGE> 20
board of directors without Stockholder approval unless otherwise required by
the General Corporation Law of Delaware.

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<PAGE> 21

CERTIFICATE OF SECRETARY

I, the undersigned, the duly elected Secretary of HS Resources, Inc.,
a Delaware corporation, do hereby certify:

That the within and foregoing Bylaws were adopted as the bylaws of the
corporation on the 16th day of December, 1996, and the same do now constitute
the bylaws of said corporation.

IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of said corporation this 16h day of December, 1996.

/s/ JAMES M. PICCONE
------------------------
Secretary

CERTIFICATE OF ASSISTANT SECRETARY

I, the undersigned, the duly elected Assistant Secretary of HS
Resources, Inc., a Delaware corporation, do hereby certify:

That the within and foregoing Bylaws were adopted as the bylaws of the
corporation on the 16th day of December, 1996, and the same do now constitute
the bylaws of said corporation.

IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of said corporation this 16th day of December, 1996.

/s/ RONALD B. JACOBS
------------------------
Assistant Secretary

<PAGE> 1
EXHIBIT 4.2

================================================================================

HS RESOURCES, INC.

AND

SUBSIDIARY GUARANTORS

$150,000,000
9-1/4% Senior Subordinated Notes due 2006

------------------------------

INDENTURE

Dated as of November 27, 1996

------------------------------

HARRIS TRUST AND SAVINGS BANK

Trustee

================================================================================
<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 Definitions and Incorporation by Reference . . . . . . . . . 1
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Incorporation by Reference of Trust Indenture
Act . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 1.03. Rules of Construction . . . . . . . . . . . . . . . 21

ARTICLE 2 The Securities . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.01. Form and Dating . . . . . . . . . . . . . . . . . . 21
SECTION 2.02. Execution and Authentication . . . . . . . . . . . . 21
SECTION 2.03. Registrar and Paying Agent . . . . . . . . . . . . . 22
SECTION 2.04. Paying Agent To Hold Money in Trust . . . . . . . . 22
SECTION 2.05. Holder Lists . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.06. Replacement Securities . . . . . . . . . . . . . . . 23
SECTION 2.07. Outstanding Securities . . . . . . . . . . . . . . . 23
SECTION 2.08. Temporary Securities . . . . . . . . . . . . . . . . 23
SECTION 2.09. Cancellation . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.10. Defaulted Interest . . . . . . . . . . . . . . . . . 23
SECTION 2.11. CUSIP Numbers . . . . . . . . . . . . . . . . . . . 24

ARTICLE 3 Redemption . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.01. Notices to Trustee . . . . . . . . . . . . . . . . . 24
SECTION 3.02. Selection of Securities To Be Redeemed . . . . . . . 24
SECTION 3.03. Notice of Redemption . . . . . . . . . . . . . . . . 25
SECTION 3.04. Effect of Notice of Redemption . . . . . . . . . . . 24
SECTION 3.05. Deposit of Redemption Price . . . . . . . . . . . . 25
SECTION 3.06. Securities Redeemed in Part . . . . . . . . . . . . 25

ARTICLE 4 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4.01. Payment of Securities . . . . . . . . . . . . . . . 25
SECTION 4.02. Commission Reports . . . . . . . . . . . . . . . . . 26
SECTION 4.03. Limitation on Indebtedness . . . . . . . . . . . . . 26
SECTION 4.04. Limitation on Restricted Payments . . . . . . . . . 27
SECTION 4.05. Limitation on Payment Restrictions Affecting Restricted
Subsidiaries . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.06. Limitation on Asset Sales . . . . . . . . . . . . . 30
SECTION 4.07. Limitation on Transactions with Affiliates . . . . . 32
SECTION 4.08. Limitation on Issuance and Sale of Capital Stock of
Restricted Subsidiaries . . . . . . . . . . . . . . . 33
SECTION 4.09. Change of Control . . . . . . . . . . . . . . . . . 34
SECTION 4.10. Limitation on Liens . . . . . . . . . . . . . . . . 34
SECTION 4.11. Limitation on Layered Indebtedness . . . . . . . . . 35
SECTION 4.12. Future Guarantors . . . . . . . . . . . . . . . . . 35
SECTION 4.13. Maintenance of Office or Agency . . . . . . . . . . 35
</TABLE>
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<TABLE>
<CAPTION>
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SECTION 4.14. Money for the Security Payments to be Held in Trust 35
SECTION 4.15. Payment of Taxes and Other Claims . . . . . . . . . 36
SECTION 4.16. Corporate Existence . . . . . . . . . . . . . . . . 36
SECTION 4.17. Compliance Certificate . . . . . . . . . . . . . . . 36
SECTION 4.18. Further Instruments and Acts . . . . . . . . . . . . 37
SECTION 4.19. Prohibition on Company and Guarantors Becoming
Investment Companies. . . . . . . . . . . . . . . . . 37
SECTION 4.20. Stay, Extension and Usury Laws . . . . . . . . . . . 37

ARTICLE 5 Successor Company . . . . . . . . . . . . . . . . . . . . . 37
SECTION 5.01. Merger, Consolidation and Sale of Substantially All
Assets . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 5.02. When a Subsidiary Guarantor May Merge or Transfer
Assets . . . . . . . . . . . . . . . . . . . . . . . 40

ARTICLE 6 Defaults and Remedies . . . . . . . . . . . . . . . . . . . 40
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . 40
SECTION 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . 42
SECTION 6.04. Waiver of Past Defaults . . . . . . . . . . . . . . 42
SECTION 6.05. Control by Majority . . . . . . . . . . . . . . . . 43
SECTION 6.06. Limitation on Suits . . . . . . . . . . . . . . . . 43
SECTION 6.07. Rights of Holders to Receive Payment . . . . . . . . 43
SECTION 6.08. Collection Suit by Trustee . . . . . . . . . . . . . 43
SECTION 6.09. Trustee May File Proofs of Claim . . . . . . . . . . 43
SECTION 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . 44
SECTION 6.11. Undertaking for Costs . . . . . . . . . . . . . . . 44

ARTICLE 7 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 7.01. Duties of Trustee . . . . . . . . . . . . . . . . . 44
SECTION 7.02. Rights of Trustee . . . . . . . . . . . . . . . . . 45
SECTION 7.03. Individual Rights of Trustee . . . . . . . . . . . . 46
SECTION 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . 47
SECTION 7.05. Notice of Defaults . . . . . . . . . . . . . . . . . 47
SECTION 7.06. Reports by Trustee to Holders . . . . . . . . . . . 47
SECTION 7.07. Compensation and Indemnity . . . . . . . . . . . . . 47
SECTION 7.08. Replacement of Trustee . . . . . . . . . . . . . . . 48
SECTION 7.09. Successor Trustee by Merger . . . . . . . . . . . . 48
SECTION 7.10. Eligibility; Disqualification . . . . . . . . . . . 49
SECTION 7.11. Preferential Collection of Claims Against Company . 49

ARTICLE 8 Discharge of Indenture; Defeasance . . . . . . . . . . . . . 49
SECTION 8.01. Discharge of Liability on Securities . . . . . . . . 49
SECTION 8.02 Defeasance . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8.03. Conditions to Defeasance . . . . . . . . . . . . . . 50
SECTION 8.04. Application of Trust Money . . . . . . . . . . . . . 51
SECTION 8.05. Repayment to Company . . . . . . . . . . . . . . . . 51
SECTION 8.06. Indemnity for Government Obligations . . . . . . . . 51
</TABLE>
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<TABLE>
<CAPTION>
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SECTION 8.07. Reinstatement . . . . . . . . . . . . . . . . . . . 51

ARTICLE 9 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.01. Without Consent of Holders . . . . . . . . . . . . . 52
SECTION 9.02. With Consent of Holders. . . . . . . . . . . . . . . 52
SECTION 9.03. Compliance with Trust Indenture Act . . . . . . . . 53
SECTION 9.04. Revocation and Effect of Consents and Waivers . . . 53
SECTION 9.05. Notation on or Exchange of Securities . . . . . . . 54
SECTION 9.06. Trustee To Sign Amendments . . . . . . . . . . . . . 54
SECTION 9.07. Payment for Consent . . . . . . . . . . . . . . . . 54

ARTICLE 10 Subordination of the Securities . . . . . . . . . . . . . . 54
SECTION 10.01. Agreement to Subordinate . . . . . . . . . . . . . 54
SECTION 10.02. Liquidation; Dissolution; Bankruptcy . . . . . . . 55
SECTION 10.03. Default on Senior Indebtedness . . . . . . . . . . 57
SECTION 10.04. Security Payments Permitted if No Default . . . . . 58
SECTION 10.05. When Security Payment Must Be Paid Over . . . . . . 58
SECTION 10.06. Notices by the Company . . . . . . . . . . . . . . 58
SECTION 10.07. Subrogation . . . . . . . . . . . . . . . . . . . . 58
SECTION 10.08. Relative Rights . . . . . . . . . . . . . . . . . . 59
SECTION 10.09. Subordination May Not Be Impaired by the Company . 59
SECTION 10.10. Distribution of Notice to Representative . . . . . 59
SECTION 10.11. Rights of Trustee and Paying Agent . . . . . . . . 59
SECTION 10.12. Consent of Holders of Specified Senior
Indebtedness . . . . . . . . . . . . . . . . . . . 60
SECTION 10.13. Contractual Subordination . . . . . . . . . . . . . 60

ARTICLE 11 Subsidiary Guaranties . . . . . . . . . . . . . . . . . . . 60
SECTION 11.01 Guaranties . . . . . . . . . . . . . . . . . . . . . 60
SECTION 11.02 Limitation on Liability . . . . . . . . . . . . . . 62
SECTION 11.03 Successors and Assigns . . . . . . . . . . . . . . . 62
SECTION 11.04 No Waiver . . . . . . . . . . . . . . . . . . . . . 62
SECTION 11.05 Modification . . . . . . . . . . . . . . . . . . . 62
SECTION 11.06 Release of Subsidiary Guarantor . . . . . . . . . . 62
SECTION 11.07 Execution of Supplemental Indenture for Future
Subsidiary Guarantors . . . . . . . . . . . . . . . 63

ARTICLE 12 Subordination of Subsidiary Guaranties . . . . . . . . . . . 63
SECTION 12.01. Agreement to Subordinate . . . . . . . . . . . . . 63
SECTION 12.02. Liquidation; Dissolution; Bankruptcy . . . . . . . 64
SECTION 12.03. Default on Subsidiary Guarantor Senior
Indebtedness . . . . . . . . . . . . . . . . . . . 65
SECTION 12.04. Guarantee Payments Permitted if No Default . . . . 67
SECTION 12.05. When Guaranty Payment Must Be Paid Over . . . . . . 67
SECTION 12.06. Notices by a Subsidiary Guarantor . . . . . . . . . 67
SECTION 12.07. Subrogation . . . . . . . . . . . . . . . . . . . . 67
SECTION 12.08. Relative Rights . . . . . . . . . . . . . . . . . . 68
</TABLE>
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<TABLE>
<CAPTION>
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SECTION 12.09. Subordination May Not be Impaired by the Subsidiary
Guarantor . . . . . . . . . . . . . . . . . . . . . 68
SECTION 12.10. Distribution or Notice to Representative . . . . . 68
SECTION 12.11. Rights of Trustee and Paying Agent . . . . . . . . 68
SECTION 12.12. Consent of Holders of Subsidiary Guarantor Senior
Indebtedness . . . . . . . . . . . . . . . . . . . 69
SECTION 12.13. Contractual Subordination . . . . . . . . . . . . . 69

ARTICLE 13 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 13.01. Compliance Certificates and Opinions . . . . . . . 69
SECTION 13.02. Form of Documents Delivered to Trustee . . . . . . 70
SECTION 13.03. Acts of Holders . . . . . . . . . . . . . . . . . . 70
SECTION 13.04. Trust Indenture Act Controls . . . . . . . . . . . 71
SECTION 13.05. Notices . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 13.06. Communication by Holders with Other Holders . . . . 72
SECTION 13.07. When Securities Disregarded . . . . . . . . . . . . 72
SECTION 13.08. Rules by Trustee, Paying Agent and Registrar . . . 73
SECTION 13.09. Legal Holidays . . . . . . . . . . . . . . . . . . 73
SECTION 13.10. Governing Law . . . . . . . . . . . . . . . . . . . 73
SECTION 13.11. No Recourse Against Others . . . . . . . . . . . . 73
SECTION 13.12. Submission to Jurisdiction; Appointment of Agent
for Service of Process; Waiver of Immunities . . . . 73
SECTION 13.13. Successors . . . . . . . . . . . . . . . . . . . . 74
SECTION 13.14. Multiple Originals . . . . . . . . . . . . . . . . 74
SECTION 13.15. Table of Contents; Headings . . . . . . . . . . . . 74
</TABLE>

Appendix A Provisions Relating to Initial
Securities and Exchange Securities

Exhibit 1 to
Appendix A Form of Initial Security

Exhibit A Form of Exchange Security
Exhibit B Form of Supplemental Indenture
<PAGE> 6
INDENTURE dated as of November 27, 1996, among HS RESOURCES, INC., a
Delaware corporation (the "Company"), certain of the Company's subsidiaries
signatory hereto (each, a "Subsidiary Guarantor" and, collectively, the
"Subsidiary Guarantors") and HARRIS TRUST AND SAVINGS BANK, an Illinois banking
corporation, as trustee (the "Trustee").

Each party agrees as follows for the benefit of the other party
and for the equal and ratable benefit of the Holders of the Company's 9-1/4%
Senior Subordinated Notes Due 2006 (the "Initial Securities") and, if and when
issued pursuant to a registered exchange for the Initial Securities, the
Company's 9-1/4% Senior Subordinated Notes Due 2006 (the "Exchange Securities"
and, together with the Initial Securities, the "Securities"):

ARTICLE 1

Definitions and Incorporation by Reference

SECTION 1.01. Definitions.

"Acquired Indebtedness" means, with respect to the Company, Indebtedness
of a Person existing at the time such Person becomes a Restricted Subsidiary.

"Additional Assets" means (i) any Property (other than cash, Permitted
Short-Term Investments or securities) used in the Oil and Gas Business or any
business ancillary thereto, (ii) Investments in any other Person engaged in the
Oil and Gas Business or any business ancillary thereto (including the
acquisition from third parties of Capital Stock of such Person) as a result of
which such other Person becomes a Restricted Subsidiary made in compliance with
the definition of the term "Restricted Subsidiary" and Section 4.04, (iii) the
acquisition from third parties of Capital Stock of a Restricted Subsidiary,
(iv) the costs of acquiring, exploiting, developing, exploring, producing or
operating in respect of oil and gas properties or (v) Permitted Business
Investments.

"Adjusted Consolidated Net Tangible Assets" means, without duplication,
as of the date of determination, (i) the sum of (A) discounted future net cash
flows from proved oil and gas reserves of the Company and its Restricted
Subsidiaries, calculated in accordance with Commission guidelines (before any
state or Federal income tax), as estimated by the Company and reviewed by
independent petroleum engineers as of a date no earlier than the date of the
Company's latest annual consolidated financial statements (or, in the case that
the date of determination is after the end of the first fiscal quarter of the
fiscal year of the Company, as estimated by the Company's engineers as of a
date no earlier than the end of the most recent fiscal quarter, which estimates
shall be confirmed by independent petroleum engineers in accordance with
Commission guidelines in the event of a Material Change), (B) the Net Working
Capital on a date no earlier than the date of the Company's latest consolidated
annual or quarterly financial statements and (C) with respect to each other
tangible asset (including undeveloped acreage) of the Company or its Restricted
Subsidiaries, the greater of (1) the net book value of such other tangible
asset on a date no earlier than the date of the Company's latest consolidated
annual or quarterly financial statements and (2) the appraised value, as
estimated by a qualified independent appraiser, of such other tangible asset,
as of a date no earlier than the date of the Company's latest audited financial

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<PAGE> 7
statements, minus (ii) minority interests and, to the extent not otherwise
taken into account in determining Adjusted Consolidated Net Tangible Assets,
any gas balancing liabilities of the Company and its Restricted Subsidiaries.

"Adjusted Net Assets" of a Subsidiary Guarantor at any date shall mean
the amount by which the fair value of the Property of such Subsidiary Guarantor
exceeds the total amount of liabilities, including, without limitation,
contingent liabilities (after giving effect to all other fixed and contingent
liabilities incurred or assumed on such date), but excluding liabilities under
the Subsidiary Guaranty, of such Subsidiary Guarantor at such date.

"Affiliate" of any specified Person means any other Person (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person or (ii)
which beneficially owns or holds directly or indirectly 10% or more of any
class of the Voting Stock of such specified Person or of any Subsidiary of 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 Stock, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.

"Asset Sale" means (i) any direct or indirect sale, transfer,
assignment, lease, conveyance or other disposition (including, without
limitation, dispositions pursuant to any merger, consolidation, Investment or
Production Payment and Reserve Sale) by the Company or any of its Restricted
Subsidiaries in any single transaction or series of transactions having a Fair
Market Value in excess of $1,000,000 of (A) shares of Capital Stock or other
ownership interests of another Person (including Capital Stock of Unrestricted
Subsidiaries) or (B) any other Property of the Company or any of its Restricted
Subsidiaries, and (ii) the issuance of Capital Stock (including, without
limitation, pursuant to any merger, consolidation, recapitalization or similar
transaction) by a Restricted Subsidiary to a Person other than the Company or a
Wholly Owned Restricted Subsidiary in any single transaction or series of
transactions having a Fair Market Value in excess of $1,000,000.
Notwithstanding the preceding sentence, for purposes of Section 4.06, the term
"Asset Sale" shall not include: (i) the sale or transfer of Permitted Short-
Term Investments, inventory, accounts receivable or other Property (excluding
the sale or transfer of oil and gas in place and other interests in real
property) in the ordinary course of business; (ii) the lease, farm-out or
abandonment of any oil and gas property in the ordinary course of business of
the Company and its Restricted Subsidiaries and in a manner customary in the
Oil and Gas Business; (iii) the disposition of Property received in settlement
of debts (including, without limitation, under any bankruptcy or similar
proceeding) owing to the Company or any Restricted Subsidiary as a result of
foreclosure, perfection or enforcement of any Lien or debt, which debts were
owing to the Company or any Restricted Subsidiary in the ordinary course of
business of the Company or such Restricted Subsidiary; (iv) the transfer of
Property to an Unrestricted Subsidiary or other Person to the extent that such
transfer constitutes a Restricted Payment made pursuant to and in compliance
with Section 4.04; (v) any disposition of all or substantially all of the
Property of the Company and its Restricted Subsidiaries taken as a whole made
subject to and in compliance with Section 5.01; (vi) the disposition of any
Property by the Company or a Restricted Subsidiary to the Company or a
Restricted Subsidiary; (vii) any issuance of Capital Stock made by a Material
Restricted Subsidiary that results in such Material Restricted Subsidiary no
longer being a Subsidiary of the Company, which issuance was made subject to
and in compliance with Section 5.01; and (viii) any Production Payment and
Reserve Sale created, incurred, issued, assumed or guaranteed in connection
with the financing of, and within 60 days after, the acquisition of the
Property that is subject thereto.

2
<PAGE> 8
"Assigned Restricted Subsidiary Indebtedness" means Indebtedness of a
Restricted Subsidiary to the Company that the Company has assigned to the
lenders under the Bank Credit Facility, as collateral securing Indebtedness of
the Company under the Bank Credit Facility.

"Average Life" means, with respect to any Indebtedness, as at any date
of determination, the quotient obtained by dividing (i) the sum of the products
of (A) the number of years (and any portion thereof) from the date of
determination to the date or dates of each successive scheduled principal
payment (including, without limitation, any sinking fund or mandatory
redemption payment requirements) of such Indebtedness multiplied by (B) the
amount of each such principal payment by (ii) the sum of all such principal
payments.

"Bank Credit Facility" means collectively, one or more senior credit
facilities or commercial paper facilities with banks or other institutional
lenders (including, without limitation, the credit facility pursuant to the
Amended and Restated Credit Agreement, dated June 14, 1996, as amended, among
the Company, The Chase Manhattan Bank, as Agent, and certain banks), together
with any security and related documents, as all such credit facilities and
documents may be amended, supplemented, extended, increased, refinanced or
replaced from time to time. For purposes of determining whether Indebtedness
under the Bank Credit Facility constitutes Permitted Indebtedness and only for
such purposes, Indebtedness Incurred in reliance on clause (i) of Section
4.03(a) shall not be deemed to constitute Indebtedness Incurred in reliance on
clause (i) of the definition of the term "Permitted Indebtedness."

"Bankruptcy Law" means Title 11, United States Code, or any similar
Federal or state law for the relief of debtors.

"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.

"Board Resolutions" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.

"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions are authorized or
obligated by law or executive order to close in New York, New York and Chicago,
Illinois and, with respect to any payment of cash or delivery of securities,
the place of such payment or delivery.

"Capitalized Lease Obligation" of any Person means the obligation of
such Person to pay rent or other amounts under a lease of property, real or
personal, that is required to be capitalized for financial reporting purposes
in accordance with GAAP, and the amount of such obligation shall be the
capitalized amount thereof determined in accordance with GAAP. For purposes of
Section 4.10, a Capitalized Lease Obligation shall be deemed to be secured by a
Lien on the Property being leased.

"Change of Control" shall be deemed to occur if (i) any "person" or
"group" (within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange
Act or any successor provision to either of the foregoing, including any group
acting for the purpose of acquiring,

3
<PAGE> 9
holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under
the Exchange Act), other than any one or more of the Permitted Holders, becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of 40%
or more of the total voting power of all classes of the Voting Stock of the
Company and/or warrants or options to acquire such Voting Stock, calculated on
a fully diluted basis, (ii) the sale, lease, conveyance or transfer of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole (other than to any Wholly Owned Restricted Subsidiary) shall
have occurred, (iii) the stockholders of the Company shall have approved any
plan of liquidation or dissolution of the Company, (iv) the Company
consolidates with or merges into another Person or any Person consolidates with
or merges into the Company in any such event pursuant to a transaction in which
the outstanding Voting Stock of the Company is reclassified into or exchanged
for cash, securities or other property, other than any such transaction where
(A) the outstanding Voting Stock of the Company is reclassified into or
exchanged for Voting Stock of the surviving corporation that is Capital Stock
and (B) the holders of the Voting Stock of the Company immediately prior to
such transaction own, directly or indirectly, not less than a majority of the
Voting Stock of the surviving corporation immediately after such transaction or
(v) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Company's Board of Directors (together
with any new directors whose election or appointment by such board or whose
nomination for election by the stockholders of the Company was approved by a
vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Company's Board of Directors then in office.

"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or if at any time after
the execution of this instrument, such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.

"Company" means the Person named as the "Company" in the first paragraph
of this Indenture, until a successor Person shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall
mean such successor Person.

4
<PAGE> 10
occurs. In addition, if since the beginning of the four full fiscal quarter
period preceding the Transaction Date, (i) the Company or any of its Restricted
Subsidiaries shall have engaged in any Asset Sale, EBITDA for such period shall
be reduced by an amount equal to the EBITDA (if positive), or increased by an
amount equal to the EBITDA (if negative), directly attributable to the assets
which are the subject of such Asset Sale for such period calculated on a pro
forma basis as if such Asset Sale and any related retirement of Indebtedness
had occurred on the first day of such period or (ii) the Company or any of its
Restricted Subsidiaries shall have acquired any material assets, EBITDA shall
be calculated on a pro forma basis as if such asset acquisitions had occurred
on the first day of such four fiscal quarter period.

"Consolidated Interest Expense" means, with respect to any Person for
any period, without duplication, (i) the sum of (A) the aggregate amount of
cash and noncash interest expense (including capitalized interest) of such
Person and its Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP in respect of Indebtedness
(including, without limitation, (1) any amortization of debt discount, (2) net
costs associated with Interest Rate Protection Agreements (including any
amortization of discounts), (3) the interest portion of any deferred payment
obligation, (4) all accrued interest, and (5) all commissions, discounts,
commitment fees, origination fees and other fees and charges owed with respect
to any Bank Credit Facility and other Indebtedness paid, accrued or scheduled
to be paid or accrued during such period; (B) Preferred Stock and Redeemable
Stock dividends of such Person and of its Restricted Subsidiaries (if such
dividends are paid to a Person other than such Person or its Wholly Owned
Restricted Subsidiaries) declared and payable other than in kind; (C) the
portion of any rental obligation of such Person or its Restricted Subsidiaries
in respect of any Capitalized Lease Obligation allocable to interest expense in
accordance with GAAP; (D) the portion of any rental obligation of such Person
or its Restricted Subsidiaries in respect of any Sale and Leaseback Transaction
that is Indebtedness allocable to interest expense (determined as if such
obligation were treated as a Capitalized Lease Obligation); and (E) to the
extent any Indebtedness of any other Person (other than Restricted
Subsidiaries) is Guaranteed by such Person or any of its Restricted
Subsidiaries, the aggregate amount of interest paid, accrued or scheduled to be
paid or accrued by such other Person during such period attributable to any
such Indebtedness; less (ii) to the extent included in (i) above, amortization
or write-off of deferred financing costs of such Person and its Restricted
Subsidiaries during such period; in the case of both (i) and (ii) above, after
elimination of intercompany accounts among such Person and its Restricted
Subsidiaries and as determined in accordance with GAAP.

5
<PAGE> 11
distributions actually paid to such Person or its Restricted Subsidiaries by
such other Person during such period; (v) the net income (or net loss) of any
Person acquired by such specified Person or any of its Restricted Subsidiaries
in a pooling-of-interests transaction for any period prior to the date of such
acquisition; (vi) any gain or loss, net of taxes, realized on the termination
of any employee pension benefit plan; (vii) any adjustments of a deferred tax
liability or asset pursuant to Statement of Financial Accounting Standards No.
109 which result from changes in enacted tax laws or rates; and (viii) the
cumulative effect of a change in accounting principles.

"Corporate Trust Office" means the office of the Trustee at which at any
particular time its corporate trust business shall be principally administered,
which office at the date of execution of this Indenture is located at 311 West
Monroe Street, Chicago, Illinois 60606.

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

"Default" means any event, act or condition the occurrence of which is,
or after notice or the passage of time or both would be, an Event of Default.

"EBITDA" means with respect to any Person for any period, the
Consolidated Net Income of such Person and its consolidated Restricted
Subsidiaries for such period, plus (i) the sum of, to the extent reflected in
the consolidated income statement of such Person and its Restricted
Subsidiaries for such period from which Consolidated Net Income is determined
and deducted in the determination of such Consolidated Net Income, without
duplication, (A) income tax expense (but excluding income tax expense relating
to (1) sales or other disposition of assets (including the Capital Stock of any
other Person) resulting in a net gain in excess of $1,000,000 and (2) the
redemption or retirement of any Indebtedness prior to its Stated Maturity), (B)
Consolidated Interest Expense, (C) depreciation and depletion expense, (D)
amortization expense, (E) exploration expense, (F) any loss, net of taxes, in
connection with the redemption or retirement of any Indebtedness prior to its
Stated Maturity, and (G) any other noncash charges, including, without
limitation, unrealized foreign exchange losses; less (ii) the sum of, to the
extent reflected in the consolidated income statement of such Person and its
Restricted Subsidiaries for such period from which Consolidated Net Income is
determined and added in the determination of such Consolidated Net Income,
without duplication, (A) income tax recovery (but excluding income tax recovery
relating to (1) sales or other dispositions of assets (including the Capital
Stock of any other Person) resulting in a net loss in excess of $1,000,000 and
(2) the redemption or retirement of any Indebtedness prior to its Stated
Maturity), (B) any gain, net of taxes, in connection with the redemption or
retirement of any Indebtedness prior to its Stated Maturity and (C) unrealized
foreign exchange gains.

"Event of Default" has the meaning specified in Section 6.01.

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<PAGE> 12
"Excess Proceeds" has the meaning specified in Section 4.06.

"Exchange Act" means the Securities and Exchange Act of 1934, as
amended.

"Exchanged Properties" means oil and gas properties received by the
Company or a Restricted Subsidiary in trade or as a portion of the total
consideration for other such properties.

"Existing Unrestricted Subsidiary" means Resource Gathering Systems,
Inc., a California corporation.

"Fair Market Value" means, with respect to any assets to be transferred
pursuant to any Asset Sale or Sale and Leaseback Transaction or any non-cash
consideration or property transferred or received by any Person, the fair
market value of such consideration or property as determined in good faith by
(i) any officer of the Company if such fair market value is less than
$10,000,000 and (ii) the Board of Directors of the Company as evidenced by a
certified resolution delivered to the Trustee if such fair market value is
equal to or in excess of $10,000,000.

"GAAP" means United States generally accepted accounting principles as
in effect on the date of this Indenture, unless stated otherwise.

"Guarantee" by any Person means any obligation, contingent or otherwise,
of such Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, and including, without limitation, any Lien on the
assets of such Person securing obligations of the primary obligor and any
obligation of such Person (i) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or to purchase (or to advance
or supply funds for the purchase or payment of) any security for the payment of
such Indebtedness, (ii) to purchase Property, securities or services for the
purpose of assuring the holder of such Indebtedness of the payment of such
Indebtedness, or (iii) to maintain working capital, equity capital or other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness (and "Guaranteed,"
"Guaranteeing" and "Guarantor" shall have meanings correlative to the
foregoing); provided, however, that a Guarantee by any Person shall not include
(A) endorsements by such Person for collection or deposit, in either case, in
the ordinary course of business or (B) a contractual commitment by one Person
to invest in another Person for so long as such Investment is reasonably
expected to constitute a Permitted Investment under clause (ii) of the
definition of Permitted Investments.

"Holder" means the Person in whose name a Security is registered on the
Registrar's books.

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<PAGE> 13
balance sheet of such Person (and "Incurrence," "Incurred," "Incurrable" and
"Incurring" shall have meanings correlative to the foregoing); provided,
however, that a change in GAAP that results in an obligation of such Person
that exists at such time, and is not theretofore classified as Indebtedness,
becoming Indebtedness shall not be deemed an Incurrence of such Indebtedness.
For purposes of this definition, Indebtedness of the Company or a Restricted
Subsidiary held by a Wholly Owned Restricted Subsidiary shall be deemed to be
Incurred by the Company or such Restricted Subsidiary in the event such Wholly
Owned Restricted Subsidiary ceases to be a Wholly Owned Restricted Subsidiary
or in the event such Indebtedness is transferred to a Person other than the
Company or a Wholly Owned Restricted Subsidiary. For purposes of this
definition, any non-interest bearing or other discount Indebtedness shall be
deemed to have been Incurred only on the date of the original issuance thereof.

"Indebtedness" means at any time (without duplication), with respect to
any Person, whether recourse is to all or a portion of the assets of such
Person, and whether or not contingent, (i) any Obligation of such Person for
borrowed money, (ii) any Obligation of such Person evidenced by bonds,
debentures, notes, Guarantees or other similar instruments, including, without
limitation, any such Obligations incurred in connection with the acquisition of
Property, assets or businesses, (iii) any reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (iv) any Obligation of such
Person issued or assumed as the deferred purchase price of Property or
services, (v) any Capital Lease Obligation of such Person, (vi) the maximum
fixed redemption or repurchase price of Redeemable Stock of such Person at the
time of determination, (vii) any payment obligation of such Person under
Permitted Hedging Agreements at the time of determination, (viii) any
obligation to pay rent or other payment amounts of such Person with respect to
any Sale and Leaseback Transaction to which such Person is a party and (ix) any
obligation of the type referred to in clauses (i) through (viii) of this
paragraph of another Person and all dividends of another Person the payment of
which, in either case, such Person has Guaranteed or is responsible or liable,
directly or indirectly, as obligor, Guarantor or otherwise; provided that
Indebtedness shall not include Production Payments and Reserve Sales. For
purposes of this definition, the maximum fixed repurchase price of any
Redeemable Stock that does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Redeemable Stock as if such
Redeemable Stock were repurchased on any date on which Indebtedness shall be
required to be determined pursuant to this Indenture; provided, however, that
if such Redeemable Stock is not then permitted to be repurchased, the
repurchase price shall be the book value of such Redeemable Stock. The amount
of Indebtedness of any Person at any date shall be the outstanding balance at
such date of all unconditional Obligations as described above and the maximum
liability at such date in respect of any contingent Obligations described
above.

Notwithstanding the foregoing, so long as any principal of, premium, if
any, on or interest on the 9-7/8% Notes remains outstanding, for purposes of
the subordination provisions of this Indenture, the Securities and any
Subsidiary Guaranties (and to the extent used therein, any applicable
definitions and other provisions, if any), and only for such purposes,
"Indebtedness" means (without duplication), with respect to any Person, (i) any
liability or obligation, contingent or otherwise, of such Person (A) for
borrowed money, (B) evidenced by bonds, notes, debentures or similar
instruments, (C) with respect to the reimbursement of any letter of credit or
banker's acceptance, (D) representing the balance deferred and unpaid of the
purchase price of any property (except any such balance that constitutes a
trade payable or accrued liability in the ordinary course of business that is
not overdue by more than 120 days or is being contested in good faith), (E) for
the payment of money relating to a Capitalized Lease Obligation or (F) in
respect of Interest Rate Protection Agreements; (ii) direct and indirect
Guarantees or similar agreements, contingent or

8
<PAGE> 14
otherwise, in respect of any Obligation of others of the types described in the
preceding clause (i); (iii) any Obligation or liability secured by a consensual
Lien to which the property or assets of such Person are subject, regardless of
whether the Obligations secured thereby shall have been assumed by or shall
otherwise be such Person's legal liability; (iv) with respect to such Person,
the liquidation preference and any mandatory redemption payment obligations in
respect of Redeemable Stock; and (v) any and all deferrals, renewals,
extensions and refundings of, or amendments, modifications or supplements to,
any liability of the kind described in any of the preceding clauses (i), (ii),
(iii) and (iv).

"Initial Subsidiary Guarantors" means HSRTW, Inc., a Delaware
corporation, and Orion Acquisition Inc., a Delaware corporation.

"Interest Rate Protection Agreement" means, with respect to any Person,
any interest rate swap agreement, forward rate agreement, interest rate cap or
other rate hedge arrangement to or under which such Person is a party or a
beneficiary, and, in the case of the Company and its Restricted Subsidiaries,
only to the extent such agreements are related to payment obligations on
Indebtedness of the Company and its Restricted Subsidiaries permitted by the
terms of Section 4.03 and are entered into in the ordinary course of business
of the Company and its Restricted Subsidiaries.

"Investment" means, with respect to any Person (i) any amount paid by
such Person, directly or indirectly (such amount to be the Fair Market Value of
such Capital Stock, securities or Property at the time of transfer), to any
other Person for Capital Stock or other securities of, or as a capital
contribution to, any other Person or (ii) any direct or indirect loan or
advance to any other Person (other than accounts receivable of such Person
arising in the ordinary course of business); provided, however, that
Investments shall not include extensions of trade credit on commercially
reasonable terms in accordance with normal trade practices and any increase in
the equity ownership in any Person resulting from retained earnings of such
Person.

"Issue Date" means the date upon which the Securities first were issued
and authenticated under this Indenture.

"Lien" means, with respect to any Property, any mortgage or deed of
trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien (statutory or other), charge, easement, encumbrance, preference,
priority or other security or similar agreement or preferential arrangement of
any kind or nature whatsoever on or with respect to such Property (including,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing). For
purposes of Section 4.10, a Capitalized Lease Obligation shall be deemed to be
secured by a Lien on the Property being leased.

"Liquid Securities" means securities (i) of an issuer that is not an
Affiliate of the Company, (ii) that are publicly traded on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market and (iii)
as to which the Company is not subject to any restrictions on sale or transfer
(including any volume restrictions under Rule 144 under the Securities Act or
any other restrictions imposed by the Securities Act) or as to which a
registration statement under the Securities Act covering the resale thereof is
in effect for as long as the securities are held; provided that securities
meeting the requirements of clauses (i), (ii) and (iii) above shall be treated
as Liquid Securities from the date of receipt thereof until and only until the
earlier of (x) the date on which such securities are sold or exchanged for cash
or Permitted Short-Term Investments and (y) 180 days following the date of
receipt of such securities. In the event such securities are not sold or
exchanged for cash or cash equivalents within 180 days of receipt thereof, for
purposes of determining whether

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<PAGE> 15
the transaction pursuant to which the Company or a Restricted Subsidiary
received the securities was in compliance with Section 4.06, such securities
shall be deemed not to have been Liquid Securities at any time.

"Material Change" means an increase or decrease (excluding changes that
result solely from changes in prices) of more than 20% during a fiscal quarter
in the estimated discounted future net cash flows from proved oil and gas
reserves of the Company and its Restricted Subsidiaries, calculated in
accordance with clause (i)(A) of the definition of Adjusted Consolidation Net
Tangible Assets; provided, however, that the following will be excluded from
the calculation of Material Change: (i) any acquisitions during the quarter of
oil and gas reserves with respect to which the Company's estimate of the
discounted future net cash flows from proved oil and gas reserves has been
confirmed by independent petroleum engineers and (ii) any dispositions of
Properties existing at the beginning of such quarter that have been disposed of
in compliance with Section 4.06.

"Net Available Cash" from an Asset Sale means cash proceeds received
therefrom (including (i) any cash proceeds received by way of deferred payment
of principal pursuant to a note or installment receivable or otherwise, but
only as and when received, and (ii) the Fair Market Value of Liquid Securities
and Permitted Short-Term Investments, and excluding (A) any consideration
received in the form of assumption of Indebtedness of the Company or any
Restricted Subsidiary, and (B) except to the extent subsequently converted to
cash, Liquid Securities or Permitted Short-Term Investments, consideration
constituting Exchanged Properties or consideration other than Permitted
Consideration), in each case net of (i) all legal, title and recording
expenses, commissions and other fees and expenses incurred, and all Federal,
state, foreign and local taxes required to be paid or accrued as a liability
under GAAP as a consequence of such Asset Sale, (ii) all payments (which
payments are made in a manner that results in the permanent reduction in the
balance of such Indebtedness and, if applicable, a permanent reduction in any
outstanding commitment for future Incurrences of Indebtedness thereunder) made
by the Company and its Restricted Subsidiaries on any Indebtedness (but
specifically excluding Indebtedness of the Company and its Restricted
Subsidiaries assumed in connection with such Asset Sale) which is secured by
any assets subject to such Asset Sale, in accordance with the terms of any Lien
upon such assets, or which must by its terms, or in order to obtain a necessary
consent to such Asset Sale or by applicable law, be repaid out of the proceeds
from such Asset Sale, (iii) all distributions and other payments required to be
made to minority interest holders in Restricted Subsidiaries or joint ventures
as a result of such Asset Sale, and (iv) the deduction of appropriate amounts
to be provided by the seller as a reserve, in accordance with GAAP, against any
liabilities associated with the assets disposed of in such Asset Sale and
retained by the Company or any Restricted Subsidiary after such Asset Sale (to
the extent such reserves are not subsequently reversed); provided, however,
that (A) in the event that any consideration for an Asset Sale (which would
otherwise constitute Net Available Cash) is required to be held in escrow
pending determination of whether a purchase price adjustment will be made, such
consideration (or any portion thereof) shall become Net Available Cash only at
such time as it is released to the Company or its Restricted Subsidiaries from
escrow; and (B) any Exchanged Properties and any consideration other than
Permitted Consideration received in connection with an Asset Sale which are
subsequently converted to cash, Liquid Securities or Permitted Short-Term
Investments shall be deemed to be Net Available Cash at such time and shall
thereafter be applied in accordance with Section 4.06.

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<PAGE> 16
"Net Working Capital" means (i) all current assets of the Company and
its Restricted Subsidiaries, less (ii) all current liabilities of the Company
and its Restricted Subsidiaries, except current liabilities included in
Indebtedness, in each case as set forth in financial statements of the Company
prepared in accordance with GAAP.

"9-7/8% Notes" means the 9-7/8% Senior Subordinated Notes due 2003 of
the Company in the original aggregate principal amount of $75,000,000.

"9-7/8% Notes Asset Sale Offer" means an offer by the Company to
purchase 9-7/8% Notes required by the indenture pursuant to which the 9-7/8%
Notes were issued as a result of a sale by the Company or a Restricted
Subsidiary of certain assets, as more particularly set forth in Section 10.16
of such indenture.

"Obligation" means any principal, interest, premium, penalty, fee and
any other liability payable under the documentation governing any Indebtedness.

"Officer" means the Chairman of the Board, the Chief Executive Officer,
the Chief Financial Officer, the President, any Vice President, the Treasurer
or the Secretary of the Company.

"Officers' Certificate" means a certificate signed by two Officers
meeting the requirements set forth in Section 13.01 and delivered to the
Trustee.

"Oil and Gas Liens" means (i) Liens on a specific oil or gas property or
any interest therein, construction thereon or improvement thereto to secure all
or any part of the costs incurred for surveying, exploration, drilling,
extraction, development, operation, production, construction, alteration,
repair or improvement of, in, under or on such property and the plugging and
abandonment of wells located thereon (it being understood that, in the case of
oil and gas producing properties, or any interest therein, costs incurred for
"development" shall include costs incurred for all facilities relating to such
properties or to projects, ventures or other arrangements of which such
properties form a part or which relate to such properties or interests); (ii)
Liens on an oil and/or gas producing property to secure obligations incurred or
guarantees of obligations incurred in connection with or necessarily incidental
to commitments for the purchase or sale of, or the transportation or
distribution of, the products derived from such property; (iii) Liens arising
under partnership agreements, oil and gas leases, overriding royalty
agreements, net profits agreements, production payment agreements, royalty
trust agreements, partnership agreements, limited liability company agreements,
farm-out agreements, division orders, contracts for the sale, purchase,
exchange, transportation, gathering or processing of oil, gas or other
hydrocarbons, unitizations and pooling designations, declarations, orders and
agreements, development agreements, operating agreements, production sales
contracts, area of mutual interest agreements, gas balancing or deferred
production agreements, injection, repressuring and recycling agreements, salt
water or other disposal agreements, seismic or geophysical permits or
agreements, and other agreements which are customary in the Oil and Gas
Business, provided in all instances that such Liens are limited to the assets
that are the subject of the relevant agreement; (iv) Liens arising in
connection with Production Payments and Reserve Sales; and (v) Liens on
pipelines or pipeline facilities that arise by operation of law.

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<PAGE> 17
"Oil and Gas Purchase, Sale and/or Swap Contract" means, with respect to
any Person, any oil and gas purchase, sale and/or swap agreements and other
agreements or arrangements, or any combination thereof, financially tied to oil
and gas prices, transportation or basis fluctuations or differentials that are
customary in the Oil and Gas Business and, in the case of the Company and its
Restricted Subsidiaries, which are entered into by the Company and its
Restricted Subsidiaries in the ordinary course of their business.

"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.

"Order" means a written order signed in the name of the Company by an
Officer and delivered to the Trustee.

"Pari Passu Indebtedness" means any Indebtedness of the Company (or a
Subsidiary Guarantor) that is pari passu in right of payment with the
Securities (or a Subsidiary Guaranty, as appropriate).

"Pari Passu Offer" means an offer by the Company to purchase Pari Passu
Indebtedness (other than the 9-7/8% Notes) required by the indenture or other
agreement or instrument pursuant to which such Pari Passu Indebtedness was
issued as a result of a sale by the Company or a Restricted Subsidiary of
certain assets.

"Paying Agent" has the meaning specified in Section 2.03.

"Permitted Business Investments" means Investments and expenditures made
in the ordinary course of, and of a nature that is or shall have become
customary in, the Oil and Gas Business as a means of actively exploiting,
exploring for, acquiring, developing, processing, gathering, storing, marketing
or transporting oil and gas through agreements, transactions, interests or
arrangements which permit one to share risks or costs, comply with regulatory
requirements regarding local ownership or satisfy other objectives customarily
achieved through the conduct of Oil and Gas Business jointly with third
parties, including, without limitation, (i) ownership interests in oil and gas
properties or gathering, transportation, processing, storage or related systems
and (ii) Investments and expenditures in the form of or pursuant to operating
agreements, process agreements, farm-in agreements, farm-out agreements,
development agreements, area of mutual interest agreements, unitization
agreements, pooling arrangements, joint bidding agreements, service contracts,
joint venture agreements, partnership agreements, limited liability company
agreements, subscription agreements, stock purchase agreements and other
similar agreements with third parties (including Unrestricted Subsidiaries).

"Permitted Consideration" has the meaning assigned to such term in
Section 4.06.

"Permitted Designee" means (i) a spouse or a child of a Permitted
Holder, (ii) trusts whose sole beneficiaries are Permitted Holders or spouses
or children of Permitted Holders, (iii) in the event of the death or
incompetence of a Permitted Holder, his estate, heirs, executor, administrator,
committee or other personal representative or (iv) any Person so long as a
Permitted Holder owns at least 51% of the voting power of all classes of the
Voting Stock of such Person.

"Permitted Hedging Agreements" means Interest Rate Protection
Agreements, Exchange Rate Contracts and Oil and Gas Purchase, Sale and/or Swap
Contracts.

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<PAGE> 18
"Permitted Holders" means Nicholas J. Sutton, P. Michael Highum and
their Permitted Designees.

"Permitted Indebtedness" has the meaning specified in Section 4.03.

"Permitted Investments" has the meaning specified in Section 4.04.

