EXHIBIT 4.1
[EXECUTION COPY]
Encore Acquisition Company
Issuer
6.25% Senior Subordinated Notes Due 2014
INDENTURE
Dated as of April 2, 2004
WELLS FARGO BANK, NATIONAL ASSOCIATION
Trustee
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
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310(a) (1)............................................................................. 7.10
(a) (2)............................................................................. 7.10
(a) (3)............................................................................. N.A.
(a) (4)............................................................................. N.A.
(b) ................................................................................ 7.08; 7.10
(c) ................................................................................ N.A.
311(a) ................................................................................ 7.11
(b) ................................................................................ 7.11
(c) ................................................................................ N.A.
312(a) ................................................................................ 2.05
(b) ................................................................................ 13.03
(c) ................................................................................ 13.03
313(a) ................................................................................ 7.06
(b) (1)............................................................................. N.A.
(b) (2)............................................................................. 7.06
(c) ................................................................................ 13.02
(d) ................................................................................ 7.06
314(a) ................................................................................ 4.02; 4.11; 13.02
(b) ................................................................................ N.A.
(c) (1)............................................................................. 13.04
(c) (2)............................................................................. 13.04
(c) (3)............................................................................. N.A.
(d) ................................................................................ N.A.
(e) ................................................................................ 13.05
(f) ................................................................................ N.A.
315(a) ................................................................................ 7.01
(b) ................................................................................ 7.05; 13.02
(c) ................................................................................ 7.01
(d) ................................................................................ 7.01
(e) ................................................................................ 6.11
316(a) (last sentence)................................................................. 13.06
(a) (1)(A).......................................................................... 6.05
(a) (1)(B).......................................................................... 6.04
(a) (2)............................................................................. N.A.
(b) ................................................................................ 6.07
317(a) (1)............................................................................. 6.08
(a) (2)............................................................................. 6.09
(b) ................................................................................ 2.04
318(a) ................................................................................ 13.01
N.A. means Not Applicable.
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Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
TABLE OF CONTENTS
Page
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ARTICLE 1 Definitions and Incorporation by Reference 1
SECTION 1.01.Definitions................................................................................ 1
SECTION 1.02.Other Definitions.......................................................................... 37
SECTION 1.03.Incorporation by Reference of Trust Indenture Act.......................................... 38
SECTION 1.04.Rules of Construction...................................................................... 38
ARTICLE 2 The Securities 39
SECTION 2.01.Form and Dating............................................................................ 39
SECTION 2.02.Execution and Authentication............................................................... 39
SECTION 2.03.Registrar and Paying Agent................................................................. 40
SECTION 2.04.Paying Agent To Hold Money in Trust........................................................ 40
SECTION 2.05.Securityholder Lists....................................................................... 40
SECTION 2.06.Transfer and Exchange...................................................................... 41
SECTION 2.07.Replacement Securities..................................................................... 41
SECTION 2.08.Outstanding Securities..................................................................... 41
SECTION 2.09.Temporary Securities....................................................................... 41
SECTION 2.10.Cancellation............................................................................... 42
SECTION 2.11.Defaulted Interest......................................................................... 42
SECTION 2.12.CUSIP Numbers.............................................................................. 42
SECTION 2.13.Issuance of Additional Securities.......................................................... 42
ARTICLE 3 Redemption 43
SECTION 3.01.Notices to Trustee......................................................................... 43
SECTION 3.02.Selection of Securities To Be Redeemed..................................................... 43
SECTION 3.03.Notice of Redemption....................................................................... 44
SECTION 3.04.Effect of Notice of Redemption............................................................. 44
SECTION 3.05.Deposit of Redemption Price................................................................ 44
SECTION 3.06.Securities Redeemed in Part................................................................ 45
SECTION 3.07.Special Mandatory Redemption............................................................... 45
ARTICLE 4 Covenants 46
SECTION 4.01.Payment of Securities...................................................................... 46
SECTION 4.02.SEC Reports................................................................................ 46
SECTION 4.03.Limitation on Indebtedness................................................................. 46
SECTION 4.04.Limitation on Restricted Payments.......................................................... 50
SECTION 4.05.Limitation on Restrictions on Distributions from Restricted Subsidiaries................... 54
SECTION 4.06.Limitation on Sales of Assets and Subsidiary Stock......................................... 56
SECTION 4.07.Limitation on Affiliate Transactions....................................................... 60
SECTION 4.08.Change of Control.......................................................................... 62
SECTION 4.09.Limitation on Liens........................................................................ 63
SECTION 4.10.Future Guarantors.......................................................................... 63
SECTION 4.11.Compliance Certificate..................................................................... 64
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SECTION 4.12.Further Instruments and Acts............................................................... 64
SECTION 4.13.Suspension of Covenants.................................................................... 64
ARTICLE 5 Successor Company 64
SECTION 5.01.When Company May Merge or Transfer Assets.................................................. 64
ARTICLE 6 Defaults and Remedies 66
SECTION 6.01.Events of Default.......................................................................... 66
SECTION 6.02.Acceleration............................................................................... 68
SECTION 6.03.Other Remedies............................................................................. 69
SECTION 6.04.Waiver of Past Defaults.................................................................... 69
SECTION 6.05.Control by Majority........................................................................ 69
SECTION 6.06.Limitation on Suits........................................................................ 70
SECTION 6.07.Rights of Holders to Receive Payment....................................................... 70
SECTION 6.08.Collection Suit by Trustee................................................................. 70
SECTION 6.09.Trustee May File Proofs of Claim........................................................... 70
SECTION 6.10.Priorities................................................................................. 71
SECTION 6.11.Undertaking for Costs...................................................................... 71
SECTION 6.12.Waiver of Stay or Extension Laws........................................................... 71
ARTICLE 7 Trustee 72
SECTION 7.01.Duties of Trustee.......................................................................... 72
SECTION 7.02.Rights of Trustee.......................................................................... 73
SECTION 7.03.Individual Rights of Trustee............................................................... 73
SECTION 7.04.Trustee's Disclaimer....................................................................... 73
SECTION 7.05.Notice of Defaults......................................................................... 74
SECTION 7.06.Reports by Trustee to Holders.............................................................. 74
SECTION 7.07.Compensation and Indemnity................................................................. 74
SECTION 7.08.Replacement of Trustee..................................................................... 75
SECTION 7.09.Successor Trustee by Merger................................................................ 76
SECTION 7.10.Eligibility; Disqualification.............................................................. 76
SECTION 7.11.Preferential Collection of Claims Against Company.......................................... 76
ARTICLE 8 Discharge of Indenture; Defeasance 76
SECTION 8.01.Discharge of Liability on Securities; Defeasance........................................... 76
SECTION 8.02.Conditions to Defeasance................................................................... 77
SECTION 8.03.Application of Trust Money................................................................. 79
SECTION 8.04.Repayment to Company....................................................................... 79
SECTION 8.05.Indemnity for Government Obligations....................................................... 79
SECTION 8.06.Reinstatement.............................................................................. 79
ARTICLE 9 Amendments 80
SECTION 9.01.Without Consent of Holders................................................................. 80
SECTION 9.02.With Consent of Holders.................................................................... 81
SECTION 9.03.Compliance with Trust Indenture Act........................................................ 82
SECTION 9.04.Revocation and Effect of Consents and Waivers.............................................. 82
SECTION 9.05.Notation on or Exchange of Securities...................................................... 82
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SECTION 9.06.Trustee To Sign Amendments................................................................. 82
SECTION 9.07.Payment for Consent........................................................................ 83
ARTICLE 10 Subordination 83
SECTION 10.01. Agreement To Subordinate.......................................................... 83
SECTION 10.02. Liquidation, Dissolution, Bankruptcy.............................................. 83
SECTION 10.03. Default on Senior Indebtedness of the Company..................................... 83
SECTION 10.04. Acceleration of Payment of Securities............................................. 84
SECTION 10.05. When Distribution Must Be Paid Over............................................... 85