"Permitted Liens" means any and all of the following: (i) Liens existing
as of the Issue Date; (ii) Liens securing the Securities, the Subsidiary
Guaranties and other obligations arising under this Indenture; (iii) any Lien
existing on any Property of a Person at the time such Person is merged or
consolidated with or into the Company or a Subsidiary Guarantor or becomes a
Restricted Subsidiary that is a Subsidiary Guarantor (and not incurred in
anticipation of such transaction), provided that such Liens are not extended to
other Property of the Company or the Subsidiary Guarantors; (iv) any Lien
existing on any Property at the time of the acquisition thereof (and not
incurred in anticipation of such transaction), provided that such Liens are not
extended to other Property of the Company or the Subsidiary Guarantors; (v) any
Lien incidental to the normal conduct of the business of the Company or the
Subsidiary Guarantors, the ownership of their Property or the conduct in the
ordinary course of their business (including, without limitation, (A)
easements, rights of way and similar encumbrances, (B) rights or title of
lessors under leases (other than Capitalized Lease Obligations), (C) rights of
collecting banks having rights of setoff, revocation, refund or chargeback with
respect to money or instruments of the Company or the Subsidiary Guarantors or
on deposit with or in the possession of such banks, (D) Liens imposed by law,
including without limitation, Liens under workers' compensation or similar
legislation and mechanics', carriers', warehousemen's, materialmen's,
suppliers' and vendors' Liens, (E) Liens incurred to secure performance of
obligations with respect to statutory or regulatory requirements, performance
or return-of-money bonds, surety bonds or other obligations of a like nature
and incurred in a manner consistent with industry practice, and (F) Liens on
deposits made in the ordinary course of business), in each case which are not
incurred in connection with the borrowing of money, the obtaining of advances
or credit or the payment of the deferred purchase price of Property and which
do not in the aggregate impair in any material respect the use of Property in
the operation of the business of the Company and its Restricted Subsidiaries
taken as a whole; (vi) Liens for taxes, assessments and governmental charges
not yet due or the validity of which are being contested in good faith by
appropriate proceedings, promptly instituted and diligently conducted, and for
which adequate reserves have been established to the extent required by GAAP;
(vii) judgment and attachment Liens not giving rise to an Event of Default or
Liens created by or existing from any litigation or legal proceeding that are
currently being contested in good faith by appropriate proceedings, promptly
instituted and diligently conducted, and for which adequate reserves have been
made to the extent required by GAAP; (viii) Liens securing Permitted Hedging
Agreements of the Company and its Restricted Subsidiaries; (ix) Oil and Gas
Liens Incurred in the ordinary course of the business of the Company and its
Restricted Subsidiaries; (x) purchase money security interests (including,
without limitation, Capitalized Lease Obligations) granted in connection with
the acquisition of fixed assets in the ordinary course of business of the
Company and its Restricted Subsidiaries, provided, that (A) such Liens attach
only to the Property so acquired with the purchase money Indebtedness secured
thereby and (B) such Liens secure only Indebtedness that is not in excess of
the purchase price of such Property; (xi) Liens to secure Permitted Non-
Recourse Indebtedness; (xii) Liens resulting from the deposit of funds or
evidences of Indebtedness in trust for the purpose of decreasing Indebtedness
of the Company or any of its Subsidiaries so long as such deposit of funds is
permitted under Section 4.04; (xiii) Liens resulting from a pledge of Capital
Stock of a Person that is not a Restricted Subsidiary; (xiv) Liens to secure
any permitted extension, renewal, refinancing, refunding or exchange (or
successive extensions, renewals, refinancings, refundings or exchanges), in
whole or in part, of or for any Indebtedness

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<PAGE> 19
secured by Liens referred to in clauses (i), (ii), (iii), (iv) and (x) above;
provided, however, that (A) such new Lien shall be limited to all or part of
the same Property that secured the original Lien, plus improvements on such
Property and (B) the Indebtedness secured by such Lien at such time is not
increased to any amount greater than the sum of (1) the outstanding principal
amount of the Indebtedness secured by such original Lien immediately prior to
such extension, renewal, refinancing, refunding or exchange and (2) an amount
necessary to pay any fees and expenses, including premiums, related to such
refinancing, refunding, extension, renewal or replacement; and (xv) Liens in
favor of the Company. Notwithstanding anything in this paragraph to the
contrary, the term "Permitted Liens" does not include Liens resulting from the
creation, incurrence, issuance, assumption or Guarantee of any Production
Payment and Reserve Sale other than (1) Production Payments and Reserve Sales
in connection with the acquisition of Properties after the Issue Date, provided
that any such Liens created in connection therewith are created, incurred,
issued, assumed or guaranteed in connection with the financing of, and within
60 days after, the acquisition of the Property that is subject thereto, or (2)
Production Payments and Reserve Sales other than those described in clause (1)
of this sentence to the extent such Production Payments and Reserve Sales
constitute Asset Sales made pursuant to and in compliance with Section 4.06.

"Permitted Non-Recourse Indebtedness" means Indebtedness of the Company
or any Restricted Subsidiary Incurred in connection with the acquisition by the
Company or such Restricted Subsidiary of any Property with respect to which (i)
the holders of such Indebtedness agree that they will look solely to the
Property so acquired and securing such Indebtedness, and neither the Company
nor any Restricted Subsidiary (A) provides direct or indirect credit support,
including any undertaking, agreement or instrument that would constitute
Indebtedness (other than the grant of a Lien on such acquired Property) or (B)
is directly or indirectly liable for such Indebtedness, and (ii) no default
with respect to such Indebtedness would cause, or permit (after notice or
passage of time or otherwise), according to the terms thereof, any holder (or
any representative of any such holder) of any other Indebtedness of the Company
or a Restricted Subsidiary to declare, a default on such other Indebtedness or
cause the payment, repurchase, redemption, defeasance or other acquisition or
retirement for value thereof to be accelerated or payable prior to any
scheduled principal payment, scheduled sinking fund payment or maturity.

"Permitted Refinancing Indebtedness" means Indebtedness ("new
Indebtedness") Incurred in exchange for, or the proceeds of which are used to
refinance, other Indebtedness ("old Indebtedness"), provided, however, that (i)
such new Indebtedness is in an aggregate principal amount not in excess of the
sum of (A) the aggregate principal amount then outstanding of the old
Indebtedness (or, if such old Indebtedness provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration thereof, such lesser amount as of the date of determination), and
(B) an amount necessary to pay any fees and expenses, including premiums
related to such exchange or refinancing, (ii) such new Indebtedness has a
Stated Maturity no earlier than the Stated Maturity of the old Indebtedness,
(iii) such new Indebtedness has an Average Life to Stated Maturity at the time
such new Indebtedness is Incurred that is equal to or greater than the Average
Life to Stated Maturity of the old Indebtedness at such time and (iv) such new
Indebtedness is subordinated in right of payment to Senior Indebtedness of the
Company (or, if applicable, a Subsidiary Guarantor) and the Securities to at
least the same extent, if any, as the old Indebtedness.

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<PAGE> 20
and undivided profits aggregating in excess of $500,000,000 and whose long-term
indebtedness is rated "A" (or higher) according to Moody's Investors Service
Inc., (iii) Investments in demand accounts, time deposit accounts, certificates
of deposit, bankers acceptances and money market deposits maturing within one
year of the date of acquisition thereof issued by a Canadian bank to which the
Bank Act (Canada) applies having capital, surplus and undivided profits
aggregating in excess of U.S. $500,000,000, (iv) investments in deposits
available for withdrawal on demand with any commercial bank which is organized
under the laws of any country in which the Company or any Restricted Subsidiary
maintains an office or is engaged in the Oil and Gas Business, provided that
(A) all such deposits have been made in such accounts in the ordinary course of
business and (B) such deposits do not at any one time exceed $10,000,000 in the
aggregate, (v) repurchase and reverse repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clause
(i) entered into with a bank meeting the qualifications described in either
clause (ii) or (iii), (vi) Investments in commercial paper, maturing not more
than 270 days after the date of acquisition, issued by a corporation (other
than an Affiliate of the Company) organized and in existence under the laws of
the United States of America or any State thereof with a rating at the time as
of which any Investment therein is made of "P-1" (or higher) according to
Moody's Investors Service Inc. or "A-1" (or higher) according to Standard &
Poor's Ratings Group, and (vii) Investments in any money market mutual fund
having assets in excess of $250,000,000 substantially all of which consist of
obligations of the types described in clauses (i), (ii), (v) and (vi) hereof.

"Preferred Stock" of any Person means Capital Stock of such Person of
any class or classes (however designated) that ranks prior, as to the payment
of dividends and/or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding up of such Person, to shares of
capital stock of at least one other class of such Person; provided, however,
that "Preferred Stock" shall not include Redeemable Stock.

"Principal Agent" means, on any date, (i) if the Bank Credit Facility
shall remain in effect on such date, the administrative agent(s) (or the
institution(s) performing similar functions) under the Bank Credit Facility and
(ii) if the Bank Credit Facility is no longer in effect on such date, the
administrative agent(s) (or the institution(s) performing similar functions)
with respect to the Specified Senior Indebtedness (or, if applicable, Specified
Senior Indebtedness of such Subsidiary Guarantor) having the highest principal
amount (including all revolving credit, letter of credit and other working
capital commitments) on such date.

"Principal Subsidiary Indebtedness Agent" means, on any date, the
administrative agent(s) (or institution(s) performing similar functions) with
respect to the Specified Senior Indebtedness of a Subsidiary Guarantor having
the highest principal amount (including all revolving credit, letter of credit
and other working capital commitments) on such date.

"Production Payments and Reserve Sales" means the grant or transfer to
any Person of a royalty, overriding royalty, net profits interest, production
payment (whether volumetric or dollar denominated), partnership interest or
other interest in oil and gas properties, reserves or the right to receive all
or a portion of the production or the proceeds from the sale of production
attributable to such properties where the holder of such interest has recourse
solely to such production or proceeds of production, subject to the obligation
of the grantor or transferor to operate and maintain, or cause the subject
interests to be operated and maintained, in a reasonably prudent manner or
other customary standard or subject to the

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obligation of the grantor or transferor to indemnify for environmental, title
or other matters customary in the Oil and Gas Business.

"Property" means, with respect to any Person, any interest of such
Person in any kind of property or asset, whether real, personal or mixed or
tangible or intangible, including, without limitation, Capital Stock and other
securities issued by any other Person (but excluding Capital Stock or other
securities issued by such first mentioned Person).

"Redeemable Stock" of any Person means any equity security of such
Person that by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or otherwise (including on the
happening of an event), is or could become required to be redeemed for cash or
other Property or is or could become redeemable for cash or other Property at
the option of the holder thereof, in whole or in part, on or prior to the first
anniversary of the Stated Maturity of the Securities; or is or could become
exchangeable at the option of the holder thereof for Indebtedness at any time
in whole or in part, on or prior to the first anniversary of the Stated
Maturity of the Securities; provided, however, that "Redeemable Stock" shall
not include any security by virtue of the fact that it may be exchanged or
converted at the option of the holder for Capital Stock of the Company having
no preferences as to dividends or liquidation over any other Capital Stock of
the Company.

"Registrar" has the meaning specified in Section 2.03.

"Representative" means any trustee, agent or representative (if any) for
the holders of any Indebtedness that constitutes Senior Indebtedness or
Subsidiary Guarantor Senior Indebtedness.

"Responsible Officer" means, when used with respect to the Trustee, any
officer assigned to the Corporate Trust Office, including any vice president,
assistant vice president, assistant secretary or any other officer of the
Trustee to whom any corporate trust matter is referred because of his or her
knowledge of and familiarity with the particular subject.

"Restricted Payment" means any or all of the following actions: (i) the
declaration or payment of any dividend on, or any distribution to holders of,
any shares of the Company's Capital Stock or Redeemable Stock (other than
dividends or distributions payable solely in shares of Capital Stock of the
Company or in options, warrants or other rights to purchase or acquire Capital
Stock of the Company); (ii) the purchase, redemption or other acquisition or
retirement for value of any Capital Stock or Redeemable Stock of the Company or
any Affiliate thereof (other than a Restricted Subsidiary) or any options,
warrants or other rights to acquire such Capital Stock or Redeemable Stock;
(iii) any principal payment on or repurchase, redemption, defeasance or other
acquisition or retirement for value, prior to any scheduled principal payment,
scheduled sinking fund payment or maturity, of any Pari Passu Indebtedness or
Subordinated Indebtedness, except (A) a 9-7/8% Notes Asset Sale Offer, (B) a
Pari Passu Offer, (C) to the extent of Excess Proceeds remaining after
compliance with Section 4.06, and to the extent required by the indenture or
other agreement or instrument pursuant to which any Subordinated Indebtedness
was issued, an offer to purchase such Subordinated Indebtedness upon a
disposition of assets, and (D) upon a "Change of Control" (even if such event
is not a Change of Control under this Indenture) to the extent required by the
indenture or other agreement or instrument pursuant to which any Pari Passu
Indebtedness or Subordinated Indebtedness was issued, provided the Company is
then in compliance with Section 4.09; (iv) the making of any Investment (other
than any Permitted Investment); or (v) the occurrence of any deemed Restricted
Payment under (A) Section 4.08, or (B) the definition of the term "Unrestricted
Subsidiary."

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"Restricted Subsidiary" means any Subsidiary of the Company, whether
existing on or after the date of this Indenture, unless such Subsidiary of the
Company is an Unrestricted Subsidiary or is designated as an Unrestricted
Subsidiary pursuant to the terms of this Indenture. The Company will not, and
will not permit any of its Restricted Subsidiaries to, take any action or enter
into any transaction or series of transactions that would result in a Person
becoming a Restricted Subsidiary (whether through an acquisition or otherwise)
unless immediately after giving effect to such transaction or transactions on a
pro forma basis, (i) no Default or Event of Default shall have occurred and be
continuing and (ii) the Company could incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) under Section 4.03.

"Sale and Leaseback Transaction" means, with respect to any Person, any
direct or indirect arrangement (excluding, however, any such arrangement
between such Person and a Wholly Owned Restricted Subsidiary of such Person or
between one or more Wholly Owned Restricted Subsidiaries of such Person)
pursuant to which Property is sold or transferred by such Person or a
Restricted Subsidiary of such Person and is thereafter leased back from the
purchaser or transferee thereof by such Person or one of its Restricted
Subsidiaries.

"Security" has the meaning stated in the first paragraph of this
Indenture and more particularly means any Security authenticated and delivered
under this Indenture.

"Securities Act" means the Securities Act of 1933, as amended.

"Senior Indebtedness" means the Obligations of the Company with respect
to (i) Indebtedness of the Company under the Bank Credit Facility and any
renewal, refunding, refinancing, replacement or extension thereof and (ii) any
other Indebtedness of the Company (other than the Securities), whether
outstanding on the date of this Indenture or thereafter created, incurred or
assumed, and any renewal, refunding, refinancing, replacement or extension
thereof, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the Securities. Notwithstanding the foregoing, Senior Indebtedness
shall not include (i) Indebtedness of the Company to a Subsidiary of the
Company, (ii) amounts owed for goods, materials or services purchased in the
ordinary course of business, (iii) Indebtedness (other than Indebtedness under
the Bank Credit Facility) incurred in violation of this Indenture, (iv) amounts
payable or any other Indebtedness to employees of the Company or any Subsidiary
of the Company, (v) any liability for Federal, state, local or other taxes owed
or owing by the Company, (vi) any Indebtedness of the Company that, when
incurred and without regard to any election under Section 1111(b) of the United
States Bankruptcy Code, was without recourse to the Company, (vii) Indebtedness
evidenced by the 9-7/8% Notes and (viii) Indebtedness evidenced by the
Securities.

"Senior Indebtedness of a Subsidiary Guarantor" or "Subsidiary Guarantor
Senior Indebtedness" means the Obligations of a Subsidiary Guarantor with
respect to (i) Indebtedness under the Bank Credit Facility and any renewal,
refunding, refinancing, replacement or extension thereof, (ii) Assigned
Restricted Subsidiary Indebtedness and (iii) any other Indebtedness of a
Subsidiary Guarantor (other than the Subsidiary Guaranties), whether
outstanding on the date of this Indenture or thereafter created, incurred or
assumed, and any renewal, refunding, refinancing, replacement or extension
thereof, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the Subsidiary Guaranties. Notwithstanding the foregoing, Senior
Indebtedness of a Subsidiary Guarantor shall not include (i) Indebtedness of a
Subsidiary Guarantor to the Company or a Subsidiary of the Company, (ii)
amounts owed for

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goods, materials or services purchased in the ordinary course of business,
(iii) Indebtedness (other than Indebtedness under the Bank Credit Facility)
incurred in violation of this Indenture, (iv) amounts payable or any other
Indebtedness to employees of the Company or any Subsidiary of the Company, (v)
any liability for Federal, state, local or other taxes owed or owing by such
Subsidiary Guarantor, (vi) any Indebtedness of a Subsidiary Guarantor that,
when incurred and without regard to any election under Section 1111(b) of the
United States Bankruptcy Code, was without recourse to such Subsidiary
Guarantor, (vii) Indebtedness evidenced by the 9-7/8% Notes and any guaranties
thereof and (viii) Indebtedness evidenced by the Securities and the Subsidiary
Guaranties.

"Significant Subsidiary" means, at any date of determination, (i) any
Subsidiary (other than TWTTC) of a Person that, together with its Subsidiaries,
(A) for the most recent fiscal year of the Company, accounted for more than 5%
of the consolidated revenues of such Person and its Subsidiaries or (B) as of
the end of such fiscal year, was the owner of more than 5% of the consolidated
assets of such Person and its Subsidiaries, and (ii) TWTTC if TWTTC, together
with its Subsidiaries, as of the end of the most recent fiscal year of the
Company, was the owner of more than 10% of the consolidated assets of the
Company and its Subsidiaries, in each case all as set forth on the most
recently available consolidated financial statements of such Person for such
fiscal year.

"Specified Senior Indebtedness" means (i) Indebtedness of the Company
under the Bank Credit Facility and (ii) so long as no Indebtedness under the
Bank Credit Facility is outstanding, on any date of determination, any Senior
Indebtedness if the sum of (A) the outstanding principal amount of all Senior
Indebtedness plus (B) the amount of unused revolving credit, letter of credit
and working capital commitments of lenders included in such Senior
Indebtedness, is not less than $20,000,000 on such date.

"Specified Senior Indebtedness of a Subsidiary Guarantor" means (i)
Assigned Restricted Subsidiary Indebtedness of such Subsidiary Guarantor, (ii)
Indebtedness of such Subsidiary Guarantor under the Bank Credit Facility and
(iii) so long as no Assigned Restricted Subsidiary Indebtedness of such
Subsidiary Guarantor and no Indebtedness of such Subsidiary Guarantor under the
Bank Credit Agreement are outstanding, on any date of determination, any Senior
Indebtedness of such Subsidiary Guarantor if the sum of (A) the outstanding
principal amount of all such Senior Indebtedness of such Subsidiary Guarantor
plus (B) the amount of unused revolving credit, letter of credit and working
capital commitments of lenders included in such Senior Indebtedness of such
Subsidiary Guarantor, is not less than $20,000,000 on such date.

"Stated Maturity" when used with respect to any security or any
installment of principal thereof or interest thereon, means the date specified
in such security as the fixed date on which the principal of such security or
such installment of principal or interest is due and payable, including
pursuant to any mandatory redemption provision (but excluding any provision
providing for the repurchase of such security at the option of the holder
thereof upon the happening of any contingency unless such contingency has
occurred).

"Subordinated Indebtedness" means Indebtedness of the Company (or a
Subsidiary Guarantor) that is expressly subordinated in right of payment to the
Securities (or a Subsidiary Guaranty, as appropriate).

"Subsidiary" of a Person means (i) another Person which is a corporation
a majority of whose Voting Stock is at the time, directly or indirectly, owned
or controlled by (A) the first Person, (B) the first Person and one or more of
its Subsidiaries or (C) one or more of the first Person's Subsidiaries or (ii)
another Person which is not a corporation (A) at least 50% of the ownership
interest of which and (B) the power to elect or direct the election of a

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majority of the directors or other governing body of which are controlled by
Persons referred to in clause (i)(A), (i)(B) or (i)(C) above.

"Subsidiary Guarantors" means (i) as of the Issue Date, the Initial
Subsidiary Guarantors, and (ii) thereafter, unless released from such
Subsidiary Guaranties as permitted by this Indenture, the Initial Subsidiary
Guarantors and any other Restricted Subsidiary that becomes a guarantor of the
Securities in compliance with the provisions of this Indenture and executes a
supplemental indenture agreeing to be bound by the terms of this Indenture.

"Subsidiary Guaranty" means an unconditional guaranty of the Securities
given by any Restricted Subsidiary pursuant to the terms of Article 11 of this
Indenture.

"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939, as
amended, as in force at the date as of which this Indenture was executed.

"Trustee" means the Person named as the "Trustee" in the first paragraph
of this Indenture until a successor Trustee shall have become such pursuant to
the applicable provision of this Indenture, and thereafter "Trustee" shall mean
such successor Trustee.

"TWTTC" means Tide West Trading & Transport Company, an Oklahoma
corporation.

"Uniform Commercial Code" means the New York Uniform Commercial Code as
in effect from time to time.

"Unrestricted Subsidiary" means (i) the Existing Unrestricted
Subsidiary, (ii) any Subsidiary of the Company that at the time of
determination shall be designated an Unrestricted Subsidiary by the Board of
Directors in the manner provided below and (iii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary (i) owns any
Capital Stock, Redeemable Stock or Indebtedness of, or owns or holds any Lien
on any Property of, the Company or any other Subsidiary of the Company that is
not a Subsidiary of the Subsidiary to be so designated or (ii) is obligated,
directly or indirectly, with respect to any Indebtedness other than
Unrestricted Subsidiary Indebtedness; provided, however, that either (A) the
Subsidiary to be so designated has total assets of $1,000 or less or (B) if
such Subsidiary has assets greater than $1,000, then such designation would be
permitted under Section 4.04 as a "Restricted Payment." The designation of a
Restricted Subsidiary as an Unrestricted Subsidiary shall be deemed to cause a
Restricted Payment to be made at the time of such designation in an amount
equal to that portion of the Fair Market Value of such Restricted Subsidiary
represented by the Company's direct and indirect ownership interest in such
Subsidiary. Unless so designated as an Unrestricted Subsidiary, any Person that
becomes a Subsidiary of the Company or of any Restricted Subsidiary will be
classified as a Restricted Subsidiary. Notwithstanding the foregoing sentence,
the Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided, however, that immediately after giving pro
forma effect to such designation (i) the Company could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under Section 4.03,
and (ii) no Default shall have occurred and be continuing. Any such designation
by the Board of Directors shall be evidenced to the Trustee by promptly filing
with the Trustee a copy of a resolution of the Board of Directors giving effect
to such designation and an Officers' Certificate certifying such resolution and
certifying that such designation complies with the foregoing provisions.

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"Unrestricted Subsidiary Indebtedness" means Indebtedness of an
Unrestricted Subsidiary (i) as to which neither the Company nor any Restricted
Subsidiary is directly or indirectly liable (by virtue of the Company or any
such Restricted Subsidiary being the primary obligor on, guarantor of, or
otherwise liable in any respect for such Indebtedness) and (ii) which, upon the
occurrence of a default with respect thereto, does not result in, or permit any
holder (or any representative of any such holder) of any Indebtedness of the
Company or a Restricted Subsidiary to declare (with the passage of time or the
giving of notice or otherwise), a default on any Indebtedness of the Company or
any Restricted Subsidiary or cause the payment, repurchase, redemption,
defeasance or other acquisition or retirement for value thereof to be
accelerated or payable prior to any scheduled principal payment, scheduled
sinking fund payment or maturity.

"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America, the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act), as custodian, with respect to any such U.S.
Government Obligation or a specific payment of principal of or interest on any
such U.S. Government Obligation held by such custodian for the account of the
holder of such depository receipt; provided, however, that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by
the custodian in respect of the U.S. Government Obligation or the specific
payment of principal of or interest on the U.S. Government Obligation evidenced
by such depository receipt.

"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons
performing similar functions) of such Person whether at all times or only so
long as no senior class of securities has such voting power by reason of any
contingency.

SECTION 1.02. 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:

"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 indenture securities means the Company and any
other obligor on the indenture securities.

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

SECTION 1.03. Rules of Construction. Unless the context
otherwise requires:

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

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

(3) "or" is not exclusive;

(4) "including" means including without limitation;

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

(6) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision;

(7) provisions apply to successive events and transactions; and

(8) references to agreements and other instruments include
subsequent amendments and waivers but only to the extent not prohibited
by this Indenture.

ARTICLE 2

The Securities

SECTION 2.01. Form and Dating. Provisions relating to the
Initial Securities and the Exchange Securities are set forth in Appendix A,
which is hereby incorporated in and expressly made part of this Indenture. The
Initial Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit 1 to Appendix A which is hereby
incorporated in and expressly made a part of this Indenture. The Exchange
Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A, which is hereby incorporated in and
expressly made a part of this Indenture. The Securities may have notations,
legends or endorsements required by law, stock exchange rule, agreements to
which the Company is subject, if any, or usage (provided that any such
notation, legend or endorsement is in a form acceptable to the Company). Each
Security shall be dated the date of its authentication. The terms of the
Securities set forth in Exhibit 1 to Appendix A and Exhibit A are part of the
terms of this Indenture.

SECTION 2.02. Execution and Authentication. Two Officers shall
sign the Securities for the Company by manual or facsimile signature. The
Company's seal shall be impressed, affixed, imprinted or reproduced on the
Securities and may be in facsimile form.

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.

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A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.

The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate the Securities. Unless limited by
the terms of such appointment, an authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as any Registrar, Paying Agent or
agent for service of notices and demands.

SECTION 2.03. 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 Company may have one or more co-registrars and one or more additional
paying agents; provided, however, that so long as Harris Trust and Savings Bank
shall be the Trustee, without the consent of the Trustee, there shall be no
more than one Registrar or Paying Agent. The term "Paying Agent" includes any
additional paying agent.

The Company shall enter into an appropriate agency agreement with
any Registrar, Paying Agent or co-registrar 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 any 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
7.07. The Company or any of its domestically incorporated Wholly Owned
Restricted Subsidiaries may act as Paying Agent, Registrar, co-registrar or
transfer agent.

The Company initially appoints the Trustee as Registrar and
Paying Agent in connection with the Securities.

SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to
each due date of the principal and interest on any Security, the Company shall
deposit with the Paying Agent a sum sufficient to pay such principal and
interest when so becoming due. 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 money held by the Paying
Agent for the payment of principal of or interest on the Securities and shall
notify the Trustee 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 to pay all money held by it to
the Trustee and to account for any funds disbursed by the Paying Agent. Upon
complying with this Section, the Paying Agent shall have no further liability
for the money delivered to the Trustee.

SECTION 2.05. 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. If the Trustee is not the Registrar,
the Company shall 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.

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SECTION 2.06. Replacement 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 Uniform Commercial Code are met and the Holder
satisfies any other reasonable requirements of the Trustee. If required by the
Trustee or the Company, 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, the Registrar and any co-registrar from any loss
which any of them may suffer if a Security is replaced. The Company and the
Trustee may charge the Holder for their expenses in replacing a Security.

Every replacement Security is an additional obligation of the
Company.

SECTION 2.07. Outstanding Securities. Securities outstanding at
any time are all Securities authenticated by the Trustee except for those
canceled by it, those delivered to it for cancellation and those described in
this Section as not outstanding. A Security does not cease to be outstanding
because the Company or an Affiliate of the Company holds the Security.

If a Security is replaced pursuant to Section 2.06, it ceases to
be outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a bona fide purchaser, in which
event the replacement Security shall cease to be outstanding, subject to the
provisions of Section 8-405 of the Uniform Commercial Code.

If the Paying Agent segregates and holds in trust, in accordance
with this Indenture, on a redemption date or maturity date money sufficient to
pay all principal, premium and interest payable on that date with respect to
the Securities (or portions thereof) to be redeemed or maturing, as the case
may be, and the Paying Agent is not prohibited from paying such money to the
Holders on that date pursuant to the terms of this Indenture, then on and after
that date such Securities (or portions thereof) cease to be outstanding and
interest on them ceases to accrue.

SECTION 2.08. Temporary Securities. Until definitive Securities
are ready for delivery, the Company may prepare and 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 the Trustee shall authenticate definitive
Securities and deliver them in exchange for temporary Securities.

SECTION 2.09. Cancellation. The Company at any time may deliver
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for
registration of transfer, exchange or payment. The Trustee and no one else
shall cancel and destroy (subject to the record retention requirements of the
Exchange Act) all Securities surrendered for registration of transfer,
exchange, payment or cancellation and deliver a certificate of such destruction
to the Company. The Company may not issue new Securities to replace Securities
it has redeemed, paid or delivered to the Trustee for cancellation.

SECTION 2.10. Defaulted Interest. If the Company defaults in a
payment of interest on the Securities, the Company shall pay defaulted interest
(plus interest on such defaulted interest to the extent lawful) in any lawful
manner. The Company may pay the defaulted interest to the Persons who are
Holders on a subsequent special record date. The Company shall fix or cause to
be fixed any such special record date and payment date to the

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<PAGE> 29
reasonable satisfaction of the Trustee and shall promptly mail to each Holder a
notice that states the special record date, the payment date and the amount of
defaulted interest to be paid.

SECTION 2.11. CUSIP Numbers. The Company in issuing the
Securities may use "CUSIP" numbers (if then generally in use) and, if so, the
Trustee shall use "CUSIP" 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 a 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 numbers.

ARTICLE 3

Redemption

SECTION 3.01. Notices to Trustee. If the Company elects to
redeem Securities pursuant to paragraph 5 of the Securities, it shall notify
the Trustee in writing of the redemption date, the principal amount of
Securities to be redeemed and the paragraph of the Securities pursuant to which
the redemption will occur.

The Company shall give each notice to the Trustee provided for in
this Section at least 45 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from the Company to the effect that such
redemption will comply with the conditions herein.

SECTION 3.02. Selection of Securities To Be Redeemed. If fewer
than all the Securities are to be redeemed, the Trustee shall select the
Securities to be redeemed pro rata or by lot or by a method that complies with
applicable legal and securities exchange requirements, if any, and that the
Trustee considers fair and appropriate and in accordance with methods generally
used at the time of selection by fiduciaries in similar circumstances. The
Trustee shall make the selection from outstanding Securities not previously
called for redemption. The Trustee may select for redemption portions of the
principal of Securities that have denominations larger than $1,000. Securities
and portions of them that the Trustee selects shall be in amounts of $1,000 or
a whole multiple of $1,000. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called
for redemption. The Trustee shall notify the Company promptly of the
Securities or portions of Securities to be redeemed.

SECTION 3.03. Notice of Redemption. At least 30 days but not
more than 60 days before a date for redemption of Securities, the Company shall
mail a notice of redemption by first-class mail to each Holder of Securities to
be redeemed.

The notice shall identify the Securities to be redeemed and shall
state:

(1) the redemption date;

(2) the redemption price;

(3) the name and address of the Paying Agent;

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<PAGE> 30
(4) that Securities called for redemption must be surrendered to
the Paying Agent to collect the redemption price;

(5) if fewer than all the outstanding Securities are to be
redeemed, the identification and principal amounts of the particular
Securities to be redeemed;

(6) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment
pursuant to the terms of this Indenture, interest on Securities (or
portion thereof) called for redemption ceases to accrue on and after the
redemption date; and

(7) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed
on the Securities.

At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section at least 45 days before the redemption date.

SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable
on the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest to the redemption date.
Failure to give notice or any defect in the notice to any Holder shall not
affect the validity of the notice to any other Holder.

SECTION 3.05. Deposit of Redemption Price. Prior to the
redemption date, the Company shall deposit with the Paying Agent (or, if the
Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust)
money sufficient to pay the redemption price of and accrued interest on all
Securities to be redeemed on that date other than Securities or portions of
Securities called for redemption which have been delivered by the Company to
the Trustee for cancellation.

SECTION 3.06. Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the Security
surrendered.

ARTICLE 4

Covenants

SECTION 4.01. Payment of Securities. The Company shall promptly
pay the principal of and interest on the Securities on the dates and in the
manner provided in the Securities and in this Indenture. Principal and
interest shall be considered paid on the date due if on such date the Trustee
or a Paying Agent holds in New York, New York in accordance with this Indenture
money sufficient to pay all principal and interest then due and the Trustee or
the Paying Agent, as the case may be, is not prohibited from paying such money
to the Holders on that date pursuant to the terms of this Indenture.

The Company shall pay interest on overdue principal 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.

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SECTION 4.02. Commission Reports. So long as any Securities are
outstanding, the Company will file with the Commission and furnish to the
Holders of Securities all quarterly and annual financial information required
to be contained in a filing with the Commission on Forms 10-Q and 10-K,
including a "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and, with respect to the annual consolidated financial
statements only, a report thereon by the Company's independent auditors.
Notwithstanding that the Company may not be required to remain subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall file with the Commission and provide the Trustee and Holders and
prospective Holders (upon request) with such annual reports and such
information, documents and other reports as are specified in such Sections and
applicable to a U.S. corporation subject to such Sections, such information,
documents and other reports to be so filed and provided at the times specified
for the filing of such information, documents and reports under such Sections;
provided, however, that the Company shall not be required to file any report,
document or other information with the Commission if the Commission does not
permit such filing.

SECTION 4.03. Limitation on Indebtedness.

(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness
(including Acquired Indebtedness) unless, after giving pro forma effect to the
application of the proceeds thereof, no Default or Event of Default would occur
as a consequence of such Incurrence or be continuing following such Incurrence
and either (i) after giving pro forma effect to the Incurrence of such
Indebtedness and the receipt and application of the proceeds thereof, the
Consolidated Interest Coverage Ratio would be at least 2.5 to 1.0 or (ii) such
Indebtedness is Permitted Indebtedness.

(b) "Permitted Indebtedness" means:

(i) Indebtedness under the Bank Credit Facility, provided
that the aggregate principal amount of all such Indebtedness under the Bank
Credit Facility at any one time outstanding does not exceed the greater of (A)
$275,000,000 and (B) an amount equal to the sum of (1) $170,000,000 and (2) 15%
of Adjusted Consolidated Net Tangible Assets determined as of the date of the
Incurrence of such Indebtedness; provided, however, that the maximum amount
available to be outstanding under the Bank Credit Facility shall be permanently
reduced by the amount of Net Available Cash from Asset Sales used to
permanently repay Indebtedness under the Bank Credit Facility and not
subsequently reinvested in Additional Assets or used to permanently reduce
other Indebtedness to the extent permitted pursuant to Section 4.06;

(ii) Indebtedness arising under this Indenture, including
without limitation the Securities and the Subsidiary Guaranties;

(iii) Indebtedness owed to the Company or any of its
Wholly Owned Restricted Subsidiaries by any of its Restricted Subsidiaries or
Indebtedness owed by the Company to any of its Wholly Owned Restricted
Subsidiaries (but only so long as such Indebtedness is held by the Company or a
Wholly Owned Restricted Subsidiary);

(iv) Indebtedness under Permitted Hedging Agreements of
the Company and its Restricted Subsidiaries (including guaranties thereof by
the Company or another Restricted Subsidiary, as applicable);

(v) Indebtedness in connection with one or more standby
letters of credit, Guarantees, performance bonds or other reimbursement
obligations issued in the

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ordinary course of business of the Company and its Restricted Subsidiaries and
not in connection with the borrowing of money or the obtaining of advances or
credit (other than advances or credit on open account, includable in current
liabilities, for goods and services in the ordinary course of business of the
Company and its Restricted Subsidiaries and on terms and conditions which are
customary in the Oil and Gas Business and other than the extension of credit
represented by such letter of credit, Guarantee or performance bond itself);

(vi) obligations relating to net oil or gas balancing
positions arising in the ordinary course of business of the Company and its
Restricted Subsidiaries which are customary in the Oil and Gas Business;

(vii) Permitted Non-Recourse Indebtedness of the Company
or any of its Restricted Subsidiaries;

(viii)Indebtedness outstanding on the Issue Date that is
not repaid with the proceeds of the Offering and not otherwise permitted in
clauses (i) through (vii) above;

(ix) Indebtedness not otherwise permitted to be Incurred
pursuant to this subsection (b), provided that the aggregate principal amount
of all Indebtedness incurred pursuant to this clause (ix), together with all
Indebtedness Incurred pursuant to clause (x) of this subsection in respect of
Indebtedness previously Incurred pursuant to this clause (ix), at any one time
outstanding does not exceed $25,000,000;

(x) Permitted Refinancing Indebtedness Incurred in
exchange for, or the proceeds of which are used to refinance, (A) Indebtedness
referred to in clauses (ii), (viii) and (ix) of this subsection (including
Indebtedness previously incurred pursuant to this clause (x)) or (B)
Indebtedness Incurred pursuant to clause (a)(i) of this Section; and

(xi) accounts payable or other obligations of the Company
or any Restricted Subsidiary to trade creditors created or assumed by the
Company or such Restricted Subsidiary in the ordinary course of business in
connection with the obtaining of goods or services.

SECTION 4.04. Limitation on Restricted Payments.

(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, make any Restricted Payment
if, at the time of and after giving effect to the proposed Restricted Payment
(i) any Default or Event of Default would have occurred and be continuing, (ii)
the Company could not incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) pursuant to Section 4.03 or (iii) the aggregate
amount expended or declared for all Restricted Payments from the Issue Date
would exceed the sum (without duplication) of the following:

(1) 50% of the aggregate Consolidated Net Income of the Company accrued on a
cumulative basis commencing on the last day of the fiscal quarter
immediately preceding the Issue Date, and ending on the last day of the
fiscal quarter ending on or immediately preceding the date of such
proposed Restricted Payment (or, if such aggregate Consolidated Net
Income shall be a loss, minus 100% of such loss), plus

(2) the aggregate net cash proceeds or the Fair Market Value of Property
other than cash received by the Company on or after the Issue Date, from
the issuance or sale (other than to a Subsidiary of the Company) of
Capital Stock of the Company or any options, warrants or rights to
purchase Capital Stock of the Company, plus

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<PAGE> 33
(3) the aggregate net cash proceeds received by the Company as capital
contributions to the Company (other than from a Subsidiary of the
Company) on or after the Issue Date, plus

(4) the aggregate net cash proceeds received by the Company upon the
exercise of any options, warrants or rights to purchase shares of
Capital Stock of the Company (other than from a Subsidiary of the
Company) on or after the Issue Date, plus

(5) the aggregate net cash proceeds received on or after the Issue Date by
the Company from the issuance or sale (other than to any Subsidiary of
the Company) of convertible debt or convertible Redeemable Stock that
has been converted into or exchanged for Capital Stock of the Company,
together with the aggregate cash received by the Company at the time of
such conversion or exchange, plus

(6) to the extent not otherwise included in the Company's Consolidated Net
Income, an amount equal to the net reduction in any Investment made by
the Company and its Restricted Subsidiaries subsequent to the Issue Date
in any Person resulting from (a) payments of interest on debt,
dividends, repayments of loans or advances, or other transfers or
distributions of Property, in each case to the Company or any Restricted
Subsidiary from any Person, and in an amount not to exceed the book
value of such Investment previously made in such Person that was treated
as a Restricted Payment, or (b) the designation of any Unrestricted
Subsidiary as a Restricted Subsidiary, in each case in an amount not to
exceed the lesser of (x) the book value of such Investment previously
made in such Unrestricted Subsidiary that was treated as a Restricted
Payment, and (y) the Fair Market Value of such Unrestricted Subsidiary,
plus

(7) $15,000,000.

(b) The limitations set forth in paragraph (a) above do not prevent the
Company or any Restricted Subsidiary from making the following Restricted
Payments so long as, at the time thereof, no Default or Event of Default shall
have occurred and be continuing (except in the case of clause (i) below under
which a Restricted Payment may be made even if a Default or Event of Default
has occurred and is continuing):

(i) the payment of any dividend on Capital Stock of the Company
or any Restricted Subsidiary within 60 days after the declaration
thereof, if at such declaration date such dividend could have been paid
in compliance with paragraph (a) above;

(ii) the purchase, redemption or other acquisition or retirement
for value of any Capital Stock of the Company or any Restricted
Subsidiary, in exchange for, or out of the aggregate net cash proceeds
of, a substantially concurrent issuance and sale (other than to a
Subsidiary of the Company) of Capital Stock of the Company;

(iii) the making of any principal payment on or the repurchase,
redemption, defeasance or other acquisition or retirement for value,
prior to any scheduled principal payment, scheduled sinking fund payment
or maturity, of any Pari Passu Indebtedness or Subordinated Indebtedness
(other than Redeemable Stock) in exchange for, or out of the aggregate
net cash proceeds of, a substantially concurrent issuance and sale
(other than to a Subsidiary of the Company) of Capital Stock of the
Company;

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<PAGE> 34
(iv) the making of any principal payment on or the repurchase,
redemption, defeasance or other acquisition or retirement for value of
Pari Passu Indebtedness or Subordinated Indebtedness in exchange for, or
out of the aggregate net cash proceeds of, a substantially concurrent
Incurrence (other than a sale to a Subsidiary of the Company) of Pari
Passu Indebtedness or Subordinated Indebtedness so long as such new
Indebtedness is Permitted Refinancing Indebtedness and such new
Indebtedness (1) has an Average Life to Stated Maturity that is longer
than the Average Life to Stated Maturity of the Securities and (2) has a
Stated Maturity for its final scheduled principal payment that is at
least 91 days later than the Stated Maturity of the final scheduled
principal payment of the Securities; and

(v) loans made to officers, directors and employees of the
Company or any Restricted Subsidiary approved by the Board of Directors
(or a duly authorized officer), the proceeds of which are used (1) to
purchase common stock of the Company in connection with a restricted
stock or employee stock purchase plan, or to exercise stock options
received pursuant to an employee or director stock option plan or other
incentive plan, in a principal amount not to exceed the exercise price
of such stock options and (2) to refinance loans, together with accrued
interest thereon, made pursuant to item (1) of this clause (v),
provided, however, that such loans do not exceed $7,500,000 at any one
time outstanding.

The actions described in clauses (i), (ii), (iii) and (v) of this
paragraph (b) shall be Restricted Payments that shall be permitted to be taken
in accordance with this paragraph (b) but shall reduce the amount that would
otherwise be available for Restricted Payments under paragraph (a) (provided
that any dividend paid pursuant to clause (i) of this paragraph (b) shall
reduce the amount that would otherwise be available under paragraph (a) when
declared, but not also when subsequently paid pursuant to such clause (i)), and
the actions described in clause (iv) of this paragraph (b) shall be Restricted
Payments that shall be permitted to be taken in accordance with this paragraph
(b) but shall not reduce the amount that would otherwise be available for
Restricted Payments under paragraph (a).

(c) "Permitted Investments" means any and all of the following: (i)
Permitted Short-Term Investments; (ii) Investments in property, plant and
equipment used in the ordinary course of business and Permitted Business
Investments; (iii) Investments by a Restricted Subsidiary in the Company; (iv)
Investments by the Company or any Restricted Subsidiary in any Restricted
Subsidiary; (v) Investments by the Company or any Restricted Subsidiary in a
Person, if such Person or a Subsidiary of such Person will, as a result of the
making of such Investment and all other contemporaneous related transactions,
become a Restricted Subsidiary or be merged or consolidated with or transfer or
convey all or substantially all of its assets to the Company or a Restricted
Subsidiary; (vi) Investments in Persons in the Oil and Gas Business (other than
Restricted Subsidiaries) intended to promote the Company's strategic business
objectives in an amount not to exceed $20,000,000 at any one time outstanding
(which Investments shall be deemed to be no longer outstanding only upon the
return of capital thereof); (vii) Investments in the form of securities
received from Asset Sales, provided that such Asset Sales are made in
compliance with Section 4.06; (viii) Investments in negotiable instruments held
for collection, lease, utility and other similar deposits, and stock,
obligations or other securities received in settlement of debts (including,
without limitation, under any bankruptcy or other similar proceeding) owing to
the Company or any of its Restricted Subsidiaries as a result of foreclosure,
perfection or enforcement of any Liens or Indebtedness, in each of the
foregoing cases in the ordinary course of business of the Company or such
Restricted Subsidiary; (ix) Investments in the form of Permitted Hedging
Agreements of the Company and its Restricted Subsidiaries; (x) relocation
allowances, advances and loans to officers, directors and employees of the
Company or any of its Restricted Subsidiaries in the ordinary course of
business, provided such items do not

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exceed $2,500,000 at any one time outstanding; and (xi) Investments not
otherwise permitted to be made pursuant to this subsection in an amount not to
exceed $5,000,000 at any one time outstanding.

SECTION 4.05. Limitation on Payment Restrictions Affecting
Restricted Subsidiaries. The Company will not, and will not permit any
Restricted Subsidiary to, create, assume or otherwise cause or suffer to exist
or to become effective any consensual encumbrance or restriction on the ability
of any Restricted Subsidiary to (i) pay dividends or make any other
distributions on its Capital Stock or Redeemable Stock held by the Company or a
Restricted Subsidiary, (ii) make payments in respect of any Indebtedness owed
to the Company or any of its Restricted Subsidiaries, (iii) make loans or
advances to the Company or any of its Restricted Subsidiaries or (iv) transfer
any of its assets to the Company or any of its Restricted Subsidiaries, other
than:

(A) consensual encumbrances or restrictions required by a Bank
Credit Facility that are not more restrictive than those in effect under the
Bank Credit Facility on the Issue Date;

(B) with respect to clause (iv) above, customary provisions
restricting subletting, assignment, pledging or transfer of any Property that
is a lease, license, contract or similar type of Property;

(C) consensual encumbrances or restrictions in instruments
governing Indebtedness of a Person acquired by the Company or any Restricted
Subsidiary at the time of such acquisition, provided that such Indebtedness was
not Incurred in anticipation of such acquisition;

(D) with respect to clause (iv) above, restrictions contained in
purchase money obligations for property acquired in the ordinary course of
business;

(E) with respect to clause (iv) above, customary restrictions
contained in asset sale agreements limiting the transfer of such assets pending
the closing of such sale; and

(F) consensual encumbrances or restrictions in instruments
governing Indebtedness Incurred to refinance, refund, extend or renew
Indebtedness referred to in clauses (C) and (D) above, provided that the
payment restrictions contained therein are not more restrictive taken as a
whole than those provided for in the Indebtedness being refinanced, refunded,
extended or renewed.

SECTION 4.06. Limitation on Asset Sales.

(a) The Company will not, and will not permit any Restricted Subsidiary
to, consummate any Asset Sale unless (i) the Company or such Restricted
Subsidiary, as the case may be, receives consideration at the time of such
Asset Sale at least equal to the Fair Market Value of the Property subject to
such Asset Sale and (ii) all of the consideration paid to the Company or such
Restricted Subsidiary in connection with such Asset Sale is in the form of
cash, Permitted Short-Term Investments, Exchanged Properties, Liquid Securities
or the assumption by the purchaser of liabilities of the Company (other than
liabilities of the Company that are by their terms subordinated to the
Securities), liabilities of any Subsidiary Guarantor that made such Asset Sale
(other than liabilities of a Subsidiary Guarantor that are by their terms
subordinated to such Subsidiary Guarantor's Subsidiary Guaranty), or
liabilities of any Restricted Subsidiary that made such Asset Sale and which is
not a Subsidiary Guarantor, in each case as a result of which the Company and
its Restricted Subsidiaries are no longer liable ("Permitted Consideration");
provided, however, that the

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Company and its Restricted Subsidiaries shall be permitted to receive Property
other than Permitted Consideration if, after giving pro forma effect to such
Asset Sale, the aggregate Fair Market Value (evaluated at the time of such
Asset Sale) of all such Property other than Permitted Consideration received
from Asset Sales made after the Issue Date, which Property is held by the
Company or any Restricted Subsidiary at the time of such Asset Sale, shall not
exceed 10% of Adjusted Consolidated Net Tangible Assets.