SECTION 10.06. Subrogation....................................................................... 85
SECTION 10.07. Relative Rights................................................................... 85
SECTION 10.08. Subordination May Not Be Impaired by Company...................................... 85
SECTION 10.09. Rights of Trustee and Paying Agent................................................ 85
SECTION 10.10. Distribution or Notice to Representative.......................................... 86
SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit Right To Accelerate.......... 86
SECTION 10.12. Trust Moneys and Escrow Funds Not Subordinated.................................... 86
SECTION 10.13. Trustee Entitled To Rely.......................................................... 86
SECTION 10.14. Trustee To Effectuate Subordination............................................... 87
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness of the Company........... 87
SECTION 10.16. Reliance by Holders of Senior Indebtedness of the Company on Subordination
Provisions........................................................................ 87
ARTICLE 11 Subsidiary Guaranties 87
SECTION 11.01. Guaranties........................................................................ 87
SECTION 11.02. Limitation on Liability........................................................... 89
SECTION 11.03. Successors and Assigns............................................................ 89
SECTION 11.04. No Waiver......................................................................... 89
SECTION 11.05. Modification...................................................................... 90
SECTION 11.06. Release of Subsidiary Guarantor................................................... 90
ARTICLE 12 Subordination of Subsidiary Guaranties 90
SECTION 12.01. Agreement To Subordinate.......................................................... 90
SECTION 12.02. Liquidation, Dissolution, Bankruptcy.............................................. 90
SECTION 12.03. Default on Senior Indebtedness of Subsidiary Guarantor............................ 91
SECTION 12.04. Demand for Payment................................................................ 92
SECTION 12.05. When Distribution Must Be Paid Over............................................... 92
SECTION 12.06. Subrogation....................................................................... 92
SECTION 12.07. Relative Rights................................................................... 92
SECTION 12.08. Subordination May Not Be Impaired by Company...................................... 93
SECTION 12.09. Rights of Trustee and Paying Agent................................................ 93
SECTION 12.10. Distribution or Notice to Representative.......................................... 93
SECTION 12.11. Article 12 Not To Prevent Events of Default or Limit Right To Demand Payment...... 93
SECTION 12.12. Trustee Entitled To Rely.......................................................... 93
SECTION 12.13. Trustee To Effectuate Subordination............................................... 94
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SECTION 12.14. Trustee Not Fiduciary for Holders of Senior Indebtedness of Subsidiary Guarantor. 94
SECTION 12.15. Reliance by Holders of Senior Indebtedness of Subsidiary Guarantors on
Subordination Provisions.......................................................... 94
ARTICLE 13 Miscellaneous 95
SECTION 13.01. Trust Indenture Act Controls...................................................... 95
SECTION 13.02. Notices........................................................................... 95
SECTION 13.03. Communication by Holders with Other Holders....................................... 95
SECTION 13.04. Certificate and Opinion as to Conditions Precedent................................ 96
SECTION 13.05. Statements Required in Certificate or Opinion..................................... 96
SECTION 13.06. When Securities Disregarded....................................................... 96
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar...................................... 97
SECTION 13.08. Legal Holidays.................................................................... 97
SECTION 13.09. Governing Law..................................................................... 97
SECTION 13.10. No Recourse Against Others........................................................ 97
SECTION 13.11. Successors........................................................................ 97
SECTION 13.12. Multiple Originals................................................................ 97
SECTION 13.13. Table of Contents; Headings....................................................... 97
Rule 144A/Regulation S Appendix
Exhibit 1 - Form of Initial Security
Exhibit A - Form of Exchange Security or Private Exchange Security
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INDENTURE dated as of April 2, 2004, among ENCORE ACQUISITION
COMPANY, a Delaware corporation (the "Company"), the guarantors listed on the
signature pages hereto and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee
(the "Trustee").
Each party agrees as follows for the benefit of the other parties
and for the equal and ratable benefit of the Holders of the Company's Initial
Securities, Exchange Securities and Private Exchange Securities (collectively,
the "Securities"):
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Additional Assets" means (1) any property, plant or equipment used
in a Related Business; (2) the Capital Stock of a Person that becomes a
Restricted Subsidiary as a result of the acquisition of such Capital Stock by
the Company or another Restricted Subsidiary; or (3) Capital Stock constituting
a minority interest in any Person that at such time is a Restricted Subsidiary;
provided, however, that any such Restricted Subsidiary described in clause (2)
or (3) above is primarily engaged in a Related Business.
"Additional Securities" means, subject to the Company's compliance
with Section 4.03, 6.25% Senior Subordinated Notes Due 2014 issued from time to
time after the Issue Date under the terms of this Indenture (other than pursuant
to Section 2.06, 2.07, 2.09 or 3.06 of this Indenture and other than Exchange
Securities or Private Exchange Securities issued pursuant to an exchange offer
for other Securities outstanding under this Indenture).
"Adjusted Consolidated Net Tangible Assets" or "ACNTA" means
(without duplication), as of the date of determination:
(a) the sum of:
(1) discounted future net revenue from proved crude oil and
natural gas reserves of the Company and its Restricted Subsidiaries
(including oil and natural gas reserves attributable to the net profits
interests owned by an Oil and Gas Royalty Trust to the extent such net
profit interests are attributable to the Company or a Restricted
Subsidiary by virtue of its ownership of Capital Stock of such Oil and Gas
Royalty Trust) calculated in accordance with SEC guidelines before any
state or federal income taxes, as estimated in a reserve report prepared
as of the end of the most recently completed fiscal year for which audited
financial statements are available, which reserve report is prepared or
audited by independent petroleum engineers, as increased by, as of the
date of determination, the discounted future net revenue calculated in
accordance with SEC guidelines (utilizing the prices utilized in such year
end reserve report) of:
(A) estimated proved crude oil and natural gas reserves of
the Company and its Restricted Subsidiaries attributable
to
acquisitions consummated since the date of such reserve
report, and
(B) estimated crude oil and natural gas reserves of the
Company and its Restricted Subsidiaries attributable to
extensions, discoveries and other additions and upward
determinations of estimates of proved crude oil and
natural gas reserves (including previously estimated
development costs incurred during the period and the
accretion of discount since the prior period end) due to
exploration, development or exploitation, production or
other activities which reserves were not reflected in
such reserve report which would, in the case of
determinations made under clauses (A) or (B), in
accordance with standard industry practice, result in
such determinations,
and decreased by, as of the date of determination, the discounted
future net revenue calculated in accordance with SEC guidelines
(utilizing the prices utilized in such year end reserve report)
attributable to:
(C) estimated proved crude oil and natural gas reserves of
the Company and its Restricted Subsidiaries reflected in
such reserve report produced or disposed of since the
date of such reserve report, and
(D) reductions in the estimated oil and natural gas reserves
of the Company and its Restricted Subsidiaries reflected
in such reserve report since the date of such reserve
report attributable to downward determinations of
estimates of proved crude oil and natural gas reserves
due to exploration, development or exploitation,
production or other activities conducted or otherwise
occurring since the date of such reserve report which
would, in the case of determinations made under clauses
(C) or (D), in accordance with standard industry
practice, result in such determinations;
provided, however, that, in the case of each of the determinations
made pursuant to clauses (A) through (D), such increases and
decreases shall be estimated by the Company's engineers, except that
if as a result of such acquisitions, dispositions, discoveries,
extensions or revisions, there is a Material Change, then such
increases and decreases in the discounted future net revenue shall
be confirmed in writing by an independent petroleum engineer;
(2) the capitalized costs that are attributable to crude oil and
natural gas properties of the Company and its Restricted Subsidiaries to
which no proved crude oil and natural gas reserves are attributed, based
on the Company's books and records as of a date no earlier than the end of
the most recent fiscal quarter for which financial
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statements of the Company have been made publicly available prior to the
date of determination;
(3) the Net Working Capital as of the end of the most recent
fiscal quarter for which financial statements of the Company have been
made publicly available prior to the date of determination; and
(4) the greater of (i) the net book value as of a date no earlier
than the end of the most recent fiscal quarter for which financial
statements of the Company have been made publicly available prior to the
date of determination and (ii) the appraised value, as estimated by
independent appraisers, of other tangible assets of the Company and its
Restricted Subsidiaries as of a date no earlier than the most recent
fiscal year for which financial statements of the Company have been made
publicly available prior to the date of determination (provided that the
Company shall not be required to obtain such an appraisal of such assets
if no such appraisal has been performed); minus
(b) to the extent not otherwise taken into account in the
immediately preceding clause (a), the sum of:
(1) minority interests;
(2) any natural gas balancing liabilities of the Company and its
Restricted Subsidiaries reflected in the Company's latest audited
consolidated financial statements;
(3) the discounted future net revenue, calculated in accordance
with SEC guidelines (utilizing the same prices utilized in the Company's
year-end reserve report), attributable to reserves subject to
participation interests, overriding royalty interests or other interests
of third parties, pursuant to participation, partnership, vendor financing
or other agreements then in effect, or which otherwise are required to be
delivered to third parties;
(4) the discounted future net revenue calculated in accordance
with SEC guidelines (utilizing the same prices utilized in the Company's
year-end reserve report), attributable to reserves that are required to be
delivered to third parties to fully satisfy the obligations of the Company
and its Restricted Subsidiaries with respect to Volumetric Production
Payments on the schedules specified with respect thereto; and
(5) the discounted future net revenue, calculated in accordance
with SEC guidelines, attributable to reserves subject to
Dollar-Denominated Production Payments that, based on the estimates of
production included in determining the discounted future net revenue
specified in the immediately preceding clause (a)(1) (utilizing the same
prices utilized in the Company's year-end reserve report), would be
necessary to satisfy fully the obligations of the Company and its
Restricted Subsidiaries with respect to Dollar-Denominated Production
Payments on the schedules specified with respect thereto.
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If the Company changes its method of accounting from the successful
efforts method to the full cost method or a similar method of accounting,
"ACNTA" will continue to be calculated as if the Company were still using the
successful efforts method of accounting.