(b) The Net Available Cash from Asset Sales may be applied by the
Company or a Restricted Subsidiary, to the extent the Company or such
Restricted Subsidiary elects (or is required by the terms of any Senior
Indebtedness), (i) to prepay, repay or purchase Senior Indebtedness of the
Company or a Subsidiary Guarantor or Indebtedness of a Restricted Subsidiary
(in each case excluding Indebtedness owed to the Company or an Affiliate of the
Company) in a manner that results in the permanent reduction in the balance of
such Indebtedness and, if applicable, a permanent reduction in any outstanding
commitment for future Incurrences of Indebtedness thereunder; (ii) to reinvest
in Additional Assets (including by means of an Investment in Additional Assets
by a Restricted Subsidiary with Net Available Cash received by the Company or
another Restricted Subsidiary); (iii) to purchase Securities or 9-7/8% Notes
pursuant to a 9-7/8% Notes Asset Sale Offer (excluding Securities or 9-7/8%
Notes owned by the Company or an Affiliate of the Company); or (iv) in such
other manner as the Company or such Restricted Subsidiary may elect in
compliance with the other provisions of this Indenture.

(c) Any Net Available Cash from an Asset Sale not applied in
accordance with clauses (i), (ii) and (iii) of the preceding subsection within
360 days from the date of such Asset Sale shall constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $10,000,000, the Company
will make an offer to purchase Securities having an aggregate principal amount
equal to the aggregate amount of Excess Proceeds (the "Prepayment Offer") at a
purchase price equal to 100% of the principal amount of such Securities plus
accrued and unpaid interest thereon (if any) to the Purchase Date (as defined
below) (the "Prepayment Offer Payment") in accordance with the procedures set
forth in this Section, but, if the terms of any Pari Passu Indebtedness require
that a Pari Passu Offer be made contemporaneously with the Prepayment Offer,
then the Excess Proceeds shall be prorated between the Prepayment Offer and
such Pari Passu Offer in accordance with the aggregate outstanding principal
amounts of the Securities and such Pari Passu Indebtedness, and the aggregate
principal amount of Securities for which the Prepayment Offer is made shall be
reduced accordingly. If the aggregate principal amount of Securities tendered
by Holders thereof exceeds the amount of available Excess Proceeds, then such
Excess Proceeds will be allocated pro rata according to the principal amount of
the Securities tendered and the Trustee will select the Securities to be
purchased by a method that complies with applicable legal and securities
exchange requirements, if any, and that the Trustee considers fair and
appropriate and in accordance with methods generally used at the time of
selection by fiduciaries in similar circumstances. To the extent that any
portion of the amount of Excess Proceeds remains after compliance with the
second sentence of this subsection and provided that all Holders of Securities
have been given the opportunity to tender their Securities for purchase as
described in the following subsection in accordance with this Indenture, the
Company or such Restricted Subsidiary may use such remaining amount for general
corporate purposes otherwise permitted under this Indenture and the amount of
Excess Proceeds will be reset to zero.

(d) Within five Business Days after 360 days from the date of an
Asset Sale, the Company shall, if it is obligated to apply an amount equal to
any Excess Proceeds (or any portion thereof) to fund an offer to purchase the
Securities, send a written Prepayment Offer notice, by first-class mail, to the
holders of the Securities (the "Prepayment Offer Notice"), accompanied by such
information regarding the Company and its Subsidiaries as the

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<PAGE> 37
Company in good faith believes will enable such holders of the Securities to
make an informed decision with respect to the Prepayment Offer. The Prepayment
Offer Notice will state, among other things, (1) that the Company is offering
to purchase Securities pursuant to the provisions of Section 4.06 of this
Indenture, (2) the purchase price and purchase date, which shall be subject to
any contrary requirements of applicable law, no less than 30 days nor more than
60 days after the date the Prepayment Offer Notice is mailed (the "Purchase
Date"), (3) that any Securities (or any portions thereof) accepted for payment
(and duly paid on the Purchase Date) pursuant to the Prepayment Offer shall
cease to accrue interest after the Purchase Date, (4) that any Securities (or
portions thereof) not properly tendered will continue to accrue interest, (5)
the aggregate principal amount of Securities to be purchased, (6) a description
of the procedure which holders of Securities must follow in order to tender
their Securities and the procedures that holders of Securities must follow in
order to withdraw an election to tender their Securities for payment, and (7)
all other instructions and materials necessary to enable holders to tender
Securities pursuant to the Prepayment Offer.

(e) On the Purchase Date, the Company will (i) accept for payment
Securities or portions thereof properly tendered pursuant to the Prepayment
Offer, (ii) deposit with the Paying Agent in immediately available funds an
amount equal to the Prepayment Offer Payment in respect of Securities or
portions thereof so tendered and (iii) deliver, or cause to be delivered, to
the Trustee the Securities so accepted together with an Officers' Certificate
listing the Securities or portions thereof tendered to the Company and accepted
for payment. The Paying Agent shall promptly mail to each holder of Securities
so accepted payment in an amount equal to the Prepayment Offer Payment for such
Securities and the Trustee shall promptly authenticate and mail to each holder
a new Securities in a principal amount equal to any unpurchased portion of the
Securities surrendered, if any; provided, that each such new Security shall be
in a principal amount of $1,000 or any integral multiple thereof. The Company
will announce publicly the results of a Prepayment Offer on or as soon as
practicable after the Purchase Date.

(f) The Company will comply, to the extent applicable, with the
requirements of Rules 13e-4 and 14e-1 under the Exchange Act and any other
securities laws or regulations thereunder to the extent such laws and
regulations are applicable in connection with the purchase of Securities as
described above. To the extent that the provisions of any securities laws or
regulations conflict with the provisions relating to the Prepayment Offer, the
Company will comply with the applicable securities laws and regulations and
will not be deemed to have breached its obligations described above by virtue
thereof.

SECTION 4.07. Limitation on Transactions with Affiliates.

(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, enter into or suffer to
exist any transaction or series of related transactions (including, without
limitation, the sale, purchase, exchange or lease of assets, property or
services) with any Affiliate of the Company unless (i) such transaction or
series of related transactions is on terms that are no less favorable to the
Company or such Restricted Subsidiary, as the case may be, than would be
available in a comparable transaction in arm's-length dealings with an
unrelated third party, (ii) with respect to a transaction or series of related
transactions involving payments in excess of $1,000,000 in the aggregate, the
Company delivers an Officers' Certificate to the Trustee certifying that such
transaction complies with clause (i) above, and (iii) with respect to a
transaction or series of transactions involving payments in excess of
$5,000,000 in the aggregate, the Company delivers an Officers' Certificate to
the Trustee certifying that (A) such transaction complies with clause (i) above
and (B) such transaction or series of related transactions has been approved by
a majority of the disinterested directors of the Board of Directors of the
Company.

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(b) The limitations of the preceding subsection do not apply
to:

(i) the payment of reasonable and customary regular fees to
directors of the Company or any of its Restricted Subsidiaries who are
not employees of the Company or any of its Restricted Subsidiaries;

(ii) indemnities of officers and directors of the Company or any
Subsidiary consistent with such Person's bylaws and applicable statutory
provisions;

(iii) any employee compensation and other benefit arrangements
entered into by the Company or any of its Subsidiaries in the ordinary
course of business;

(iv) relocation allowances, advances and loans made to officers,
directors and employees of the Company and its Restricted Subsidiaries
provided such items do not exceed $2,500,000 in the aggregate at any one
time outstanding;

(v) transactions among the Company and its Restricted
Subsidiaries;

(vi) loans constituting Restricted Payments made pursuant to and
in compliance with Section 4.04(b)(v); and

(vii) the gas gathering agreement between the Company and the
Existing Unrestricted Subsidiary as in effect on the Issue Date and oil
and gas operating agreements entered into in the ordinary course of
business by the Company and its Restricted Subsidiaries in a manner
consistent with the current practice of the Company and its Restricted
Subsidiaries as of the Issue Date so long as such operating agreements
are in a form customary in the Oil and Gas Business.

SECTION 4.08. Limitation on Issuance and Sale of Capital Stock
of Restricted Subsidiaries. The Company will not (i) permit any Restricted
Subsidiary to issue any Capital Stock (including, without limitation, pursuant
to any merger, consolidation, recapitalization or similar transaction) other
than to the Company or a Wholly Owned Restricted Subsidiary or (ii) permit any
Person other than the Company or a Restricted Subsidiary to own any Capital
Stock of any other Restricted Subsidiary (other than directors' qualifying
shares), except for (A) a sale to a Person of the Capital Stock of a Restricted
Subsidiary, which sale was made by the Company or a Restricted Subsidiary
subject to, and in compliance with, as appropriate, either Section 4.04 or
Section 4.06, and such Person's subsequent ownership of such Capital Stock of
such Restricted Subsidiary, (B) the issuance of Capital Stock by a Restricted
Subsidiary to a Person other than the Company or a Wholly Owned Restricted
Subsidiary, which issuance was made subject to and in compliance with Section
4.06, and such Person's subsequent ownership of such Capital Stock and (C) the
ownership of Capital Stock of a Restricted Subsidiary owned by a Person at the
time such Restricted Subsidiary became a Restricted Subsidiary or acquired by
such Person in connection with the formation of the Restricted Subsidiary (and
in the case of the formation of such Restricted Subsidiary, the issuance of
such Capital Stock). If a Person (other than a Material Restricted Subsidiary)
whose Capital Stock was issued or sold in a transaction described in this
Section is, as a result of such transaction, no longer a Restricted Subsidiary,
then any Capital Stock of such Person retained by the Company or a Restricted
Subsidiary shall be treated as a Restricted Payment made at the time of such
transaction in an amount equal to that portion of the Fair Market Value of such
Person represented by such retained Capital Stock.

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SECTION 4.09. Change of Control.

(a) Upon the occurrence of a Change of Control, each Holder of
Securities shall have the right to require the Company to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such Holder's
Securities pursuant to the offer described below (the "Change of Control
Offer") at a purchase price in cash equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, thereon to the purchase date
(the "Change of Control Payment").

(b) Within 30 days following any Change of Control, the Company
shall mail a notice to each Holder stating, among other things: (i) that a
Change of Control has occurred and a Change of Control Offer is being made
pursuant to this Indenture and that all Securities (or portions thereof)
properly tendered will be accepted for payment; (ii) the purchase price and the
purchase date, which shall be, subject to any contrary requirements of
applicable law, no fewer than 30 days nor more than 60 days from the date the
Company notifies the Holders of the occurrence of the Change of Control (the
"Change of Control Payment Date"); (iii) that any Securities (or portions
thereof) accepted for payment (and duly paid on the Change of Control Payment
Date) pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date; (iv) that any Securities (or portions
thereof) not properly tendered will continue to accrue interest; (v) a
description of the transaction or transactions constituting the Change of
Control; (vi) the procedures that Holders of Securities must follow in order to
tender their Securities (or portions thereof) for payment and the procedures
that Holders of Securities must follow in order to withdraw an election to
tender Securities (or portions thereof) for payment; and (vii) all other
instructions and materials necessary to enable Holders to tender Securities
pursuant to the Change of Control Offer.

(c) On the Change of Control Payment Date, the Company will
(i) accept for payment Securities or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent in
immediately available funds an amount equal to the Change of Control Payment in
respect of Securities or portions thereof so tendered and (iii) deliver, or
cause to be delivered, to the Trustee the Securities so accepted together with
an Officers' Certificate listing the Securities or portions thereof tendered to
the Company and accepted for payment. The Paying Agent shall promptly mail to
each Holder of Securities so accepted payment in an amount equal to the Change
of Control Payment for such Securities and the Trustee shall promptly
authenticate and mail to each holder a new Securities in a principal amount
equal to any unpurchased portion of the Securities surrendered, if any;
provided, that each such new Security shall be in a principal amount of $1,000
or any integral multiple thereof. The Company will announce publicly the
results of a Change in Control Offer on or as soon as practicable after the
Change of Control Payment Date.

(d) The Company will comply, to the extent applicable, with the
requirements of Rules 13e-4 and 14e-1 under the Exchange Act, and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the purchase of Securities in
connection with a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with the provisions relating to the
Change of Control Offer, the Company will comply with the applicable securities
laws and regulations and will not be deemed to have breached its obligations
described above by virtue thereof.

SECTION 4.10. Limitation on Liens. The Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, enter
into, create, incur, assume or suffer to exist any Lien on or with respect to
any Property of the Company or such

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<PAGE> 40
Restricted Subsidiary, whether owned on the Issue Date or acquired after the
Issue Date, or any interest therein or any income or profits therefrom, unless
the Securities (and, in the case of a Restricted Subsidiary, a Subsidiary
Guaranty from such Subsidiary) are secured equally and ratably with (or prior
to) any and all other obligations secured by such Lien, except that the Company
and its Restricted Subsidiaries may enter into, create, incur, assume or suffer
to exist Liens securing Senior Indebtedness, Liens securing Senior Indebtedness
of a Subsidiary Guarantor, Liens securing Indebtedness of a Restricted
Subsidiary that is not a Subsidiary Guarantor and Permitted Liens.

SECTION 4.11. Limitation on Layered Indebtedness.

(a) The Company will not Incur any Indebtedness which is subordinated
or junior in right of payment to any Senior Indebtedness unless such
Indebtedness constitutes Indebtedness which is junior to, or pari passu with,
the Securities in right of payment.

(b) The Company will not permit any Subsidiary Guarantor to, and no
Subsidiary Guarantor will, Incur any Indebtedness that is subordinated or
junior in right of payment to any other Indebtedness of such Subsidiary
Guarantor unless such Indebtedness is, by its terms, pari passu with or
subordinated in right of payment to such Subsidiary Guarantor's Subsidiary
Guaranty.

SECTION 4.12 Future Guarantors. The Company shall cause any
Restricted Subsidiary that becomes a Significant Subsidiary (and any
Significant Subsidiary that was previously an Unrestricted Subsidiary which
becomes a Restricted Subsidiary) after the Issue Date to execute and deliver to
the Trustee a supplemental indenture in the form of Exhibit B hereto pursuant
to which such Significant Subsidiary will become a Subsidiary Guarantor and
shall Guarantee payment of the Securities as provided in Section 11.07.

SECTION 4.13. Maintenance of Office or Agency. The Company
shall maintain in The City of New York, an office or agency where Securities
may be presented or surrendered for payment, where 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 shall give prompt written notice to the Trustee of
the location, and any change in the location, of such office or agency. If at
any time the Company 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 at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee its agent to receive all presentations, surrenders, notices and
demands.

The Company may also from time to time designate one or more
other offices or agencies (in or outside of The City of New York) where the
Securities may be presented or surrendered for any or all of such purposes, and
may from time to time rescind such designations; provided that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in The City of New York, for such
purposes. The Company shall give prompt written notice to the Trustee of any
such designation and any change in the location of any such other office or
agency.

SECTION 4.14. Money for the Security Payments to be Held in
Trust. If the Company, any Subsidiary of the Company or any of their
respective Affiliates shall at any time act as Paying Agent with respect to the
Securities, such Paying Agent shall, on or before each due date of the
principal of (and premium, if any) or interest on any of the Securities,
segregate and hold in trust for the benefit of the Persons entitled thereto
money sufficient to pay the principal (and premium, if any) or interest so
becoming due until such

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<PAGE> 41
money shall be paid to such Persons or otherwise disposed of as herein
provided, and shall promptly notify the Trustee of its action or failure so to
act.

Whenever the Company shall have one or more Paying Agents with
respect to the Securities, it shall, prior to or on each due date of the
principal of (and premium, if any) or interest on any of the Securities,
deposit with a Paying Agent a sum sufficient to pay the principal (and premium,
if any) or interest so becoming due, such sum to be held in trust for the
benefit of the Persons entitled to such principal, premium or interest, and
(unless such Paying Agent is the Trustee) the Paying Agent shall promptly
notify the Trustee of the Company's action or failure so to act.

Any funds deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, premium, if
any, or interest on any Securities and remaining unclaimed for two years after
the date upon which such payment shall have become due, shall be paid to the
Company on Order or, if then held by the Company, shall be discharged from such
trust; provided, however, that the Company shall cause to be published at least
once in a newspaper of general circulation in The City of New York or mailed to
each Holder entitled to such unclaimed funds, notice that such funds remain
unclaimed and that, after a date specified therein, which shall be a date not
less than 30 days from the date of such publication or mailing, any unclaimed
balance of such money remaining as of such date shall be repaid to the Company.
After repayment to the Company, Holders entitled to such funds shall look only
to the Company for payment without interest thereon, as an unsecured general
creditor, and the Trustee and the Paying Agent shall have no further liability
with respect to such trust money, and the Company shall not be a trustee in
respect of such funds.

SECTION 4.15. Payment of Taxes and Other Claims. The Company
shall pay or discharge or cause to be paid or discharged, before the same shall
become delinquent, (a) all material taxes, assessments and governmental charges
levied or imposed upon the Company or any of its Subsidiaries or upon the
income, profits or property of the Company or any of its Subsidiaries and (b)
all material lawful claims for labor, materials and supplies which, if unpaid,
might by law become a Lien upon the property of the Company or any of its
Subsidiaries; provided 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 adequate reserves in accordance with
GAAP or other appropriate provision has been made.

SECTION 4.16. Corporate Existence. The Company will, and will
cause each of its Significant Subsidiaries to, preserve and keep in full force
and effect its corporate existence in accordance with applicable law, except as
permitted in Sections 5.01 and 5.02; provided, however, that the Company may
terminate the corporate existence of any Significant Subsidiary that is not a
Subsidiary Guarantor if, in the good faith judgment of the Board of Directors,
such termination is desirable in the conduct of the business of the Company and
its Restricted Subsidiaries and is not disadvantageous in any material respect
to the Holders.

SECTION 4.17. 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 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 and whether or not the signers know of any Default
that occurred during such period. If they do, the certificate shall describe
the Default, its status and what action the Company is taking or proposes to
take with respect thereto. The Company also shall comply with TIA Section
314(a)(4).

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SECTION 4.18. 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 4.19. Prohibition on Company and Guarantors Becoming
Investment Companies. None of the Company or the Subsidiary Guarantors shall
become an "investment company" as defined in the Investment Company Act of
1940, as amended.

SECTION 4.20. Stay, Extension and Usury Laws. The Company and
each of the Subsidiary Guarantors covenants (to the extent that it may lawfully
do so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit of advantage of, any stay, extension or
usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted to
the Trustee, but shall suffer and permit the execution of every such power as
though no such law has been enacted.

ARTICLE 5

Successor Company

SECTION 5.01. Merger, Consolidation and Sale of Substantially
All Assets.

(a) The Company (i) will not merge or consolidate with or into any other
Person (whether or not the Company is the surviving entity), and (ii) will not
and will not permit its Restricted Subsidiaries to, directly or indirectly,
sell, transfer, assign, lease, convey or otherwise dispose of all or
substantially all of the Property of the Company and its Restricted
Subsidiaries taken as a whole in any one transaction or a series of
transactions (including, without limitation, dispositions pursuant to mergers,
consolidations, Investments and Production Payments and Reserve Sales), in each
case unless:

(A) the Surviving Entity shall be a corporation organized
and existing under the laws of the United States of America or a
State thereof or the District of Columbia;

(B) if the Company is not the Surviving Entity, the
Surviving Entity expressly assumes, by supplemental indenture
satisfactory to the Trustee, executed and delivered to the
Trustee by the Surviving Entity, the due and punctual payment of
the principal of, premium, if any, and interest on all the
Securities, according to their tenor, and the due and punctual
performance and observance of all of the covenants and conditions
of this Indenture to be performed by the Company (and in the case
of clause (ii) above, the Company and the Surviving Entity shall
both be considered as the issuer of the Securities);

(C) in the case of the sale, transfer, assignment, lease,
conveyance or other disposition of all or substantially all of
the Property of the Company and its Restricted Subsidiaries taken
as a whole, such Property shall have been transferred as an
entirety or virtually as an entirety to one Person;

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(D) immediately before and after giving effect to such
transaction or series of transactions on a pro forma basis, no
Default or Event of Default shall have occurred and be
continuing;

(E) except in the case of a merger of the Company with a
Restricted Subsidiary, immediately after giving effect to such
transaction or series of transactions on a pro forma basis, the
Surviving Entity would be able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under
Section 4.03;

(F) except in the case of a merger of the Company with a
Restricted Subsidiary, immediately after giving effect to such
transaction or series of transactions on a pro forma basis, the
Surviving Entity shall have a Consolidated Net Worth equal to or
greater than the Consolidated Net Worth of the Company
immediately prior to the transaction or series of transactions;

(G) if the Company is not the Surviving Entity, then (1)
each Subsidiary Guarantor (unless it is the Surviving Entity)
shall have executed and delivered to the Trustee a supplemental
indenture satisfactory to the Trustee confirming that such
Subsidiary Guarantor's Subsidiary Guaranty remains in full force
and effect and guarantees the Surviving Entity's obligations
under this Indenture and the Securities, (2) each Significant
Subsidiary of the Surviving Entity (determined immediately after
giving effect to such transaction or series of transactions on a
pro forma basis) shall have executed and delivered to the Trustee
a supplemental indenture satisfactory to the Trustee pursuant to
which such Person becomes a Subsidiary Guarantor and guarantees
the Securities pursuant to the terms of a Subsidiary Guaranty and
(3) in the case of clause (ii) above, the Company shall have
executed and delivered to the Trustee a supplemental indenture
satisfactory to the Trustee pursuant to which the Company
confirms its obligations for the due and punctual payment of the
principal of, premium, if any, and interest on all the
Securities, according to their tenor, and the due and punctual
performance and observance of all of the covenants and conditions
of this Indenture to be performed by the Company; and

(H) the Company and, if the Company is not the Surviving
Entity, the Surviving Entity, each shall have delivered to the
Trustee Officers' Certificates (attaching the calculations to
demonstrate compliance with clauses (E) and (F) above) and an
Opinion of Counsel, each stating that such merger, consolidation
or disposition and any such supplemental indentures comply with
the above provisions and that all conditions precedent relating
to such transaction or transactions have been complied with.

The term "Surviving Entity" shall mean the Person referred to in
clauses (i) and (ii) above (1) formed by or surviving any such merger or
consolidation involving the Company or (2) to which any such sale, transfer,
assignment, lease, conveyance or other disposition is made.

(b) In addition to, and not in limitation of, subsection (a) above,
(i) the Company will not permit any Material Restricted Subsidiary to merge or
consolidate with or into any other Person (whether or not such Material
Restricted Subsidiary survives such merger or consolidation), and (ii) the
Company will not permit any Material Restricted Subsidiary to directly or
indirectly issue Capital Stock or Redeemable Stock in a single transaction or a
series of transactions (including, without limitation, engaging in any
recapitalization or

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<PAGE> 44
similar transaction) if, after giving effect to such issuance (and all possible
conversions, exercises and similar events with respect to any such stock
(whether or not then convertible or exercisable) in order to reach a fully
diluted, fully converted basis), such Material Restricted Subsidiary would no
longer be a Subsidiary of the Company, in each case unless:

(A) immediately before and after giving effect to such
transaction or series of transactions on a pro forma basis, no
Default or Event of Default shall have occurred and be
continuing;

(B) except in the case of a merger of a Material
Restricted Subsidiary with the Company or a Wholly Owned
Restricted Subsidiary, immediately after giving effect to such
transaction or series of transactions on a pro forma basis, the
Company would be able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under Section
4.03;

(C) except in the case of a merger of a Material
Restricted Subsidiary with the Company or a Wholly Owned
Restricted Subsidiary, immediately after giving effect to such
transaction or series of transactions on a pro forma basis, the
Company shall have a Consolidated Net Worth equal to or greater
than the Consolidated Net Worth of the Company immediately prior
to the transaction or series of transactions;

(D) the Material Restricted Subsidiary Survivor shall have
executed and delivered to the Trustee, as appropriate, either (1)
a supplemental indenture satisfactory to the Trustee confirming
that such Material Restricted Subsidiary Survivor's Subsidiary
Guaranty remains in full force and effect and guarantees the
Company's obligations under this Indenture and the Securities, or
(2) a supplemental indenture satisfactory to the Trustee pursuant
to which such Material Restricted Subsidiary Survivor becomes a
Subsidiary Guarantor and guarantees the Securities pursuant to
the terms of a Subsidiary Guaranty; and

(E) the Company and such Material Restricted Subsidiary
Survivor each shall have delivered to the Trustee Officers'
Certificates (in the case of the Company, attaching the
calculations to demonstrate compliance with clauses (B) and (C)
above) and an Opinion of Counsel, each stating that such merger,
consolidation or issuance and any such supplemental indentures
comply with the above provisions and that all conditions
precedent relating to such transaction or transactions have been
complied with.

The term "Material Restricted Subsidiary Survivor" shall
mean (1) in the case of clause (i) above, the Person surviving
any such merger or consolidation or (2) in the case of clause
(ii) above, such Material Restricted Subsidiary.

(c) With respect to each transaction or series of transactions
described in subsections (a) and (b) above, giving effect to such transaction
or series of transactions on a pro forma basis shall include, without
limitation, (i) treating any Indebtedness not previously the obligation of the
Company or any of its Restricted Subsidiaries which becomes an obligation of
the Company or any of its Restricted Subsidiaries in connection with or as a
result of such transaction or series of transactions as having been Incurred at
the time of such transaction or series of transactions, and (ii) giving effect
to any Indebtedness Incurred or anticipated to be Incurred in connection with
such transaction or series of transactions.

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SECTION 5.02. When a Subsidiary Guarantor May Merge or Transfer
Assets. Each Subsidiary Guarantor may merge or consolidate with or dispose of
its assets to the Company or a Wholly Owned Restricted Subsidiary that is a
Subsidiary Guarantor except to the extent any such transaction is limited by
Section 5.01. In addition, each Subsidiary Guarantor may merge or consolidate
with or dispose of its assets to any Person (other than the Company or a Wholly
Owned Restricted Subsidiary that is a Subsidiary Guarantor), regardless of
whether such Person is an Affiliate of such Subsidiary Guarantor, if: (i)
immediately after such transaction, and giving effect thereto, no Default or
Event of Default has occurred and is continuing;(ii) such transaction was
subject to, and consummated in compliance with, as appropriate, either Section
4.06 or Section 5.01; and (iii) the Company shall have delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel, each stating that such
transaction complies with the above provisions and that all conditions
precedent relating to such transaction have been complied with.

ARTICLE 6

Defaults and Remedies

SECTION 6.01. Events of Default. Whenever used herein, an
"Event of Default" means any one of the following events (whatever the reason
for such Event of Default and whether it shall be voluntary or involuntary or
be 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):

(a) the Company shall fail to make any payment of interest on
the Securities within 30 days after any such amount becomes due in
accordance with the terms thereof;

(b) the Company shall fail to make any payment of principal of
(or premium, if any, on) the Securities when due in accordance with the
terms thereof, whether upon maturity, acceleration, call for redemption,
call for purchase under Section 4.06 or Section 4.09 or otherwise;

(c) the Company and any Subsidiary Guarantor shall fail to
observe or perform any other covenant or agreement contained in the
Securities or this Indenture and such failure continues for a period of
60 days after written notice of such failure has been sent to the
Company by the Trustee specifying such default and requiring it to be
remedied and stating that such notice is a "Notice of Default";

(d) the occurrence and continuation beyond any applicable grace
period of any default in the payment of the principal of (or premium, if
any, on) or interest on any Indebtedness (other than Permitted Non-
Recourse Indebtedness) of the Company (other than the Securities) or any
Restricted Subsidiary for money borrowed when due (whether resulting
from maturity, acceleration, mandatory redemption or otherwise), or any
other default causing acceleration of any Indebtedness (other than
Permitted Non-Recourse Indebtedness) of the Company or any Restricted
Subsidiary for money borrowed, provided that the aggregate principal
amount of such Indebtedness shall exceed $5,000,000; and specifically
including, without limitation, any such default under or acceleration of
any Indebtedness (other than Permitted Non-Recourse Indebtedness)
directly or indirectly resulting or derived from, or caused by, a
default under or acceleration of any Permitted Non-Recourse
Indebtedness;

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<PAGE> 46
(e) one or more final judgments or orders by a court of
competent jurisdiction are entered against the Company or any Restricted
Subsidiary in an uninsured or unindemnified aggregate amount in excess
of $5,000,000 and such judgments or orders are not discharged, waived,
stayed, satisfied or bonded for a period of 60 consecutive days;

(f) the Company or any Restricted Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:

(i) commences a voluntary case or files a request or
petition for a writ of execution to initiate bankruptcy
proceedings or have itself adjudicated as bankrupt;

(ii) consents to the entry of an order for relief against
it in an involuntary case;

(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; or

(v) proposes or agrees to an accord or composition in
bankruptcy between itself and its creditors;

(g) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:

(i) is for relief against the Company or any Restricted
Subsidiary in an involuntary case;

(ii) appoints a Custodian of the Company or any
Restricted Subsidiary or for any substantial part of the property
of the Company or any Restricted Subsidiary;

(iii) orders the winding up or liquidation of the Company
or any Restricted Subsidiary;

(iv) adjudicates the Company or a Restricted Subsidiary
as bankrupt or insolvent; or

(v) ratifies an accord or composition in bankruptcy
between the Company or a Restricted Subsidiary and the respective
creditors thereof;

and the order or decree remains unstayed and in effect for 60
days; or

(h) a Subsidiary Guaranty ceases to be in full force and
effect (other than in accordance with the terms of this Indenture and
such Subsidiary Guaranty) or a Subsidiary Guarantor denies or disaffirms
its obligations under its Subsidiary Guaranty.

SECTION 6.02. Acceleration. If an Event of Default (other than
an Event of Default described in clause (f) or (g) above) with respect to the
Securities at the time outstanding shall occur and be continuing, either the
Trustee or the Holders of at least 25% in aggregate principal amount of the
outstanding Securities by written notice may declare the

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<PAGE> 47
principal amount of the Securities to be due and payable immediately. If an
Event of Default described in clause (f) or (g) above with respect to the
Securities at the time outstanding shall occur, the principal amount of all the
Securities will automatically, and without any action by the Trustee or any
Holder, become immediately due and payable.

After any such acceleration, but before a judgment or decree
based on acceleration, the Holders of a majority in aggregate principal amount
of the outstanding Securities may rescind and annul such acceleration if

(a) the Company or any Subsidiary Guarantor has paid or
deposited with the Trustee a sum sufficient to pay

(i) all money paid or advanced by the Trustee hereunder
and the reasonable compensation, expenses, disbursement and
advances of the Trustee, its agents and counsel,

(ii) all overdue installments of interest on all
Securities;

(iii) the principal of (and premium, if any, on ) any
Securities that have become due otherwise than by such
declaration of acceleration and interest thereon at the rate or
rates prescribed therefor in the Securities, and

(iv) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate prescribed
therefor in the Securities;

(b) all Events of Default, other than the nonpayment of
principal of Securities which have become due solely by such declaration
of acceleration, have been cured or waived as provided in Section 6.04;

(c) the annulment of such acceleration would not conflict with
any judgment or decree of a court of competent jurisdiction; and

(d) the Company has delivered an Officers' Certificate to the
Trustee to the effect of clauses (b) and (c) of this sentence.

No such rescission shall affect any subsequent Default or impair any
right consequent thereto.

SECTION 6.03. Other Remedies. If an Event of Default occurs and
is continuing, the Trustee may pursue any available remedy to collect the
payment of principal of or interest 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 6.04. Waiver of Past Defaults. The Holders of a
majority in principal amount of the Securities by notice to the Trustee may
waive an existing Default and its consequences except (i) a Default in the
payment of the principal of or interest on a Security or (ii) a Default in
respect of a provision that under Section 9.02 cannot be amended

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<PAGE> 48
without the consent of each Holder affected. When a Default is waived, it is
deemed cured, but no such waiver shall extend to any subsequent or other
Default or impair any consequent right.

SECTION 6.05. Control by Majority. The Holders of a majority in
principal amount of the 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 conflicts with law or this Indenture
or, subject to Section 7.01, that the Trustee determines is unduly prejudicial
to the rights of other Holders, it being understood that the Trustee shall have
no duty to ascertain whether or not such actions or forbearances are unduly
prejudiced to such 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. Prior to taking any
action hereunder, the Trustee shall be entitled to indemnification satisfactory
to it in its sole discretion against all losses and expenses caused by taking
or not taking such action.

SECTION 6.06. Limitation on Suits. No Holder of any Securities
shall have any right to institute any proceeding, judicial or otherwise, with
respect to this Indenture, or for the appointment of a receiver or a trustee,
or for any other remedy hereunder, unless:

(i) such Holder has previously given to the Trustee written
notice of a continuing Event of Default with respect to the Securities;

(ii) the Holders of at least 25% in aggregate principal amount of
the outstanding Securities have made written request, and such Holder or
Holders have offered reasonable indemnity, to the Trustee to institute
such proceeding as trustee; and

(iii) the Trustee has failed to institute such proceeding, and
has not received from the Holders of a majority in aggregate principal
amount of the outstanding Securities a direction inconsistent with such
request, within 60 days after such notice, request and offer.

A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over another Holder.

SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
to receive payment of principal of and interest 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 6.08. Collection Suit by Trustee. If an Event of
Default specified in Section 6.01(a) or (b) 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 to the extent lawful) and the amounts provided
for in Section 7.07.

SECTION 6.09. 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 and the Holders allowed in
any judicial proceedings relative to the Company, its creditors or its property
and, unless prohibited by law or

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applicable regulations, 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 it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and its counsel, and any
other amounts due the Trustee under Section 7.07.

SECTION 6.10. Priorities. If the Trustee collects any money or
property pursuant to this Article 6, it shall pay out the money or property in
the following order:

FIRST: to the Trustee for amounts due under Section 7.07;

SECOND: to holders of Senior Indebtedness of the Company to the
extent required by Article 10;

THIRD: to Holders for amounts due and unpaid on the Securities
for principal and interest, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Securities for
principal and interest, respectively; and

FOURTH: to the Company.

The Trustee may fix a record date and payment date for any
payment to Holders pursuant to this Section. 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 6.11. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee 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, 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 does not apply
to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit
by Holders of more than 10% in principal amount of the Securities.

ARTICLE 7

Trustee

SECTION 7.01. 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 their exercise as a prudent Person would
exercise or use under the circumstances in the conduct of such Person's own
affairs.

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(b) Except during the continuance of an Event of Default:

(1) 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

(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this
Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of
this Indenture.

(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:

(1) this subsection does not limit the effect of subsection (b)
of this Section;

(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and

(3) 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 6.05.

(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to subsections (a), (b) and (c) of this Section.

(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.

(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 and to the provisions of the Trust
Indenture Act.

SECTION 7.02. Rights of Trustee.

(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper Person. The Trustee need
not investigate any fact or matter stated in the document.

(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
the Officers' Certificate or Opinion of Counsel.

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(c) The Trustee may act through 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; provided, however, that the Trustee's conduct does not constitute
willful misconduct or negligence.

(e) The Trustee may consult with counsel, 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) Prior to the occurrence of an Event of Default hereunder and after
the curing or waiving of all Events of Default, the Trustee shall not be bound
to make any investigation into the facts or matters stated in any resolution,
Officer's Certificate, or other certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval, appraisal, bond, debenture,
note, coupon, security, or other paper or document unless requested in writing
to do so by the Holders of not less than a majority in aggregate principal
amount of the Securities then outstanding; provided, that if the payment within
a reasonable time to the Trustee of the costs, expenses or liabilities likely
to be incurred by it in the making of such investigation is, in the opinion of
the Trustee, not reasonably assured to the Trustee by the security afforded to
it by the terms of this Indenture, the Trustee may require reasonable indemnity
against such expenses or liabilities as a condition to proceeding; the
reasonable expenses of every such examination shall be paid by the Company or,
if advanced by the Trustee, shall be repaid by the Company upon demand.

(g) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.

(h) The Trustee shall not be bound to ascertain or inquire as to the
performance or observance of any covenants, conditions, or agreements on the
part of the Company, except as otherwise set forth herein, but the Trustee may
require of the Company full information and advice as to the performance of the
covenants, conditions and agreements contained herein and shall be entitled in
connection herewith to examine the books, records and premises of the Company.

(i) The permissive rights of the Trustee to do things enumerated in
this Indenture shall not be construed as a duty.

(j) Except for (i) a default under Section 6.01(a) or (b) hereof, or
(ii) any other event of which the Trustee has "actual knowledge" and which
event, with the giving of notice or the passage of time or both, would
constitute an Event of Default under this Indenture, the Trustee shall not be
deemed to have notice of any Default or Event of Default unless specifically
notified in writing of such event by the Company or the Holders of not less
than 25% in aggregate principal amount of the Securities then outstanding; as
used herein, the term "actual knowledge" means the actual fact or statement of
knowing, without any duty to make any investigation with regard thereto.

SECTION 7.03. 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, Registrar, co-
registrar or co-paying agent may do the same with like rights. However, the
Trustee must comply with Sections 7.10 and 7.11.

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SECTION 7.04. 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, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it 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 7.05. Notice of Defaults. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to each
Holder notice of the Default within 90 days after it occurs. Except in the
case of a Default in payment of principal of or interest on any Security
(including payments pursuant to the mandatory redemption provisions of such
Security, if any), the Trustee may withhold the notice if and so long as the
Trustee in good faith determines that withholding the notice is in the
interests of Holders.

SECTION 7.06. 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 15 in each year, the Trustee
shall mail to each Holder a brief report dated as of such date that complies
with TIA Section 313(a). The Trustee also shall comply with TIA Sections
313(b) and 313(c).

A copy of each report at the time of its mailing to Holders shall
be filed with the Commission and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any
delisting thereof.

SECTION 7.07. Compensation and Indemnity. The Company shall pay
to the Trustee promptly upon request from time to time the compensation for its
services as agreed to by the Trustee and the Company. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee promptly upon request
for all reasonable out-of-pocket expenses incurred or made by it, including
costs of collection, in addition to the compensation for its services. Such
expenses shall include the reasonable compensation and 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 or
reasonable expense (including reasonable attorneys' fees) incurred by it in
connection with the acceptance and administration of this trust and the
performance of its duties hereunder. 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 may have
separate counsel and the Company shall pay the fees and expenses of such
counsel. 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. The Company need not pay for any
settlement made by the Trustee without the Company's consent, such consent not
to be unreasonably withheld.

To secure the Company's payment obligations in this Section, 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 and interest on particular Securities.

The Company's payment obligations pursuant to this Section shall
survive the discharge of this Indenture. When the Trustee incurs expenses
after the occurrence of a Default specified in Section 6.01(f) or (g) with
respect to the Company, the expenses are intended to constitute expenses of
administration under the Bankruptcy Law.

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SECTION 7.08. 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:

(1) the Trustee fails to comply with Section 7.10;

(2) the Trustee is adjudged bankrupt or insolvent;

(3) a receiver or other public officer takes charge of the
Trustee or its property; or

(4) the Trustee otherwise becomes incapable of acting.

If the Trustee resigns, 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 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 7.07.

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 10% in principal amount of the Securities may petition any court of
competent jurisdiction for the appointment of a successor Trustee.

If the Trustee fails to comply with Section 7.10, 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, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.

SECTION 7.09. 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 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; and in all such cases such certificates shall
have the full force which it is anywhere in the Securities or in this Indenture
provided that the certificate of the Trustee shall have.

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SECTION 7.10. Eligibility; Disqualification. The Trustee shall
at all times satisfy the requirements of TIA Section 310(a). The Trustee shall
have a combined capital and surplus of at least $50,000,000 as set forth in its
most recent published annual report of condition. The Trustee shall comply
with TIA Section 310(b); provided, however, that there shall be excluded from
the operation of TIA Section 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 Section 310(b)(1) are met.

SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.

ARTICLE 8

Discharge of Indenture; Defeasance

SECTION 8.01. Discharge of Liability on Securities.

(a) When (i) the Company delivers to the Trustee all outstanding
Securities (other than Securities replaced pursuant to Section 2.06) for
cancellation or (ii) all outstanding Securities have become due and payable,
whether at maturity or as a result of the mailing of a notice of redemption
pursuant to Article 3 hereof and the Company irrevocably deposits with the
Trustee cash in U.S. dollars, U.S. Government Obligations or a combination
thereof sufficient to pay at maturity or upon redemption all outstanding
Securities, including premium and interest thereon to maturity or such
redemption date (other than Securities replaced pursuant to Section 2.06), and
premium, if any, and if in either case the Company pays all other sums payable
hereunder by the Company, then this Indenture shall, subject to Sections
8.01(b), cease to be of further effect. The Trustee shall acknowledge
satisfaction and discharge of this Indenture on demand of the Company
accompanied by an Officers' Certificate and an Opinion of Counsel and at the
cost and expense of the Company.

(b) Notwithstanding subsection (a) above, the Company's obligations in
Sections 2.03, 2.04, 2.05, 2.06, 7.07, 7.08, 8.05, 8.06 and 8.07 shall survive
until the Securities have been paid in full. Thereafter, the Company's
obligations in Sections 7.07, 8.05 and 8.06 shall survive.

SECTION 8.02 Defeasance.

(a) Subject to Sections 8.02(d) and 8.03, the Company at any time may
terminate (i) all its obligations under the Securities and this Indenture
("legal defeasance option") or (ii) its obligations under Sections 4.03, 4.04,
4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.12, 4.15, 5.01(a)(E) and 5.01(a)(F) and
the operation of Sections 6.01(d), 6.01(e), 6.01(f) and 6.01(g) (but, in the
case of Sections 6.01(f) and (g), with respect only to Significant
Subsidiaries) ("covenant defeasance option"). The Company may exercise its
legal defeasance option notwithstanding its prior exercise of its covenant
defeasance option.

(b) If the Company exercises its legal defeasance option, payment of
the Securities may not be accelerated because of an Event of Default. If the
Company exercises its covenant defeasance option, payment of the Securities may
not be accelerated because of an Event of Default specified in Sections
6.01(d), 6.01(e), 6.01(f) and 6.01(g) (but, in the case of Sections 6.01(f) and
(g), with respect only to Significant Subsidiaries). If the Company

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exercises its legal defeasance option or its covenant defeasance option, each
Subsidiary Guarantor shall be released from all its obligations under its
Subsidiary Guaranty.

(c) Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.

(d) Notwithstanding subsection (a) above, the Company's obligations
in Sections 2.03, 2.04, 2.05, 2.06, 7.07, 7.08, 8.05, 8.06 and 8.07 shall
survive until the Securities have been paid in full. Thereafter, the Company's
obligations in Section 7.07, 8.05 and 8.06 shall survive.

SECTION 8.03. Conditions to Defeasance. The Company may
exercise its legal defeasance option or its covenant defeasance option only if:

(1) the Company irrevocably deposits in trust with the Trustee
cash in U.S. dollars, U.S. Government Obligations or a combination
thereof for the payment of principal of, interest on and premium, if
any, on the Securities to maturity or redemption, as the case may be;

(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and without
reinvestment on the deposited U.S. Government Obligations plus any
deposited money without investment will provide cash at such times and
in such amounts as will be sufficient to pay principal, premium and
interest when due on all the Securities to maturity or redemption, as
the case may be;

(3) 123 days pass after the deposit is made and during the 123-
day period no Default specified in Sections 6.01(f) or (g) with respect
to the Company occurs which is continuing at the end of the period;

(4) the deposit does not constitute a default under any other
agreement binding on the Company and is not prohibited by Article 10;

(5) the Company delivers to the Trustee an Opinion of Counsel to
the effect that the trust resulting from the deposit does not
constitute, or is qualified as, a regulated investment company under the
Investment Company Act of 1940;

(6) in the case of the legal defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (i) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (ii) since the date of this Indenture there
has been a change in the applicable Federal income tax law, in either
case to the effect that, and based thereon such Opinion of Counsel shall
confirm that, the Holders will not recognize income, gain or loss for
Federal income tax purposes as a result of such defeasance and will be
subject to Federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such defeasance had
not occurred;

(7) in the case of the covenant defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders will not recognize income, gain or loss for Federal
income tax purposes as a result of such covenant defeasance and will be
subject to Federal income tax on the same amounts,

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in the same manner and at the same times as would have been the case if
such covenant defeasance had not occurred; and

(8) the Company delivers to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent to
the defeasance and discharge of the Securities as contemplated by this
Article 8 have been complied with.

Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date
in accordance with Article 3.

SECTION 8.04. Application of Trust Money. The Trustee shall
hold in trust money or U.S. Government Obligations deposited with it pursuant
to this Article 8. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal, premium and interest on the Securities.

SECTION 8.05. Repayment to Company. The Trustee and the Paying
Agent shall promptly turn over to the Company upon request any excess money or
securities held by them at any time.

Subject to any applicable abandoned property law, the Trustee and
the Paying Agent shall pay to the Company upon Order any money held by them for
the payment of principal of, premium, if any, or interest on any Securities
that remains unclaimed for two years after the date upon which such payment
shall have become due; provided, however, that the Company shall cause to be
published at least once in a newspaper of general circulation in The City of
New York or mailed to each Holder entitled to such unclaimed funds, notice that
such funds remain unclaimed and that, after a date specified therein, which
shall be a date not less than 30 days from the date of such publication or
mailing, any unclaimed balance of such money remaining as of such date shall be
repaid to the Company. After repayment to the Company, Holders entitled to
such funds shall look only to the Company for payment without interest thereon,
as an unsecured general creditor, and the Trustee and the Paying Agent shall
have no further liability with respect to such money.

SECTION 8.06. Indemnity for Government Obligations. The Company
shall pay and shall indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against deposited U.S. Government Obligations or the
principal and interest received on such U.S. Government Obligations.

SECTION 8.07. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with
this Article 8 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article 8 until such time as the Trustee
or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article 8; provided, however, that, if the
Company has made any payment of interest on or principal of any Securities
because of 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 or U.S. Government Obligations held by the Trustee or
Paying Agent.