"Affiliate" of any specified Person means any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of Sections 4.04, 4.06 and 4.07 only, "Affiliate" shall also mean any
beneficial owner of Capital Stock representing 10% or more of the total voting
power of the Voting Stock (on a fully diluted basis) of the Company or of rights
or warrants to purchase such Capital Stock (whether or not currently
exercisable) and any Person who would be an Affiliate of any such beneficial
owner pursuant to the first sentence hereof. No Person shall be deemed an
Affiliate of an Oil and Gas Royalty Trust solely by virtue of ownership of
Capital Stock of such trust.
"Applicable Premium" means, with respect to a Security at any time,
the greater of (1) 1.0% of the principal amount of such Security at such time
and (2) the excess, if any, of (A) the present value at such time of (i) the
principal amount of such Security plus (ii) any required interest payments due
on such Security through April 15, 2009, computed using a discount rate equal to
the Treasury Rate plus 50 basis points, over (B) the principal amount of such
Security.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) by
the Company or any Restricted Subsidiary or any Oil and Gas Royalty Trust, the
Capital Stock of which is owned by the Company or a Restricted Subsidiary,
including any disposition by means of a merger, consolidation or similar
transaction (each referred to for the purposes of this definition as a
"disposition"), of:
(1) any shares of Capital Stock of a Restricted Subsidiary (other
than directors' qualifying shares or shares required by
applicable law to be held by a Person other than the Company
or a Restricted Subsidiary) or of an Oil and Gas Royalty
Trust;
(2) all or substantially all the assets of any division or line of
business of the Company or any Restricted Subsidiary;
(3) any other assets of the Company or any Restricted Subsidiary
outside of the ordinary course of business of the Company or
such Restricted Subsidiary; or
(4) any net profit interests held by any such Oil and Gas Royalty
Trust
other than, in the case of clauses (1), (2) and (3) above,
(A) a disposition by a Restricted Subsidiary to the Company
or by the Company or a Restricted Subsidiary to a
Restricted Subsidiary;
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(B) for purposes of Section 4.06 only, (x) a disposition
that constitutes a Restricted Payment permitted by
Section 4.04 or a Permitted Investment and (y) a
disposition of all or substantially all the assets of
the Company in accordance with Section 5.01; and
(C) the trade or exchange by the Company or any Restricted
Subsidiary of any oil or natural gas property or
interest therein of the Company or such Restricted
Subsidiary for any oil or natural gas property or
interest therein of another Person, including any cash
or cash equivalents necessary in order to achieve an
exchange of equivalent value; provided, however, that
the value of the oil or natural gas property or interest
therein received by the Company or any Restricted
Subsidiary in such trade or exchange (including any cash
or cash equivalents) is at least equal to the fair
market value (as determined in good faith by the Board
of Directors, an Officer or an officer of such
Restricted Subsidiary with responsibility for such
transaction, which determination shall be conclusive
evidence of compliance with this provision) of the oil
or natural gas property or interest therein (including
any cash or cash equivalents) so traded or exchanged;
(D) the creation of a Lien;
(E) a disposition of oil and natural gas properties in
connection with tax credit transactions complying with
Section 29 or any successor or analogous provisions of
the Code;
(F) a disposition of the Capital Stock of or any Investment
in any Unrestricted Subsidiary other than an Oil and Gas
Royalty Trust;
(G) surrender or waiver of contract rights or the
settlement, release or surrender of contract, tort or
other claims of any kind;
(H) any disposition of defaulted receivables that arose in
the ordinary course of business for collection;
(I) the contribution of net profits interests in oil and
natural gas properties to an Oil and Gas Royalty Trust
that is wholly owned by the Company or a Restricted
Subsidiary at the time or as the result of such
contribution;
(J) Production Payments and Reserve Sales in connection with
the acquisition of any crude oil and natural gas
property after the Issue Date; provided that any such
Production Payment and Reserve Sale is created,
incurred, issued or assumed in connection with the
financing of, and within 30 days after the acquisition
of, such oil and natural gas property;
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(K) the sale or transfer (whether or not in the ordinary
course of business) of any oil and gas property or
interest therein to which no proved reserves are
attributable at the time of such sale or transfer; and
(L) a single transaction or series of related transactions
that involve the disposition of assets with a fair
market value of less than $2.0 million.
"Attributable Debt" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Securities, compounded semiannually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended); provided, however, that if such
Sale/Leaseback Transaction results in a Capital Lease Obligation, the amount of
Indebtedness represented thereby will be determined in accordance with the
definition of "Capital Lease Obligation" in this Section 1.01.