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ARTICLE 9

Amendments

SECTION 9.01. Without Consent of Holders.

(a) The Company, the Subsidiary Guarantors and the Trustee may
amend this Indenture or the Securities without notice to or consent of any
Holder:

(i) to cure any ambiguity, omission, defect or
inconsistency;

(ii) to provide for the assumption of the obligations of
the Company under this Indenture upon the merger, consolidation
or sale or other disposition of all or substantially all of the
assets of the Company and its Restricted Subsidiaries taken as a
whole and certain other events specified in Section 5.01;

(iii) to provide for uncertificated Securities in
addition to or in place of certificated Securities;

(iv) to comply with any requirement of the Commission in
order to effect or maintain the qualification of this Indenture
under the TIA;

(v) to make any change that does not adversely affect the
rights of any Holder of Securities in any material respect;

(vi) to add or remove Subsidiary Guarantors pursuant to
the procedures set forth in this Indenture; and

(vii) 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.

(b) An amendment under this Section may not make any change
that adversely affects the rights under Article 10 or Article 12 of any holder
of Senior Indebtedness of the Company or any Subsidiary Guarantor then
outstanding unless the holders of such Senior Indebtedness (or any group or
representative thereof authorized to give a consent) consent to such change in
writing.

(c) After an amendment under this Section 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.

SECTION 9.02. With Consent of Holders.

(a) The Company, the Subsidiary Guarantors and the Trustee, with
the written consent of the Holders of at least a majority of the principal
amount of the Securities, may

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execute supplemental indentures or amendments adding any provisions to or
changing or eliminating any of the provisions of this Indenture or modifying
the rights of the Holders of the Securities, except that no supplemental
indenture, amendment or wavier, without the consent of each Holder affected
thereby, may:

(i) reduce the principal amount of Securities whose
Holders must consent to an amendment or waiver;

(ii) reduce the rate of or extend the time for payment of
interest on any Securities;

(iii) change the currency in which any amount due in
respect of the Securities is payable;

(iv) reduce the principal of or any premium on or change
the Stated Maturity of any Securities or alter the redemption or
repurchase provisions with respect thereto;

(v) reduce the relative ranking of any Securities;

(vi) release any security that may have been granted in
respect of the Securities;

(vii) make any change in Article 10 or Article 12 that
adversely affects the rights of any Holder under Article 10 or
Article 12;

(viii) impair the right of any Holder to institute suit
for enforcement of any payment on or with respect to such
Holder's Securities or any Subsidiary Guaranty; or

(ix) make any change in Sections 6.04, 6.07 or 9.02.

(b) It shall not be necessary for the consent of the Holders
under this Section to approve the particular form of any proposed amendment,
but it shall be sufficient if such consent approves the substance thereof.

(c) An amendment under this Section may not make any change
that adversely affects the rights under Article 10 or Article 12 of any holder
of Senior Indebtedness of the Company or any Subsidiary Guarantor then
outstanding unless the holders of such Senior Indebtedness (or any group or
representative thereof authorized to give a consent) consent to such change in
writing.

(d) After an amendment under this Section 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.

SECTION 9.03. Compliance with Trust Indenture Act. Every
amendment to this Indenture or the Securities shall comply with the Trust
Indenture Act as then in effect.

SECTION 9.04. Revocation and Effect of Consents and Waivers.

(a) 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

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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. After an
amendment or waiver becomes effective, it shall bind every Holder. An
amendment or waiver becomes effective upon the execution of such amendment or
waiver by the Trustee.

(b) 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 subsection, those Persons who were
Holders at such record date (or their duly designated proxies), and only those
Persons, shall be entitled to give 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 be valid
or effective for more than 120 days after such record date.

SECTION 9.05. 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 9.06. Trustee To Sign Amendments. The Trustee shall
sign any amendment authorized pursuant to this Article 9 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 indemnity reasonably
satisfactory to it and to receive, and (subject to Section 7.01) 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.

SECTION 9.07. Payment for Consent. Neither the Company nor any
Affiliate of the Company shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.

ARTICLE 10

Subordination of the Securities

SECTION 10.01 Agreement to Subordinate.

Notwithstanding any other provision to the contrary in this Indenture,
the Company covenants and agrees, and each Holder by accepting a Security
covenants and agrees, that the principal of (and premium, if any) and interest
on the Indebtedness now or hereafter evidenced by the Securities and this
Indenture are subordinated in right of payment, to the extent and in the manner
provided in this Article, to the prior payment in full in cash of all

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existing and future Senior Indebtedness, and that the subordination provisions
set forth in this Article are for the benefit of, and shall be enforceable
directly by, the holders of Senior Indebtedness.

Each Holder authorizes and directs the Trustee on such Holder's behalf
to take such action as may be necessary or appropriate, in the sole discretion
of the Trustee, to acknowledge or effectuate the subordination between the
Holders and the holders of Senior Indebtedness as provided in this Article and
appoints the Trustee as such Holder's attorney-in-fact for any and all such
purposes, including, in the event of any voluntary or involuntary liquidation
or dissolution of the Company, whether total or partial, or in a bankruptcy,
reorganization, insolvency, receivership, dissolution, assignment for the
benefit of creditors, marshalling of assets or similar proceeding relating to
the Company or its property, the timely filing of a claim for the unpaid
balance of such Holder's Securities in the form required in said proceeding and
cause said claim to be approved. If the Trustee does not file a proper claim
or proof of debt in the form required in such proceeding prior to 20 days
before the expiration of the time to file such claim or claims, then the
Principal Agent is hereby authorized to have the right to file and is hereby
authorized to file an appropriate claim for and on behalf of the Holders;
provided, however, that any such claim filed by the Principal Agent shall be
superseded by the claim, if any, subsequently filed by the Trustee.

Each Holder by accepting a Security acknowledges and agrees that the
subordination provision set forth in this Article are, and are intended to be,
an inducement and consideration to each holder of any Senior Indebtedness,
whether such Senior Indebtedness was created before or after the issuance of
the Securities, to acquire and continue to hold, or to continue to hold, such
Senior Indebtedness, and such holder of Senior Indebtedness shall be deemed
conclusively to have relied upon such subordination provisions in acquiring and
continuing to hold, or in continuing to hold, such Senior Indebtedness, and
such holder is made an obligee hereunder and may enforce directly such
subordination provisions.

SECTION 10.02 Liquidation; Dissolution; Bankruptcy

Upon any payment or distribution (whether in cash, property, debt,
equity or other securities, a combination thereof or otherwise) to creditors or
equity holders of the Company in a voluntary or involuntary liquidation or
dissolution of the Company, whether total or partial, or in bankruptcy,
reorganization, insolvency, receivership, dissolution, assignment for the
benefit of creditors, marshalling of assets or similar proceeding relating to
the Company or its property:

(a) holders of Senior Indebtedness shall be entitled to
receive payment in full in cash of all amounts due or to become due on
or in respect of all Senior Indebtedness before Holders shall be
entitled to receive any Security Payment (as defined in Section
10.03(a)); and

(b) until all Senior Indebtedness is paid in full in cash, any
Security Payment (as defined in Section 10.03(a)) to which Holders would
be entitled but for this Article shall be made to holders of Senior
Indebtedness, as their interests may appear.

Upon any prepayment, payment or distribution referred to in this
Article, the Trustee and the Holders shall be entitled to rely upon any order
or decree of a court of competent jurisdiction in which such proceedings are
pending for the purpose of ascertaining the identity of Persons entitled to
participate in such payment or distribution, the holders of Senior
Indebtedness, the amount thereof or payable thereon and all other facts
pertinent

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thereto or to this Article, and the Trustee and the Holders shall be entitled
to rely upon a certificate of the liquidating trustee or agent or other Person
(including any Representative of holders of Senior Indebtedness) making any
payment or distribution to the Trustee or to the Holders for the purpose of
ascertaining the identity of Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article. In the event that the Trustee determines
in good faith that further evidence is required with respect to the right of
any Person, as a holder of Senior Indebtedness, to participate in any payment
or distribution pursuant to this Section, the Trustee may requires such Person
(at the expense of the Holders) to furnish evidence to the reasonable
satisfaction of the Trustee, acting in good faith, as to the amount of such
Senior Indebtedness held by such Person, as to the extent to which such Person
is entitled to participate in such payment or distribution, and as to other
facts pertinent to the rights of such Person under this Section, and if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive
payment.

For purposes of this Article, a distribution may consist of cash,
securities or other property, by set-off or otherwise; provided that, for
purposes of this Article only, the words "cash, securities or other property"
shall not be deemed to include securities of the Company or any other
corporation ("Reorganization Securities") provided for by a plan of
reorganization or readjustment of the Company the payment of which is
subordinated, at least to the extent provided in this Article with respect to
the Securities, to the payment of all Senior Indebtedness that may at the time
be outstanding; provided, further, that (a) all Senior Indebtedness is assumed
by the new corporation, if any, resulting from any such reorganization or
readjustment, (b) no right, remedy, power, privilege or Lien of any holder of
Senior Indebtedness is, without the consent of such holder, altered by such
reorganization or readjustment, (c) the stated maturity date of the
Reorganization Securities is not earlier than the later of the stated maturity
date of the Securities or two years after the stated maturity of the Senior
Indebtedness, (d) no amortization of principal of Reorganization Securities is
required prior to the stated maturity date of the Reorganization Securities,
(e) the interest rate on the Reorganization Securities is not greater than the
nondefault interest rate on the Securities, (f) no scheduled interest payments
on the Reorganization Securities shall be made in cash while the Senior
Indebtedness is outstanding, (g) the principal amount of the Reorganization
Securities on the date of issuance thereof does not exceed the outstanding
principal amount of the Securities on the date of commencement of the
bankruptcy case pursuant to which the Reorganization Securities are issued, (h)
the circumstances requiring redemption or defeasance of the Reorganization
Securities are not broader than those requiring redemption or defeasance of the
Securities and (i) the covenants, representations and warranties and events of
default applicable to the Reorganization Securities are not materially more
restrictive or burdensome than those contained in this Indenture.

The consolidation or merger of the Company with or into any Person, or
the sale, assignment, transfer, lease, conveyance or other disposition of all
or substantially all of the Company's assets to any Person, upon the terms and
conditions set forth in Article 5, shall not be deemed to be liquidation,
dissolution or reorganization or similar proceeding relating to the Company for
purposes of this Section if the Person formed by or surviving such
consolidation or merger, or to which such sale, assignment, transfer, lease,
conveyance or other disposition is made, shall, as a part of such
consolidation, merger, sale, assignment, transfer, lease, conveyance or other
disposition, comply with the conditions set forth in Article 5.

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SECTION 10.03 Default on Senior Indebtedness.

(a) Upon any Senior Indebtedness becoming due and payable,
whether at the stated maturity thereof or by acceleration or otherwise,
such Senior Indebtedness shall first be irrevocably and indefeasibly
paid in full in cash, or the immediate payment thereof duly provided for
in cash, before the Company or any Person acting on behalf of the
Company shall directly or indirectly pay, prepay, redeem, retire,
repurchase or otherwise acquire for value, or make any deposit pursuant
to Article 8 in respect of, or make any other prepayment, payment or
distribution (whether in cash, property, securities or a combination
thereof or otherwise) on account of the principal of (or premium, if
any) or interest on, any Securities (each, a "Security Payment").

(b) No Security Payment shall be made if, at the time of such
Security Payment there exists a default in payment of all or any portion
of any principal of (and premium, if any) and interest and fees,
expenses, costs and other obligations on Senior Indebtedness, and such
default shall not have been cured or waived in writing or the benefits
of this sentence waived in writing by or on behalf of the holders of
such Senior Indebtedness.

(c) In addition, during the continuance of any event of
default (other than a default referred to in subsection (b) of this
Section 10.03) with respect to any Specified Senior Indebtedness, as
such event of default is defined therein or in the instrument under
which such Specified Senior Indebtedness is outstanding, permitting the
holders of such Specified Senior Indebtedness to accelerate the maturity
thereof under the terms of such Specified Senior Indebtedness, and upon
written notice of such event of default given by the Principal Agent to
the Trustee, with a copy to the Company (the delivery of such shall not
affect the validity of the notice to the Trustee), then, unless and
until such event of default shall have been cured or waived or shall
have ceased to exist, no Security Payment shall be made; provided, that
if the holders of the Specified Senior Indebtedness to which the default
relates have not declared such Specified Senior Indebtedness to be
immediately due and payable within 179 days after the occurrence of such
default (or have declared such Specified Senior Indebtedness to be
immediately due and payable and within such period have rescinded such
declaration of acceleration), then, subject to the provisions of Section
10.02 and 10.03(a), the Company shall resume making any and all unpaid
scheduled Security Payments. Any period during which any Security
Payment is prohibited pursuant to the immediately preceding sentence is
referred to in this Article as a "payment blockage period."
Notwithstanding any other provisions of this Article or any other
provision of this Indenture, in no event shall a payment blockage period
under this Article extend beyond 179 days from the date on which such
payment blockage period commenced. Not more than one payment blockage
period may be commenced within any consecutive 365-day period with
respect to the Securities. For all purposes of this Article, no event
of default that existed or was continuing on the date of the
commencement of any payment blockage period with respect to the
Specified Senior Indebtedness initialing such payment blockage period
shall be, or be made, the basis for the commencement of a second payment
blockage period by the holder or holders of such Specified Senior
Indebtedness at any time after the 365-day period referred to in the
previous sentence unless such event of default shall have been cured or
waived for a period of not less than 90 consecutive days.

(d) The Company covenants that it will, upon request of the
Trustee, deliver an Officers' Certificate (with copies thereof to the
Representative of each class of Senior Indebtedness) showing in
reasonable detail the Senior Indebtedness

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outstanding as of the date of such Officers' Certificate and the
Representative of each class of Senior Indebtedness. The Trustee may
conclusively rely thereon except to the extent that it shall have
received, from the Representative of any class of Senior Indebtedness,
notice in writing controverting any of the statements made therein. Not
less than 10 days prior to making any distribution in respect of Senior
Indebtedness pursuant to this Section, the Trustee shall deliver to each
Representative of any class of Senior Indebtedness copies of the most
recent Officers' Certificate filed with it by the Company pursuant to
this subsection (d).

(e) In the event that the Securities are declared due and
payable before their Stated Maturity in accordance with Article 6, then
and in such event the holders of Senior Indebtedness outstanding at the
time the Securities so become due and payable shall be entitled to
receive payment in full in cash of all amounts due or to become due on
or in respect of such Senior Indebtedness (whether or not an event of
default has occurred thereunder or such Senior Indebtedness is, or has
been declared to be, due and payable prior to the date on which it
otherwise would ave become due and payable) before the Holders shall be
entitled to receive any Security Payment.

SECTION 10.04 Security Payments Permitted if No Default.

Nothing contained in this Article or elsewhere in this Indenture, or in
any of the Securities, shall prevent the Company or any Person acting on behalf
of the Company, at any time except as otherwise provided in Section 10.02 from
making any Security Payment.

SECTION 10.05 When Security Payment Must Be Paid Over.

In the event that any Security Payment is made to the Trustee or the
Holders that, because of this Article, should not have been so made or may not
be paid over to the Holders, such Security Payment shall be held by the Trustee
or the Holders who receive such Security Payment, as the case may be, for the
benefit of, and shall forthwith be paid over or delivered to, the holders of
the Senior Indebtedness remaining unpaid or their Representatives, as their
interests may appear, to the extent necessary to irrevocably and indefeasibly
pay such Senior Indebtedness in full in cash in accordance with its terms,
after giving effect to any concurrent payment or distribution to or for the
holders of such Senior Indebtedness.

SECTION 10.06 Notices by the Company.

The Company shall promptly notify the Trustee, each Paying Agent and the
Principal Agent of any facts known to the Company that would cause a Security
Payment to violate this Article, but failure to give such notice shall not
affect the subordination provided in this Article of the Securities to Senior
Indebtedness. Without limiting the foregoing, if payment of the Securities is
accelerated because of an Event of Default, the Company shall promptly notify
the Principal Agent of the acceleration.

SECTION 10.07 Subrogation.

After all Senior Indebtedness is irrevocably and indefeasibly paid in
full in cash and until the Securities are paid in full, Holders shall be
subrogated to the rights of holders of Senior Indebtedness to receive
distributions applicable to Senior Indebtedness to the extent that
distributions otherwise payable to Holders have been applied to the payment of
Senior Indebtedness. A distribution made under this Article to holders of
Senior Indebtedness which otherwise would have been made to Holders is not, as
between the Company and the Holders, payment by the Company on Senior
Indebtedness.

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SECTION 10.08 Relative Rights.

This Article defines the relative rights of Holders and holders of
Senior Indebtedness. Nothing in this Indenture shall:

(a) impair, as between the Company and the Holders, the
obligation of the Company, which is absolute and unconditional, to pay
the principal of (and premium, if any) and interest on the Securities in
accordance with their terms;

(b) affect the relative rights of Holders and creditors of the
Company other than holders of Senior Indebtedness; or

(c) prevent the Trustee or any Holder from exercising its
available remedies upon a Default or Event of Default, subject to the
rights of holders of Senior Indebtedness to receive prepayment, payments
and distributions otherwise payable to Holders.

If the Company fails because of this Article to pay the principal of (or
premium, if any) or interest on a Security on the due date or upon the
acceleration thereof, the failure is still a Default or Event of Default.

SECTION 10.09 Subordination May Not Be Impaired by the Company.

No right of any holder of Senior Indebtedness to enforce the
subordination of the Indebtedness evidenced by the Securities shall be impaired
by (a) any act or failure to act by the Company or by its failure to comply
with this Indenture, (b) any release of any collateral or any guarantor or any
Person of the Company's obligations under the Senior Indebtedness, (c) any
amendment, supplement, extension, renewal, restatement or other modification of
the Senior Indebtedness, (d) any settlement or compromise of any Senior
Indebtedness, (e) the unenforceability of any of the Senior Indebtedness or (f)
the failure of any holder of Senior Indebtedness to pursue claims against the
Company.

SECTION 10.10 Distribution of Notice to Representative.

Whenever a distribution is to be made or a notice given to holders of
Senior Indebtedness, the distribution may be made and the notice given to their
Representative (if any).

SECTION 10.11 Rights of Trustee and Paying Agent.

The Trustee or any Payment Agent may continue to make payments in
respect of the Securities and shall not be charged with knowledge of the
existence of facts that would prohibit the making of any such payment unless,
not less than three Business Days prior to the date of any such payment, a
Responsible Officer of the Trustee receives written notice reasonably
satisfactory to it that payments in respect of the Securities may not be made
under this Article. Only the Company, a Representative (satisfactorily
identified to the Trustee) or a holder of a class of Senior Indebtedness that
has no Representative (satisfactorily identified to the Trustee) may give the
notice. Prior to the receipt of such notice, the Trustee and any Paying Agent
shall be entitled in all respects to assume that no such facts exist. In any
case, the Trustee shall have no responsibility to the holders of Senior
Indebtedness for payments made to Holders by the Company or any Paying Agent
unless cash payments are made at the direction of the Trustee after receipt of
such notice referred to above.

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Neither the Trustee nor any Payment Agent shall be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness.

The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have it were not Trustee.

This Section is solely for the benefit of the Trustee and any Payment
Agents and shall not limit the obligations of the Holders under Section 10.05.

SECTION 10.12 Consent of Holders of Specified Senior Indebtedness.

The provisions of this Article (including the definitions contained in
this Article and references to this Article contained in this Indenture) shall
not be amended, waived or modified in a manner that would adversely affect the
rights of the holders of any Specified Senior Indebtedness, and no such
amendment, waiver or modification shall become effective, unless the holders of
such Specified Senior Indebtedness shall have consented in writing (in
accordance with the provisions of the agreement governing such Specified Senior
Indebtedness) to such amendment, waiver or modification.

SECTION 10.13 Contractual Subordination.

This Article 10 represents a bona fide agreement of contractual
subordination pursuant to Section 510(b) of the United States Bankruptcy Code.

ARTICLE 11

Subsidiary Guaranties

SECTION 11.01. Guaranties. Each Subsidiary Guarantor hereby
unconditionally and irrevocably guarantees, jointly and severally, to each
Holder and to the Trustee and its successors and assigns (a) the full and
punctual payment of principal of, premium, if any, and interest on the
Securities when due, whether at maturity, by acceleration, by redemption or
otherwise, and all other monetary obligations of the Company under this
Indenture and the Securities and (b) the full and punctual performance within
applicable grace periods of all other obligations of the Company under this
Indenture and the Securities (all the foregoing being hereinafter collectively
called the "Obligations"). Each Subsidiary Guarantor further agrees that the
Obligations may be extended or renewed, in whole or in part, without notice or
further assent from such Subsidiary Guarantor and that such Subsidiary
Guarantor will remain bound under this Article 11 notwithstanding any extension
or renewal of any Obligation.

Each Subsidiary Guarantor waives presentation to, demand of, payment
from and protest to the Company of any of the Obligations and also waives
notice of protest for nonpayment. Each Subsidiary Guarantor waives notice of
any default under the Securities or the Obligations. The obligations of each
Subsidiary Guarantor hereunder shall not be affected by (a) the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any right or
remedy against the Company or any other Person under this Indenture, the
Securities or any other agreement or otherwise; (b) any extension or renewal of
any thereof; (c) any rescission, waiver, amendment or modification of any of
the terms or provisions of this Indenture, the Securities or any other
agreement; (d) the release of any security held by any Holder or the Trustee
for the Obligations or any of them; (e) the failure of any Holder or the
Trustee to exercise any right or remedy against any other guarantor of the
Obligations; or (f) any change in the ownership of such Subsidiary Guarantor.

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Each Subsidiary Guarantor further agrees that its Subsidiary Guaranty
herein constitutes a guarantee of payment, performance and compliance when due
(and not a guarantee of collection) and waives any right to require that any
resort be had by any Holder or the Trustee to any security held for payment of
the Obligations.

Each Subsidiary Guaranty is, to the extent and in the manner set forth
in Article 12, subordinated and subject in right of payment to the prior
payment in full of the principal of and premium, if any, and interest on all
Senior Indebtedness of the Subsidiary Guarantor giving such Subsidiary Guaranty
and each Subsidiary Guaranty is made subject to such provisions of this
Indenture.

Except as expressly set forth in Sections 8.02, 11.02 and 11.06, the
obligations of each Subsidiary Guarantor hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, including any
claim of waiver, release, surrender, alteration or compromise, and shall not be
subject to any defense of setoff, counterclaim, recoupment or termination
whatsoever or by reason of the invalidity, illegality or unenforceability of
the Obligations or otherwise. Without limiting the generality of the
foregoing, the obligations of each Subsidiary Guarantor herein shall not be
discharged or impaired or otherwise affected by the failure of any Holder or
the Trustee to assert any claim or demand or to enforce any remedy under this
Indenture, the Securities or any other agreement, by any waiver or modification
of any thereof, by any default, failure or delay, willful or otherwise, in the
performance of the Obligations, or by any other act or thing or omission or
delay to do any other act or thing which may or might in any manner or to any
extent vary the risk of such Subsidiary Guarantor or would otherwise operate as
a discharge of such Subsidiary Guarantor as a matter of law or equity.

Each Subsidiary Guarantor further agrees that its Subsidiary Guaranty
herein shall continue to be effective or be reinstated, as the case may be, if
at any time payment, or any part thereof, of principal of, premium, if any, or
interest on any Obligation is rescinded or must otherwise be restored by any
Holder or the Trustee upon the bankruptcy or reorganization of the Company or
otherwise.

In furtherance of the foregoing and not in limitation of any other right
which any Holder or the Trustee has at law or in equity against any Subsidiary
Guarantor by virtue hereof, upon the failure of the Company to pay the
principal of, premium, if any, or interest on any Obligation when and as the
same shall become due, whether at maturity, by acceleration, by redemption or
otherwise, or to perform or comply with any other Obligation, each Subsidiary
Guarantor hereby promises to and will, upon receipt of written demand by the
Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the
Trustee an amount equal to the sum of (i) the unpaid amount of such
Obligations, (ii) accrued and unpaid interest on such Obligations (but only to
the extent not prohibited by law) and (iii) all other monetary Obligations of
the Company to the Holders and the Trustee.

Each Subsidiary Guarantor agrees that it shall not be entitled to any
right of subrogation in respect of any Obligations guaranteed hereby until
payment in full of all Obligations and all obligations to which the Obligations
are subordinated as provided in Article 12. Each Subsidiary Guarantor further
agrees that, as between it, on the one hand, and the Holders and the Trustee,
on the other hand, (x) the maturity of the Obligations Guaranteed hereby may be
accelerated as provided in Article 6 for the purposes of such Subsidiary
Guarantor's Subsidiary Guaranty herein, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the Obligations
guaranteed hereby, and (y) in the event of any declaration of acceleration of
such Obligations as provided in Article 6, such Obligations (whether or not due
and payable) shall forthwith become due and payable by such Subsidiary
Guarantor for the purposes of this Section.

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Each Subsidiary Guarantor also agrees to pay any and all costs and
expenses (including reasonable attorneys' fees) incurred by the Trustee or any
Holder in enforcing any rights under this Section.

SECTION 11.02. Limitation on Liability. Any term or provision of
this Indenture to the contrary notwithstanding, the maximum aggregate amount of
the obligations guaranteed hereunder by any Subsidiary Guarantor shall not
exceed the maximum amount that can be hereby guaranteed without rendering this
Indenture, as it relates to such Subsidiary Guarantor, voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally. To effectuate the
foregoing intention, the obligations of each Subsidiary Guarantor shall be
limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Subsidiary Guarantor and after giving
effect to any collections from or payments made by or on behalf of any other
Subsidiary Guarantor in respect of the obligations of such other Subsidiary
Guarantor under its Subsidiary Guaranty or pursuant to its contribution
obligations hereunder, result in the obligations of such Subsidiary Guarantor
under its Subsidiary Guaranty not constituting a fraudulent conveyance or
fraudulent transfer under federal, state or foreign law. Each Subsidiary
Guarantor that makes a payment or distribution under a Subsidiary Guaranty
shall be entitled to a contribution from each other Subsidiary Guarantor in a
pro rata amount based on the Adjusted Net Assets of each Subsidiary Guarantor.

SECTION 11.03. Successors and Assigns. This Article 11 shall be
binding upon each Subsidiary Guarantor and its successors and assigns and shall
enure to the benefit of the successors and assigns of the Trustee and the
Holders and, in the event of any transfer or assignment of rights by any Holder
or the Trustee, the rights and privileges conferred upon that party in this
Indenture and in the Securities shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions of this
Indenture.

SECTION 11.04. No Waiver. Neither a failure nor a delay on the
part of either the Trustee or the Holders in exercising any right, power or
privilege under this Article 11 shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise of
any right, power or privilege. The rights, remedies and benefits of the
Trustee and the Holders herein expressly specified are cumulative and not
exclusive of any other rights, remedies or benefits which either may have under
this Article 11 at law, in equity, by statute or otherwise.

SECTION 11.05. Modification. No modification, amendment or waiver of
any provision of this Article 11, nor the consent to any departure by any
Subsidiary Guarantor therefrom, shall in any event be effective unless the same
shall be in writing and signed by the Trustee, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on any Subsidiary Guarantor in any case shall
entitle such Subsidiary Guarantor to any other or further notice or demand in
the same, similar or other circumstances.

SECTION 11.06. Release of Subsidiary Guarantor. Any Subsidiary
Guarantor that is no longer a Significant Subsidiary may, by execution and
delivery to the Trustee of a supplemental indenture satisfactory to the Trustee
(attaching the calculations to demonstrate such status), be released from its
Subsidiary Guaranty and cease to be a Subsidiary Guarantor. Any Subsidiary
Guarantor that is designated an Unrestricted Subsidiary pursuant to and in
compliance with the terms of this Indenture shall be released from and relieved
of its obligations under its Subsidiary Guaranty upon execution and delivery of
a supplemental indenture satisfactory to the Trustee. Such supplemental
indenture shall be accompanied by an Officers' Certificate and an Opinion of
Counsel, each stating that such supplemental indenture and release of the
Subsidiary Guaranty complies with the provisions of this

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Indenture and that all conditions precedent to such supplemental indenture and
release of the Subsidiary Guaranty have been complied with.

SECTION 11.07. Execution of Supplemental Indenture for Future
Subsidiary Guarantors. Each Subsidiary which is required to become a
Subsidiary Guarantor pursuant to Section 4.12 shall, and the Company shall
cause each such Subsidiary to, promptly execute and deliver to the Trustee a
supplemental indenture in the form of Exhibit B hereto pursuant to which such
Subsidiary shall become a Subsidiary Guarantor under this Article 11 and shall
guarantee the Obligations. Concurrently with the execution and delivery of
such supplemental indenture, the Company shall deliver to the Trustee an
Opinion of Counsel to the effect that such supplemental indenture has been duly
authorized, executed and delivered by such Subsidiary and that, subject to the
application of bankruptcy, insolvency, moratorium, fraudulent conveyance or
transfer and other similar laws relating to creditors' rights generally and to
the principles of equity, whether considered in a proceeding at law or in
equity, the Subsidiary Guaranty of such Subsidiary Guarantor is a legal, valid
and binding obligation of such Subsidiary Guarantor, enforceable against such
Subsidiary Guarantor in accordance with its terms.

ARTICLE 12

Subordination of Subsidiary Guaranties

SECTION 12.01 Agreement to Subordinate.

Notwithstanding any other provision to the contrary in this Indenture,
each Subsidiary Guarantor covenants and agrees, and each Holder by accepting a
Security covenants and agrees, that all payments by such Subsidiary Guarantor
in respect of its Subsidiary Guarantee are subordinated in right of payment, to
the extent and in the manner provided in this Article, to the prior payment in
full in cash of all existing and future Senior Indebtedness of such Subsidiary
Guarantor, and that the subordination provisions set forth in this Article are
for the benefit of, and shall be enforceable directly by, the holders of Senior
Indebtedness of such Subsidiary Guarantor.

Each Holder authorizes and directs the Trustee on such Holder's behalf
to take such action as may be necessary or appropriate, in the sole discretion
of the Trustee, to acknowledge or effectuate the subordination between the
Holders and the holders of Subsidiary Guarantor Senior Indebtedness as provided
in this Article and appoints the Trustee as such Holder's attorney-in-fact for
any and all such proposes, including, in the event of any voluntary or
involuntary liquidation or dissolution of a Subsidiary Guarantor, whether total
or partial, or in a bankruptcy, reorganization, insolvency, receivership,
dissolution, assignment of the benefit of creditors, marshalling of assets or
similar proceeding relating to a Subsidiary Guarantor or its property, the
timely filing of a claim for the unpaid balance of such Holder's Securities in
the form required in said proceeding and cause said claim to be approved. If
the Trustee does not file a property claim or proof to debt in the form
required in such proceeding prior to 20 days before the expiration of the time
to exile such claim or claims, then the Principal Subsidiary Indebtedness Agent
is hereby authorized to have the right to file and is hereby authorized to file
an appropriate claim for and on behalf of the Holders; provided, however, that
any such claim filed by such Principal Subsidiary Indebtedness Agent shall be
superseded by the claim, if any, subsequently filed by the Trustee.

Each Holder by accepting a Security acknowledges and agrees that the
subordination provisions set forth in this Article are, and are intended to be,
an inducement and

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consideration to each holder of any Subsidiary Guarantor Senior Indebtedness,
whether such Subsidiary Guarantor Senior Indebtedness was created before or
after the issuance of the Securities, to acquire and continue to hold, or to
continue to hold, such Subsidiary Guarantor Senior Indebtedness, and such
holder of Subsidiary Guarantor Senior Indebtedness shall be deemed conclusively
to have relied upon such subordination provisions in acquiring and continuing
to hold, or in continuing to hold, such Subsidiary Guarantor Senior
Indebtedness, and such holder is made an obligee hereunder and may enforce
directly such subordination provisions.

SECTION 12.02 Liquidation; Dissolution; Bankruptcy

Upon any payment or distribution (whether in cash, property, debt,
equity or other securities, a combination thereof or otherwise) to creditors or
equity holders of a Subsidiary Guarantor in a voluntary or involuntary
liquidation or dissolution of such Subsidiary Guarantor, whether total or
partial, or in bankruptcy, reorganization, insolvency, receivership,
dissolution, assignment for the benefit of creditors, marshalling of assets or
similar proceeding relating to such Subsidiary Guarantor or its property:

(a) holders of Subsidiary Guarantor Senior Indebtedness of
such Subsidiary Guarantor shall be entitled to receive payment in full
in cash of all amounts due or to become due on or in respect of all such
Subsidiary Guarantor Senior Indebtedness before Holders shall be
entitled to receive any payment by such Subsidiary Guarantor in respect
of its Subsidiary Guaranty or distribution of any assets or securities
of such Subsidiary Guarantor (each, a "Guaranty Payment"); and

(b) until all Subsidiary Guarantor Senior Indebtedness of such
Subsidiary Guarantor is paid in full in cash, any Guaranty Payment to
which Holders would be entitled but for this Article shall be made to
holders of Subsidiary Guarantor Senior Indebtedness of such Subsidiary
Guarantor, as their interests may appear.

Upon any payment or distribution referred to in this Article, the
Trustee and the Holders shall be entitled to rely upon any order or decree of a
court of competent jurisdiction in which such proceedings are pending for the
purpose of ascertaining the identity of Persons entitled to participate in such
payment or distribution, the holders of Subsidiary Guarantor Senior
Indebtedness, the amount thereof or payable thereon and all other facts
pertinent thereto or to this Article, and the Trustee and the Holders shall be
entitled to rely upon a certificate of the liquidating trustee or agent or
other Person (including any Representative of holders of Subsidiary Guarantor
Senior Indebtedness) making any payment or distribution to the Trustee or to
the Holders for the purpose of ascertaining the identity of Persons entitled to
participate in such payment or distribution, the holders of Subsidiary
Guarantor Senior Indebtedness, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article. In the event that the Trustee determines in good
faith that further evidence is required with respect to the right of any
Person, as a holder of Subsidiary Guarantor Senior Indebtedness, the
participate in any payment or distribution pursuant to this Section, the
Trustee may request such Person (as the expense of the Holders) to furnish
evidence to the reasonable satisfaction of the Trustee, acting in good faith,
as to the amount of such Subsidiary Guarantor Senior Indebtedness held by such
Person, as to the extent to which such Person is entitled to participate in
such payment or distribution, and as to the other facts pertinent to the rights
of such Person under this Section, and if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive payment.

For purposes of this Article, a distribution may consist of cash,
securities or other property, by set-off or otherwise, provided that, for
purposes of this Article only, the words

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"cash, securities or other property" shall not be deemed to include securities
of a Subsidiary Guarantor or any other corporation ("Subsidiary Guarantor
Reorganization Securities") provided for by a plan of reorganization or
readjustment of a Subsidiary Guarantor the payment of which is subordinated, at
least to the extent provided in this Article with respect to its Subsidiary
Guaranty, to the payment of all Subsidiary Guarantor Senior Indebtedness of
such Subsidiary Guarantor that may at the time be outstanding, provided,
further, that (a) all such Subsidiary Guarantor Senior Indebtedness is assumed
by the new corporation, if any, resulting from any such reorganization or
readjustment, (b) no right, remedy, power, privilege or Lien of any holder of
such Subsidiary Guarantor Senior Indebtedness is, without the consent of such
holder, altered by such reorganization or readjustment, (c) the stated maturity
date of the Subsidiary Guarantor Reorganization Securities is not earlier than
the later of the stated maturity date of the Securities or two years after the
stated maturity of such Subsidiary Guarantor Senior Indebtedness, (d) no
amortization of principal of Subsidiary Guarantor Reorganization Securities is
required prior to the stated maturity date of the Subsidiary Guarantor
Reorganization Securities, (e) the interest rate on the Subsidiary Guarantor
Reorganization Securities is not greater than the nondefault interest rate on
the Securities, (f) no scheduled interest payments on the Subsidiary Guarantor
Reorganization Securities shall be made in cash while such Subsidiary Guarantor
Senior Indebtedness is outstanding, (g) the principal amount of the Subsidiary
Guarantor Reorganization Securities on the date of issuance thereof does not
exceed the outstanding principal amount of the Securities on the date of
commencement of the bankruptcy case pursuant to which the Subsidiary Guarantor
Reorganization Securities are issued, (h) the circumstances requiring
redemption or defeasance of the Subsidiary Guarantor Reorganization Securities
are not broader than those requiring redemption or defeasance of the Securities
and (i) the covenants, representations and warranties and events of default
applicable to the Subsidiary Guarantor Reorganization Securities are not
materially more restrictive or burdensome than those contained in this
Indenture.

The consolidation or merger of a Subsidiary Guarantor with or into any
Person, or the sale, assignment, transfer, lease, conveyance or other
disposition of all or substantially all of such Subsidiary Guarantor's assets
to any Person, in compliance with the terms and conditions set forth in
Sections 5.01 and 5.02, shall not be deemed to be a liquidation, dissolution or
reorganization or similar proceeding relating to such Subsidiary Guarantor for
purposes of this Section.

SECTION 12.03 Default on Subsidiary Guarantor Senior Indebtedness.

(a) Upon any Subsidiary Guarantor Senior Indebtedness of a
Subsidiary Guarantor becoming due and payable, whether at the stated
maturity thereof or by acceleration or otherwise, such Subsidiary
Guarantor Senior Indebtedness shall first be irrevocably and
indefeasibly paid in full in cash, or the immediate payment thereof duly
provided for in cash, before such Subsidiary Guarantor or any Person
acting on behalf of such Subsidiary Guarantor shall directly or
indirectly make any Guaranty Payment.

(b) No Guaranty Payment shall be made by a Subsidiary
Guarantor if, at the time of such Guaranty Payment, there exists a
default in payment of all or any portion of any principal of (and
premium, if any) and interest and fees, expenses, costs and other
Obligations on Subsidiary Guarantor Senior Indebtedness of such
Subsidiary Guarantor, and such default shall not have been cured or
waived in writing or the benefits of this sentence waived in writing by
or on behalf of the holders of such Subsidiary Guarantor Senior
Indebtedness.

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(c) In addition, during the continuance of any event of
default (other than a default referred to in subsection (b) of this
Section 12.03) with respect to any Subsidiary Guarantor Senior
Indebtedness, as such event of default is defined therein or in the
instrument under which such Subsidiary Guarantor Senior Indebtedness is
outstanding, permitting the holders of such Specified Senior
Indebtedness of a Subsidiary Guarantor to accelerate the maturity
thereof under the terms of such Specified Senior Indebtedness of a
Subsidiary Guarantor, and upon written notice of such event of default
given by the Principal Subsidiary Indebtedness Agent to the Trustee,
with a copy to the Company (the delivery of which shall not affect the
validity of the notice to the Trustee), then, unless and until such
event of default shall have been cured or waived or shall have ceased to
exist, no Guaranty Payment shall be made; provided, that if the holders
of the Specified Senior Indebtedness of a Subsidiary Guarantor to which
the default relates have not declared such Specified Senior Indebtedness
of a Subsidiary Guarantor to be immediately due and payable within 179
days after the occurrence of such default (or have declared such
Specified Senior Indebtedness of a Subsidiary Guarantor to be
immediately due and payable and within such period have rescinded such
declaration of acceleration), then, subject to the provisions of Section
12.02 and 12.03(a), Guaranty Payments may be made. Any period during
which any Guaranty Payment is prohibited pursuant to the immediately
preceding sentence is referred to in this Article as a "payment blockage
period." Notwithstanding any other provision of this Article or any
other provision of this Indenture, in no event shall a payment blockage
period under this Article extend beyond 179 days from the date on which
such payment blockage period commenced. Not more than one payment
blockage period may be commenced within any consecutive 365-day period.
For all purposes of this Article, no event of default that existed or
was continuing on the date of the commencement of any payment blockage
period with respect to the Specified Senior Indebtedness of a Subsidiary
Guarantor initialing such payment blockage period shall be, or be made,
the basis for the commencement of a second payment blockage period by
the holder or holders of such Specified Senior Indebtedness of a
Subsidiary Guarantor at any time after the 365-day period referred to in
the previous sentence unless such event of default shall have been cured
or waived for a period of not less than 90 consecutive days. In
addition, for purposes of this Article, neither the Company nor any of
its Subsidiaries shall be deemed to be a holder of any Specified Senior
Indebtedness of a Subsidiary Guarantor.

(d) Each Subsidiary Guarantor covenants that it will, upon
request of the Trustee, deliver an Officers' Certificate (with copies
thereof to the Representative of each class of Subsidiary Guarantor
Senior Indebtedness of such Subsidiary Guarantor) showing in reasonable
detail the Subsidiary Guarantor Senior Indebtedness of such Subsidiary
Guarantor outstanding as of the date of such Officers' Certificate and
the Representative of each class of such Subsidiary Guarantor Senior
Indebtedness. The Trustee may conclusively rely thereon except to the
extent that it shall have received, from the Representative of any class
of such Subsidiary Guarantor Senior Indebtedness, notice in writing
controverting any of the statements made therein. Not less than 10 days
prior to making any distribution in respect of Subsidiary Guarantor
Senior Indebtedness of a Subsidiary Guarantor pursuant to this Section,
the Trustee shall deliver to each Representative of any class of such
Subsidiary Guarantor Senior Indebtedness copies of the most recent
Officers' Certificate filed with it by such Subsidiary Guarantor
pursuant to this subsection (d).

(e) In the event that the Securities are declared due and
payable before their Stated Maturity in accordance with Article 6, then
and in such event the holders of Subsidiary Guarantor Senior
Indebtedness of any Subsidiary Guarantor outstanding

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at the time the Securities so become due and payable shall be entitled
to receive payment in full in cash of all amounts due or to become due
on or in respect of such Subsidiary Guarantor Senior Indebtedness
(whether or not an event of default has occurred thereunder or such
Subsidiary Guarantor Senior Indebtedness is, or has been declared to be,
due and payable prior to the date on which it otherwise would have
become due and payable) before the Holders shall be entitled to receive
any Guaranty Payment.

SECTION 12.04 Guaranty Payments Permitted if No Default.

Nothing contained in this Article or elsewhere in this Indenture, or in
any of the Securities, shall prevent a Subsidiary Guarantor or any Person
acting on behalf of a Subsidiary Guarantor, at any time except as otherwise
provided in Section 12.02 or 12.03, from making any Guaranty Payment.

SECTION 12.05 When Guaranty Payment Must Be Paid Over.

In the event that any Guaranty Payment is made to the Trustee or the
Holders that, because of this Article, should not have been so made or may not
be paid over to the Holders, such Guaranty Payment shall be held by the Trustee
or the Holders who receive such Guaranty Payment, as the case may be, for the
benefit of, and shall forthwith be paid over or delivered to, the holders of
the Subsidiary Guarantor Senior Indebtedness remaining unpaid or their
Representatives, as their interests may appear, to the extent necessary to
irrevocably and indefeasibly pay such Subsidiary Guarantor Senior Indebtedness
in full in cash or in accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the holders of such Subsidiary
Guarantor Senior Indebtedness.

SECTION 12.06 Notices by a Subsidiary Guarantor.

Each Subsidiary Guarantor shall promptly notify the Trustee, each Paying
Agent and the Principal Subsidiary Indebtedness Agent of any facts known to
such Subsidiary Guarantor that would cause a Guaranty Payment to violate this
Article, but failure to give such notice shall not affect the subordination
provided in this Article of any Subsidiary Guarantee to Subsidiary Guarantor
Senior Indebtedness.

SECTION 12.07 Subrogation.

After all Subsidiary Guarantor Senior Indebtedness is irrevocably and
indefeasibly paid in full in cash and until the Securities are paid in full,
Holders shall be subrogated to the rights of holders of Subsidiary Guarantor
Senior Indebtedness to receive distributions applicable to Subsidiary Guarantor
Senior Indebtedness to the extent that distributions otherwise payable to
Holders have been applied to the payment of Subsidiary Guarantor Senior
Indebtedness. A distribution made under this Article to holders of Subsidiary
Guarantor Senior Indebtedness which otherwise should have been made to Holders
is not, as between a Subsidiary Guarantor and the Holders, payment by such
Subsidiary Guarantor on Subsidiary Guarantor Senior Indebtedness.

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SECTION 12.08 Relative Rights.

This Article defines the relative rights of Holders and holders of
Subsidiary Guarantor Senior Indebtedness. Nothing in this Indenture shall:

(a) impair, as between a Subsidiary Guarantor and the Holders,
the obligation of a Subsidiary Guarantor, which is absolute and
unconditional, to make any Guaranty Payment in accordance with the terms
of its Subsidiary Guaranty;

(b) affect the relative rights of Holders and creditors of a
Subsidiary Guarantor other than holders of Subsidiary Guarantor Senior
Indebtedness of such Subsidiary Guarantor; or

(c) prevent the Trustee or any Holder from exercising its
available remedies upon a Default or Event of Default, subject to the
rights of holders of Subsidiary Guarantor Senior Indebtedness to receive
prepayment, payments and distributions otherwise payable to Holders.

If a Subsidiary Guarantor fails because of this Article to pay the
principal of (or premium, if any) or interest on a Security on the due date or
upon the acceleration thereof, the failure is still a Default or Event of
Default.

SECTION 12.09 Subordination May Not be Impaired by the Subsidiary
Guarantor.

No right of any holder of Subsidiary Guarantor Senior Indebtedness to
enforce the subordination of the Obligation of a Subsidiary Guarantor pursuant
to its Subsidiary Guaranty shall be impaired by (a) any act or failure to act
by such Subsidiary Guarantor or by its failure to comply with this Indenture,
(b) any release of any collateral or any guarantor or any Person or such
Subsidiary Guarantor's obligations under its Subsidiary Guarantor Senior
Indebtedness, (c) any amendment, supplement, extension, renewal, restatement or
other modification of any Subsidiary Guarantor Senior Indebtedness, (d) any
settlement or compromise of any Subsidiary Guarantor Senior Indebtedness, (e)
the unenforceability of any of the Subsidiary Guarantor Senior Indebtedness of
such Subsidiary Guarantor or (f) the failure of any holder of Subsidiary
Guarantor Senior Indebtedness of such Subsidiary Guarantor to pursue claims
against such Subsidiary Guarantor.

SECTION 12.10 Distribution or Notice to Representative.

Whenever a distribution is to be made or a notice given to holders of
Subsidiary Guarantor Senior Indebtedness, the distribution may be made and the
notice given to their Representative (if any).

SECTION 12.11 Rights of Trustee and Paying Agent.

The Trustee or any Paying Agent may continue to make payments in respect
of the Securities and shall not be charged with knowledge of the existence of
facts that would prohibit the making of any such payment unless, not less than
three Business Days prior to the date of any such payment, a Responsible
Officer of the Trustee receives written notice reasonably satisfactory to it
that payments in respect of the Notices may not be made under this Article.
Only a Subsidiary Guarantor, a Representative (satisfactorily identified to the
Trustee) or a holder of a class of Subsidiary Guarantor Senior Indebtedness
that has no Representative (satisfactorily identified to the Trustee) may give
the notice. Prior to the receipt of such notice, the Trustee and any Paying
Agent shall be entitled in all respects to

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assume that no such facts exist. In any case, the Trustee shall have no
responsibility to the holders of Subsidiary Guarantor Senior Indebtedness for
payments made to Holders by a Subsidiary Guarantor or any Paying Agent unless
such payments are made at the direction of the Trustee after receipt of such
notice referred to above.

Neither the Trustee nor any Paying Agent shall be deemed to owe any
fiduciary duty to the holders of Subsidiary Guarantor Senior Indebtedness.

The Trustee in its individual or any other capacity may hold Subsidiary
Guarantor Senior Indebtedness with the same rights it would have if it were not
Trustee.

This Section is solely for the benefit of the Trustee and any Paying
Agents and shall not limit the obligations of the Holders under Section 12.05.

SECTION 12.12 Consent of Holders of Subsidiary Guarantor Senior
Indebtedness.

The provisions of this Article (including the definitions contained in
this Article and references to this Article contained in this Indenture) shall
not be amended, waived or modified in a manner that would adversely affect the
rights of the holders of any Specified Senior Indebtedness of a Subsidiary
Guarantor, and no such amendment, waiver or modification shall become
effective, unless the holders of such Specified Senior Indebtedness of a
Subsidiary Guarantor shall have consented in writing (in accordance with the
provisions of the Agreement governing such Specified Senior Indebtedness of a
Subsidiary Guarantor) to such amendment, waiver or modification.

SECTION 12.13 Contractual Subordination.

This Article represents a bona fide agreement of contractual
subordination pursuant to Section 510(b) of the United States Bankruptcy Code.

ARTICLE 13

Miscellaneous

SECTION 13.01. Compliance Certificates and Opinions. Upon any
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall furnish to the Trustee, to
the extent required by the TIA or this Indenture, (i) an Officers' Certificate
stating that all conditions precedent, if any, provided for in this Indenture
(including any covenant, compliance with which constitutes a condition
precedent) relating to the proposed action have been complied with and (ii) an
Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.

Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:

(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein relating
thereto;

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(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;

(3) a statement that, in the opinion of each 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

(4) a statement as to whether or not, in the opinion of each such
individual, such condition or covenant has been complied with.

SECTION 13.02. Form of Documents Delivered to Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may
certify or give an opinion with respect to some matters and one or more other
such Persons as to other matters, and any such Person may certify or give an
opinion as to such matters in one or several documents.

Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, and may
state that it is so based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Company stating that the information with respect to such factual matters is in
the possession of the Company, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate of opinion or representations
with respect to such matters are erroneous.

Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.

SECTION 13.03. Acts of Holders.

(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by a
specified percentage of Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such specified percentage
of Holders in person or by agents duly appointed in writing; and, except as
herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are received by the Trustee and, where it is
hereby expressly required, to the Company. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holders signing such instrument or instruments.
Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Indenture and (subject to
Sections 7.01 and 7.02) conclusive in favor of the Trustee and the Company, if
made in the manner provided in this Section.

(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of authority. The

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fact and date of the execution of any such instrument or writing, or the
authority of the Person executing the same, may also be proved in any other
manner which the Trustee deems sufficient, including the execution of such
instrument or writing without more.

(c) The ownership, principal amount and serial numbers of Securities
held by any Person, and the date of holding the same, shall be proved by the
Security Register.

(d) If the Company shall solicit from the Holders of Securities any
request, demand, authorization, direction, notice, consent, waiver or other
Act, the Company may, at its option, by or pursuant to Board Resolution, fix in
advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other
Act, but the Company shall have no obligation to do so. Such record date shall
be the record date specified in or pursuant to such Board Resolution, which
shall be a date not earlier than the date 30 days prior to the first
solicitation is completed. If such a record date is fixed, such request,
demand, authorization, direction, notice, consent, waiver or other Act may be
given before or after such record date, but only the Holders of record at the
close of business on such record date shall be deemed to be Holders for the
purposes of determining whether Holders of the requisite proportion of
outstanding Securities have authorized or agreed or consented to such request,
demand, authorization, direction, notice, consent, waiver or other Act, and for
that purpose the outstanding Securities shall be computed as of such record
date; provided that no such authorization, agreement or consent by the Holders
on such record date shall be deemed effective unless it shall become effective
pursuant to the provisions of this Indenture not later than eleven months after
the record date.

(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future
Holder of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made
upon such Security.

(f) Without limiting the foregoing, a Holder entitled hereunder to
give or take any action with regard to any particular Security may do so with
regard to all or any part of the principal amount of such Security or by one or
more duly appointed agents each of which may do so pursuant to such appointment
with regard to all or any different part of such principal amount.

SECTION 13.04. 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 Trust Indenture Act, the
required provision shall control. If any provision of this Indenture modifies
or excludes any provision of the TIA that may be so modified or excluded, the
latter provision shall be deemed to apply to this Indenture as so modified or
excluded, as the case may be.

SECTION 13.05. Notices. Any notice or communication shall be in
writing and delivered in person, or sent by registered or certified mail, by
air courier guaranteeing overnight delivery or by fax (promptly confirmed by
telephone) and addressed as follows:

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if to the Company or any Subsidiary Guarantor:

HS Resources, Inc.
One Maritime Plaza
Fifteenth Floor
San Francisco, CA 94111
Attn: Chief Financial Officer
Phone: (415) 433-5795
Fax: (415) 433-5811

with a copy to:

HS Resources, Inc.
1999 Broadway, Suite 3600
Denver, CO 80202
Attn: General Counsel
Phone: (303) 296-3600
Fax: (303) 296-3601

if to the Trustee:

Harris Trust and Savings Bank
311 West Monroe Street
Chicago, Illinois 60606
Attention: Indenture Trust Division/Marianne Tinerella
Phone: (312) 461-2420
Fax: (312) 461-3525

The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.

Any notice or communication sent to a Holder shall be sent to the
Holder at the Holder's address as it appears on the registration books of the
Registrar and shall be sufficiently given if so sent within the time
prescribed.

Failure to send a notice or communication to a Holder or any
defect in it shall not effect its sufficiency with respect to other Holders.
If a notice or communication is given in the manner provided above, it is duly
given, whether or not the addressee receives it.

SECTION 13.06. Communication by Holders with Other Holders.
Holders may communicate pursuant to TIA Section 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
Section 312(c).

SECTION 13.07. When Securities 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 Person directly or indirectly controlling or controlled by or under
direct or indirect common control with 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 the Trustee 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.

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SECTION 13.08. 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 13.09. Legal Holidays. A "Legal Holiday" is a Saturday,
a Sunday or a day on which banking institutions are not required to be open in
the State of New York and the State of Illinois. 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 shall accrue for the intervening period. If a regular
record date is a Legal Holiday, the record date shall not be affected.

SECTION 13.10. Governing Law. This Indenture and the Securities
shall be governed by, and construed in accordance with, the laws of the State
of New York but without giving effect to applicable principles of conflicts of
law to the extent that the application of the laws of another jurisdiction
would be required thereby.

SECTION 13.11. No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Securities or 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 13.12 Submission to Jurisdiction; Appointment of Agent
for Service of Process; Waiver of Immunities.

(a) The Company and each Subsidiary Guarantor hereby
irrevocably, to the fullest extent it may do so under applicable law, submits
to the jurisdiction of any New York State or federal court sitting in the
Borough of Manhattan, The City of New York and to the courts of its own
corporate domicile with respect to all actions brought against it as a
defendant in respect of any suit, action or proceeding or arbitral award
arising out or relating to this Indenture, the Securities or any transaction
contemplated hereby or thereby (a "Proceeding"), and irrevocably accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts, to the fullest extent it may do so under
applicable law. The Company and each Subsidiary Guarantor irrevocably waives,
to the fullest extent it may do so under applicable law, trial by jury and any
objection which it may now or hereafter have to the laying of the venue of any
such Proceeding brought in any such court and any claim that any such
Proceeding brought in any such court has been brought in an inconvenient forum.
The Company and each Subsidiary Guarantor acknowledges that it has, by separate
written instrument, irrevocably appointed CT Corporation System (the "Process
Agent"), with an office at 1633 Broadway, New York, New York 10019, as its
authorized agent to receive on behalf of the Company and each Subsidiary
Guarantor and its property service of copies of the summons and compliant and
any other process which may be served in any proceeding, and that the Process
Agent has accepted such appointment. If for any reason such Process Agent
shall cease to be such agent for service of process, the Company and each
Subsidiary Guarantor shall forthwith appoint a new agent of recognized standing
for service of process in the State of New York, United States and deliver to
the Trustee a copy of the new agent's acceptance of that appointment within 30
days. Nothing herein shall affect the right of the Trustee, any Paying Agent
or any Holder to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against the Company or the
Subsidiary Guarantors in any other court of competent jurisdiction.

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(b) Service may be made by delivering by hand a copy of such
process to the Company or the Subsidiary Guarantors, as the case may be, in
care of the Process Agent at the address specified above. The Company and the
Subsidiary Guarantors hereby irrevocably authorize and direct the Process Agent
to accept such service on their behalf. Failure of the Process Agent to give
notice to the Company or the Subsidiary Guarantors or failure of the Company or
the Subsidiary Guarantors to receive notice of such service of process shall
not affect in any way the validity of such service on the Process Agent or the
Company or the Subsidiary Guarantors. As an alternative method of service, the
Company and the Subsidiary Guarantors also irrevocably consent to the service
of any and all process in any such proceeding by the delivery by hand of copies
of such process to the Company or the Subsidiary Guarantors, as the case may
be, at the applicable address specified in Section 13.05 hereof or at the
address most recently furnished in writing by the Company or the Subsidiary
Guarantors to the Trustee. The Company and the Subsidiary Guarantors covenant
and agree that they shall take any and all reasonable action, including the
execution and filing of any and all documents, that may be necessary to
continue the designation of the Process Agent specified above in full force and
effect during the term of the Securities, and to cause the Process Agent to
continue to act as such.

(c) The Company and the Subsidiary Guarantors irrevocably
agree that, in any Proceedings anywhere (whether for an injunction, specific
performance or otherwise), no immunity (to the extent that it may at any time
exist, whether on the grounds of sovereignty or otherwise) from such
Proceedings, from attachment (whether in aid of execution, before judgment or
otherwise) of their assets or from execution of judgment shall be claimed by
them or on their behalf or with respect to their assets, except to the extent
required by applicable law, any such immunity being irrevocably waived, to the
fullest extent permitted by applicable law. The Company and the Subsidiary
Guarantors irrevocably agree that, where permitted by applicable law, they and
their assets are, and shall be, subject to such Proceedings, attachment or
execution in respect of their obligations under this Indenture or the
Securities.

SECTION 13.13. 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 13.14. 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. This Indenture may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute but one and the same instrument.

SECTION 13.15. 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.

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IN WITNESS WHEREOF, the parties have caused this Indenture to be
duly executed as of the date first above written.

THE COMPANY:

HS RESOURCES, INC.

By: /s/ P. MICHAEL HIGHUM
--------------------------
Name: P. Michael Highum
Title: President

SUBSIDIARY GUARANTORS:

ORION ACQUISITION, INC.

By: /s/ P. MICHAEL HIGHUM
--------------------------
Name: P. Michael Highum
Title: President

HSRTW, INC.

By: /s/ P. MICHAEL HIGHUM
--------------------------
Name: P. Michael Highum
Title: President

TRUSTEE:

HARRIS TRUST AND SAVINGS BANK

By: /s/ ROBERT D. FOLTZ
--------------------------
Name: Robert D. Foltz
Title: Vice President

S-1
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APPENDIX A

FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO RULE 144A,
INSTITUTIONAL "ACCREDITED INVESTORS" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7)) AND TO CERTAIN PERSONS IN
OFFSHORE TRANSACTIONS IN RELIANCE ON REGULATION S.

PROVISIONS RELATING TO INITIAL SECURITIES
AND EXCHANGE SECURITIES

1. Definitions

1.1 Definitions

For the purposes of this Appendix A the following terms shall have the
meanings indicated below:

"Definitive Security" means a certificated Initial Security
bearing the restricted securities legend set forth in Section 2.3(d) and which
is held by an IAI in accordance with Section 2.1(c).

"Depository" means The Depository Trust Company, its nominees and
their respective successors.

"Exchange Securities" means the 9-1/4% Senior Subordinated Notes
Due 2006 to be issued pursuant to this Indenture in connection with a
Registered Exchange Offer pursuant to the Registration Agreement.

"IAI" means an institutional "accredited investor" as described
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.

"Initial Purchasers" means Salomon Brothers Inc, Chase Securities
Inc., Lehman Brothers Inc. and Prudential Securities Incorporated.

"Initial Securities" means the 9-1/4% Senior Subordinated Notes
Due 2006, issued under this Indenture on or about the date hereof.

"Purchase Agreement" means the Purchase Agreement dated as of
November 22, 1996, among the Company, the Subsidiary Guarantors and the Initial
Purchasers, as such may be amended from time to time.

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

"Registered Exchange Offer" means the offer by the Company,
pursuant to the Registration Agreement, to certain Holders of Initial
Securities, to issue and deliver to such Holders, in exchange for the Initial
Securities, a like aggregate principal amount of Exchange Securities registered
under the Securities Act.

"Registration Agreement" means the Registration Agreement dated
as of November 27, 1996, among the Company and the Initial Purchasers, as such
may be amended from time to time.

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"Securities" means the Initial Securities and the Exchange
Securities, treated as a single class.

"Securities Act" means the Securities Act of 1933, as amended.

"Securities Custodian" means the custodian with respect to a
Global Security (as appointed by the Depository), or any successor person
thereto and shall initially be the Trustee.

"Shelf Registration Statement" means the registration statement
issued by the Company in connection with the offer and sale of Initial
Securities pursuant to the Registration Agreement.

"Transfer Restricted Securities" means Definitive Securities and
Securities that bear or are required to bear the legend set forth in Section
2.3(d) hereto.

1.2 Other Definitions

<TABLE>
<CAPTION>
Defined in
----------
Term Section:
---- -------
<S> <C>
"Agent Members" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(b)
"Global Security" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(a)
"Regulation S" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(a)
"Rule 144A" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(a)
</TABLE>

2. The Securities

2.1 Form and Dating

The Initial Securities are being offered and sold by the Company
pursuant to the Purchase Agreement.

(a) Global Securities. Initial Securities offered and sold to a
QIB in reliance on Rule 144A under the Securities Act ("Rule 144A") or outside
of the United States to a non-U.S. Person in reliance on Regulation S under the
Securities Act ("Regulation S"), in each case as provided in the Purchase
Agreement, shall be issued initially in the form of one or more permanent
global Securities in definitive, fully registered form without interest coupons
with the global securities legend and restricted securities legend set forth in
Exhibit 1 hereto (each, a "Global Security"), which shall be deposited on
behalf of the purchasers of the Initial Securities represented thereby with the
Trustee, as custodian for the Depository (or with such other custodian as the
Depository may direct), and registered in the name of the Depository or a
nominee of the Depository, duly executed by the Company and authenticated by
the Trustee as provided in the Indenture. 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 and the Depository or its
nominee as hereinafter provided.

(b) Book-Entry Provisions. This Section 2.1(b) shall apply only
to a Global Security deposited with or on behalf of the Depository.

The Company shall execute and the Trustee shall, in accordance
with this Section 2.1(b) and pursuant to an order of the Company, authenticate
and deliver initially one or more Global Securities that (i) shall be
registered in the name of the Depository for such Global Security or Global
Securities or the nominee of such Depository and (ii) shall

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be delivered by the Trustee to such Depository or pursuant to such Depository's
instructions or held by the Trustee as custodian for the Depository.

Members of, or participants in, the Depository ("Agent Members")
shall have no rights under this Indenture with respect to any Global Security
held on their behalf by the Depository, or by the Trustee as the custodian of
the Depository, or under any Global Security, and the Depository or its
nominee, as the case may be, 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
herein shall prevent the Company, the Trustee or any agent of the Company or
the Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or shall impair, as between the
Depository and its Agent Members, the operation of customary practices of such
Depository governing the exercise of the rights of a holder of a beneficial
interest in any Global Security.

Ownership of beneficial interests in any Global Security will be
shown on, and transfers thereof will be effected only through, records
maintained by the Depositary or its nominee (with respect to interests of Agent
Members) and the records of Agent Members (with respect to interests of Persons
other than Agent Members).

(c) Definitive Securities. Except as provided in this Section
2.1 or Sections 2.3 or 2.4, owners of beneficial interests in Global Securities
will not be entitled to receive physical delivery of certificated Securities.
Purchasers of Initial Securities who are IAI's and are not QIBs and did not
purchase Initial Securities sold in reliance on Regulation S will receive
Definitive Securities; provided, however, that upon transfer of such Definitive
Securities to a QIB, such Definitive Securities will, unless the Global
Security has previously been exchanged, be exchanged for an interest in a
Global Security pursuant to the provisions of Section 2.3.

2.2 Authentication. The Trustee shall authenticate and deliver: (1)
Initial Securities for original issue in an aggregate principal amount of
$150,000,000 and (2) Exchange Securities for issue only in a Registered
Exchange Offer pursuant to the Registration Agreement, for a like principal
amount of Initial Securities, upon a written order of the Company signed by two
Officers of the Company. Such order shall specify the amount of the Securities
to be authenticated and the date on which the original issue of Securities is
to be authenticated and whether the Securities are to be Initial Securities or
Exchange Securities. The aggregate principal amount of Securities outstanding
at any time may not exceed $150,000,000, except as provided in Section 2.07 of
this Indenture.

2.3 Transfer and Exchange.

(a) Transfer and Exchange of Definitive Securities. When
Definitive Securities are presented to the Registrar or a co-registrar with a
request:

(x) to register the transfer of such Definitive Securities; or

(y) to exchange such Definitive Securities for an equal
principal amount of Definitive Securities of other authorized
denominations,

the Registrar or co-registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Securities surrendered for transfer or
exchange:

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(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Company
and the Registrar or co-registrar, duly executed by the Holder thereof
or his attorney duly authorized in writing; and

(ii) are being transferred or exchanged pursuant to an effective
registration statement under the Securities Act, pursuant to Section
2.3(b) or pursuant to clause (A), (B) or (C) below, and are accompanied
by the following additional information and documents, as applicable:

(A) if such Definitive Securities are being delivered to
the Registrar by a Holder for registration in the name of such
Holder, without transfer, a certification from such Holder to
that effect; or

(B) if such Definitive Securities are being transferred
to the Company, a certification to that effect; or

(C) if such Definitive Securities are being transferred
pursuant to an exemption from registration in accordance with
Rule 144, (i) a certification to that effect (in the form set
forth on the reverse of the Security) and (ii) if the Company or
Registrar so requests, an opinion of counsel or other evidence
reasonably satisfactory to them as to the compliance with the
restrictions set forth in the legend set forth in Section
2.3(d)(i).

(b) Restrictions on Transfer of a Definitive Security for a
Beneficial Interest in a Global Security. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee
of a Definitive Security, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Trustee, together with:

(i) certification, in the form set forth on the reverse of the
Security, that such Definitive Security is being transferred (A) to a
QIB in accordance with Rule 144A, or (B) outside the United States in an
offshore transaction within the meaning of Regulation S and in
compliance with Rule 904 under the Securities Act; and

(ii) written instructions directing the Trustee to make, or to
direct the Securities Custodian to make, an adjustment on its books and
records with respect to such Global Security to reflect an increase in
the aggregate principal amount of the Securities represented by the
Global Security, such instructions to contain information regarding the
Depositary account to be credited with such increase,

then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased by the aggregate principal amount of the Definitive Security to be
exchanged and shall credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the Global Security
equal to the principal amount of the Definitive Security so cancelled. If no
Global Securities are then outstanding and the Global Security has not been
previously exchanged pursuant to Section 2.4, the Company shall issue and the
Trustee shall authenticate, upon written order of the Company in the form of an
Officers' Certificate, a new Global Security in the appropriate principal
amount.

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<PAGE> 85
(c) Transfer and Exchange of Global Securities.

(i) The transfer and exchange of Global Securities or beneficial
interests therein shall be effected through the Depository, in accordance with
this Indenture (including applicable restrictions on transfer set forth herein,
if any) and the procedures of the Depository therefor. A transferor of a
beneficial interest in a Global Security shall deliver to the Registrar a
written order given in accordance with the Depositary's procedures containing
information regarding the participant account of the Depositary to be credited
with a beneficial interest in the Global Security. The Registrar shall, in
accordance with such instructions instruct the Depository to credit to the
account of the Person specified in such instructions a beneficial interest in
the Global Security and to debit the account of the Person making the transfer
the beneficial interest in the Global Security being transferred.

(ii) Notwithstanding any other provisions of this Appendix A
(other than the provisions set forth in Section 2.4), a Global Security
may not be transferred as a whole except by the Depository to a nominee
of the Depository or by a nominee of the Depository to the Depository or
another nominee of the Depository or by the Depository or any such
nominee to a successor Depository or a nominee of such successor
Depository.

(iii) In the event that a Global Security is exchanged for
Securities in definitive registered form pursuant to Section 2.4 prior
to the consummation of a Registered Exchange Offer or the effectiveness
of a Shelf Registration Statement with respect to such Securities, such
Securities may be exchanged only in accordance with such procedures as
are substantially consistent with the provisions of this Section 2.3
(including the certification requirements set forth on the reverse of
the Initial Securities intended to ensure that such transfers comply
with Rule 144A or Regulation S, as the case may be) and such other
procedures as may from time to time be adopted by the Company.

(d) Legend.

(i) Except as permitted by the following paragraphs (ii), (iii)
and (iv), each Security certificate evidencing the Global Securities and
the Definitive Securities (and all Securities issued in exchange
therefor or in substitution thereof) shall bear a legend in
substantially the following form:

"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT
THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X)
PRIOR TO THE THIRD ANNIVERSARY OF THE ISSUANCE HEREOF (OR A PREDECESSOR
SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE
COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH
TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS
THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A") TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE
144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY
THE BOX

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<PAGE> 86
CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE
OF THIS SECURITY), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH
REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED
BY THE TRANSFEROR ON THE CERTIFICATE ON THE REVERSE OF THIS SECURITY),
AND, IF SUCH TRANSFER IS BEING EFFECTED BY CERTAIN TRANSFERORS SPECIFIED
IN THE INDENTURE (AS DEFINED BELOW) PRIOR TO THE EXPIRATION OF THE "40
DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE 903(c)(3) OF
REGULATION S UNDER THE SECURITIES ACT), A CERTIFICATE WHICH MAY BE
OBTAINED FROM THE COMPANY OR THE TRUSTEE, (4) TO AN INSTITUTION THAT IS
AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501 (A)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE
TRANSFEROR ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING THIS
SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A
CERTIFICATE, WHICH MAY BE OBTAINED FROM THE TRUSTEE, IS DELIVERED BY THE
TRANSFEREE TO THE COMPANY AND THE TRUSTEE (PROVIDED THAT CERTAIN HOLDERS
SPECIFIED IN THE INDENTURE MAY NOT TRANSFER THIS SECURITY PURSUANT TO
THIS CLAUSE (4) PRIOR TO THE EXPIRATION OF THE "40 DAY RESTRICTED
PERIOD" (WITHIN THE MEANING OF RULE 903(c)(3) OF REGULATION S UNDER THE
SECURITIES ACT), (5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE
SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. AN INSTITUTIONAL
ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES IT WILL FURNISH TO THE
COMPANY AND THE TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THEY
MAY REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS
SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF,
BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF
THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A OR (2) AN INSTITUTION THAT IS AN "ACCREDITED
INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT
PURPOSES AND NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE
REQUIREMENTS OF PARAGRAPH (o)(2) OF RULE 902 UNDER) REGULATION S UNDER
THE SECURITIES ACT."

Each Definitive Security will also bear the following additional
legend:

"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER
INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO
CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS."

(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global
Security) pursuant to Rule 144 under the Securities Act:

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(A) in the case of any Transfer Restricted Security that
is a Definitive Security, the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Security for a
Definitive Security that does not bear the legend set forth above
and rescind any restriction on the transfer of such Transfer
Restricted Security; and

(B) in the case of any Transfer Restricted Security that
is represented by a Global Security, the Registrar shall permit
the Holder thereof to exchange such Transfer Restricted Security
for a Definitive Security that does not bear the legend set forth
above and rescind any restriction on the transfer of such
Transfer Restricted Security,

in either case, if the Holder certifies in writing to the Registrar that its
request for such exchange was made in reliance on Rule 144 (such certification
to be in the form set forth on the reverse of the Initial Security).

(iii) After a transfer of any Initial Securities during the
period of the effectiveness of a Shelf Registration Statement with
respect to such Initial Securities, all requirements pertaining to
legends on such Initial Security will cease to apply, the requirements
requiring any such Initial Security issued to certain Holders be issued
in global form will cease to apply, and an Initial Security in
certificated or global form without legends will be available to the
transferee of the Holder of such Initial Securities upon exchange of
such transferring Holder's certificated Initial Security. Upon the
occurrence of any of the circumstances described in this paragraph, the
Company will deliver an Officers' Certificate to the Trustee instructing
the Trustee to issue Securities without legends.

(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Securities pursuant to which certain Holders of
such Initial Securities are offered Exchange Securities in exchange for
their Initial Securities, all requirements pertaining to such Initial
Securities that Initial Securities issued to certain Holders be issued
in global form will cease to apply and certificated Initial Securities
with the restricted securities legend set forth in Exhibit 1 hereto will
be available to Holders of such Initial Securities that do not exchange
their Initial Securities, and Exchange Securities in certificated or
global form will be available to Holders that exchange such Initial
Securities in such Registered Exchange Offer. Upon the occurrence of
any of the circumstances described in this paragraph, the Company will
deliver an Officers' Certificate to the Trustee instructing the Trustee
to issue Securities without legends.

(e) Cancellation or Adjustment of Global Security. At such time
as all beneficial interests in a Global Security have either been exchanged for
certificated or Definitive Securities, redeemed, repurchased or canceled, such
Global Security shall be returned to the Depository 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 certificated
or Definitive Securities, repurchased 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.

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(f) Obligations with Respect to Transfers and Exchanges of
Securities.

(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate certificated
Securities, Definitive Securities and Global Securities at the
Registrar's or co-registrar's request.

(ii) No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax, assessments, or similar
governmental charge payable in connection therewith.

(iii) The Registrar or co-registrar shall not be required to
register the transfer of or exchange of any Security for a period
beginning 15 days before the mailing of a notice of an offer to
repurchase Securities or 15 days before an interest payment date.

(iv) Prior to the due presentation for registration of transfer
of any Security, the Company, the Trustee, the Paying Agent, the
Registrar or any co-registrar may deem and treat the person in whose
name a Security is registered as the absolute owner of such Security for
the purpose of receiving payment of principal of and interest on such
Security and for all other purposes whatsoever, whether or not such
Security is overdue, and none of the Company, the Trustee, the Paying
Agent, the Registrar or any co-registrar shall be affected by notice to
the contrary.

(v) All Securities issued upon any transfer or exchange pursuant
to the terms of this Indenture shall evidence the same debt and shall be
entitled to the same benefits under this Indenture as the Securities
surrendered upon such transfer or exchange.

(g) No Obligation of the Trustee.

(i) The Trustee shall have no responsibility or obligation to
any beneficial owner of a Global Security, a member of, or a participant
in the Depository or other Person with respect to the accuracy of the
records of the Depository or its nominee or of any participant or member
thereof, with respect to any ownership interest in the Securities or
with respect to the delivery to any participant, member, beneficial
owner or other Person (other than the Depository) of any notice
(including any notice of redemption) or the payment of any amount, under
or with respect to such Securities. All notices and communications to
be given to the Holders and all payments to be made to Holders under the
Securities shall be given or made only to or upon the order of the
registered Holders (which shall be the Depository or its nominee in the
case of a Global Security). The rights of beneficial owners in any
Global Security shall be exercised only through the Depository subject
to the applicable rules and procedures of the Depository. The Trustee
may rely and shall be fully protected in relying upon information
furnished by the Depository with respect to its members, participants
and any beneficial owners.

(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Security (including any transfers
between or among Depository participants, members or beneficial owners
in any Global Security) other than to require delivery of such
certificates and other documentation or evidence as are expressly
required by, and to do so if and when expressly required by, the terms
of this Indenture, and to examine

8
<PAGE> 89
the same to determine substantial compliance as to form with the express
requirements hereof.

2.4 Certificated Securities

(a) A Global Security deposited with the Depository or with the
Trustee as custodian for the Depository pursuant to Section 2.1 shall be
transferred to the beneficial owners thereof in the form of certificated
Securities in an aggregate principal amount equal to the principal amount of
such Global Security, in exchange for such Global Security, only if such
transfer complies with Section 2.3 and (i) the Depository notifies the Company
that it is unwilling or unable to continue as a depository for such Global
Security or if at any time the Depository ceases to be a clearing agency
registered under the Exchange Act, and a successor depository is not appointed
by the Company within 90 days, (ii) the Company executes and delivers to the
Trustee a notice that such Global Security shall be so transferable,
registrable and exchangeable, and such transfer shall be registrable or (iii)
there shall have occurred and be continuing an Event of Default or an event
which, with the giving of notice or lapse of time or both, would constitute an
Event of Default with respect to the Securities represented by such Global
Security.

(b) Any Global Security that is exchangeable for certificated
Securities pursuant to Section 2.4 will be transferred to, and registered and
exchanged for, certificated Securities in authorized denominations and
registered in such names as the Depository or its nominee holding such Global
Security may direct. Subject to the foregoing, a Global Security is not
exchangeable, except for a Global Security of like denomination to be
registered in the name of the Depository or its nominee. In the event that a
Global Security becomes exchangeable for certificated Securities, (i)
certificated Securities will be issued only in fully registered form in
denominations of $1,000 or integral multiples thereof, (ii) payment of
principal, premium, any repurchase price, and interest on the certificated
Securities will be payable, and the transfer of the certificated Securities
will be registrable, at the office or agency of the Company maintained for such
purposes and (iii) no service charge will be made for any issuance of the
certificated Securities, but the Company may require payment of a sum
sufficient to cover any transfer tax, assessment or similar governmental charge
payable in connection therewith. In addition, such certificates will bear the
legend set forth in Section 2.3(d) (unless the Company determines otherwise in
accordance with applicable law) subject, with respect to such Securities, to
the provisions of such legend. Holders of certificated Securities may only
transfer their Securities (i) to the Company or (ii) to a QIB; provided,
however, that the agreement of such holder is subject to any requirement of law
that the disposition of such holder's property shall at all times be and remain
within its control.

(c) Subject to the provisions of Section 2.4(b), the registered
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.

(d) In the event of the occurrence of either of the events
specified in Section 2.4(a)(i), (ii) or (iii), the Company will promptly make
available to the Trustee a reasonable supply of certificated Securities in
definitive, fully registered form without interest coupons.

9
<PAGE> 90
EXHIBIT 1
to APPENDIX A

[FORM OF FACE OF INITIAL SECURITY]

HS RESOURCES, INC.

No._____ CUSIP No.__________

[Global Securities Legend]

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 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 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 ON THE REVERSE HEREOF.

THIS GLOBAL SECURITY IS EXCHANGEABLE FOR SECURITIES IN
DEFINITIVE, FULLY REGISTERED FORM, WITHOUT INTEREST COUPONS, IF (A) DTC
NOTIFIES THE COMPANY THAT IT IS UNWILLING OR UNABLE TO CONTINUE AS DEPOSITORY
FOR THIS GLOBAL SECURITY OR IF AT ANY TIME DTC CEASES TO BE A "CLEARING AGENCY"
REGISTERED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND A
SUCCESSOR DEPOSITORY IS NOT APPOINTED BY THE COMPANY WITHIN 90 DAYS OF SUCH
NOTICE, (B) THE COMPANY EXECUTES AND DELIVERS TO THE TRUSTEE A NOTICE THAT THIS
GLOBAL SECURITY SHALL BE TRANSFERABLE, REGISTRABLE AND EXCHANGEABLE, AND SUCH
TRANSFER SHALL BE REGISTRABLE, OR (C) AN EVENT OF DEFAULT (AS HEREINAFTER
DEFINED) HAS OCCURRED AND IS CONTINUING WITH RESPECT TO THE SECURITIES.

[Restricted Securities Legend]

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE THIRD ANNIVERSARY OF
THE ISSUANCE HEREOF (OR A PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER
THAT WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING

1
<PAGE> 91
THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN
(1) TO THE COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON WHOM
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE
OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE
BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF
THIS SECURITY), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S
UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON
THE CERTIFICATE ON THE REVERSE OF THIS SECURITY), AND, IF SUCH TRANSFER IS
BEING EFFECTED BY CERTAIN TRANSFERORS SPECIFIED IN THE INDENTURE (AS DEFINED
BELOW) PRIOR TO THE EXPIRATION OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE
MEANING OF RULE 903(c)(3) OF REGULATION S UNDER THE SECURITIES ACT), A
CERTIFICATE WHICH MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE, (4) TO AN
INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501 (A)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY
THE TRANSFEROR ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING THIS SECURITY
FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A CERTIFICATE, WHICH MAY
BE OBTAINED FROM THE TRUSTEE, IS DELIVERED BY THE TRANSFEREE TO THE COMPANY AND
THE TRUSTEE (PROVIDED THAT CERTAIN HOLDERS SPECIFIED IN THE INDENTURE MAY NOT
TRANSFER THIS SECURITY PURSUANT TO THIS CLAUSE (4) PRIOR TO THE EXPIRATION OF
THE "40 DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE 903(c)(3) OF
REGULATION S UNDER THE SECURITIES ACT), (5) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE)
UNDER THE SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. AN INSTITUTIONAL
ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES IT WILL FURNISH TO THE COMPANY
AND THE TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THEY MAY REASONABLY
REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE
FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) AN INSTITUTION THAT
IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER
THE SECURITIES ACT AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES
AND NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES
WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH
(o)(2) OF RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT.

[IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH
TRANSFER AGENT MAY REASONABLY REQUIRE TO

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<PAGE> 92
CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.]1

GLOBAL SECURITY
Representing 9-1/4% Senior Subordinated Notes Due 2006

HS RESOURCES, INC., a Delaware corporation, hereby promises to pay to
CEDE & CO., or registered assigns, the principal sum indicated on Schedule A
hereof, on November 15, 2006.

Interest Payment Dates: May 15 and November 15, commencing May 15, 1997.

Record Dates: May 1 and November 1.

Additional provisions of this Security are set forth on the other side
of this Security.

IN WITNESS WHEREOF, HS RESOURCES, INC. has caused this instrument to be
duly executed under its corporate seal.

Dated:

HS RESOURCES, INC.

By:
----------------------------
Name:
Title:

TRUSTEE'S CERTIFICATE OF AUTHENTICATION

HARRIS TRUST AND SAVINGS BANK,
as Trustee, certifies that this is one of
the Securities referred to in the Indenture.

By:
----------------------------------------
Authorized Signatory

- --------------------

(1) Include if a Definitive Security to be held by an
institutional "accredited investor" (as defined in Rule
501(a),(1),(2),(3) or (7) under the Securities Act) who is not a Qualified
Institutional Buyer.

3
<PAGE> 93
[FORM OF REVERSE SIDE OF INITIAL SECURITY]

9-1/4% Senior Subordinated Note Due 2006

1. Interest

(a) General. HS Resources, Inc., 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 per annum shown above. The
Company will pay interest semiannually on May 15 and November 15 of each year.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the Issue Date.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.

(b) Special Interest. The holder of this Security is entitled to the
benefits of a Registration Agreement, dated as of November 27, 1996, among the
Company and the Initial Purchasers named therein (as such may be amended from
time to time, the "Registration Agreement"). Capitalized terms used in this
subsection (b) but not defined herein have the meanings assigned to them in the
Registration Agreement.

In the event that (i) neither the Exchange Offer Registration Statement
nor the Shelf Registration Statement has been filed with the Commission on or
prior to January 24, 1997, (ii) the Exchange Offer Registration Statement has
not been declared effective on or prior to March 27, 1997, (iii) neither the
Registered Exchange Offer has been consummated nor the Shelf Registration
Statement has been declared effective on or prior to April 25, 1997, or (iv)
after either the Exchange Offer Registration Statement or the Shelf
Registration Statement has been declared effective, such Registration Statement
thereafter ceases to be effective or usable in connection with resales of the
Securities at any time that the Company is obligated to maintain the
effectiveness thereof pursuant to the Registration Agreement (each such event
referred to in clauses (i) through (iv) above being referred to herein as a
"Registration Default"), additional interest ("Special Interest") will accrue
on this Security (in addition to the interest described in subsection (a)
above) from and including the date on which any such Registration Default shall
occur to but excluding the date on which all Registration Defaults have been
cured. Special Interest shall accrue at a rate of 0.50% per annum during the
90-day period immediately following the occurrence of any Registration Default
and shall increase by 0.25% per annum at the end of each subsequent 90-day
period, but in no event shall Special Interest accrue at a rate in excess of
1.50% per annum. Special Interest will be payable to the holder hereof in the
same manner as interest under subsection (a) above.

2. Method of Payment

4
<PAGE> 94
interest may be paid by check mailed to the registered Holders at their
registered addresses. The Company will make all payments in respect of a
certificated Security (including principal, premium and interest), by mailing a
check to the registered address of each Holder thereof; provided, however, that
payments on the Securities may also be made, in the case of a Holder of at
least $1,000,000 aggregate principal amount of Securities, by wire transfer to
a U.S. dollar account maintained by the payee with a bank in the United States
if such Holder elects payment by wire transfer by giving written notice to the
Trustee or the Paying Agent to such effect designating such account no later
than 30 days immediately preceding the relevant due date for payment (or such
other date as the Trustee may accept in its discretion).

3. Paying Agent and Registrar

Initially, Harris Trust and Savings Bank ("Trustee"), an Illinois
banking corporation, will act as Paying Agent and Registrar. The Company may
appoint and change any Paying Agent, Registrar or co-registrar without notice.
The Company or any of its domestically incorporated Wholly Owned Restricted
Subsidiaries may act as Paying Agent, Registrar or co-registrar.

4. Indenture

The Company issued the Securities under an Indenture dated as of
November 27, 1996 (as such may be amended from time to time, the "Indenture"),
among the Company, the Initial Subsidiary Guarantors and the Trustee. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15
U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the
"Act"). Terms defined in the Indenture and not defined herein have the
meanings ascribed thereto in the Indenture. The Securities are subject to all
such terms, and Holders are referred to the Indenture and the Act for a
statement of those terms.

The Securities are unsecured senior subordinated obligations of the
Company limited to $150,000,000 aggregate principal amount at any one time
outstanding (subject to Section 2.07 of the Indenture). This Security is one
of the Initial Securities referred to in the Indenture. The Securities include
the Initial Securities and any Exchange Securities issued in exchange for the
Initial Securities pursuant to the Indenture. The Initial Securities and the
Exchange Securities are treated as a single class of securities under the
Indenture. The Indenture imposes certain limitations on the Incurrence of
Indebtedness by the Company and its Restricted Subsidiaries; the payment of
dividends on, and redemption of, Capital Stock of the Company and its
Restricted Subsidiaries and the redemption of certain Pari Passu Indebtedness
and Subordinated Indebtedness of the Company and its Restricted Subsidiaries;
Investments; sales of assets and Restricted Subsidiary Capital Stock; certain
transactions with Affiliates of the Company; the sale or issuance of Capital
Stock of the Restricted Subsidiaries; the creation of Liens; and
consolidations, mergers and transfers of all or substantially all of the
Company's assets. In addition, the Indenture prohibits certain restrictions on
distributions and dividends from Restricted Subsidiaries.

To guarantee the due and punctual payment of the principal, premium and
interest, if any, on the Securities and all other amounts payable by the
Company under the Indenture and the Securities when and as the same shall be
due and payable, whether at maturity, by acceleration or otherwise, according
to the terms of the Securities and the Indenture, the Subsidiary Guarantors
have unconditionally guaranteed the Obligations on a senior subordinated basis
pursuant to the terms of the Indenture.

5
<PAGE> 95
5. Optional Redemption

The Securities are not redeemable prior to November 15, 2001. At any
time on or after November 15, 2001, the Securities are redeemable at the option
of the Company, in whole or in part, on not less than 30 nor more than 60 days'
notice, at the following redemption prices (expressed as percentages of
principal amount), plus accrued and unpaid interest (if any) to the date of
redemption.

If redeemed during the 12-month period commencing November 15 of the
years indicated:

<TABLE>
<CAPTION>
Redemption
Year Price
------- -----------
<S> <C>
2001.............................................. 104.625%
2002.............................................. 103.083%
2003.............................................. 101.542%
2004 and thereafter............................... 100.000%
</TABLE>

Notwithstanding the foregoing, on and prior to November 15, 1999, the
Company may redeem up to 33 1/3% of the aggregate principal amount of the
Securities originally outstanding at a redemption price of 109.25% of the
principal amount thereof, plus accrued and unpaid interest (if any) thereon to
the redemption date, with the net proceeds of one or more Equity Offerings of
the Company; provided that at least 66 2/3% of the aggregate principal amount
of the Securities originally issued remains outstanding immediately after the
occurrence of such redemption; and provided, further, that such redemption
shall occur not later than 75 days after the date of the closing of any such
Equity Offering. The redemption shall be made in accordance with procedures set
forth in the Indenture.

6. Notice of Redemption

Notice of redemption will be mailed by first-class mail at least 30 days
but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at his registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest on all Securities (or portions thereof) to be redeemed on the
redemption date is deposited with the Paying Agent on or before the redemption
date and certain other conditions are satisfied, on and after such date
interest ceases to accrue on such Securities (or such portions thereof) called
for redemption.

7. Put Provisions

Upon a Change of Control, unless the Company has elected to redeem the
Securities pursuant to paragraph 5, any Holder of Securities will have the
right, subject to certain conditions specified in the Indenture, to cause the
Company to repurchase all or any part of the Securities of such Holder at a
purchase price equal to 101% of the principal amount of the Securities to be
repurchased plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date that is on or prior
to the date of purchase) as provided in, and subject to the terms of, the
Indenture.

6
<PAGE> 96
In the event that the aggregate amount of Excess Proceeds from Asset
Sales exceeds $10,000,000, the Company will, subject to certain conditions
specified in the Indenture, make an offer to repurchase Securities having an
aggregate principal amount equal to the aggregate amount of Excess Proceeds at
a purchase price equal to 100% of the principal amount of such Securities plus
accrued and unpaid interest, if any, to the purchase date.

8. Subordination

The Securities are subordinated to Senior Indebtedness of the Company,
as defined in the Indenture. To the extent provided in the Indenture, Senior
Indebtedness of the Company must be paid before the Securities may be paid. In
addition, each Subsidiary Guaranty is subordinated to Senior Indebtedness of
the relevant Subsidiary Guarantor, as defined in the Indenture. The Company
and each Subsidiary Guarantor agrees, and each Holder by accepting a Security
agrees, to the subordination provisions contained in the Indenture and
authorizes the Trustee to give it effect and appoints the Trustee as attorney-
in-fact for such purpose.

9. Denominations; Transfer; Exchange

The Securities are in registered form without coupons in denominations
of $1,000 (or in the case of Definitive Securities sold to institutional
accredited investors as described in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, minimum denominations of $250,000, unless the Company otherwise
consents) and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. Upon any transfer or exchange,
the Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements or transfer documents and to pay any taxes
required by law or permitted by the Indenture. The Registrar need not register
the transfer of or exchange any Securities selected for redemption (except, in
the case of a Security to be redeemed in part, the portion of the Security not
to be redeemed) or to transfer or exchange any Securities for a period of 15
days prior to a selection of Securities to be redeemed or 15 days before an
interest payment date.

10. Persons Deemed Owners

The registered Holder of this Security may be treated as the owner of it
for all purposes.

11. Unclaimed Money

If money for the payment of principal or interest remains unclaimed for
two years, the Trustee or Paying Agent shall pay the money back to the Company
at its written request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only
to the Company and not to the Trustee for payment.

12. Discharge and Defeasance

Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations for the
payment of principal, premium and interest on the Securities to redemption or
maturity, as the case may be.

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<PAGE> 97
13. Amendment, Waiver

Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the
Securities and (ii) any default or noncompliance with any provision may be
waived with the written consent of the Holders of a majority in principal
amount outstanding of the Securities. Subject to certain exceptions set forth
in the Indenture, without the consent of any Holder, the Company, the
Subsidiary Guarantors and the Trustee may amend the Indenture or the Securities
(i) to cure any ambiguity, omission, defect or inconsistency, (ii) to provide
for the assumption of the obligations of the Company under the Indenture upon
the merger, consolidation or sale or other disposition of all or substantially
all of the assets of the Company and its Restricted Subsidiaries taken as a
whole and certain other events specified in Article 5 of the Indenture, (iii)
to provide for uncertificated Securities in addition to or in place of
certificated Securities, (iv) to comply with any requirement of the Commission
in order to effect or maintain the qualification of the Indenture under the
Trust Indenture Act, (v) to make any change that does not adversely affect the
rights of any Holder of Securities in any material respect, (vi) to add or
remove Subsidiary Guarantors pursuant to the procedures set forth in the
Indenture, and (vii) to provide for certain other modifications and amendments
as set forth in the Indenture. Certain provision of the Securities and the
Indenture may not be amended or waived without the consent of each Holder
affected thereby.