"Average Life" means, as of the date of determination, with respect
to any Indebtedness, the quotient obtained by dividing (1) the sum of the
products of the numbers of years from the date of determination to the dates of
each successive scheduled principal payment of or redemption or similar payment
with respect to such Indebtedness multiplied by the amount of such payment by
(2) the sum of all such payments.
"Bank Indebtedness" means all Obligations pursuant to the Credit
Facilities.
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligation" means an obligation that is required to
be classified and accounted for as a capital lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, units of
beneficial interests (including of an Oil and Gas Royalty Trust), rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) equity of such Person, including any Preferred Stock,
but excluding any debt securities convertible into or exchangeable for such
equity.
"Change of Control" means the occurrence of any of the following
events:
(1) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than one or more Permitted
Holders, is or becomes
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the "beneficial owner" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act), except that for purposes of this
clause (1) such person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more
than 35% of the total voting power of the Voting Stock of the
Company; provided, however, that the Permitted Holders
beneficially own (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act), directly or indirectly, in the aggregate a
lesser percentage of the total voting power of the Voting
Stock of the Company than such other person and do not have
the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of the Board of
Directors (for the purposes of this clause (1), such other
person shall be deemed to beneficially own any Voting Stock of
a Person (the "specified person") held by any other Person
(the "parent entity"), if such other person is the beneficial
owner (as defined above in this clause (1)), directly or
indirectly, of more than 35% of the voting power of the Voting
Stock of such parent entity and the Permitted Holders
beneficially own (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act), directly or indirectly, in the aggregate a
lesser percentage of the voting power of the Voting Stock of
such parent entity and do not have the right or ability by
voting power, contract or otherwise to elect or designate for
election a majority of the board of directors of such parent
entity);
(2) during any period of two consecutive years, individuals who,
at the beginning of such period, constituted the Board of
Directors (together with (A) any new directors whose election
by such Board of Directors or whose nomination for election by
the shareholders of the Company was approved by a vote of the
majority of the directors of the Company 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 and (B) any representative of a Permitted Holder)
cease for any reason to constitute a majority of the Board of
Directors then in office;
(3) the adoption of a plan relating to the liquidation or
dissolution of the Company; or
(4) the merger or consolidation of the Company with or into
another Person or the merger of another Person with or into
the Company, or the sale of all or substantially all the
assets of the Company (determined on a consolidated basis) to
another Person (other than, in all such cases, a Person that
is controlled by one or more Permitted Holders), other than a
transaction following which (A) in the case of a merger or
consolidation transaction, holders of securities that
represented 100% of the Voting Stock of the Company
immediately prior to such transaction (or other securities
into which such securities are converted as part of such
merger or consolidation transaction) own directly or
indirectly at least a majority
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of the voting power of the Voting Stock of the surviving
Person in such merger or consolidation transaction immediately
after such transaction and (B) in the case of a sale of assets
transaction, each transferee becomes an obligor in respect of
the Securities and a Subsidiary of the transferor of such
assets.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor and, for purposes of
any provision contained herein and required by the TIA, each other obligor on
the indenture securities.
"Consolidated Coverage Ratio" as of any date of determination means
the ratio of (x) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters for which financial information of the
Company has been made publicly available prior to the date of such determination
to (y) Consolidated Interest Expense for such four fiscal quarters; provided,
however, that:
(1) if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains
outstanding or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio is an Incurrence of
Indebtedness, or both, EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving
effect on a pro forma basis to such Indebtedness and the use
of proceeds thereof as if such Indebtedness had been Incurred
on the first day of such period and such proceeds had been
applied as of such date;
(2) if the Company or any Restricted Subsidiary has repaid,
repurchased, defeased or otherwise discharged any Indebtedness
since the beginning of such period or if any Indebtedness is
to be repaid, repurchased, defeased or otherwise discharged on