14. Defaults and Remedies

Under the Indenture, Events of Default include (i) failure to pay any
interest on the Securities when due, continued for 30 days; (ii) failure to pay
principal of (or premium, if any, on) the Securities when due; (iii) failure to
perform any other covenant of the Company or any Subsidiary Guarantor in the
Indenture, continued for 60 days after written notice as provided in the
Indenture; (iv) the occurrence and continuation beyond any applicable grace
period of any default in the payment of the principal of (or premium, if any,
on) or interest on any Indebtedness (other than Permitted Non-Recourse
Indebtedness) of the Company (other than the Securities) or any Restricted
Subsidiary for money borrowed when due (whether resulting from maturity,
acceleration, mandatory redemption or otherwise), or any other default causing
acceleration of any Indebtedness (other than Permitted Non-Recourse
Indebtedness) of the Company or any Restricted Subsidiary for money borrowed,
provided that the aggregate principal amount of such Indebtedness shall exceed
$5,000,000; and specifically including, without limitation, any such default
under or acceleration of any Indebtedness (other than Permitted Non-Recourse
Indebtedness) directly or indirectly resulting or derived from, or caused by, a
default under or acceleration of any Permitted Non-Recourse Indebtedness; or
(v) one or more final judgments or orders by a court of competent jurisdiction
are entered against the Company or any Restricted Subsidiary in an uninsured or
unindemnified aggregate amount in excess of $5,000,000 and such judgments or
orders are not discharged, waived, stayed, satisfied or bonded for a period of
60 consecutive days; (vi) certain events of bankruptcy, insolvency or
reorganization; or (vii) a Subsidiary Guaranty ceases to be in full force and
effect (other than in accordance with the terms of the Indenture and such
Subsidiary Guaranty) or a Subsidiary Guarantor denies or disaffirms its
obligations under its Subsidiary Guaranty.

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 (except a
Default in payment of principal or interest) if it determines that withholding
notice is in the interest of the Holders.

8
<PAGE> 98

15. Trustee Dealings with the Company

Subject to certain limitations imposed by the Trust Indenture Act, 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.

16. No Recourse Against Others

A director, officer, employee or stockholder, as such, of the Company or
any Subsidiary Guarantor shall not have any liability for any obligations of
the Company or a Subsidiary Guarantor under the Securities or 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.

17. Governing Law

THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS
OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

18. Authentication

This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.

19. Abbreviations

Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).

20. Holders' Compliance with Registration Agreement

Each Holder of a Security, by acceptance hereof, acknowledges and agrees
to the provisions of the Registration Agreement, including, without limitation,
the obligations of the Holders with respect to a registration and the
indemnification of the Company to the extent provided therein.

9
<PAGE> 99
21. 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.

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.

10
<PAGE> 100
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 social security 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.

Dated: Your Signature:
---------------- ----------------------------------------

- --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.

In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in
Rule 144(k) under the Securities Act 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 transferred in accordance with its
terms:

CHECK ONE BOX BELOW

(1) [ ] to the Company; or

(2) [ ] pursuant to an effective registration statement under the
Securities Act of 1933; or

(3) [ ] inside the United States to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act
of 1933) that purchases for its own account or for the
account of a qualified institutional buyer to whom notice
is given that such transfer is being made in reliance on
Rule 144A, in each case pursuant to and in compliance with
Rule 144A under the Securities Act of 1933; or

(4) [ ] outside the United States in an offshore transaction
within the meaning of Regulation S under the Securities
Act in compliance with Rule 904 under the Securities Act
of 1933; or

(5) [ ] to an institutional "accredited investor" (as defined in
Schedule 501(a)(1), (2), (3) or (7) under the Securities
Act of 1933) that has furnished to the Trustee a signed
letter containing certain representations and agreements
(the form of which letter can be obtained from the
Trustee); or

11
<PAGE> 101
(6) [ ] pursuant to another available exemption from registration
provided by Rule 144 under the Securities Act of 1933.

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 (4), (5) or (6) is checked, the Trustee may require, prior to
registering any such transfer of the Securities, such legal opinions,
certifications and other information as the Company has reasonably
requested to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, such as the exemption
provided by Rule 144 under such Act.

-------------------------------------
Signature

Signature Guarantee:

- ---------------------------- -------------------------------------
Signature must be guaranteed Signature

- --------------------------------------------------------------------------------
Notice: Signature(s) must be guaranteed by an institution which is a
participant in the Securities Transfer Agent Medallion Program
("STAMP") or similar program.

12
<PAGE> 102
TO BE COMPLETED BY PURCHASER IF (3) 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, 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:
----------------- ------------------------------------------------
NOTICE: To be executed by an executive officer

13
<PAGE> 103
OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Security purchased by the
Company pursuant to Section 4.06 or Section 4.09 of the Indenture, check the
appropriate box:

Section 4.06 [ ]

Section 4.09 [ ]

If you want to elect to have only part of this Security purchased
by the Company pursuant to Section 4.06 or Section 4.09 of the Indenture, state
the amount in principal amount (must be an integral multiple of $1,000):
$_______________

Dated: Your Signature:
--------------- ------------------------------
(Sign exactly as your name
appears on the other side
of this Security.)

Signature Guarantee:
-----------------------------
(Signature must be guaranteed)

14
<PAGE> 104
[TO BE ATTACHED TO GLOBAL SECURITIES]

SCHEDULE A

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY

The initial principal amount at maturity of this Global Security shall
be $__________. The following increases or decreases in this Global Security
have been made:

<TABLE>
<CAPTION>
Date of Amount of decrease Amount of increase Principal amount of Signature of
Exchange in Principal in Principal Amount this Global authorized
Amount of this of this Global Security following signatory of
Global Security Security such decrease or Trustee or
increase Securities
Custodian
<S> <C> <C> <C> <C>

</TABLE>

15
<PAGE> 105
EXHIBIT A

[FORM OF FACE OF EXCHANGE SECURITY]

HS RESOURCES, INC.

No._____ CUSIP No.__________

[Global Securities Legend]

1
<PAGE> 106
GLOBAL SECURITY
Representing 9-1/4% Senior Subordinated Notes Due 2006

HS RESOURCES, INC., a Delaware corporation, hereby promises to pay to
CEDE & CO., or registered assigns, the principal sum indicated on Schedule A
hereof, on November 15, 2006.

Interest Payment Dates: May 15 and November 15, commencing May 15,
1997.

Record Dates: May 1 and November 1.

Additional provisions of this Security are set forth on the other side
of this Security.

IN WITNESS WHEREOF, HS RESOURCES, INC. has caused this instrument to be
duly executed under its corporate seal.

Dated:

HS RESOURCES, INC.

By:
-------------------------------
Name:
Title:

TRUSTEE'S CERTIFICATE OF AUTHENTICATION

HARRIS TRUST AND SAVINGS BANK,
as Trustee, certifies that this is one of
the Securities referred to in the Indenture.

By:
----------------------------------------
Authorized Signatory

2
<PAGE> 107
[FORM OF REVERSE SIDE OF EXCHANGE SECURITY]

9-1/4% Senior Subordinated Note Due 2006

1. Interest

HS Resources, Inc., 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 per annum shown above. The Company will pay
interest semiannually on May 15 and November 15 of each year. Interest on the
Securities will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from the Issue Date. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.

2. Method of Payment

The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered Holders of Securities at the close
of business on the May 1 or November 1 immediately preceding the interest
payment date even if Securities are canceled after the record date and on or
before the interest payment date. Holders must surrender Securities to a
Paying Agent to collect principal payments. The Company will pay principal 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 the
Securities represented by a Global Security (including principal, premium and
interest) will be made by wire transfer of immediately available funds to the
accounts specified by The Depository Trust Company, but, at the option of the
Company, interest may be paid by check mailed to the registered Holders at
their registered addresses. The Company will make all payments in respect of a
certificated Security (including principal, premium and interest), by mailing a
check to the registered address of each Holder thereof; provided, however, that
payments on the Securities may also be made, in the case of a Holder of at
least $1,000,000 aggregate principal amount of Securities, by wire transfer to
a U.S. dollar account maintained by the payee with a bank in the United States
if such Holder elects payment by wire transfer by giving written notice to the
Trustee or the Paying Agent to such effect designating such account no later
than 30 days immediately preceding the relevant due date for payment (or such
other date as the Trustee may accept in its discretion).

3. Paying Agent and Registrar

Initially, Harris Trust and Savings Bank, an Illinois banking
corporation ("Trustee"), will act as Paying Agent and Registrar. The Company
may appoint and change any Paying Agent, Registrar or co-registrar without
notice. The Company or any of its domestically incorporated Wholly Owned
Restricted Subsidiaries may act as Paying Agent, Registrar or co-registrar.

4. Indenture

3
<PAGE> 108
defined in the Indenture and not defined herein have the meanings ascribed
thereto in the Indenture. The Securities are subject to all such terms, and
Holders are referred to the Indenture and the Act for a statement of those
terms.

The Securities are unsecured senior subordinated obligations of the
Company limited to $150,000,000 aggregate principal amount at any one time
outstanding (subject to Section 2.07 of the Indenture). This Security is one
of the Exchange Securities referred to in the Indenture. The Securities
include the Initial Securities and any Exchange Securities issued in exchange
for the Initial Securities pursuant to the Indenture. The Initial Securities
and the Exchange Securities are treated as a single class of securities under
the Indenture. The Indenture imposes certain limitations on the Incurrence of
Indebtedness by the Company and its Restricted Subsidiaries; the payment of
dividends on, and redemption of, Capital Stock of the Company and its
Restricted Subsidiaries and the redemption of certain Pari Passu Indebtedness
and Subordinated Indenture of the Company and its Restricted Subsidiaries;
Investments; sales of assets and Restricted Subsidiary Capital Stock; certain
transactions with Affiliates of the Company; the sale or issuance of Capital
Stock of the Restricted Subsidiaries; the creation of Liens; and
consolidations, mergers and transfers of all or substantially all of the
Company's assets. In addition, the Indenture prohibits certain restrictions on
distributions and dividends from Restricted Subsidiaries.

5. Optional Redemption

If redeemed during the 12-month period commencing November 15 of the
years indicated:

<TABLE>
<CAPTION>
Redemption
Year Price
------ -----------
<S> <C>
2001............................................... 104.625%
2002............................................... 103.083%
2003............................................... 101.542%
2004 and thereafter................................ 100.000%
</TABLE>

4
<PAGE> 109
the date of the closing of any such Equity Offering. The redemption shall be
made in accordance with procedures set forth in the Indenture.

6. Notice of Redemption

7. Put Provisions

In the event that the aggregate amount of Excess Proceeds from Asset
Sales exceeds $10,000,000, the Company will, subject to certain conditions
specified in the Indenture, make an offer to repurchase Securities having an
aggregate principal amount equal to the aggregate amount of Excess Proceeds at
a purchase price equal to 100% of the principal amount of such Securities plus
accrued and unpaid interest, if any, to the purchase date.

8. Subordination

9. Denominations; Transfer; Exchange

5
<PAGE> 110
endorsements or transfer documents and to pay any taxes required by law or
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be
redeemed) or to transfer or exchange any Securities for a period of 15 days
prior to a selection of Securities to be redeemed or 15 days before an interest
payment date.

10. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner of it
for all purposes.

11. Unclaimed Money

12. Discharge and Defeasance

13. Amendment, Waiver

Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the
Securities and (ii) any default or noncompliance with any provision may be
waived with the written consent of the Holders of a majority in principal
amount outstanding of the Securities. Subject to certain exceptions set forth
in the Indenture, without the consent of any Holder, the Company, the
Subsidiary Guarantors and the Trustee may amend the Indenture or the Securities
(i) to cure any ambiguity, omission, defect or inconsistency, (ii) to provide
for the assumption of the obligations of the Company under the Indenture upon
the merger, consolidation or sale or other disposition of all or substantially
all of the assets of the Company and its Restricted Subsidiaries taken as a
whole and certain other events specified in Article 5 of the Indenture, (iii)
to provide for uncertificated Securities in addition to or in place of
certificated Securities, (iv) to comply with any requirement of the Commission
in order to effect or maintain the qualification of the Indenture under the
Trust Indenture Act, (v) to make any change that does not adversely affect the
rights of any Holder of Securities in any material respect, (vi) to add or
remove Subsidiary Guarantors pursuant to the procedures set forth in the
Indenture, and (vii) to provide for certain other modifications and amendments
as set forth in the Indenture. Certain provisions of the Securities and the
Indenture may not be amended or waived without the consent of each Holder
affected thereby.

6
<PAGE> 111
14. Defaults and Remedies

15. Trustee Dealings with the Company

16. No Recourse Against Others

7
<PAGE> 112
17. Governing Law

18. Authentication

This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.

19. Abbreviations

20. Holders' Compliance with Registration Agreement

21. CUSIP Numbers

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.

8
<PAGE> 113
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 social security 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.

Dated: Your Signature:
---------------- ----------------------------------------

- --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.

Signature Guarantee:

- ----------------------------
Signature must be guaranteed

9
<PAGE> 114
OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Security purchased by the
Company pursuant to Section 4.06 or Section 4.09 of the Indenture, check the
appropriate box:

Section 4.06 [ ]

Section 4.09 [ ]

Dated: Your Signature:
--------------- ------------------------------
(Sign exactly as your name
appears on the other side
of this Security.)

Signature Guarantee:
-----------------------------
(Signature must be guaranteed)

10
<PAGE> 115
[TO BE ATTACHED TO GLOBAL SECURITIES]

SCHEDULE A

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY

The initial principal amount at maturity of this Global Security shall
be $__________. The following increases or decreases in this Global Security
have been made:

</TABLE>

11
<PAGE> 116
EXHIBIT B
FORM OF SUPPLEMENTAL INDENTURE

SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
_______________, among [SUBSIDIARY GUARANTOR] (the "New Subsidiary Guarantor"),
a subsidiary of HS Resources, Inc. (or its successor), a Delaware corporation
(the "Company"), HS RESOURCES, INC., the Subsidiary Guarantors (the "Existing
Subsidiary Guarantors") under the Indenture referred to below, and HARRIS TRUST
AND SAVINGS BANK, an Illinois banking corporation, as trustee under the
Indenture referred to below (the "Trustee").

W I T N E S S E T H :

WHEREAS the Company has heretofore executed and delivered to the
Trustee an Indenture (as such may be amended from time to time, the
"Indenture"), dated as of November 27, 1996, providing for the issuance of an
aggregate principal amount of $150,000,000 of 9-1/4% Senior Subordinated Notes
due 2006 (the "Securities");

WHEREAS Section 4.12 of the Indenture provides that under certain
circumstances the Company is required to cause the New Subsidiary Guarantor to
execute and deliver to the Trustee a supplemental indenture pursuant to which
the New Subsidiary Guarantor shall unconditionally guarantee all of the
Company's obligations under the Securities pursuant to a Subsidiary Guaranty on
the terms and conditions set forth herein; and

WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee,
the Company and Existing Subsidiary Guarantors are authorized to execute and
deliver this Supplemental Indenture;

NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the New Subsidiary Guarantor, the Company, the Existing Subsidiary Guarantors
and the Trustee mutually covenant and agree for the equal and ratable benefit
of the holders of the Securities as follows:

1. Definitions. (a) Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.

(b) For all purposes of this Supplemental Indenture, except as
otherwise herein expressly provided or unless the context otherwise requires:
(i) the terms and expressions used herein shall have the same meanings as
corresponding terms and expressions used in the Indenture; and (ii) the words
"herein," "hereof" and "hereby" and other words of similar import used in this
Supplemental Indenture refer to this Supplemental Indenture as a whole and not
to any particular section hereof.

2. Agreement to Guarantee. The New Subsidiary Guarantor hereby
agrees, jointly and severally with all other Subsidiary Guarantors, to
guarantee the Company's obligations under the Securities on the terms and
subject to the conditions set forth in Article 11 of the Indenture and to be
bound by all other applicable provisions of the Indenture. From and after the
date hereof, the New Subsidiary Guarantor shall be a Subsidiary Guarantor for
all purposes under the Indenture and the Securities.

3. Ratification of Indenture; Supplemental Indentures Part of
Indenture. Except as expressly amended hereby, the Indenture is in all
respects ratified and confirmed and all the

1
<PAGE> 117
terms, conditions and provisions thereof shall remain in full force and effect.
This Supplemental Indenture shall form a part of the Indenture for all
purposes, and every holder of Securities heretofore or hereafter authenticated
and delivered shall be bound hereby.

4. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE
EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.

5. Trustee Makes No Representation. The Trustee makes no
representation as to the validity or sufficiency of this Supplemental
Indenture.

6. Counterparts. The parties may sign any number of copies of
this Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.

7. Effect of Headings. The Section headings herein are for
convenience only and shall not effect the construction thereof.

IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed as of the date first above written.

[NEW SUBSIDIARY GUARANTOR]

By:
----------------------------------
Name:
Title:

HS RESOURCES, INC.

By:
----------------------------------
Name:
Title:

[SUBSIDIARY GUARANTORS]

By:
----------------------------------
Name:
Title:

HARRIS TRUST AND SAVINGS BANK,
as Trustee

By:
----------------------------------
Name:
Title:

<PAGE> 1
EXHIBIT 4.3

HS RESOURCES, INC.

and

HARRIS TRUST AND SAVINGS BANK

Trustee

--------------------------

First Supplemental Indenture

Dated as of November 25, 1996

--------------------------

$75,000,000

9 7/8 Senior Subordinated Notes due 2003
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE

THIS FIRST SUPPLEMENTAL INDENTURE (this "FIRST SUPPLEMENTAL
INDENTURE") dated as November 25, 1996 is among HS RESOURCES, INC., a Delaware
corporation (the "COMPANY"), and its wholly-owned subsidiaries, ORION
ACQUISITION, INC., a Delaware corporation ("ORION") and HSRTW, INC., a
Delaware corporation ("HSRTW") (collectively, Orion and HSRTW are referred to
herein as the "GUARANTORS") and HARRIS TRUST AND SAVINGS BANK (the "TRUSTEE").

RECITALS

A. The Company and the Trustee executed an indenture dated as of
December 1, 1993 (the "INDENTURE"), relating to the Company's 9 7/8% Senior
Subordinated Notes due 2003 (the "NOTES"). All terms not defined herein shall
have the meanings assigned to them in the Indenture.

B. Pursuant to Section 13.3 of the Indenture, Orion and HSRTW
desire to become Subsidiary Guarantors by executing (i) this First Supplemental
Indenture, which subjects the Guarantors to the provisions of the Indenture,
and (ii) Subsidiary Guarantees, pursuant to which each of the Guarantors
guarantees the obligations of the Company under the Indenture.

C. Pursuant to Section 9.1 of the Indenture, the Company and the
Trustee desire to amend the Indenture without the consent of any Holder to add
Orion and HSRTW as Subsidiary Guarantors.

D. All conditions precedent provided for in the Indenture
relating to this First Supplemental Indenture have been complied with.

AGREEMENT

NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH, the
Company, Orion, HSRTW, and the Trustee mutually covenant and agree for the
equal and proportionate benefit of all Holders of the Notes as follows:

<PAGE> 3
ARTICLE I

AMENDMENT OF ARTICLE I

SECTION 1.1 DEFINITIONAL AMENDMENT. Section 1.1 of Article I of
the Indenture is amended by substituting the definition of Subsidiary Guarantor
with the following:

"SUBSIDIARY GUARANTOR" means (i) Orion Acquisition, Inc., a
Delaware corporation, (ii) HSRTW, Inc., a Delaware corporation, and
(iii) each of the Restricted Subsidiaries that becomes a guarantor of
the Notes in compliance with the provisions hereof and executes a
supplemental indenture agreeing to be bound by the terms hereof.

SECTION 1.2 MUTATIS MUTANDIS EFFECT. The Indenture is hereby
amended mutatis mutandis to reflect the addition of the changes incorporated in
the Indenture pursuant to Section 1.1 above.

ARTICLE II

MISCELLANEOUS

SECTION 2.1 COUNTERPARTS. This First Supplemental Indenture may
be executed in counterparts, each of which when so executed shall be deemed to
be an original, but all such counterparts shall together constitute one and the
same instrument.

SECTION 2.2 SEVERABILITY. In the event that any provision in
this First Supplemental Indenture shall be held to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.

SECTION 2.3 HEADINGS. The article and section headings herein
are for convenience only and shall not have an effect on the construction
hereof.

SECTION 2.4 SUCCESSORS AND ASSIGNS. Any covenants and agreements
in this First Supplemental Indenture by the Company, the Guarantors and the
Trustee shall bind their respective successors and assigns, whether so
expressed or not.

SECTION 2.5 GOVERNING LAW. THIS FIRST SUPPLEMENTAL INDENTURE
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.

SECTION 2.6 EFFECT OF FIRST SUPPLEMENTAL INDENTURE. Except as
amended by this First Supplemental Indenture, the terms and provisions of the
Indenture shall remain in full force and effect.

-2-
<PAGE> 4
SECTION 2.7 TRUSTEE. The Trustee accepts the modifications of
trusts referenced in the Indenture and effected by this First Supplemental
Indenture. Without limiting the generality of the foregoing, the Trustee
assumes no responsibility for the correctness of the recitals herein contained,
which shall be taken as the statements of the Company and the Guarantors, and
the Trustee shall not be responsible or accountable in any way whatsoever for
or with respect to the validity or execution or sufficiency of this First
Supplemental Indenture, and the Trustee makes no representation with respect
thereto.

[THIS SPACE INTENTIONALLY LEFT BLANK]

-3-
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be executed by their duly authorized representatives
as of the date hereof.

COMPANY:

ATTEST HS RESOURCES, INC.

/s/ JAMES M. PICCONE By: /s/ P. MICHAEL HIGHUM
- ------------------------------- ----------------------------------------
Name: James M. Piccone Name: P. Michael Highum
Title: Secretary Title: President

SUBSIDIARY GUARANTORS:

ATTEST ORION ACQUISITION, INC.

ATTEST HSRTW, INC.

TRUSTEE:

ATTEST HARRIS TRUST AND SAVINGS BANK

/s/ C. POTTER By: /s/ J. BARTOLINI
- ------------------------------- ----------------------------------------
Name: C. Potter Name: J. Bartolini
------------------------- -----------------------------
Title: Assistant Secretary Title: Vice President
------------------------ ----------------------------

-4-
<PAGE> 6
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )

On the 25 day of November, 1996, before me personally came P. Michael
Highum, to me known, who, being by me duly sworn, did depose and say that he
resides at Englewood, Colorado, that such person is the President of HS
RESOURCES, INC., one of the corporations described in and which executed the
above instrument; that such persons knows the corporate seal of such
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed pursuant to authority of the board of directors of such
corporation; and that such person executed said instrument pursuant to like
authority.

/s/ LINDA S. BUSK
---------------------------------------
Notary -- Linda S. Busk
(NOTARIAL SEAL)

My commission expires: 1/4/97

STATE OF COLORADO )
) ss.
COUNTY OF DENVER )

On the 25th day of November, 1996, before me personally came P.
Michael Highum, to me known, who, being by me duly sworn, did depose and say
that he resides at Englewood, Colorado, that such person is the President of
ORION ACQUISITION, INC., one of the corporations described in and which
executed the above instrument; that such persons knows the corporate seal of
such corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed pursuant to authority of the board of directors of
such corporation; and that such person executed said instrument pursuant to
like authority.

/s/ LINDA S. BUSK
---------------------------------------
Notary -- Linda S. Busk
(NOTARIAL SEAL)

My commission expires: 1/4/97

-5-
<PAGE> 7
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )

On the 25th day of November, 1996, before me personally came P.
Michael Highum, to me known, who, being by me duly sworn, did depose and say
that he resides at Englewood, Colorado, that such person is the President of
HSRTW, INC., one of the corporations described in and which executed the above
instrument; that such persons knows the corporate seal of such corporation;
that the seal affixed to said instrument is such corporate seal; that it was so
affixed pursuant to authority of the board of directors of such corporation;
and that such person executed said instrument pursuant to like authority.

/s/ LINDA S. BUSK
---------------------------------------
Notary -- Linda S. Busk
(NOTARIAL SEAL)

My commission expires: 1/4/97

STATE OF )
) ss.
COUNTY OF )

On the 25th day of November, 1996, before me personally came_________
, to me known, who, being by me duly sworn, did depose and say that he resides
at ______________________________________________________, that such person is
the of HARRIS TRUST AND SAVINGS BANK, one of the corporations described in and
which executed the above instrument; that such persons knows the corporate seal
of such corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed pursuant to authority of the board of directors of
such corporation; and that such person executed said instrument pursuant to like
authority.

/s/ MARIANNE CODY
---------------------------------------
Notary -- Marianne Cody
(NOTARIAL SEAL)

My commission expires:

-6-

<PAGE> 1
EXHIBIT 10.22

SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

THIS SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
(this "Amendment") is among: HS RESOURCES, INC., a corporation formed under the
laws of the State of Delaware (the "Borrower"); each of the lenders that is a
signatory hereto; and THE CHASE MANHATTAN BANK (in its individual capacity,
"Chase"), as agent for the Lenders (in such capacity, together with its
successors in such capacity, the "Agent").

R E C I T A L S

A. The Borrower, the Agent, and the Lenders (as defined in the Credit
Agreement as hereafter defined) have entered into that certain Amended and
Restated Credit Agreement dated as of June 14, 1996 as amended by the First
Amendment to Amended and Restated Credit Agreement dated as of June 17, 1996 (as
amended, the "Credit Agreement"), pursuant to which the Lenders have agreed to
make certain loans and extensions of credit to the Borrower upon the terms and
conditions as provided therein; and

B. The Borrower, the Agent, and the Lenders now desire to make certain
amendments to the Credit Agreement.

NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration and the mutual benefits, covenants and agreements herein
expressed, the parties hereto now agree as follows:

1. All capitalized terms used in this Amendment and not otherwise
defined herein shall have the meanings ascribed to such terms in the Credit
Agreement.

2. The definitions of "Threshold Amount" and "Threshold Utilization
Percentage" in Section 1.02 of the Credit Agreement are hereby deleted, and
wherever the term "Threshold Utilization Percentage" is used in the Credit
Agreement, the term "Borrowing Base Utilization Percentage" (as hereinafter
defined) shall be substituted in place thereof.

3. The definitions "Applicable Margin," "Indenture," "Subordinated
Debt" and "Subordinated Notes" in Section 1.02 of the Credit Agreement are
hereby amended to read as follows:

"Applicable Margin" shall mean for Base Rate Loans or
Eurodollar Loans or the commitment fee pursuant to Section 2.04(a) the
following rate per annum as applicable based on the Borrowing Base
Utilization Percentage in effect from time to time:
<PAGE> 2
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Borrowing Base Utilization Eurodollar Base Rate Commitment
Percentage Loans Loan Fee
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Greater than or equal to 80%, 1.250% 0.250% 0.375%
- --------------------------------------------------------------------------------------
Greater than or equal to 60%, 1.1250% 0.1250% 0.375%
but less than 80%
- --------------------------------------------------------------------------------------
Greater than or equal to 40%, 1.000% 0.000% 0.375%
but less than 60%
- --------------------------------------------------------------------------------------
Less than 40% 0.750% 0.000% 0.300%
- --------------------------------------------------------------------------------------
</TABLE>

"Indentures" shall mean the 93 Indenture and the 96 Indenture.

"Subordinated Debt" shall mean the Debt of the Company
evidenced by the Subordinated Notes or the Indentures.

"Subordinated Notes" shall mean the 93 Subordinated Notes and
the 96 Subordinated Notes.

4. Section 1.02 of the Credit Agreement is hereby supplemented, where
alphabetically appropriate, with the addition of the following definitions:

"Borrowing Base Utilization Percentage" shall mean, as of any
day, the fraction expressed as a percentage, the numerator of which is
the balance of all Loans and LC Exposure outstanding on such day, and
the denominator of which is the Borrowing Base in effect on such day.

"93 Indenture" shall mean the Indenture between the Borrower,
as Issuer, and Harris Trust and Savings Bank, as Trustee, providing for
the issuance of $75,000,000 of Senior Subordinated Notes due December
1, 2003 and all renewals, extensions and modifications permitted by the
terms of this Agreement.

"96 Indenture" shall mean the Indenture between the Borrower,
as Issuer, the Guarantors and Harris Trust and Savings Bank, as
Trustee, providing for the issuance of $150,000,000 of Senior
Subordinated Notes due November 15, 2006 and all renewals, extensions
and modifications permitted by the terms of this Agreement.

"93 Subordinated Notes" shall mean the Senior Subordinated
Notes issued pursuant to the 93 Indenture.

"96 Subordinated Notes" shall mean the Senior Subordinated
Notes issued pursuant to the 96 Indenture.

-2-
<PAGE> 3
"Second Amendment" shall mean that certain Second Amendment to
Amended and Restated Credit Agreement dated as of November 27, 1996,
among the Borrower, the Lenders and the Agent.

"Second Amendment Effective Date" shall mean the effective
date of the Second Amendment and shall be the same date as the
effective date of the 96 Indenture; provided, that the conditions
required by Section 9 of the Second Amendment have been satisfied.

5. Section 2.08 of the Credit Agreement is hereby amended to read as
follows:

"Section 2.08 Borrowing Base.

(a) The Borrowing Base shall be determined in accordance with
Section 2.08(b) by the Agent with the concurrence of the Super Majority
Lenders and is subject to redetermination in accordance with Section
2.08(d). Upon any redetermination of the Borrowing Base, such
redetermination shall remain in effect until the next successive
Redetermination Date. "Redetermination Date" shall mean the date that
the redetermined Borrowing Base becomes effective subject to the notice
requirements specified in Section 2.08(f) both for scheduled
redeterminations and unscheduled redeterminations. So long as any of
the Commitments are in effect or any LC Exposure or Loans are
outstanding hereunder, this facility shall be governed by the then
effective Borrowing Base. During the period from and after the Second
Amendment Effective Date until the first Redetermination Date
thereafter, the amount of the Borrowing Base shall be $275,000,000.

(b) Upon receipt of the reports required by Section 8.07 and
such other reports, data and supplemental information as may from time
to time be reasonably requested by the Agent (the "Engineering
Reports"), each Lender will redetermine the Borrowing Base. Such
redetermination will be in accordance with its normal and customary
procedures for evaluating oil and gas reserves and other related assets
as such exist at that particular time. Each Lender, in its sole
discretion, may make adjustments to the rates, volumes and prices and
other assumptions set forth therein in accordance with its normal and
customary procedures for evaluating oil and gas reserves and other
related assets as such exist at that particular time. The Agent shall
propose to the Lenders the new Borrowing Base within 30 days following
receipt by the Agent and the Lenders of the Engineering Reports in a
timely and complete manner. After having received notice of such
proposal by the Agent, the Super Majority Lenders shall have 15 days to
agree or disagree with such proposal. If at the end of the 15 days, the
Super Majority Lenders have not communicated their approval or
disapproval, such silence shall be deemed to be an approval and the
Agent's proposal shall be the new Borrowing Base. If however, the Super
Majority Lenders shall not have approved or have been deemed to have
approved the new Borrowing Base within 15 days, the Agent and the Super
Majority Lenders shall, within a reasonable period of time, agree on
the new Borrowing Base.

-3-
<PAGE> 4
(c) The Agent may exclude any Oil and Gas Property or portion
of production therefrom or any income from any other Property from the
Borrowing Base, at any time, because title information is not
reasonably satisfactory.

(d) So long as any of the Commitments are in effect and until
payment in full of all Loans hereunder, on or around the fifteenth day
of each April, commencing April 15, 1997 (each being a "Scheduled
Redetermination Date"), the Super Majority Lenders shall redetermine
the amount of the Borrowing Base in accordance with Section 2.08(b). In
addition, the Super Majority Lenders or the Borrower may initiate a
redetermination of the Borrowing Base at any other time as they so
elect; provided, however, that the Borrower and the Super Majority
Lenders may each initiate only one such unscheduled redetermination
during any consecutive twelve (12) month period. In the event of a
redetermination initiated by the Super Majority Lenders, the Agent will
specify in writing to the Borrower the date on which the Borrower is to
furnish a Reserve Report in accordance with Section 8.07(b) and the
date on which such redetermination is to occur.

(e) The Agent shall promptly notify in writing the Borrower
and the Lenders of the new Borrowing Base. Any redetermination of the
Borrowing Base shall not be in effect until written notice is received
by the Borrower.

6. Sections 7.21 and 8.09 of the Credit Agreement are hereby amended by
substituting the word "Indentures" for the word "Indenture" in such sections.

7. Section 8.01 of the Credit Agreement is hereby amended by adding the
following clause (i):

"(i) At each time of delivery of the financial statements
required to be delivered pursuant to Sections 8.01(a) and (b) a report
in form and substance satisfactory to the Agent setting forth the use
of proceeds from asset sales and demonstrating compliance with Section
4.03(b)(i) of the 96 Indenture."

8. Section 9.01(g) of the Credit Agreement is hereby amended to read in
its entirety as follows:

"(g) the Subordinated Debt not to exceed at any time
$75,000,000 of principal outstanding under the 93 Subordinated Notes
and $150,000,000 of principal outstanding under the 96 Subordinated
Notes;"

9. The Credit Agreement is hereby amended by deleting Section 9.03(g)
and 9.15(v).

10. Section 9.20 of the Credit Agreement is hereby amended to read as
follows:

"Section 9.20 Subordinated Debt.

-4-
<PAGE> 5
(a) The Borrower will not modify or amend the terms of the 93
Indenture as in existence on December 1, 1993 and any related documents
without the consent of the Majority Banks, if the effect of such
modification or amendment would be to shorten the time for payment on
any 93 Subordinated Notes, increase the principal amount of the 93
Subordinated Notes above $75,000,000, increase the rate of interest on
any 93 Subordinated Note or change the method of calculating interest
so as to effectively increase the rate of interest on any 93
Subordinated Note, change any of the provisions of Sections 2.3, 5.1,
Article VIII, Article X, Article XI, Article XII, Article XIII or
Article XIV, and Section 1.1 as to any of the definitions used in or
relating to any of the above Sections and Articles, or any other
provisions which would detrimentally effect the rights of the Banks.
The Indebtedness shall first be irrevocably and indefeasibly paid in
full in cash, or the immediate payment thereof duly provided for in
cash, and this Agreement terminated before the Company, any Subsidiary
or any Person acting on behalf of the Company or any Subsidiary shall
directly or indirectly pay, prepay, redeem, retire, repurchase or
otherwise acquire for value, or make a deposit pursuant to Article IV
of the 93 Indenture in respect of, or make any other prepayment,
payment or distribution (whether in cash, property, securities or
accommodation thereof or otherwise) on account of the principal of (or
premium, if any) or interest on, any 93 Subordinated Note or Subsidiary
Subordinat ed Debt related thereto; except that the Company may make
payments of interest that has accrued and is payable on the 93
Subordinated Notes pursuant to the terms of the 93 Indenture and pay
the principal of the 93 Subordinated Notes at the stated maturity of
December 1, 2003, provided that no Event of Default exists and is
continuing and such payment shall not cause an Event of Default.

(b) The Borrower will not modify or amend the terms of the 96
Indenture as in existence on November 27, 1996 and any related
documents without the consent of the Majority Banks, if the effect of
such modification or amendment would be to shorten the time for payment
on any 96 Subordinated Notes, increase the principal amount of the 96
Subordinated Notes above $150,000,000, increase the rate of interest on
any 96 Subordinated Note or change the method of calculating interest
so as to effectively increase the rate of interest on any 96
Subordinated Note, change the form of the reverse side of the Initial
Security or the Exchange Security issued under the 96 Indenture, change
any of the provisions of Section 6.01, Articles 3,4,5,10,11 and 12, and
Section 1.01 as to any of the definitions used in or relating to any of
the above Sections and Articles, or any other provisions which would
detrimentally effect the rights of the Banks. The Indebtedness shall
first be irrevocably and indefeasibly paid in full in cash, or the
immediate payment thereof duly provided for in cash, and this Agreement
terminated before the Company, any Subsidiary or any Person acting on
behalf of the Company or any Subsidiary shall directly or indirectly
pay, prepay, redeem, retire, repurchase or otherwise acquire for value,
or make a deposit pursuant to Article 8 of the 96 Indenture in respect
of, or make any other prepayment, payment or distribution (whether in
cash, property, securities or accommodation thereof or otherwise) on
account of the principal of (or premium, if any) or interest on, any 96
Subordinated Note or Subsidiary Subordinated Debt

-5-
<PAGE> 6
related thereto; except that the Company may make payments of interest
that has accrued and is payable on the 96 Subordinated Notes pursuant
to the terms of the 96 Indenture and pay the principal of the 96
Subordinated Notes at the stated maturity of November 15, 2006,
provided that no Event of Default exists and is continuing and such
payment shall not cause an Event of Default."

11. Annex I of the Credit Agreement is hereby replaced by Annex I to
this Amendment.

12. This Amendment shall become binding on the Lenders when, and only
when, the following conditions shall have been satisfied and the Agent shall
have received each of the following, as applicable, in form and substance
satisfactory to the Agent or its counsel:

(a) counterparts of this Amendment executed by the Borrower
and the Majority Lenders;

(b) a copy of the 96 Indenture;

(d) Orion or the Borrower shall have purchased and received an
assignment of all of the Oil & Gas Properties of WRL; and

(e) such other documents as it or its counsel may reasonably
request.

13. The parties hereto hereby acknowledge and agree that, except as
specifically supplemented and amended, changed or modified hereby, the Credit
Agreement shall remain in full force and effect in accordance with its terms.

14. The Borrower hereby reaffirms that as of the date of this
Amendment, the representations and warranties contained in Article VII of the
Credit Agreement are true and correct on the date hereof as though made on and
as of the date of this Amendment, except as such representations and warranties
are expressly limited to an earlier date.

15. THIS AMENDMENT (INCLUDING, BUT NOT LIMITED TO, THE VALIDITY AND
ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, OTHER THAN THE CONFLICT OF LAWS RULES
THEREOF.

16. This Amendment may be executed in two or more counterparts, and it
shall not be necessary that the signatures of all parties hereto be contained on
any one counterpart hereof; each counterpart shall be deemed an original, but
all of which together shall constitute one and the same instrument.

-6-
<PAGE> 7
[SIGNATURES BEGIN NEXT PAGE]

-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of November 27, 1996.

BORROWER: HS RESOURCES, INC.

By: /s/ JAMES E. DUFFY
----------------------------
Name: James E. Duffy
Title: Vice President

LENDER AND AGENT: THE CHASE MANHATTAN BANK

By: /s/ MARY JO WOODFORD
----------------------------
Name: Mary Jo Woodford
Title: Vice President

LENDERS: CIBC INC.

By: /s/ ALEKSANDRA K. DYMANUS
----------------------------
Name: Aleksandra K. Dymanus
Title: Authorized Signatory

WELLS FARGO BANK, N.A.

By: /s/ ALLEN RHEEM
----------------------------
Name: Allen Rheem
Title: Vice President

CREDIT LYONNAIS NEW YORK BRANCH

By: /s/ PASCAL POUPELLE
----------------------------
Name: Pascal Poupelle
Title: Senior Vice President

S - 1
<PAGE> 9
UNION BANK OF CALIFORNIA, N.A.

By: /s/ RANDALL L. OSTERBERG
-------------------------
Name: Randall L. Osterberg
Title: Vice President

ROYAL BANK OF CANADA

By: /s/ JOHN LUSTGARTEN
-------------------------
Name John Lustgarten
Title: Associate

DEN NORSKE BANK ASA

By: /s/ CHARLES E. HALL
-------------------------
Name: Charles E. Hall
Title: Senior Vice President

By: /s/ JAN MORTEN KREUTZ
-------------------------
Name: Jan Morten Kreutz
Title: Vice President

MEESPIERSON, N.V.

By: /s/ DARRELL W. HOLLEY
-------------------------
Name: Darrell W. Holley
Title: Vice President

S - 2
<PAGE> 10
ABN AMRO BANK N.V.
San Francisco International Branch

By: ABN AMRO NORTH AMERICA, INC.,
as agent

By: /s/ BRADFORD H. LEAHY
-----------------------------------
Name: Bradford H. Leahy
Title: Officer

By: /s/ L. T. OSBORNE
-----------------------------------
Name: L. T. Osborne
Title: Group Vice President

FIRST UNION NATIONAL BANK OF NORTH
CAROLINA

By: /s/ MICHAEL J. KOLOSOWSKY
-----------------------------------
Name: Michael J. Kolosowsky
Title: Vice President

THE SANWA BANK, LIMITED

By: /s/ VIRGINIA HART
-----------------------------------
Name: Virginia Hart
Title: Vice President

SOCIETE GENERALE

By: /s/ RICHARD A. GOULD
-----------------------------------
Name: Richard A. Gould
Title: Vice President

S - 3
<PAGE> 11
BANQUE PARIBAS

By: /s/ TOM McGRATH
----------------------------------
Name: Tom McGrath
Title: Vice President

By: /s/ DON MALEY, JR.
----------------------------------
Name: Don Maley, Jr.
Title: Managing Director

CAISSE NATIONALE DE CREDIT AGRICOLE

By: /s/ DAVID BOUHL, FVP
----------------------------------
Name: David Bouhl
Title: President of Corporate Banking

S - 4

<PAGE> 1
EXHIBIT 10.40

PURCHASE AGREEMENT

AMONG

HS RESOURCES, INC.,
ORION ACQUISITION, INC.,
HSRTW, INC.
SALOMON BROTHERS INC,
CHASE SECURITIES INC.,
LEHMAN BROTHERS INC.,
PRUDENTIAL SECURITIES INCORPORATED

DATED NOVEMBER 22, 1996
<PAGE> 2
HS RESOURCES, INC.
$150,000,000
9 1/4% SENIOR SUBORDINATED NOTES DUE 2006

PURCHASE AGREEMENT

New York, New York
November 22, 1996

Salomon Brothers Inc
Chase Securities Inc.
Lehman Brothers Inc.
Prudential Securities Incorporated
As Representatives of the Initial Purchasers
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048

Ladies and Gentlemen:

HS Resources, Inc., a Delaware corporation (the "COMPANY"), proposes
to issue and sell to the parties named in SCHEDULE I hereto (the "INITIAL
PURCHASERS"), for whom you are acting as representatives (the
"REPRESENTATIVES"), $150,000,000 principal amount of its 9 1/4% Senior
Subordinated Notes Due 2006 (the "NOTES") to be guaranteed on a senior
subordinated basis (the "SUBSIDIARY GUARANTIES" and, together with the Notes,
the "SECURITIES") by Orion Acquisition, Inc., a Delaware corporation ("ORION
ACQUISITION"), and HSRTW, Inc., a Delaware corporation ("HSRTW" and together
with Orion Acquisition the "SUBSIDIARY GUARANTORS"). The Securities are to be
issued under an indenture (the "INDENTURE"), dated as of November 27, 1996,
between the Company and Harris Trust and Savings Bank, as trustee. If you are
the only Initial Purchasers, all references herein to the Representatives shall
be deemed to be to the Initial Purchasers.

The sale of the Securities to the Initial Purchasers will be made
without registration of the Securities under the Securities Act of 1933, as
amended (the "SECURITIES ACT"), in reliance upon exemptions from the
registration requirements of the Securities Act. You have advised the Company
that the Initial Purchasers will offer and sell the Securities purchased by
them hereunder in accordance with Section 4 hereof as soon as you deem
advisable.

In connection with the sale of the Securities, the Company has
prepared a preliminary offering memorandum, dated November 6, 1996 (including
any and all exhibits thereto and any information incorporated by reference
therein, the "PRELIMINARY MEMORANDUM") and a final offering memorandum, dated
November 22, 1996 (including any and all exhibits thereto and any information
incorporated by reference therein, the "FINAL MEMORANDUM"). Each of the
Preliminary Memorandum and the Final Memorandum sets forth certain information
concerning

1
<PAGE> 3
the Company, the Subsidiary Guarantors and the Securities. The Company and the
Subsidiary Guarantors, jointly and severally, hereby confirm that they have
authorized the use of the Preliminary Memorandum and the Final Memorandum, and
any amendment or supplement thereto, in connection with the offer and sale of
the Securities by the Initial Purchasers. Unless stated to the contrary, all
references in this Purchase Agreement (this "AGREEMENT") to the Final
Memorandum are to the Final Memorandum at the Execution Time (as defined below)
and are not meant to include any amendment or supplement, or any information
incorporated by reference therein, subsequent to the Execution Time, and any
references herein to the terms "AMEND", "AMENDMENT" or "SUPPLEMENT" with
respect to the Final Memorandum shall be deemed to refer to and include any
information filed under the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), subsequent to the Execution Time which is incorporated by
reference therein.

1. Representations and Warranties of the Company and the
Subsidiary Guarantors. The Company and the Subsidiary Guarantors jointly and
severally represent and warrant to each Initial Purchaser as set forth below in
this Section 1.

(a) Each of the Company, the Subsidiary Guarantors and
their respective subsidiaries is a corporation or partnership, duly
incorporated or formed and is validly existing as a corporation or
partnership in good standing under the laws of the jurisdiction in
which it is chartered, organized or formed and is duly qualified to do
business as a foreign corporation or partnership and is in good
standing under the laws of each jurisdiction which requires such
qualification wherein it owns or leases material properties or
conducts material business, except in such jurisdictions in which the
failure to so qualify would not have a material adverse effect on the
Company, the Subsidiary Guarantors and their respective subsidiaries
taken as a whole.

(b) Each of the Company, the Subsidiary Guarantors and
their respective subsidiaries has full power (corporate and other) to
own or lease its properties and conduct its business as described in
the Final Memorandum; and each of the Company and the Subsidiary
Guarantors have full power (corporate and other) to enter into this
Agreement, the Indenture, the Notes and the Registration Agreement,
dated as of November 27, 1996, among the Company, the Subsidiary
Guarantors and the Initial Purchasers (the "REGISTRATION AGREEMENT")
(collectively, the "TRANSACTION DOCUMENTS") to which it is a party and
to carry out all the terms and provisions hereof and thereof to be
carried out by it, including, without limitation, the issuance, sale
and delivery of the Securities.

(c) The issued shares of capital stock of each of the
Company's subsidiaries have been duly authorized and validly issued,
are fully paid and nonassessable and, except as otherwise set forth in
the Final Memorandum, are owned beneficially, directly or indirectly,
by the Company free and clear of any security interests, liens,
encumbrances, preemptive rights or claims.

(d) The Company has an authorized, issued and outstanding
equity capitalization as set forth in the Final Memorandum (except for
issuances, if any, subsequent to September 30, 1996 pursuant to the
Company's stock option plans). All

2
<PAGE> 4
of the issued shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable.
No holders of outstanding shares of capital stock of the Company are
entitled as such to any preemptive or other rights to subscribe for
any of the Securities.

(e) The consolidated financial statements and schedules
of the Company and its consolidated subsidiaries included in the Final
Memorandum present fairly in all material respects the financial
position of the Company and its consolidated subsidiaries and the
results of operation and changes in financial condition as of the
dates and periods therein specified. Such financial statements and
schedules have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the period
involved (except as otherwise noted therein). The pro forma financial
statements of the Company and its subsidiaries and the related notes
thereto included in the Final Memorandum have been prepared in
accordance with the Securities and Exchange Commission's (the
"COMMISSION") rules and guidelines with respect to pro forma financial
statements and have been properly compiled on the bases described
therein, and the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate to give
effect to the transactions and circumstances referred to therein. The
selected financial data set forth under the caption "Selected
Historical and Pro Forma Combined Financial Data" in the Final
Memorandum present fairly in all material respects, on the basis
stated in the Final Memorandum, the information included therein.

(f) Arthur Andersen LLP, who has certified certain
financial statements of the Company and its consolidated subsidiaries
and delivered their report with respect to the audited consolidated
financial statements and schedules included in the Final Memorandum,
are independent public accountants within the meaning of the
Securities Act and the applicable rules and regulations thereunder.

(g) The execution, delivery and performance of this
Agreement have been duly authorized by the Company and the Subsidiary
Guarantors, this Agreement has been duly executed and delivered by the
Company and the Subsidiary Guarantors and upon the due execution and
delivery by the other parties hereto, this Agreement will constitute
legal, valid and binding obligations of the Company and the Subsidiary
Guarantors, enforceable in accordance with its terms. This Agreement
conforms in all material respects to the description thereof contained
in the Final Memorandum.

(h) No legal or governmental proceedings are pending to
which the Company, the Subsidiary Guarantors or any of their
respective subsidiaries is a party or to which the property of the
Company, the Subsidiary Guarantors or any of their respective
subsidiaries is subject that are not described in the Final
Memorandum, and no such proceedings have been threatened against the
Company, the Subsidiary Guarantors or any of their respective
subsidiaries or with respect to any of their respective properties,
except in each case for such proceedings that, if the subject of an
unfavorable decision, ruling or finding, would not, individually or in
the aggregate, result in a material adverse effect on the condition
(financial or otherwise), business prospects, net worth or results of
operations of the Company, the Subsidiary Guarantors and their
respective

3
<PAGE> 5
subsidiaries, taken as a whole (a "MATERIAL ADVERSE EFFECT"), or have
a material adverse effect on the ability of the Company to perform its
obligations under any of the Transaction Documents.

(i) The issuance, offering and sale of the Securities to
the Initial Purchasers by the Company and the Subsidiary Guarantors
pursuant to this Agreement, the compliance by the Company and the
Subsidiary Guarantors with the other provisions of this Agreement and
the authorization, execution and delivery by the Company and the
Subsidiary Guarantors of this Agreement and the other Transaction
Documents to which it is a party and the consummation of the other
transactions contemplated herein and therein do not (i) require the
consent, approval, authorization, registration or qualification of or
with any governmental authority, except such as have been obtained and
such as may be required under state securities or blue sky laws or,
with respect to the obligations under the Registration Agreement,
except such as may be required under the Trust Indenture Act of 1939,
as amended (the "TRUST INDENTURE ACT"), or as may be required to
register the Securities under the Securities Act or (ii) conflict with
or result in a breach or violation of any of the terms and provisions
of, or constitute a default under, any indenture, mortgage, deed of
trust, lease or other agreement or instrument to which the Company,
the Subsidiary Guarantors or any of their respective subsidiaries is a
party or by which the Company, the Subsidiary Guarantors or any of
their respective subsidiaries or any of their respective properties
are bound, except under the Chase Facility (as hereinafter defined) (a
consent with respect to which will be obtained prior to the Closing
Date) and except in each case for such conflicts, breaches or
violations that would not, individually or in the aggregate, result in
a Material Adverse Effect, or the charter documents or bylaws of the
Company, the Subsidiary Guarantors or any of their respective
subsidiaries, or any statute or any judgment, decree, order, rule or
regulation of any court or other governmental authority or any
arbitrator applicable to the Company, the Subsidiary Guarantors or any
of their respective subsidiaries.

(j) Neither the Company nor any Subsidiary Guarantor has
(i) taken, directly or indirectly, any action designed to cause or to
result in, or that has constituted or which might reasonably be
expected to constitute, the stabilization or manipulation of the price
of any securities of the Company to facilitate the sale or resale of
the Securities or (ii) paid or agreed to pay to any person any
compensation for soliciting another to purchase the Securities (other
than compensation paid to the Initial Purchasers under this
Agreement).

(k) Subsequent to the respective dates as of which
information is given in the Final Memorandum, (i) the Company, the
Subsidiary Guarantors and their respective subsidiaries have not
incurred any material liability or obligation, direct or contingent,
nor entered into any material transaction not in the ordinary course
of business; (ii) the Company and the Subsidiary Guarantors have not
purchased any of their outstanding capital stock, nor declared, paid
or otherwise made any dividend or distribution of any kind on their
capital stock; and (iii) there has not been any material change in the
capital stock, short-term debt or long-term debt of the Company, the
Subsidiary Guarantors and their respective subsidiaries, except in
each case as described in or contemplated by the Final Memorandum.

4
<PAGE> 6
(l) The Company, the Subsidiary Guarantors and each of
their respective subsidiaries have good and indefeasible title to all
items of real property and good title to all personal property owned
by each of them, in each case free and clear of any security
interests, liens, encumbrances, equities, claims and other defects,
except such as do not materially and adversely affect the value of
such property and do not interfere with the use made or proposed to be
made of such property by the Company, the Subsidiary Guarantors, or
their respective subsidiaries, and the Company, the Subsidiary
Guarantors and their respective subsidiaries have valid, subsisting
and enforceable leases for the properties described in the Final
Memorandum as leased by them, with exceptions in each case as are not
material and do not interfere with the business of the Company, the
Subsidiary Guarantors and their respective subsidiaries, taken as a
whole, in each case except as described in or contemplated by the
Final Memorandum.

(m) No labor dispute with the employees of the Company,
the Subsidiary Guarantors or any of their respective subsidiaries
exists or, to the knowledge of the Company, is threatened or imminent
that would result in a Material Adverse Effect, except as described in
or contemplated by the Final Memorandum.

(n) The Company, the Subsidiary Guarantors and each of
their respective subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which they
are engaged; neither the Company, the Subsidiary Guarantors nor any of
their respective subsidiaries have been refused any insurance coverage
sought or applied for; and neither the Company, the Subsidiary
Guarantors nor any of their respective subsidiaries has any reason to
believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its
business at a cost that would not result in a Material Adverse Effect,
except as described in or contemplated by the Final Memorandum.

(o) No subsidiary of the Company is currently prohibited,
directly or indirectly, from paying any dividends to the Company, from
making any other distribution on such subsidiary's capital stock, from
repaying to the Company any loans or advances to such subsidiary from
the Company or from transferring any of such subsidiary's property or
assets to the Company, except as described in or contemplated by the
Final Memorandum.

(p) The Company, the Subsidiary Guarantors and their
respective subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state or foreign regulatory
authorities required to conduct their respective businesses except for
those the failure of which to possess, individually or in the
aggregate, would not have a Material Adverse Effect, and neither the
Company, the Subsidiary Guarantors nor any of their respective
subsidiaries have received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or
permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result in a Material
Adverse Effect, except as described in or contemplated by the Final
Memorandum.

5
<PAGE> 7
(q) The Company and the Subsidiary Guarantors have filed
all foreign, federal, state and local tax returns that are required to
be filed through the date hereof or have requested extensions thereof
and have paid all taxes (other than immaterial amounts of franchise
taxes with respect to immaterial subsidiaries and immaterial amounts
of severance taxes) required to be paid by them and any other
assessment, fine or penalty levied against them, to the extent that
any of the foregoing is due and payable, except for any such
assessment, fine or penalty that is currently being contested in good
faith or as described in or contemplated by the Final Memorandum.

(r) Neither the Company, the Subsidiary Guarantors nor
any of their respective subsidiaries is in violation of any federal or
state law or regulation relating to occupational safety and health or
to the storage, handling or transportation of hazardous or toxic
materials, and the Company, the Subsidiary Guarantors and their
respective subsidiaries have received all permits, licenses or other
approvals required of them under applicable federal and state
occupational safety and health and environmental laws and regulations
to conduct their respective businesses, and the Company, the
Subsidiary Guarantors and their respective subsidiaries are in
compliance with all terms and conditions of any such permit, license
or approval, except any such violation of law or regulation, failure
to receive required permits, licenses or other approvals or failure to
comply with the terms and conditions of such permits, licenses or
approvals which would not, singly or in the aggregate, result in a
Material Adverse Effect, except as described in or contemplated by the
Final Memorandum.

(s) Each certificate signed by any officer of the Company
and the Subsidiary Guarantors and delivered to the Representatives or
counsel for the Initial Purchasers shall be deemed to be a
representation and warranty by the Company and the Subsidiary
Guarantors to the Initial Purchasers as to the matters covered
thereby.

(t) The Company, the Subsidiary Guarantors and each of
their respective subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset
accountability; (iii) access to assets is permitted only in accordance
with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.

(u) No default exists, and no event has occurred which,
with notice or lapse of time or both, would constitute a default in
the due performance and observance of any terms, covenant or condition
of any indenture, mortgage, deed of trust, lease or other agreement or
instrument to which the Company, the Subsidiary Guarantors or any of
their respective subsidiaries is a party or by which the Company, the
Subsidiary Guarantors or any of their respective subsidiaries or any
of their respective properties is bound or may be affected in any
material adverse respect with regard to property, business or
operations of the Company, the Subsidiary Guarantors and their
respective

6
<PAGE> 8
subsidiaries, taken as a whole, except for such defaults that would
not result in a Material Adverse Effect.

(v) The Preliminary Memorandum, at the date thereof, did
not contain 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.
The Final Memorandum, at the date thereof, does not, and as of the
Closing Date (as defined below) will not (and any amendment or
supplement thereto, at the date thereof and at the Closing Date, will
not), contain 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;
provided, however, that the Company and the Subsidiary Guarantors make
no representation or warranty as to the information contained in or
omitted from the Preliminary Memorandum or the Final Memorandum, or
any amendment or supplement thereto, in reliance upon and in
conformity with information furnished in writing to the Company by or
on behalf of the Initial Purchasers through the Representatives
specifically for inclusion therein.

(w) None of the Company, the Subsidiary Guarantors or any
of their respective Affiliates (as defined in Rule 501(b) of
Regulation D under the Securities Act ("REGULATION D")), nor, assuming
that the representations and warranties made by the Initial Purchasers
pursuant to Section 4 herein are true and correct, any person acting
on its or their behalf has, directly or indirectly, made offers or
sales of any security, or solicited offers to buy any security, under
circumstances that would require the registration of the Securities
under the Securities Act.

(x) None of the Company, the Subsidiary Guarantors, or
any of their respective Affiliates, or, assuming that the
representations and warranties made by the Initial Purchasers pursuant
to Section 4 herein are true and correct, any person acting on its or
their behalf has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D) in connection
with any offer or sale of the Securities in the United States.

(y) The Securities satisfy the eligibility requirements
of Rule 144A(d)(3) under the Securities Act.

(z) None of the Company, the Subsidiary Guarantors, any
of their respective Affiliates, or, assuming that the representations
and warranties made by the Initial Purchasers pursuant to Section 4
herein are true and correct, any person acting on its or their behalf
has engaged in any directed selling efforts with respect to the
Securities, and each of them has complied with the offering
restrictions requirement of Regulation S ("REGULATION S") under the
Securities Act with respect to the Securities. Terms used in this
paragraph have the meanings given to them by Regulation S.

(aa) The Company has been advised by the National
Association of Securities Dealers, Inc. PORTAL Market that the
Securities have been designated PORTAL eligible securities in
accordance with the rules and regulations of the National Association
of Securities Dealers, Inc.

7
<PAGE> 9
(bb) Neither the Company nor any of the Subsidiary
Guarantors is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "INVESTMENT COMPANY
ACT"), without taking account of any exemption arising out of the
number of holders of the Company's or such Subsidiary Guarantor's
securities.

(cc) The Company is subject to and in compliance in all
material respects with the reporting requirements of Section 13 or
Section 15(d) of the Exchange Act.

(dd) The information provided by the Company and the
Subsidiary Guarantors pursuant to Section 5(h) hereof will not, at the
date thereof, contain 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.

(ee) The Indenture, the Registration Agreement and the
Securities have been duly and validly authorized and, in the case of
the Indenture and the Registration Agreement, when duly executed and
delivered by the parties thereto, and in the case of the Securities,
when duly issued, authenticated, and delivered in accordance with the
terms of the Indenture, endorsed by each Subsidiary Guarantor and paid
for in accordance with the terms of this Agreement, (A) the Notes will
be validly issued and outstanding and will constitute valid and
binding obligations of the Company enforceable against the Company in
accordance with their terms and entitled to the benefits of the
Indenture and the Registration Agreement and (B) the Subsidiary
Guaranties will constitute valid and binding obligations of the
Subsidiary Guarantors enforceable against the Subsidiary Guarantors in
accordance with their terms. The Securities, Indenture and the
Registration Agreement conform in all material respects to the
description thereof contained in the Final Memorandum.

(ff) The Company, the Subsidiary Guarantors and their
respective subsidiaries conduct their business in compliance with all
applicable laws, rules and regulations of the jurisdictions in which
they are conducting business, except where the failure to be so in
compliance would not have a Material Adverse Effect.

(gg) Except for consents (the "CHASE CONSENT") necessary
under the Company's credit facility (as amended, the "CHASE FACILITY")
with The Chase Manhattan Bank, which will be obtained prior to the
Closing Date, no circumstances exist as of the date hereof which, had
the Notes already been issued immediately prior to the execution of
this Agreement, would constitute a Default or an Event of Default (as
such terms are defined in the Indenture).

2. Purchase and Sale. Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Company
agrees to sell to each Initial Purchaser, and each Initial Purchaser agrees,
severally and not jointly, to purchase from the Company, at a purchase price of
96.732% of the principal amount thereof, plus accrued interest, if any, from
November 27, 1996 to the Closing Date, the principal amount of Notes set forth
opposite such Initial Purchaser's name in SCHEDULE I hereto.

8
<PAGE> 10
3. Delivery and Payment. Delivery of and payment for the
Securities shall be made at 10:00 AM, New York City time, on November 27, 1996,
or such later date as the Representatives shall designate, which date and time
may be postponed by agreement between the Representatives and the Company or as
provided in Section 10 hereof (such date and time of delivery and payment for
the Securities being herein called the "CLOSING DATE"). Delivery of the
Securities shall be made to the Representatives for the respective accounts of
the Initial Purchasers against payment by the Initial Purchasers through the
Representatives of the purchase price thereof to or upon the order of the
Company by wire transfer payable in New York Clearing House funds or such other
manner of payment as may be agreed by the Company and the Representatives.
Delivery of the Securities shall be made at such location as the
Representatives shall reasonably designate at least one business day in advance
of the Closing Date and payment for the Securities shall be made at the office
of Davis, Graham & Stubbs LLP, 370 17th Street, Suite 4700, Denver, CO 80202.
Certificates for the Securities shall be registered in such names and in such
denominations as the Representatives may request not less than three full
business days in advance of the Closing Date.

The Company agrees to have the Securities available for inspection,
checking and packaging by the Representatives in New York, New York, not later
than 1:00 PM on the business day prior to the Closing Date.

4. Offering of Securities. Each Initial Purchaser, severally and
not jointly, represents and warrants to and agrees, with the Company and the
Subsidiary Guarantors that:

(a) It has not offered or sold, and will not offer or
sell, any Securities except (i) to those it reasonably believes to be
"QUALIFIED INSTITUTIONAL BUYERS" (as defined in Rule 144A under the
Securities Act) and that, in connection with each such sale, it has
taken or will take reasonable steps to ensure that the purchaser of
such Securities is aware that such sale is being made in reliance on
Rule 144A, (ii) to other institutional "ACCREDITED INVESTORS" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D) who
provide to it and to the Company a letter in the form of EXHIBIT A
hereto or (iii) in accordance with the restrictions set forth in
EXHIBIT B hereto.

(b) Neither it nor any person acting on its behalf has
made or will make offers or sales of the Securities in the United
States by means of any form of general solicitation or general
advertising (within the meaning of Regulation D) in the United States.

5. Agreements. The Company and the Subsidiary Guarantors jointly
and severally agree with each Initial Purchaser that:

(a) The Company and the Subsidiary Guarantors will
furnish to each Initial Purchaser and to counsel for the Initial
Purchasers, during the period referred to in paragraph (c) below, as
many copies of the Final Memorandum and any amendments and supplements
thereto as it may reasonably request. The Initial Purchasers will pay
the expenses of printing, shipping and production of all documents
relating to the offering and all "roadshow" expenses incurred by the
Initial Purchasers or the Company.

9
<PAGE> 11
(b) The Company and the Subsidiary Guarantors will not
amend or supplement the Final Memorandum, other than by filing
documents under the Exchange Act which are incorporated by reference
therein, without the prior written consent of the Representatives;
provided, however, that, prior to the completion of the distribution
of the Securities by the Initial Purchasers (as determined by the
Representatives), the Company and the Subsidiary Guarantors will not
file any document under the Exchange Act which is incorporated by
reference in the Final Memorandum unless, prior to such proposed
filing, the Company and the Subsidiary Guarantors have furnished the
Representatives with a copy of such document for their review and the
Representatives have not reasonably objected to the filing of such
document. The Company and the Subsidiary Guarantors will promptly
advise the Representatives when any document filed under the Exchange
Act which is incorporated by reference in the Final Memorandum shall
have been filed with the Commission.

(c) If at any time prior to the completion of the sale of
the Securities by the Initial Purchasers (as determined by the
Representatives), any event occurs as a result of which the Final
Memorandum, as then amended or supplemented, 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 if it
should be necessary to amend or supplement the Final Memorandum to
comply with the Securities Act or any applicable state securities or
blue sky laws, the Company and the Subsidiary Guarantors will promptly
notify the Representatives of the same and, subject to the
requirements of paragraph (b) of this Section 5, will prepare and
provide to the Representatives pursuant to paragraph (a) of this
Section 5 an amendment or supplement which will correct such statement
or omission or effect such compliance.

(d) The Company and the Subsidiary Guarantors will
arrange for the qualification of the Securities for sale by the
Initial Purchasers under the laws of such jurisdictions as the Initial
Purchasers may designate and will maintain such qualifications in
effect so long as required for the sale of the Securities, except that
in no event shall the Company be obligated in connection therewith to
qualify as a foreign corporation or to execute a general consent to
service of process. The Company and the Subsidiary Guarantors will
promptly advise the Representatives of the receipt by the Company or
any Subsidiary Guarantor 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.

(e) The Company will not, and will not permit any of its
subsidiaries to, resell any Securities that have been acquired by any
of them.

(f) None of the Company, the Subsidiary Guarantors, any
of their respective Affiliates, or, assuming that the representations
and warranties made by the Initial Purchasers pursuant to Section 4
hereof are true and correct, any person acting on their behalf will,
directly or indirectly, make offers or sales of any security, or
solicit offers to buy any security, under circumstances that would
require the registration of the Securities under the Securities Act.

10
<PAGE> 12
(g) None of the Company, the Subsidiary Guarantors, any
of their respective Affiliates, or, assuming that the representations
and warranties made by the Initial Purchasers pursuant to Section 4
hereof are true and correct, any person acting on their behalf will
engage in any form of general solicitation or general advertising
(within the meaning of Regulation D) in connection with any offer or
sale of the Securities in the United States, except in connection with
the Registration Agreement as permitted by the Securities Act.

(h) So long as any of the Securities or the Subsidiary
Guaranties are "RESTRICTED SECURITIES" within the meaning of Rule
144(a)(3) under the Securities Act, the Company and the Subsidiary
Guarantors will, during any period in which it is not subject to and
in compliance with Section 13 or 15(d) of the Exchange Act, provide to
each holder of such restricted securities and to each prospective
purchaser (as designated by such holder) of such restricted
securities, upon the request of such holder or prospective purchaser,
any information required to be provided by Rule 144A(d)(4) under the
Securities Act. This covenant is intended to be for the benefit of
the holders, and the prospective purchasers designated by such
holders, from time to time of such restricted securities.

(i) None of the Company, the Subsidiary Guarantors, any
of their respective Affiliates, or, assuming that the representations
and warranties made by the Initial Purchasers pursuant to Section 4
hereof are true and correct, any person acting on its or their behalf
will engage in any directed selling efforts with respect to the
Securities, and each of them will comply with the offering
restrictions requirement of Regulation S with respect to the
Securities. Terms used in this paragraph have the meanings given to
them by Regulation S.

(j) The Company and the Subsidiary Guarantors will
cooperate with the Representatives and use their best efforts to
permit the Securities to be eligible for clearance and settlement
through The Depository Trust Company.

(k) The Company will not, until 180 days following the
Closing Date, without the prior written consent of the
Representatives, offer, sell or contract to sell, or otherwise dispose
of, directly or indirectly, or announce the offering of, any debt
securities issued or guaranteed by the Company (other than the
Securities or in connection with the registered exchange offer
contemplated by the Registration Agreement).

(l) In connection with any disposition of Securities
pursuant to a transaction made in compliance with paragraph 6 of
EXHIBIT A, the Company will reissue certificates evidencing such
Securities without the legend referred to in paragraph 5 of EXHIBIT A
(provided, in the case of a transaction made in compliance with
paragraph 6(f) of EXHIBIT A, that the legal opinion referred to
therein so permits).

(m) The Company will use its best efforts to enable the
Securities to be designated PORTAL eligible in accordance with the
rules and regulations of the National Association of Securities
Dealers, Inc.

11
<PAGE> 13
6. Conditions to the Obligations of the Initial Purchasers. The
obligations of the Initial Purchasers to purchase the Securities shall be
subject to the accuracy of the representations and warranties on the part of
the Company and the Subsidiary Guarantors contained herein at the date and time
that this Agreement is executed and delivered by the parties hereto (the
"EXECUTION TIME") and the Closing Date, to the accuracy of the statements of
the Company and the Subsidiary Guarantors made in any certificates provided to
the Representatives pursuant to the provisions hereof, to the performance by
the Company and the Subsidiary Guarantors of their obligations hereunder and to
the following additional conditions:

(a) The Company shall have furnished to the
Representatives the opinion of Davis, Graham & Stubbs LLP, counsel for
the Company, dated the Closing Date, to the effect that:

(i) each of the Company and the Subsidiary
Guarantors has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized, with full
corporate power and authority to own its properties and
conduct its business as described in the Final Memorandum, and
is duly qualified to do business as a foreign corporation and
is in good standing under the laws of each jurisdiction in
which the character of the business conducted by it or the
location of the properties owned or leased by it makes such
qualification necessary (except where the failure to so
qualify would not reasonably be expected to have a Material
Adverse Effect);

(ii) all the outstanding shares of capital stock
of the Company and the Subsidiary Guarantors have been duly
and validly authorized and issued and are fully paid and
nonassessable, and, except as otherwise set forth in the Final
Memorandum, all outstanding shares of capital stock of the
Subsidiary Guarantors are owned by the Company either directly
or through wholly owned subsidiaries free and clear of any
perfected security interest and, to the knowledge of such
counsel, any other security interests, claims, liens or
encumbrances;

(iii) each of the Company and the Subsidiary
Guarantors has full corporate power to enter into the
Transaction Documents to which it is a party and to carry out
all the terms and provisions thereof to be carried out by it,
including, without limitation, with respect to the Company,
the issuance, sale and delivery of the Notes, and, with
respect to the Subsidiary Guarantors, the issuance, sale and
delivery of the Subsidiary Guaranties;

(iv) the execution, delivery and performance of
this Agreement and the Registration Agreement have been duly
authorized by the Company and the Subsidiary Guarantors, this
Agreement and the Registration Agreement have been duly
executed and delivered by the Company and the Subsidiary
Guarantors and this Agreement and the

12
<PAGE> 14

Registration Agreement constitute legal, valid and binding
obligations of the Company and the Subsidiary Guarantors,
enforceable in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy,
reorganization, insolvency, fraudulent conveyance, moratorium
or other similar laws relating to or affecting creditors'
rights generally and by general equitable principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law). This Agreement and the
Registration Agreement conform in all material respects to the
description thereof contained in the Final Memorandum;

(v) to the knowledge of such counsel, there are
no legal or governmental proceedings pending to which the
Company, the Subsidiary Guarantors or any of their respective
subsidiaries is a party or to which the property of the
Company, the Subsidiary Guarantors or any of their respective
subsidiaries is subject that are not described in the Final
Memorandum, and no such proceedings have been threatened
against the Company, the Subsidiary Guarantors or any of their
respective subsidiaries or with respect to any of their
respective properties, except in each case for such
proceedings that, if the subject of an unfavorable decision,
ruling or finding, would not, singly or in the aggregate,
result in a material adverse change in the condition
(financial or otherwise), business, net worth or results of
operations of the Company, the Subsidiary Guarantors and their
respective subsidiaries, taken as a whole, or have a material
adverse effect on the ability of the Company to perform its
obligations under any of the Transaction Documents;

(vi) the Company's authorized equity
capitalization is as set forth in the Final Memorandum;

(vii) the Indenture has been duly authorized,
executed and delivered, and, assuming due execution and
delivery by the Trustee, constitutes a legal, valid and
binding instrument enforceable against the Company and the
Subsidiary Guarantors in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy,
reorganization, insolvency, fraudulent conveyance, moratorium
or other similar laws relating to or affecting creditors'
rights generally and by general equitable principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law); the Securities have been duly
and validly authorized and, when executed and authenticated in
accordance with the provisions of the Indenture and delivered
to and paid for by the Initial Purchasers pursuant to this
Agreement, the Notes will constitute legal, valid and binding
obligations of the Company and the Subsidiary Guarantors
entitled to the benefits of the Indenture and the Subsidiary
Guaranties will constitute valid and binding obligations of
the Subsidiary Guarantors enforceable against the Subsidiary
Guarantors in accordance with their terms, except as
enforcement thereof may be limited by bankruptcy,
reorganization, insolvency, fraudulent conveyance,

13
<PAGE> 15

moratorium or other similar laws relating to or affecting
creditors' rights generally and by general equitable
principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law); and the
statements set forth under the heading "Description of the
Notes" in the Final Memorandum, insofar as such statements
purport to summarize certain provisions of the Securities and
the Indenture, provide a fair summary of such provisions;

(viii) the information set forth in the Final
Memorandum under the headings "Certain Federal Income Tax
Consequences" and "Risk Factors--Governmental and
Environmental Regulation" and in Item
1--Business--Regulation--Environmental Regulations and Item
3--Legal Proceedings and Environmental Issues of the Company's
Annual Report on Form 10-K for the year ended December 31,
1995, to the extent that it constitutes matters of law,
summaries of legal matters, the Company's charter and bylaws
or legal proceedings, or legal conclusions, is correct in all
material respects;

(ix) no consent, approval, authorization or order
of any court or governmental agency or body is required for
the consummation of the transactions contemplated herein,
except, with respect to the obligations under the Registration
Agreement, such as may be required under the Trust Indenture
Act or as may be required to register the Securities under the
Securities Act, and such as may be required under the blue sky
or securities laws of any jurisdiction in connection with the
purchase and sale of the Securities by the Initial Purchasers
and such other approvals (specified in such opinion) as have
been obtained;

(x) neither the issuance and sale of the
Securities, the execution and delivery of the Transaction
Documents, the consummation of any other of the transactions
herein or therein contemplated nor the fulfillment of the
terms hereof or thereof will conflict with, result in a breach
or violation of, or constitute a default under any law or the
charter or by-laws of the Company or the Subsidiary Guarantors
or the terms of any material indenture or other material
agreement or instrument known to such counsel and to which the
Company, the Subsidiary Guarantors or any of their
subsidiaries is a party or bound or any judgment, order or
decree known to such counsel to be applicable to the Company,
the Subsidiary Guarantors or any of their subsidiaries of any
court, regulatory body, administrative agency, governmental
body, arbitrator having jurisdiction over the Company, the
Subsidiary Guarantors or any of their subsidiaries;

(xi) assuming the accuracy of the representations
and warranties and compliance with the agreements contained
herein, no registration of the Securities under the Securities
Act is required, and no qualification of the Indenture under
the Trust Indenture Act is necessary, for the offer and

14
<PAGE> 16
sale by the Initial Purchasers of the Securities in the manner
contemplated by this Agreement;

(xii) neither the Company nor any Subsidiary
Guarantor is an "investment company" within the meaning of the
Investment Company Act without taking account of any exemption
arising out of the number of holders of the Company's or the
Subsidiary Guarantor's securities; and

(xiii) a court applying Colorado conflict of laws
rules in a properly presented and argued case will give effect
to the express choice of law provisions contained in the
Transaction Documents.

Such counsel shall also state that, as of the Closing
Date, nothing has come to such counsel's attention that would lead it
to believe that the Final Memorandum (together with any amendment or
supplement thereto) contained an untrue statement of a material fact
or omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. Notwithstanding the foregoing, such
counsel need express no belief with respect to the financial
statements, financial schedules, other financial or statistical data
(including any reserve, production and cost data) and any geologic
information included in or incorporated by reference in the Final
Memorandum and any amendment or supplement thereto.

In rendering such opinion, such counsel may rely (A)
as to matters involving the application of laws of any jurisdiction
other than the State of Colorado, the State of Delaware or the United
States, to the extent they deem proper and specified in such opinion,
upon the opinion of other counsel of good standing whom they believe
to be reliable and who are satisfactory to counsel for the Initial
Purchasers and (B) as to matters of fact, to the extent they deem
proper, on certificates of responsible officers of the Company and
public officials.

All references in this Section 6(a) to the Final
Memorandum shall be deemed to include any amendment or supplement
thereto at the Closing Date.

(b) The Representatives shall have received from counsel
for the Initial Purchasers such opinion or opinions, dated the Closing
Date, with respect to the issuance and sale of the Securities, the
Final Memorandum (as amended or supplemented at the Closing Date) and
other related matters as the Representatives may reasonably require,
and the Initial Purchasers, the Company and the Subsidiary Guarantors
shall have provided such counsel with access to such documents as they
reasonably request for the purpose of enabling them to pass upon such
matters.

(c) The Company and the Subsidiary Guarantors shall have
furnished to the Representatives a certificate of the Company, signed
by the Chairman of the Board, the Chief Executive Officer or the
President and the principal financial or accounting officer of the
Company, dated the Closing Date, to the effect that the signers of
such certificate

15
<PAGE> 17
have carefully examined the Final Memorandum, any amendment or
supplement to the Final Memorandum and this Agreement and that:

(i) the representations and warranties of the
Company and the Subsidiary Guarantors made in this Agreement
are true and correct in all material respects on and as of the
Closing Date with the same effect as if made on the Closing
Date, and the Company and the Subsidiary Guarantors have
complied with all the agreements and satisfied all the
conditions on their part to be performed or satisfied
hereunder at or prior to the Closing Date; and

(ii) since the date of the most recent financial
statements included in the Final Memorandum, there has been no
material adverse change in the condition (financial or other),
earnings, business or properties of the Company and its
subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set
forth in or contemplated by the Final Memorandum (exclusive of
any amendment or supplement thereto).

(d) At the Execution Time and at the Closing Date, Arthur
Andersen LLP shall have furnished to the Representatives a letter or
letters, dated respectively as of the Execution Time and as of the
Closing Date, in form and substance reasonably satisfactory to the
Representatives, confirming that they are independent accountants
within the meaning of the Securities Act and the Exchange Act and the
applicable rules and regulations thereunder and Rule 101 of the Code
of Professional Conduct of the American Institute of Certified Public
Accountants (the "AICPA") and stating in effect that:

(i) in their opinion the audited financial
statements and financial statement schedules and pro forma
financial statements included or incorporated in the Final
Memorandum and reported on by them comply in form in all
material respects with the applicable accounting requirements
of the Exchange Act and the related published rules and
regulations thereunder;

(ii) on the basis of a reading of the latest
unaudited financial statements made available by the Company
and its subsidiaries; carrying out certain specified
procedures (but not an examination in accordance with
generally accepted auditing standards) which would not
necessarily reveal matters of significance with respect to the
comments set forth in such letter; a reading of the minutes of
the meetings of the stockholders, board of directors and
committees of the Company and its subsidiaries; and inquiries
of certain officials of the Company who have responsibility
for financial and accounting matters of the Company and its
subsidiaries as to transactions and events subsequent to
December 31, 1995, nothing came to their attention which
caused them to believe that:

16
<PAGE> 18
(1) any unaudited financial statements included
or incorporated in the Final Memorandum do not comply
in form in all material respects with applicable
accounting requirements and with the published rules
and regulations of the Commission with respect to
financial statements included or incorporated in
quarterly reports on Form 10-Q under the Exchange
Act; and said unaudited financial statements are not,
in all material respects, in conformity with
generally accepted accounting principles applied on a
basis substantially consistent with that of the
audited financial statements included or incorporated
in the Final Memorandum; or

(2) with respect to the period subsequent to
September 30, 1996, there were any changes, at a
specified date not more than five business days prior
to the date of the letter, in the long-term debt of
the Company and its subsidiaries or capital stock of
the Company or decreases in the stockholders' equity
of the Company or decreases in total assets or
working capital of the Company and its subsidiaries
as compared with the amounts shown on the September
30, 1996 consolidated balance sheet included or
incorporated in the Final Memorandum, or for the
period from October 1, 1996 to such specified date
there were any decreases, as compared with the
corresponding period in the preceding year in oil and
natural gas revenues or income (loss) before taxes or
in net income (loss) or net income (loss) per share
of the Company and its subsidiaries, except in all
instances for changes or decreases set forth in such
letter, in which case the letter shall be accompanied
by an explanation by the Company as to the
significance thereof unless said explanation is not
deemed necessary by the Representatives;

(iii) they have performed certain other specified
procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature
(which is limited to accounting, financial or statistical
information derived from the general accounting records of the
Company and its subsidiaries) set forth on the Final
Memorandum, including the information set forth on the Cover
Page and under the captions "Summary--The Offering," "Summary
Historical and Pro Forma Data," "Summary Operating and Reserve
Data," "Risk Factors," "Use of Proceeds," "Capitalization,"
"Selected Historical and Pro Forma Financial Data,"
"Management's Discussion and Analysis of Financial Condition
and Results of Operation," "Business and Properties" and
"Description of Other Indebtedness" in the Final Memorandum
agrees with the accounting records of the Company and its
subsidiaries, excluding any questions of legal interpretation;
and

(iv) on the basis of a reading of the unaudited
pro forma financial statements (the "PRO FORMA FINANCIAL
STATEMENTS") included or

17
<PAGE> 19
incorporated in the Final Memorandum; carrying out certain
specified procedures; inquiries of certain officials of the
Company who have responsibility for financial and accounting
matters; and proving the arithmetic accuracy of the
application of the pro forma adjustments to the historical
amounts in the pro forma financial statements, nothing came to
their attention which caused them to believe that the pro
forma financial statements do not comply in form in all
material respects with the applicable accounting requirements
of Rule 11-02 of Regulation S-X or that the pro forma
adjustments have not been properly applied to the historical
amounts in the compilation of such statements.

All references in this Section 6(d) to the Final Memorandum
shall be deemed to include any amendment or supplement thereto at the
date of the letter.

(e) Subsequent to the Execution Time or, if earlier, the
dates as of which information is given in the Final Memorandum, there
shall not have been (i) any change or decrease specified in the letter
or letters referred to in paragraph (d) of this Section 6 or (ii) any
change, or any development involving a prospective change, in or
affecting the business or properties of the Company and its
subsidiaries the effect of which, in any case referred to in clause
(i) or (ii) above, is, in the judgment of the Representatives, so
material and adverse as to make it impractical or inadvisable to
market the Securities as contemplated by the Final Memorandum.

(f) Subsequent to the Execution Time, there shall not
have been any decrease in the rating of any of the Company's debt
securities by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the
Securities Act) or any notices given of any intended or potential
decrease in any such rating or of a possible change in any such rating
that does not indicate the direction of the possible change.

(g) The Representatives, on behalf of the Initial
Purchasers, shall have received a fully executed original of the
Registration Agreement.

(h) The Company shall have delivered to the
Representatives copies of the Chase Consent in form and substance
acceptable to the Representatives.

(i) The Company shall have delivered to the
Representatives copies of the supplemental indenture to the Indenture
dated as of December 1, 1993 between the Company and Harris Trust and
Savings Bank relating to the Company's 9 7/8% Senior Subordinated
Notes due 2003 (the "9 7/8% INDENTURE"), which supplemental indenture
shall provide for a guaranty by the Subsidiary Guarantors of the notes
issued under the 9 7/8% Indenture and shall be in form and substance
acceptable to the Representatives.

(j) Prior to the Closing Date, the Company shall have
furnished to the Representatives such further information,
certificates and documents as the Representatives may reasonably
request.

18
<PAGE> 20
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Representatives and counsel for the Initial Purchasers,
this Agreement and all obligations of the Initial Purchasers hereunder may be
canceled at, or at any time prior to, the Closing Date by the Representatives.
Notice of such cancellation shall be given to the Company or any Subsidiary
Guarantor in writing or by telephone or telegraph confirmed in writing.

The documents required to be delivered by this Section 6 will be
delivered at the office of Davis, Graham & Stubbs LLP, 370 17th Street, Suite
4700, Denver, CO 80202, on the Closing Date.

7. Reimbursement of Expenses. If the sale of the Securities
provided for herein is not consummated because any condition to the obligations
of the Initial Purchasers set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 11 hereof or because of any
refusal, inability or failure on the part of the Company or any Subsidiary
Guarantor to perform any agreement herein or comply with any provision hereof
other than by reason of a default by any of the Initial Purchasers in payment
for the Securities on the Closing Date, the Company and the Subsidiary
Guarantors will reimburse the Initial Purchasers severally upon demand for all
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
that shall have been incurred by them in connection with the proposed purchase
and sale of the Securities, except for any and all expenses relating to the
production, printing and shipping of the Preliminary Memorandum and the Final
Memorandum and any amendments or supplements thereof, and any "roadshow"
expenses incurred by the Initial Purchasers or the Company.

8. Indemnification and Contribution. (a) The Company and the
Subsidiary Guarantors, jointly and severally, agree to indemnify and hold
harmless each Initial Purchaser, the directors, officers, employees and agents
of each Initial Purchaser and each person who controls any Initial Purchaser
within the meaning of either the Securities Act or the Exchange Act against any
and all losses, claims, damages or liabilities, joint or several, to which they
or any of them may become subject under the Securities Act, the Exchange Act or
other federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Memorandum, the Final
Memorandum or any information provided by the Company to any holder or
prospective purchaser of Securities pursuant to Section 5(h), or in any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and agrees to
reimburse each such indemnified party, as incurred, for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company and the Subsidiary Guarantors will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made in the Preliminary Memorandum or the Final
Memorandum, or in any

19
<PAGE> 21
amendment thereof or supplement thereto, in reliance upon and in conformity
with written information furnished to the Company or a Subsidiary Guarantor by
or on behalf of any Initial Purchasers through the Representatives specifically
for inclusion therein. This indemnity agreement will be in addition to any
liability which the Company and the Subsidiary Guarantors may otherwise have.

(b) Each Initial Purchaser severally agrees to indemnify and hold
harmless the Company, its directors, officers, employees and agents and each
person who controls the Company within the meaning of either the Securities Act
or the Exchange Act, to the same extent as the foregoing indemnity from the
Company to each Initial Purchaser, but only with reference to written
information relating to such Initial Purchaser furnished to the Company by or
on behalf of such Initial Purchaser through the Representatives specifically
for inclusion in the Preliminary Memorandum or the Final Memorandum (or in any
amendment or supplement thereto). This indemnity agreement will be in addition
to any liability which any Initial Purchaser may otherwise have. The Company
and the Subsidiary Guarantors acknowledge that the statements set forth in the
last paragraph of the cover page and under the heading "Plan of Distribution"
in the Preliminary Memorandum and the Final Memorandum constitute the only
information furnished in writing by or on behalf of the Initial Purchasers for
inclusion in the Preliminary Memorandum or the Final Memorandum (or in any
amendment or supplement thereto).

(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise timely learn of such action and such failure
results in the forfeiture by the indemnifying party of substantial rights and
defenses 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. The indemnifying party
shall be entitled to appoint counsel of the indemnifying party's choice at the
indemnifying party's expense to represent the indemnified party in any action
for which indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to
appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the reasonable fees,
costs and expenses of such separate counsel if (i) the use of counsel chosen by
the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or potential defendants
in, or targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of the institution of
such action or (iv) the indemnifying party shall authorize the indemnified
party to employ separate counsel at

20
<PAGE> 22
the expense of the indemnifying party. An indemnifying party will not, without
the prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified parties
are actual or potential parties to such claim or action) unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action, suit or
proceeding.

(d) In the event that the indemnity provided in paragraph (a) or
(b) of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Initial Purchasers agree
to contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively "LOSSES") to which the Company
and one or more of the Initial Purchasers may be subject in such proportion as
is appropriate to reflect the relative benefits received by the Company or by
the Initial Purchasers from the offering of the Securities; provided, however,
that in no case shall any Initial Purchaser (except as may be provided in any
agreement among the Initial Purchasers relating to the offering of the
Securities) be responsible for any amount in excess of the purchase discount or
commission applicable to the Securities purchased by such Initial Purchaser
hereunder. If the allocation provided by the immediately preceding sentence is
unavailable for any reason, the Company and the Initial Purchasers shall
contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company or the Initial
Purchasers in connection with the statements or omissions which resulted in
such Losses as well as any other relevant equitable considerations. Benefits
received by the Company shall be deemed to be equal to the total net proceeds
from the offering of the Securities (before deducting expenses), and benefits
received by the Initial Purchasers shall be deemed to be equal to the total
purchase discounts and commissions received by the Initial Purchasers from the
Company in connection with the purchase of the Securities hereunder. Relative
fault shall be determined by reference to whether any alleged untrue statement
or omission relates to information provided by the Company or the Initial
Purchasers. The Company and the Initial Purchasers agree that it would not be
just and equitable if contribution were determined by pro rata allocation or
any other method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph (d), 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 Section 8, each person who controls
an Initial Purchaser within the meaning of either the Securities Act or the
Exchange Act and each director, officer, employee and agent of an Initial
Purchaser shall have the same rights to contribution as such Initial Purchaser,
and each person who controls the Company within the meaning of either the
Securities Act or the Exchange Act and each officer, director, employee and
agent of the Company shall have the same rights to contribution as the Company,
subject in each case to the applicable terms and conditions of this paragraph
(d).

9. Default by an Initial Purchaser. If any one or more Initial
Purchasers shall fail to purchase and pay for any of the Securities agreed to
be purchased by such Initial Purchaser hereunder and such failure to purchase
shall constitute a default in the performance of its or their obligations under
this Agreement, the remaining Initial Purchasers shall be obligated severally
to take up and pay for (in the respective proportions which the principal
amount of Securities

21
<PAGE> 23
set forth opposite their names in SCHEDULE I hereto bears to the aggregate
principal amount of Securities set forth opposite the names of all the
remaining Initial Purchasers) the Securities which the defaulting Initial
Purchaser or Initial Purchasers agreed but failed to purchase; provided,
however, that in the event that the aggregate principal amount of Securities
which the defaulting Initial Purchaser or Initial Purchasers agreed but failed
to purchase shall exceed 10% of the aggregate principal amount of Securities
set forth in SCHEDULE I hereto, the remaining Initial Purchasers shall have the
right to purchase all, but shall not be under any obligation to purchase any,
of the Securities, and if such non-defaulting Initial Purchasers do not
purchase all the Securities, this Agreement will terminate without liability to
any non-defaulting Initial Purchaser or the Company. In the event of a default
by any Initial Purchaser as set forth in this Section 9, the Closing Date shall
be postponed for such period, not exceeding seven days, as the Representatives
shall determine in order that the required changes in the Final Memorandum or
in any other documents or arrangements may be effected. Nothing contained in
this Agreement shall relieve any defaulting Initial Purchaser of its liability,
if any, to the Company or any non-defaulting Initial Purchaser for damages
occasioned by its default hereunder.

10. Termination. This Agreement shall be subject to
termination in the absolute discretion of the Representatives, by notice given
to the Company prior to delivery of and payment for the Securities, if prior to
such time (i) trading in any of the Company's securities shall have been
suspended by the Commission or the New York Stock Exchange or trading in
securities generally on the New York Stock Exchange shall have been suspended
(excluding any coordinated trading halt triggered solely as a result of a
specified decrease in a market index) or limited or minimum prices shall have
been established on such exchange, (ii) a banking moratorium shall have been
declared either by Federal or New York State authorities or (iii) there shall
have occurred any outbreak or escalation of hostilities, declaration by the
United States of a national emergency or war or other calamity or crisis the
effect of which on financial markets is such as to make it, in the judgment of
the Representatives, impracticable or inadvisable to proceed with the offering
or delivery of the Securities as contemplated by the Final Memorandum.

11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of
the Company, the Subsidiary Guarantors, or their respective officers and of the
Initial Purchasers set forth in or made pursuant to this Agreement will remain
in full force and effect, regardless of any investigation made by or on behalf
of the Initial Purchasers or the Company or any of the officers, directors or
controlling persons referred to in Section 8 hereof, and will survive delivery
of and payment for the Securities. The provisions of Sections 7 and 8 hereof
shall survive the termination or cancellation of this Agreement.

12. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Representatives, will be mailed,
delivered or telegraphed and confirmed to them, care of Salomon Brothers Inc,
at Seven World Trade Center, New York, New York, 10048; or, if sent to the
Company, will be mailed, delivered or telegraphed and confirmed to it at One
Maritime Plaza, 15th Floor, San Francisco, California 94111, Attention: Chief
Financial Officer, with a copy to the Company at 1999 Broadway, Suite 3600,
Denver, Colorado 80202, Attention: General Counsel.