the date of the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio, EBITDA and
Consolidated Interest Expense for such period shall be
calculated on a pro forma basis as if such discharge had
occurred on the first day of such period and as if the Company
or such Restricted Subsidiary had not earned the interest
income actually earned (if any) during such period in respect
of cash or Temporary Cash Investments used to repay,
repurchase, defease or otherwise discharge such Indebtedness;
(3) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition,
EBITDA for such period shall be reduced by an amount equal to
EBITDA (if positive) directly attributable to the assets which
were the subject of such Asset Disposition for such period, or
increased by an amount equal to EBITDA (if negative), directly
attributable thereto for such period and Consolidated Interest
Expense for such period shall be reduced by an amount equal to
the Consolidated Interest Expense directly attributable to any
Indebtedness
-8-
of the Company or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to
the Company and its continuing Restricted Subsidiaries in
connection with such Asset Disposition for such period (or, if
the Capital Stock of any Restricted Subsidiary is sold, the
Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Restricted Subsidiary
to the extent the Company and its continuing Restricted
Subsidiaries are no longer liable for such Indebtedness after
such sale);
(4) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made
an Investment in any Restricted Subsidiary (or any Person
which becomes a Restricted Subsidiary) or an acquisition of
material assets, including any acquisition of assets occurring
in connection with a transaction requiring a calculation to be
made hereunder, which constitutes all or substantially all of
an operating unit of a business, EBITDA and Consolidated
Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the Incurrence of
any Indebtedness) as if such Investment or acquisition
occurred on the first day of such period; and
(5) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with
or into the Company or any Restricted Subsidiary since the
beginning of such period) shall have made any Asset
Disposition, any Investment or acquisition of assets that
would have required an adjustment pursuant to clause (3) or
(4) above if made by the Company or a Restricted Subsidiary
during such period, EBITDA and Consolidated Interest Expense
for such period shall be calculated after giving pro forma
effect thereto as if such Asset Disposition, Investment or
acquisition occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and the
amount of Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the pro forma calculations shall be determined
in good faith by a responsible financial or accounting Officer of the Company.
If any Indebtedness bears a floating rate of interest and is being given pro
forma effect, the interest on such Indebtedness shall be calculated as if the
rate in effect on the date of determination had been the applicable rate for the
entire period (taking into account any Interest Rate Agreement applicable to
such Indebtedness, but if the remaining term of such Interest Rate Agreement is
less than twelve months, then such Interest Rate Agreement shall only be taken
into account for that portion of the period equal to the remaining term
thereof).
The Consolidated Interest Expense attributable to interest on any
Indebtedness under a revolving credit facility, the outstanding principal
balance of which is required to be computed on a pro forma basis in accordance
with the foregoing, shall be computed based upon the average daily balance of
such Indebtedness during the applicable period, provided, that such average
daily balance shall take into account the amount of any repayment of
Indebtedness under
-9-
such revolving credit facility during the applicable period, to the extent such
repayment permanently reduced the commitments or amounts available to be
borrowed under such facility.
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its consolidated Restricted Subsidiaries,
plus, to the extent not included in such total interest expense, and to the
extent incurred by the Company or its Restricted Subsidiaries, without
duplication:
(1) interest expense attributable to capital leases and the
interest expense attributable to leases constituting part of a
Sale/Leaseback Transaction;
(2) amortization of debt discount and debt issuance cost;
(3) capitalized interest;
(4) non-cash interest expense;
(5) commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance
financing;
(6) net payments pursuant to Interest Rate Agreements;
(7) Preferred Stock dividends in respect of all Preferred Stock
held by Persons other than the Company or a Wholly Owned
Subsidiary (other than dividends payable solely in Capital
Stock (other than Disqualified Stock) of the Company);
(8) interest incurred in connection with Investments in
discontinued operations;
(9) interest accruing on any Indebtedness of any other Person to
the extent such Indebtedness is Guaranteed by (or secured by
the assets of) the Company or any Restricted Subsidiary; and
(10) the cash contributions to any employee stock ownership plan or
similar trust to the extent such contributions are used by
such plan or trust to pay interest or fees to any Person
(other than the Company) in connection with Indebtedness
Incurred by such plan or trust;
minus, to the extent included above, write-off of deferred financing costs and
interest attributable to Dollar-Denominated Production Payments.