22
<PAGE> 24
13. Successors. This Agreement will inure to the benefit of and
be binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 8 hereof,
and, except as expressly set forth in Section 5(h) hereof, no other person will
have any right or obligation hereunder.

14. Applicable Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New York.

15. Business Day. For purposes of this Agreement, "business day"
means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on
which banking institutions in the City of New York, New York are authorized or
obligated by law, executive order or regulation to close.

16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original, but all such
counterparts will together constitute one and the same instrument.

[The remainder of this page is intentionally left blank]

23
<PAGE> 25
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this Agreement and your acceptance shall represent a binding
agreement between the Company, the Subsidiary Guarantors and the Initial
Purchasers.

Very truly yours,

HS Resources, Inc.

By: /s/ P. MICHAEL HIGHUM
-------------------------------
Name: P. Michael Highum
Title: President

Orion Acquisition, Inc.

By: /s/ P. MICHAEL HIGHUM
-------------------------------
Name: P. Michael Highum
Title: President

HSRTW, Inc.

By: /s/ P. MICHAEL HIGHUM
-------------------------------
Name: P. Michael Highum
Title: President

The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.

Salomon Brothers Inc
Chase Securities Inc.
Lehman Brothers Inc.
Prudential Securities Incorporated

By: Salomon Brothers Inc

By: /s/ JAMES C. V. ROGERS
----------------------------------
Name: James C.V. Rogers
Title: Vice President

[For themselves and the other
Initial Purchasers named in
Schedule I to the foregoing Agreement]

S-1
<PAGE> 26
SCHEDULE I

<TABLE>
<CAPTION>
Principal Amount
of Securities
Initial Purchasers to be Purchased
- ------------------ -----------------
<S> <C>
Salomon Brothers Inc . . . . . . . . . . . . . . . . . . . . $ 75,000,000

Chase Securities Inc. . . . . . . . . . . . . . . . . . . . . $ 25,000,000

Lehman Brothers Inc. . . . . . . . . . . . . . . . . . . . . $ 25,000,000

Prudential Securities Incorporated . . . . . . . . . . . . . $ 25,000,000

-------------
Total . . . . . . . . . $ 150,000,000

</TABLE>

<PAGE> 27
EXHIBIT A

Non-Distribution Letter for U.S. Purchasers

November 22, 1996

HS Resources, Inc.
One Maritime Plaza
Fifteenth Floor
San Francisco, California 94111

Re: Purchase of $150,000,000 principal amount of 9 1/4% Senior
Subordinated Notes due 2006 (the "Notes"), of HS Resources, Inc. (the
"Company") guaranteed on a senior subordinated basis (the "Subsidiary
Guaranties" and, together with the Notes, the "Securities") by Orion
Acquisition, Inc. and HSRTW, Inc. (collectively, the "Subsidiary
Guarantors")

Ladies and Gentlemen:

In connection with our purchase of the Securities we confirm that:

1. We understand that the Securities are not being and will not
be registered under the Securities Act of 1933, as amended (the "Securities
Act"), and are being sold to us in a transaction that is exempt from the
registration requirements of the Securities Act.

2. We acknowledge that (a) neither the Company, the Subsidiary
Guarantors, nor the Initial Purchasers (as defined in the Offering Memorandum
dated November 22, 1996, relating to the Securities (the "Final Memorandum"))
nor any person acting on behalf of the Company, the Subsidiary Guarantors or
the Initial Purchasers has made any representation to us with respect to the
Company or the Subsidiary Guarantors or the offer or sale of any Securities and
(b) any information we desire concerning the Company, the Subsidiary Guarantors
and the Securities or any other matter relevant to our decision to purchase the
Securities (including a copy of the Final Memorandum) is or has been made
available to us.

3. We have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Securities, and we are (or any account for which we are
purchasing under paragraph 4 below is) an institutional "accredited investor"
(within the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D under
the Securities Act) able to bear the economic risk of investment in the
Securities.

4. We are acquiring the Securities for our own account (or for
accounts as to which we exercise sole investment discretion and have authority
to make, and do make, the statements
<PAGE> 28
contained in this letter) and not with a view to any distribution of the
Securities, subject, nevertheless, to the understanding that the disposition of
our property will at all times be and remain within our control.

5. We understand that (a) the Securities will be in registered
form only and that any certificates delivered to us in respect of the
Securities will bear a legend substantially to the following effect:

"These Securities have not been registered under the
Securities Act of 1933. Further offers or sales of these
Securities are subject to certain restrictions, as set forth
in the Offering Memorandum dated November 22, 1996 relating to
these Securities."

and (b) the Company and the Subsidiary Guarantors have agreed to reissue such
certificates without the foregoing legend only in the event of a disposition of
the Securities in accordance with the provisions of paragraph 6 below
(provided, in the case of a disposition of the Securities in accordance with
paragraph 6(f) below, that the legal opinion referred to in such paragraph so
permits), or at our request at such time as we would be permitted to dispose of
them in accordance with paragraph 6(a) below.

6. We agree that in the event that at some future time we wish to
dispose of any of the Securities, we will not do so unless such disposition is
made in accordance with any applicable securities laws of any state of the
United States and:

(a) the Securities are sold in compliance with Rule 144(k) under
the Securities Act; or

(b) the Securities are sold in compliance with Rule 144A under the
Securities Act; or

(d) the Securities are sold pursuant to an effective registration
statement under the Securities Act; or

(e) the Securities are sold to the Company or an affiliate (as
defined in Rule 501(b) of Regulation D) of the Company; or

(f) the Securities are disposed of in any other transaction that
does not require registration under the Securities Act, and we
theretofore have furnished to the Company or its designee an opinion
of counsel experienced in securities law matters to such effect or
such other documentation as the Company or its designee may reasonably
request.
<PAGE> 29
Very truly yours,

By:
------------------------------------
(Authorized Officer)
<PAGE> 30
EXHIBIT B

SELLING RESTRICTIONS FOR OFFERS AND
SALES OUTSIDE THE UNITED STATES

(1)(a) The Securities have not been and will not be registered under
the Securities Act and may not be offered or sold within the United States or
to, or for the account or benefit of, U.S. persons except in accordance with
Regulation S under the Securities Act or pursuant to an exemption from the
registration requirements of the Securities Act. Each Initial Purchaser
represents and agrees that, except as otherwise permitted by section 4(a)(i) or
(ii) of the Agreement to which this is an exhibit, it has offered and sold the
Securities, and will offer and sell the Securities, (i) as part of their
distribution at any time and (ii) otherwise until 40 days after the later of
the commencement of the offering and the Closing Date, only in accordance with
Rule 903 of Regulation S under the Securities Act. Accordingly, each Initial
Purchaser represents and agrees that neither it, nor any of its affiliates nor
any person acting on its or their behalf has engaged or will engage in any
directed selling efforts with respect to the Securities, and that it and they
have complied and will comply with the offering restrictions requirement of
Regulation S. Each Initial Purchaser agrees that, at or prior to the
confirmation of sale of Securities (other than a sale of Securities pursuant to
Section 4(a)(i) or (ii) of the Agreement to which this is an exhibit), it shall
have sent to each distributor, dealer or person receiving a selling concession,
fee or other remuneration that purchases Securities from it during the
restricted period a confirmation or notice to substantially the following
effect:

"The Securities covered hereby have not been registered under
the U.S. Securities Act of 1933 (the "Securities Act") and may not be
offered or sold within the United States or to, or for the account or
benefit of, U.S. persons (i) as part of their distribution at any time
or (ii) otherwise until 40 days after the later of the commencement of
the offering and November 27, 1996, except in either case in
accordance with Regulation S or Rule 144A under the Securities Act.
Terms used above have the meanings given to them by Regulation S."

(b) Each Initial Purchaser also represents and agrees that it has
not entered and will not enter into any contractual arrangement with any
distributor with respect to the distribution of the Securities, except with its
affiliates or with the prior written consent of the Company.

(2) Each Initial Purchaser represents and agrees that (i) it has
not offered or sold, and will not offer or sell any Securities in the United
Kingdom by means of any document other than to persons whose ordinary business
it is to buy, hold, manage or dispose of investments, whether as principal or
as agent, for purposes of their businesses or otherwise in circumstances that
do not constitute an offer to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulations 1995, (ii) it has
complied and will comply with all applicable provisions of the Financial
Services Act 1986 of the United Kingdom with respect to anything done by it in
relation to the Securities in, from or otherwise involving the United Kingdom,
and (iii) it has only issued or passed on and will only issue or pass on, to
any person in the United Kingdom, any document received by it in connection
with the issue of the Securities if that person is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1995 or is a person to whom the document may otherwise
lawfully be issued or passed on.
<PAGE> 31
(2) Each Initial Purchaser represents and agrees that:

(i) it has not offered or sold and will not offer or sell in the
United Kingdom, by means of any document, and Securities prior to application
for listing of the Securities being made in accordance with Part IV of the
Financial Services Act 1986 of the United Kingdom other than to persons whose
ordinary business it is to buy or sell shares or debentures, whether as
principal or agent (except in circumstances which do not constitute an offer to
the public within the meaning of the Companies Act 1985 of Great Britain);

(ii) it has complied and will comply with all applicable provisions
of the Financial Services Act 1986 of the United Kingdom with respect to
anything done by it in relation to the Securities in, from or otherwise
involving the United Kingdom; and

(iii) it has only issued or passed on and will only issue or pass on
in the United Kingdom any document received by it in connection with the issue
of the Securities, other than any document which consists of or any part of
listing particulars, supplementary listing particulars or any other document
required or permitted to be published by listing rules under Part IV of the
Financial Service Act 1986 of the United Kingdom, to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1995 or is a person to whom the document may
otherwise lawfully be issued or passed on.

<PAGE> 1
EXHIBIT 10.41

HS RESOURCES, INC.

9 1/4% Senior Subordinated Notes Due 2006

REGISTRATION AGREEMENT
New York, New York
November 27, 1996

Salomon Brothers Inc
Chase Securities Inc.
Lehman Brothers Inc.
Prudential Securities Incorporated
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048

Dear Sirs:

HS Resources, Inc., a Delaware corporation (the "COMPANY"), proposes
to issue and sell to certain purchasers (the "INITIAL PURCHASERS"), for whom
you are acting as Representatives, upon the terms set forth in a purchase
agreement of even date herewith (the "PURCHASE AGREEMENT"), $150,000,000
principal amount of its 9 1/4% Senior Subordinated Notes due 2006 (the
"SECURITIES") (the "INITIAL PLACEMENT") to be guaranteed on a senior
subordinated basis by Orion Acquisition, Inc., a Delaware corporation
("ORION"), and HSRTW, Inc., a Delaware corporation ("HSRTW" and, together with
Orion, the "SUBSIDIARY GUARANTORS"). As an inducement to the Initial
Purchasers to enter into the Purchase Agreement and in satisfaction of a
condition to your obligations thereunder, the Company and the Subsidiary
Guarantors jointly and severally agree with you, (i) for your benefit and the
benefit of the other Initial Purchasers and (ii) for the benefit of the holders
from time to time of the Securities (including you and the other Initial
Purchasers) (each of the foregoing a "HOLDER" and together the "HOLDERS"), as
follows:

1. Definitions. Capitalized terms used herein without
definition shall have their respective meanings set forth in the Purchase
Agreement. As used in this Agreement, the following capitalized defined terms
shall have the following meanings:

"ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.

"AFFILIATE" of any specified person means any other person
which, directly or indirectly, is in control of, is controlled by, or is under
common control with, such specified person. For purposes of this definition,
control of a person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such person whether by

<PAGE> 2
contract or otherwise; and the terms "CONTROLLING" and "CONTROLLED" have
meanings correlative to the foregoing.

"CLOSING DATE" has the meaning set forth in the Purchase
Agreement.

"COMMISSION" means the Securities and Exchange Commission.

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated
thereunder.

"EXCHANGE OFFER REGISTRATION PERIOD" means the one year period
following the consummation of the Registered Exchange Offer, exclusive of any
period during which any stop order shall be in effect suspending the
effectiveness of the Exchange Offer Registration Statement.

"EXCHANGE OFFER REGISTRATION STATEMENT" means a registration
statement of the Company on an appropriate form under the Act with respect to
the Registered Exchange Offer, all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.

"EXCHANGING DEALER" means any Holder (which may include the
Initial Purchasers) which is a broker-dealer, electing to exchange Securities
acquired for its own account as a result of market-making activities or other
trading activities, for New Securities.

"FINAL MEMORANDUM" has the meaning set forth in the Purchase
Agreement.

"HOLDER" has the meaning set forth in the preamble hereto.

"INDENTURE" means the Indenture relating to the Securities,
dated as of November 27, 1996, between the Company and Harris Trust and Savings
Bank, as trustee, as the same may be amended from time to time in accordance
with the terms thereof.

"INITIAL PLACEMENT" has the meaning set forth in the preamble
hereto.

"MAJORITY HOLDERS" means the Holders of a majority of the
aggregate principal amount of securities registered under a Registration
Statement.

"MANAGING UNDERWRITERS" means the investment banker or
investment bankers and manager or managers that shall administer an
underwritten offering.

"NEW SECURITIES" means debt securities of the Company
identical in all material respects to the Securities (except that the cash
interest and interest rate step-up

2
<PAGE> 3
provisions and the transfer restrictions will be modified or eliminated, as
appropriate), to be issued under the Indenture or the New Securities Indenture.

"NEW SECURITIES INDENTURE" means an indenture between the
Company and the New Securities Trustee, identical in all material respects with
the Indenture (except that the cash interest and interest rate step-up
provisions will be modified or eliminated, as appropriate).

"NEW SECURITIES TRUSTEE" means a bank or trust company
reasonably satisfactory to the Initial Purchasers, as trustee, with respect to
the New Securities under the New Securities Indenture.

"PROSPECTUS" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Securities or the New Securities, covered by
such Registration Statement, and all amendments and supplements to the
Prospectus, including post-effective amendments.

"REGISTERED EXCHANGE OFFER" means the proposed offer to the
Holders to issue and deliver to such Holders, in exchange for the Securities, a
like principal amount of the New Securities.

"REGISTRATION STATEMENT" means any Exchange Offer Registration
Statement or Shelf Registration Statement that covers any of the Securities or
the New Securities pursuant to the provisions of this Agreement, amendments and
supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.

"SECURITIES" has the meaning set forth in the preamble hereto.

"SHELF REGISTRATION" means a registration effected pursuant to
Section 3 hereof.

"SHELF REGISTRATION PERIOD" has the meaning set forth in
Section 3(b) hereof.

"SHELF REGISTRATION STATEMENT" means a "shelf" registration
statement of the Company pursuant to the provisions of Section 3 hereof which
covers some or all of the Securities or New Securities, as applicable, on an
appropriate form under Rule 415 under the Act, or any similar rule that may be
adopted by the Commission, amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.

3
<PAGE> 4
"TRUSTEE" means the trustee with respect to the Securities
under the Indenture.

"UNDERWRITER" means any underwriter of the Securities in
connection with an offering thereof under a Shelf Registration Statement.

2. Registered Exchange Offer; Resales of New Securities
by Exchanging Dealers; Private Exchange.

(a) The Company shall prepare and, not later than January
24, 1997, shall file with the Commission the Exchange Offer Registration
Statement with respect to the Registered Exchange Offer. The Company shall
cause the Exchange Offer Registration Statement to become effective under the
Act no later than March 27, 1997.

(b) Upon the effectiveness of the Exchange Offer
Registration Statement, the Company shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer to
enable each Holder electing to exchange Securities for New Securities (assuming
that such Holder is not an affiliate of the Company within the meaning of the
Act, acquires the New Securities in the ordinary course of such Holder's
business and has no arrangements with any person to participate in the
distribution of the New Securities) to trade such New Securities from and after
their receipt without any limitations or restrictions under the Act and without
material restrictions under the securities laws of a substantial proportion of
the several states of the United States.

(i) mail to each Holder a copy of the Prospectus
forming part of the Exchange Offer Registration Statement, together
with an appropriate letter of transmittal and related documents;

(ii) keep the Registered Exchange Offer open for
not less than 30 days and not more than 45 days after the date notice
thereof is mailed to the Holders (or longer if required by applicable
law);

(iii) utilize the services of a depositary for the
Registered Exchange Offer with an address in the Borough of Manhattan,
The City of New York; and

(iv) comply in all material respects with all
applicable laws.

(d) As soon as practicable after the close of the
Registered Exchange Offer, the Company shall:

(i) accept for exchange all Securities tendered
and not validly withdrawn pursuant to the Registered Exchange Offer;

4
<PAGE> 5
(ii) deliver to the Trustee for cancellation all
Securities so accepted for exchange; and

(iii) cause the Trustee or the New Securities
Trustee, as the case may be, promptly to authenticate and deliver to
each Holder of Securities New Securities equal in principal amount to
the Securities of such Holder so accepted for exchange.

(e) The Initial Purchasers and the Company acknowledge
that, pursuant to interpretations by the Commission's staff of Section 5 of the
Act, and in the absence of an applicable exemption therefrom, each Exchanging
Dealer is required to deliver a Prospectus in connection with a sale of any New
Securities received by such Exchanging Dealer pursuant to the Registered
Exchange Offer in exchange for Securities acquired for its own account as a
result of market-making activities or other trading activities. Accordingly,
the Company shall:

(i) include the information set forth in ANNEX A
hereto on the cover of the Exchange Offer Registration Statement, in
ANNEX B hereto in the forepart of the Exchange Offer Registration
Statement in a section setting forth details of the Exchange Offer,
and in ANNEX C hereto in the underwriting or plan of distribution
section of the Prospectus forming a part of the Exchange Offer
Registration Statement, and include the information set forth in ANNEX
D hereto in the Letter of Transmittal delivered pursuant to the
Registered Exchange Offer; and

(ii) use its best efforts to keep the Exchange
Offer Registration Statement continuously effective under the Act
during the Exchange Offer Registration Period for delivery by
Exchanging Dealers in connection with sales ofNew Securities received
pursuant to the Registered Exchange Offer, as contemplated by Section
4(h)below.

(f) In the event that any Initial Purchaser determines
that it is not eligible to participate in the Registered Exchange Offer with
respect to the exchange of Securities constituting any portion of an unsold
allotment, at the request of such Initial Purchaser, the Company shall issue
and deliver to such Initial Purchaser or the party purchasing New Securities
registered under a Shelf Registration Statement as contemplated by Section 3
hereof from such Initial Purchaser, in exchange for such Securities, a like
principal amount of New Securities. The Company shall seek to cause the CUSIP
Service Bureau to issue the same CUSIP number for such New Securities as for
New Securities issued pursuant to the Registered Exchange Offer.

3. Shelf Registration. If, (i) because of any change in
law or applicable interpretations thereof by the Commission's staff, the
Company determines upon advice of its outside counsel that it is not permitted
to effect the Registered Exchange Offer as contemplated by Section 2 hereof, or
(ii) if for any other reason the Registered Exchange Offer is not consummated
by April 25, 1997, or (iii) if any Initial Purchaser so requests with respect
to Securities held by it following consummation of the Registered Exchange
Offer, or (iv) if any Holder (other than an Initial Purchaser) is not eligible
to participate in the Registered Exchange

5
<PAGE> 6
Offer or (v) in the case of any Initial Purchaser that participates in the
Registered Exchange Offer or acquires New Securities pursuant to Section 2(f)
hereof, such Initial Purchaser does not receive freely tradeable New Securities
in exchange for Securities constituting any portion of an unsold allotment (it
being understood that, for purposes of this Section 3, (x) the requirement that
an Initial Purchaser deliver a Prospectus containing the information required
by Items 507 and/or 508 of Regulation S-K under the Act in connection with
sales of New Securities acquired in exchange for such Securities shall result
in such New Securities being not "freely tradeable" but (y) the requirement
that an Exchanging Dealer deliver a Prospectus in connection with sales of New
Securities acquired in the Registered Exchange Offer in exchange for Securities
acquired as a result of market-making activities or other trading activities
shall not result in such New Securities being not "freely tradeable"), the
following provisions shall apply:

(a) The Company shall as promptly as practicable (but in
no event more than 30 days after so required or requested pursuant to this
Section 3), file with the Commission and thereafter shall cause to be declared
effective under the Act a Shelf Registration Statement relating to the offer
and sale of the Securities or the New Securities, as applicable, by the Holders
from time to time in accordance with the methods of distribution elected by
such Holders and set forth in such Shelf Registration Statement; provided, that
with respect to New Securities received by an Initial Purchaser in exchange for
Securities constituting any portion of an unsold allotment, the Company may, if
permitted by current interpretations by the Commission's staff, file a
post-effective amendment to the Exchange Offer Registration Statement
containing the information required by Regulation S-K Items 507 and/or 508, as
applicable, in satisfaction of its obligations under this paragraph (a) with
respect thereto, and any such Exchange Offer Registration Statement, as so
amended, shall be referred to herein as, and governed by the provisions herein
applicable to, a Shelf Registration Statement.

(b) The Company shall use its best efforts to keep the
Shelf Registration Statement continuously effective in order to permit the
Prospectus forming part thereof to be usable by Holders for a period of three
years from the date the Shelf Registration Statement is declared effective by
the Commission (or until one year after such effective date if such Shelf
Registration Statement is filed at the request of an Initial Purchaser) or such
shorter period that will terminate when all the Securities or New Securities,
as applicable, covered by the Shelf Registration Statement have been sold
pursuant to the Shelf Registration Statement (in any such case, such period
being called the "SHELF REGISTRATION PERIOD"). The Company shall be deemed not
to have used its best efforts to keep the Shelf Registration Statement
effective during the requisite 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 (i) such action is required
by applicable law, or (ii) such action is taken by the Company in good faith
and for valid business reasons (not including avoidance of the Company's
obligations hereunder), including, but not limited to, the acquisition or
divestiture of assets, so long as the Company promptly thereafter complies with
the requirements of Section 4(k) hereof, if applicable.

4. Registration Procedures. In connection with any
Shelf Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:

6
<PAGE> 7
(a) The Company shall furnish to you, prior to the filing
thereof with the Commission, a copy of any Shelf Registration Statement and any
Exchange Offer Registration Statement, and each amendment thereof and each
amendment or supplement, if any, to the Prospectus included therein and shall
use its best efforts to reflect in each such document, when so filed with the
Commission, such comments as you reasonably may propose.

(b) The Company shall ensure that (i) any Registration
Statement and any amendment thereto and any Prospectus forming part thereof and
any amendment or supplement thereto complies in all material respects with the
Act and the rules and regulations thereunder, (ii) any Registration Statement
and any amendment thereto does not, when it becomes effective, contain an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
and (iii) any Prospectus forming part of any Registration Statement, and any
amendment or supplement to such Prospectus, does not include an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements, in the light of the circumstances under which
they were made, not misleading.

(c) (i) The Company shall advise you and, in the case
of a Shelf Registration Statement, the Holders of securities covered
thereby, and, if requested by you or any such Holder, confirm such
advice in writing:

A. when a Registration Statement and any
amendment thereto has been filed with the Commission and when the
Registration Statement or any post-effective amendment thereto has
become effective; and

B. of any request by the Commission for
amendments or supplements to the Registration Statement or the
Prospectus included therein or for additional information.

(ii) The Company shall advise you and, in the case
of a Shelf Registration Statement, the Holders of securities covered
thereby, and, in the case of an Exchange Offer Registration Statement,
any Exchanging Dealer which has provided in writing to the Company a
telephone or facsimile number and address for notices, and, if
requested by you or any such Holder or Exchanging Dealer, confirm such
advice in writing:

A. of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or
the initiation of any proceedings for that purpose;

B. of the receipt by the Company of any
notification with respect to the suspension of the qualification of
the securities included therein for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and

7
<PAGE> 8
C. of the happening of any event that requires
the making of any changes in the Registration Statement or the
Prospectus so that, as of such date, the statements therein are not
misleading and do not 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 (which advice shall be accompanied by an
instruction to suspend the use of the Prospectus until the requisite
changes have been made).

(d) The Company shall use its best efforts to obtain the
withdrawal of any order suspending the effectiveness of any Registration
Statement at the earliest possible time.

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

(f) The Company shall, during the Shelf Registration
Period, deliver to each Holder of securities included within the coverage of
any Shelf Registration Statement, without charge, as many copies of the
Prospectus (including each preliminary Prospectus) included in such Shelf
Registration Statement and any amendment or supplement thereto as such Holder
may reasonably request during such periods as the Holder continues to hold the
securities covered by the Shelf Registration Statement; and the Company
consents to the use of the Prospectus or any amendment or supplement thereto by
each of the selling Holders of securities in connection with the offering and
sale of the securities covered by the Prospectus or any amendment or supplement
thereto, except during such periods in which the Company has provided notice in
accordance with paragraph (c)(i) above and has not filed a post-effective
amendment pursuant to Section 4(k) hereof or given the Holders notice of the
lifting of any stop order or suspension.

(g) The Company shall furnish to each Exchanging Dealer
which so requests, without charge, at least one copy of the Exchange Offer
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules included therein, any documents incorporated
by reference therein, and, if the Exchanging Dealer so requests in writing, all
exhibits (including those incorporated by reference).

(h) The Company shall, during the Exchange Offer
Registration Period, promptly deliver to each Exchanging Dealer, without
charge, as many copies of the Prospectus included in such Exchange Offer
Registration Statement and any amendment or supplement thereto as such
Exchanging Dealer may reasonably request for delivery by such Exchanging Dealer
in connection with a sale of New Securities received by it pursuant to the
Registered Exchange Offer; and the Company consents to the use of the
Prospectus or any amendment or supplement thereto by any such Exchanging
Dealer, as aforesaid, except during such periods in which the Company has
provided notice in accordance with paragraph (c)(i) above and has not filed a
post-effective amendment pursuant to Section 4(k) hereof or given the Holders
notice of the lifting of any stop order or suspension.

8
<PAGE> 9
(i) Prior to the Registered Exchange Offer or any other
offering of securities pursuant to any Registration Statement, the Company
shall register or qualify or cooperate with the Holders of securities included
therein and their respective counsel in connection with the registration or
qualification of such securities for offer and sale under the securities or
blue sky laws of such jurisdictions as any such Holders reasonably request 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
such Registration Statement; provided, however, that the Company will not be
required to qualify generally to do business in any jurisdiction where it is
not then so qualified or to take any action which would subject it to general
service of process or to taxation in any such jurisdiction where it is not then
so subject.

(j) The Company shall cooperate with the Holders of
Securities to facilitate the timely preparation and delivery of certificates
representing Securities to be sold pursuant to any Registration Statement free
of any restrictive legends and in such denominations and registered in such
names as Holders may request prior to sales of securities pursuant to such
Registration Statement.

(k) Upon the occurrence of any event contemplated by
paragraph (c)(ii)(C) above, the Company shall promptly prepare a post-effective
amendment to any Registration Statement or an amendment or supplement to the
related Prospectus or file any other required document so that, as thereafter
delivered to purchasers of the securities included therein, the Prospectus will
not include an 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.

(l) Not later than the effective date of any such
Registration Statement hereunder, the Company shall provide a CUSIP number for
the Securities or New Securities, as the case may be, registered under such
Registration Statement, and provide the applicable trustee with printed
certificates for such Securities or New Securities, in a form eligible for
deposit with The Depository Trust Company.

(m) The Company shall use its best efforts to comply with
all applicable rules and regulations of the Commission and shall make generally
available to its security holders as soon as practicable after the effective
date of the applicable Registration Statement an earnings statement satisfying
the provisions of Section 11(a) of the Act.

(n) The Company shall cause the Indenture or the New
Securities Indenture, as the case may be, to be qualified under the Trust
Indenture Act of 1939, as amended, in a timely manner.

(o) The Company may require each Holder of securities to
be sold pursuant to any Shelf Registration Statement to furnish to the Company
such information regarding the Holder and the distribution of such securities
as the Company may from time to time reasonably require for inclusion in such
Registration Statement.

9
<PAGE> 10
(p) The Company shall, if requested, promptly incorporate
in a Prospectus supplement or post- effective amendment to a Shelf Registration
Statement, such information as the Managing Underwriters and Majority Holders
reasonably request and shall make all required filings of such Prospectus
supplement or post-effective amendment as soon as notified of the matters to be
incorporated in such Prospectus supplement or post-effective amendment.

(q) In the case of any Shelf Registration Statement, the
Company shall enter into such agreements (including underwriting agreements)
and take all other appropriate actions in order to expedite or facilitate the
registration or the disposition of the Securities, and in connection therewith,
if an underwriting agreement is entered into, cause the same to contain
indemnification provisions and procedures no less favorable than those set
forth in Section 6 (or such other provisions and procedures acceptable to the
Majority Holders and the Managing Underwriters, if any, with respect to all
parties to be indemnified pursuant to Section 6) from Holders of Securities to
the Company.

(r) In the case of any Shelf Registration Statement, the
Company shall (i) make reasonably available for inspection by the Holders of
securities to be registered thereunder, any underwriter participating in any
disposition pursuant to such Registration Statement, and any attorney,
accountant or other agent retained by the Holders or any such underwriter all
relevant financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries; (ii) cause the Company's
officers, directors and employees to supply all relevant information reasonably
requested by the Holders or any such underwriter, attorney, accountant or agent
in connection with any such Registration Statement as is customary for similar
due diligence examinations; provided, however, that any information that is
designated in writing by the Company, in good faith, as confidential at the
time of delivery of such information shall be kept confidential by the Holders
or any such underwriter, attorney, accountant or agent, unless such disclosure
is made in connection with a court proceeding or required by law, or such
information becomes available to the public generally or through a third party
without an accompanying obligation of confidentiality; (iii) make such
representations and warranties to the Holders of securities registered
thereunder and the underwriters, if any, in form, substance and scope as are
customarily made by issuers to underwriters in primary underwritten offerings
and covering matters including, but not limited to, those set forth in the
Purchase Agreement; (iv) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the Managing Underwriters, if any) addressed to each
selling Holder and the underwriters, if any, covering such matters as are
customarily covered in opinions requested in underwritten offerings and such
other matters as may be reasonably requested by such Holders and underwriters;
(v) obtain "cold comfort" letters and updates thereof from the independent
certified public accountants of the Company (and, if necessary, any other
independent certified public accountants of any subsidiary of the Company or of
any business acquired by the Company for which separate financial statements
and financial data are, or are required to be, included in the Registration
Statement), addressed to each selling Holder of securities registered
thereunder and the underwriters, if any, in customary form and covering matters
of the type customarily covered in "cold comfort" letters in connection with
primary underwritten offerings; and (vi) deliver such documents and
certificates as may be reasonably requested by the Majority Holders and the
Managing Underwriters, if any,

10
<PAGE> 11
including those to evidence compliance with Section 4(k) and with any customary
conditions contained in the underwriting agreement or other agreement entered
into by the Company. The foregoing actions set forth in clauses (iii), (iv),
(v) and (vi) of this Section 4(r) shall be performed at (A) the effectiveness
of such Registration Statement and each post-effective amendment thereto and
(B) each closing under any underwriting or similar agreement as and to the
extent required thereunder.

(s) In the case of any Exchange Offer Registration
Statement, the Company shall (i) make reasonably available for inspection by
such Initial Purchaser, and any attorney, accountant or other agent retained by
such Initial Purchaser, all relevant financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries; (ii)
cause the Company's officers, directors and employees to supply all relevant
information reasonably requested by such Initial Purchaser or any such
attorney, accountant or agent in connection with any such Registration
Statement as is customary for similar due diligence examinations; provided,
however, that any information that is designated in writing by the Company, in
good faith, as confidential at the time of delivery of such information shall
be kept confidential by such Initial Purchaser or any such attorney, accountant
or agent, unless such disclosure is made in connection with a court proceeding
or required by law, or such information becomes available to the public
generally or through a third party without an accompanying obligation of
confidentiality; (iii) make such representations and warranties to such Initial
Purchaser, in form, substance and scope as are customarily made by issuers to
underwriters in primary underwritten offerings and covering matters including,
but not limited to, those set forth in the Purchase Agreement; (iv) obtain
opinions of counsel to the Company and updates thereof (which counsel and
opinions (in form, scope and substance) shall be reasonably satisfactory to
such Initial Purchaser and its counsel, addressed to such Initial Purchaser,
covering such matters as are customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably requested by
such Initial Purchaser or its counsel); (v) obtain "cold comfort" letters and
updates thereof from the independent certified public accountants of the
Company (and, if necessary, any other independent certified public accountants
of any subsidiary of the Company or of any business acquired by the Company for
which separate financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to such Initial
Purchaser, in customary form and covering matters of the type customarily
covered in "cold comfort" letters in connection with primary underwritten
offerings, or if requested by such Initial Purchaser or its counsel in lieu of
a "cold comfort" letter, an agreed-upon procedures letter under Statement on
Auditing Standards No. 35, covering matters requested by such Initial Purchaser
or its counsel; and (vi) deliver such documents and certificates as may be
reasonably requested by such Initial Purchaser or its counsel, including those
to evidence compliance with Section 4(k) and with conditions customarily
contained in underwriting agreements. The foregoing actions set forth in
clauses (iii), (iv), (v), and (vi) of this Section 4(s) shall be performed at
the close of the Registered Exchange Offer and the effective date of any
post-effective amendment to the Exchange Offer Registration Statement.

5. Registration Expenses. The Company shall bear all
expenses incurred in connection with the performance of its obligations under
Sections 2, 3 and 4 hereof and, in the event of any Shelf Registration
Statement, will reimburse the Holders for the reasonable fees and

11
<PAGE> 12
disbursements of one firm or counsel designated by the Majority Holders to act
as counsel for the Holders in connection therewith, and, in the case of any
Exchange Offer Registration Statement, will reimburse the Initial Purchasers
for the reasonable fees and disbursements of counsel acting in connection
therewith.

6. Indemnification and Contribution.

(a) In connection with any Registration Statement, the
Company agrees to indemnify and hold harmless each Holder of securities covered
thereby (including each Initial Purchaser and, with respect to any Prospectus
delivery as contemplated in Section 4(h) hereof, each Exchanging Dealer), the
directors, officers, employees and agents of each such Holder and each person
who controls any such Holder within the meaning of either the Act or the
Exchange Act against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Act, the
Exchange Act or other Federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement as originally filed or in any amendment thereof, or in any
preliminary Prospectus or Prospectus, or in any amendment thereof or supplement
thereto, 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 agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company will
not be liable in any case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of any such Initial Purchaser or Holder specifically for inclusion
therein. This indemnity agreement will be in addition to any liability which
the Company may otherwise have.

The Company also agrees to indemnify or contribute to Losses
of, as provided in Section 6(d), any underwriters of Securities registered
under a Shelf Registration Statement, their officers and directors and each
person who controls such underwriters on substantially the same basis as that
of the indemnification of the Initial Purchaser and the selling Holders
provided in this Section 6(a) and shall, if requested by any Holder, enter into
an underwriting agreement reflecting such agreement, as provided in Section
4(q) hereof.

(b) Each Holder of securities covered by a Registration
Statement (including each Initial Purchaser and, with respect to any Prospectus
delivery as contemplated in Section 4(h) hereof, each Exchanging Dealer)
severally agrees to indemnify and hold harmless (i) the Company, (ii) each of
its directors, (iii) each of its officers who signs such Registration Statement
and (iv) each person who controls the Company within the meaning of either the
Act or the Exchange Act to the same extent as the foregoing indemnity from the
Company to each such Holder, but only with reference to written information
relating to such Holder furnished to the Company by or on behalf of such Holder
specifically for inclusion in the documents

12
<PAGE> 13
referred to in the foregoing indemnity. This indemnity agreement will be in
addition to any liability which any such Holder may otherwise have.

(c) Promptly after receipt by an indemnified party under
this Section 6 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 6, notify the indemnifying party in
writing of the commencement thereof; but the failure so to notify the
indemnifying party (i) will not relieve it from liability under paragraph (a)
or (b) above unless and to the extent it did not otherwise timely learn of such
action and such failure results in the forfeiture by the indemnifying party of
substantial rights and defenses 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. The
indemnifying party shall be entitled to appoint counsel of the indemnifying
party's choice at the indemnifying party's expense to represent the indemnified
party in any action for which indemnification is sought (in which case the
indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be
reasonably satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the indemnified
party in an action, the indemnified party shall have the right to employ
separate counsel (including local counsel), and the indemnifying party shall
bear the reasonable fees, costs and expenses of such separate counsel (and
local counsel) if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after notice of the institution of such action or (iv) the indemnifying
party shall authorize the indemnified party to employ separate counsel at the
expense of the indemnifying party. An indemnifying party will not, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified parties
are actual or potential parties to such claim or action) unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action, suit or
proceeding.

(d) In the event that the indemnity provided in paragraph
(a) or (b) of this Section 6 is unavailable to or insufficient to hold harmless
an indemnified party for any reason, then each applicable indemnifying party,
in lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in
connection with investigating or defending same) (collectively "LOSSES") to
which such indemnified party may be subject in such proportion as is
appropriate to reflect the relative benefits received by such indemnifying
party, on the one hand, and such indemnified party, on the other hand, from the
Initial

13
<PAGE> 14
Placement and the Registration Statement which resulted in such Losses;
provided, however, that in no case shall any Initial Purchaser or any
subsequent Holder of any Security or New Security be responsible, in the
aggregate, for any amount in excess of the purchase discount or commission
applicable to such Security, or in the case of a New Security, applicable to
the Security which was exchangeable into such New Security, as set forth on the
cover page of the Final Memorandum, nor shall any underwriter be responsible
for any amount in excess of the underwriting discount or commission applicable
to the securities purchased by such underwriter under the Registration
Statement which resulted in such Losses. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the indemnifying
party and the indemnified party shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of such indemnifying party, on the one hand, and such indemnified party,
on the other hand, in connection with the statements or omissions which
resulted in such Losses as well as any other relevant equitable considerations.
Benefits received by the Company shall be deemed to be equal to the sum of (x)
the total net proceeds from the Initial Placement (before deducting expenses)
as set forth on the cover page of the Final Memorandum and (y) the total amount
of Special Interest (as defined in the Final Memorandum) which the Company was
not required to pay as a result of registering the securities covered by the
Registration Statement which resulted in such Losses. Benefits received by the
Initial Purchasers shall be deemed to be equal to the total purchase discounts
and commissions as set forth on the cover page of the Final Memorandum, and
benefits received by any other Holders shall be deemed to be equal to the value
of receiving Securities or New Securities, as applicable, registered under the
Act. Benefits received by any underwriter shall be deemed to be equal to the
total underwriting discounts and commissions, as set forth on the cover page of
the Prospectus forming a part of the Registration Statement which resulted in
such Losses. Relative fault shall be determined by reference to whether any
alleged untrue statement or omission relates to information provided by the
indemnifying party, on the one hand, or by the indemnified party, on the other
hand. The parties agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph (d), no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. For purposes of this Section 6, each
person who controls a Holder within the meaning of either the Act or the
Exchange Act and each director, officer, employee and agent of such Holder
shall have the same rights to contribution as such Holder, and each person who
controls the Company within the meaning of either the Act or the Exchange Act,
each officer, employee and agent of the Company who shall have signed the
Registration Statement and each director of the Company shall have the same
rights to contribution as the Company, subject in each case to the applicable
terms and conditions of this paragraph (d).

(e) The provisions of this Section 6 will remain in full
force and effect, regardless of any investigation made by or on behalf of any
Holder or the Company or any of the officers, directors or controlling persons
referred to in Section 6 hereof, and will survive the sale by a Holder of
securities covered by a Registration Statement.

14
<PAGE> 15
7. Miscellaneous.

(a) No Inconsistent Agreements. The Company has not, as
of the date hereof, entered into, nor shall it, on or after the date hereof,
enter into, any agreement with respect to its securities that is inconsistent
with the rights granted to the Holders herein or otherwise conflicts with the
provisions hereof.

(b) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
qualified, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, unless the Company has obtained the
written consent of the Holders of at least a majority of the then outstanding
aggregate principal amount of Securities (or, after the consummation of any
Exchange Offer in accordance with Section 2 hereof, of New Securities);
provided that, with respect to any matter that directly or indirectly affects
the rights of any Initial Purchaser hereunder, the Company shall obtain the
written consent of each such Initial Purchaser against which such amendment,
qualification, supplement, waiver or consent is to be effective.
Notwithstanding the foregoing (except the foregoing proviso), a waiver or
consent to departure from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect the rights of other Holders may be given by the Majority Holders,
determined on the basis of securities being sold rather than registered under
such Registration Statement.

(c) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by hand-delivery,
first-class mail, telex, telecopier, or air courier guaranteeing overnight
delivery:

(i) if to a Holder, at the most current address
given by such holder to the Company in accordance with the provisions
of this Section 7(c), which address initially is, with respect to each
Holder, the address of such Holder maintained by the Registrar under
the Indenture, with a copy in like manner to Salomon Brothers Inc;

(ii) if to you, initially at the respective
addresses set forth in the Purchase Agreement; and

(iii) if to the Company, initially at its address
set forth in the Purchase Agreement.

All such notices and communications shall be deemed to have
been duly given when received.

The Initial Purchasers or the Company by notice to the other
may designate additional or different addresses for subsequent notices or
communications.

15
<PAGE> 16
(d) 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 Securities and/or New Securities.
The Company hereby agrees to extend the benefits of this Agreement to any
Holder of Securities and/or New Securities and any such Holder may specifically
enforce the provisions of this Agreement as if an original party hereto.

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

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

(g) Governing Law. This agreement shall be governed by
and construed in accordance with the internal laws of the State of New York
applicable to agreements made and to be performed in said State.

(h) Severability. In the event that any one of more of
the provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any respect for any
reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions hereof shall not be in any
way impaired or affected thereby, it being intended that all of the rights and
privileges of the parties shall be enforceable to the fullest extent permitted
by law.

(i) Securities Held by the Company, etc. Whenever the
consent or approval of Holders of a specified percentage of principal amount of
Securities or New Securities is required hereunder, Securities or New
Securities, as applicable, held by the Company or its Affiliates (other than
subsequent Holders of Securities or New Securities if such subsequent Holders
are deemed to be Affiliates solely by reason of their holdings of such
Securities or New Securities) shall not be counted in determining whether such
consent or approval was given by the Holders of such required percentage.

[The remainder of this page is intentionally left blank]

16
<PAGE> 17
Please confirm that the foregoing correctly sets forth the
agreement between the Company and you.

Very truly yours,

HS RESOURCES, INC.

By: /s/ P. MICHAEL HIGHUM
-----------------------
Name: P. Michael Highum
Title: President

ORION ACQUISITION, INC.

By: /s/ P. MICHAEL HIGHUM
-----------------------
Name: P. Michael Highum
Title: President

HSRTW, INC.

By: /s/ P. MICHAEL HIGHUM
-----------------------
Name: P. Michael Highum
Title: President

Accepted in New York, New York
November 27, 1996

SALOMON BROTHERS INC
CHASE SECURITIES INC.
LEHMAN BROTHERS INC.
PRUDENTIAL SECURITIES INCORPORATED

By: SALOMON BROTHERS INC

By: /s/ JAMES C.V. ROGERS
-----------------------
Name: James C.V. Rogers
Title: Vice President

S-1
<PAGE> 18
ANNEX A

Annex A

Each broker-dealer that receives New Securities for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Securities. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of New
Securities received in exchange for Securities where such New Securities were
acquired by such broker-dealer as a result of market-making activities or other
trading activities. The Company has agreed that, starting on the Expiration
Date (as defined herein) and ending on the close of business on the first
anniversary of the Expiration Date, it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
<PAGE> 19
ANNEX B

Annex B

Each broker-dealer that receives New Securities for its own account in exchange
for Securities, where such Securities were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Securities. See "Plan of Distribution."
<PAGE> 20
ANNEX C

PLAN OF DISTRIBUTION

Each broker-dealer that receives New Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of New Securities received in
exchange for Securities where such Securities were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that, starting on the Expiration Date and ending on the close of business on
the first anniversary of the Expiration Date, it will make this Prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale.

The Company will not receive any proceeds from any sale of New
Securities by broker-dealers. New Securities received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Securities or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such New
Securities. Any broker-dealer that resells New Securities that were received
by it for its own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such New Securities may be deemed
to be an "underwriter" within the meaning of the Securities Act and any profit
of any such resale of New Securities and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation
under the Securities Act. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.

For a period of one year after the Expiration Date, the
Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer (including the expenses of one counsel
for the holders of the Securities) other than commissions or concessions of any
brokers or dealers and will indemnify the holders of the Securities (including
any broker-dealers) against certain liabilities, including liabilities under
the Securities Act.

[IF APPLICABLE, ADD INFORMATION REQUIRED BY REGULATION S-K ITEMS 507 AND/OR
508.]
<PAGE> 21
ANNEX D

Rider A

CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.

Name:
--------------------------------------------------
Address:
--------------------------------------------------

--------------------------------------------------

Rider B

If the undersigned is not a broker-dealer, the undersigned represents that it
is not engaged in, and does not intend to engage in, a distribution of New
Securities. If the undersigned is a broker-dealer that will receive New
Securities for its own account in exchange for Securities, it represents that
the Securities to be exchanged for New Securities were acquired by it as a
result of market-making activities or other trading activities and acknowledges
that it will deliver a prospectus in connection with any resale of such New
Securities; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
report (and to all references to our Firm) included in or made a part of this
Registration Statement.

/s/ ARTHUR ANDERSEN LLP
------------------------------------
ARTHUR ANDERSEN LLP

Denver, Colorado,
January 7, 1997.

<PAGE> 1
EXHIBIT 23.2

Williamson Petroleum Consultants, Inc.

HOUSTON

MIDLAND

CONSENT OF INDEPENDENT ENGINEERS

Williamson Petroleum Consultants, Inc. (Williamson) hereby consents to the
references to Williamson and our review entitled "Review of Oil and Gas
Reserves and Associated Net Revenues to the Interests of HS Resources, Inc. as
Prepared by HS Resources, Inc., Effective December 31, 1995, Constant Pricing
Economics, Williamson Project 5.8339" in the HS Resources, Inc. Registration
Statement Form S-4 to be filed with the Securities and Exchange Commission on
or about January 6, 1997.

/s/ WILLIAMSON PETROLEUM CONSULTANTS, INC.
WILLIAMSON PETROLEUM CONSULTANTS, INC.

Houston, Texas
January 3, 1997

1010 LAMAR STREET

SUITE 1000

HOUSTON, TEXAS

77002-6314

713.658.8278

FAX 713.658.0218