-10-
"Consolidated Net Income" means, for any period, the net income of
the Company and its consolidated Subsidiaries; provided, however, that there
shall not be included in such Consolidated Net Income:
(1) any net income of any Person (other than the Company) if such
Person is not a Restricted Subsidiary, except that:
(A) subject to the exclusion contained in clause (4) below,
the Company's equity in the net income of any such
Person for such period shall be included in such
Consolidated Net Income in an amount equal to the
aggregate amount of cash actually distributed by such
Person during such period to the Company or a Restricted
Subsidiary as a dividend, interest payment or other
distribution (subject, in the case of a dividend,
interest payment or other distribution paid to a
Restricted Subsidiary, to the limitations contained in
clause (3) below); and
(B) the Company's equity in a net loss of any such Person
for such period shall not be included in determining
such Consolidated Net Income, except to the extent of
the aggregate cash actually contributed to such Person
by the Company or a Restricted Subsidiary during such
period;
(2) solely for the purposes of determining the aggregate amount
available for Restricted Payments under Section 4.04(a)(3),
any net income (or loss) of any Person acquired by the Company
or a Subsidiary in a pooling of interests transaction for any
period prior to the date of such acquisition;
(3) any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly,
on the payment of dividends or the making of distributions by
such Restricted Subsidiary, directly or indirectly, to the
Company, except that:
(A) subject to the exclusion contained in clause (4) below,
the Company's equity in the net income of any such
Restricted Subsidiary for such period shall be included
in such Consolidated Net Income in an amount equal to
the aggregate amount of cash that could have been
distributed by such Restricted Subsidiary during such
period to the Company or another Restricted Subsidiary
as a dividend, interest payment or other distribution
(subject, in the case of a dividend, interest payment or
other distribution paid to another Restricted
Subsidiary, to the limitation contained in this clause);
and
(B) the Company's equity in a net loss of any such
Restricted Subsidiary for such period shall be included
in determining such Consolidated Net Income;
-11-
(4) any gain or loss, together with any related provision for
taxes on such gain or loss and all related fees and expenses,
realized in connection with (A) the sale or other disposition
of any assets of the Company, its consolidated Subsidiaries or
any other Person (including pursuant to any Sale/Leaseback
Transaction) which is not sold or otherwise disposed of in the
ordinary course of business and (B) the disposition of any
securities of any Person or the extinguishment of any
Indebtedness of the Company or any of its Subsidiaries;
(5) extraordinary or non-recurring gains or losses, together with
any related provision for taxes on such gains or losses and
all related fees and expenses; and
(6) the cumulative effect of a change in accounting principles;
(7) any impairment losses on oil and natural gas properties;
(8) any unrealized non-cash gains or losses or charges in respect
of Hedging Obligations (including those resulting from the
application of FAS 133); and
(9) any non-cash compensation charge arising from any grant of
stock, stock options or other equity-based awards.
Notwithstanding the foregoing, for the purposes of Section 4.04 only, there
shall be excluded from Consolidated Net Income any repurchases, repayments or
redemptions of Investments, proceeds realized on the sale of Investments or
return of capital to the Company or a Restricted Subsidiary to the extent such
repurchases, repayments, redemptions, proceeds or returns increase the amount of
Restricted Payments permitted under such section pursuant to clause (a)(3)(E)
thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company ending at least 45 days prior to the taking of any
action for the purpose of which the determination is being made, as the sum of:
(1) the par or stated value of all outstanding Capital Stock of
the Company plus
(2) paid-in capital or capital surplus relating to such Capital
Stock plus
(3) any retained earnings or earned surplus
less (A) any accumulated deficit and (B) any amounts attributable to
Disqualified Stock.
"Cortez" means Cortez Oil & Gas, Inc., a Delaware corporation.
-12-
"Cortez Agreement" means that certain Stock Purchase Agreement dated
March 2, 2004 by and among the Company, Cortez and the other parties thereto.
"Credit Facilities" means, with respect to the Company or any
Restricted Subsidiary, one or more debt facilities (including under the
Revolving Credit Facility) or commercial paper facilities with banks or other
lenders providing revolving credit loans, term loans, production payment
facilities, receivables financing facilities (including through the sale of
receivables) or letters of credit facilities, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time.
"Currency Agreement" means in respect of a Person any foreign
exchange contract, currency swap agreement or other similar agreement designed
to protect such Person against fluctuations in currency values.
"Default" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
"Designated Senior Indebtedness", with respect to a Person means:
(1) the Bank Indebtedness; and
(2) any other Senior Indebtedness of such Person which, at the
date of determination, has an aggregate principal amount
outstanding of, or under which, at the date of determination,
the holders thereof are committed to lend up to, at least
$25.0 million and is specifically designated by such Person in
the instrument evidencing or governing such Senior
Indebtedness as "Designated Senior Indebtedness" for purposes
of this Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable at the option of the holder) or upon
the happening of any event:
(1) matures or is mandatorily redeemable (other than redeemable
only for Capital Stock of such Person which is not itself
Disqualified Stock) pursuant to a sinking fund obligation or
otherwise;
(2) is convertible or exchangeable at the option of the holder for
Indebtedness or Disqualified Stock; or
(3) is mandatorily redeemable or must be purchased upon the
occurrence of certain events or otherwise, in whole or in part
(other than redeemable or required to be purchased only for
Capital Stock of such Person which is not itself Disqualified
Stock);
in each case on or prior to the 91st day after the Stated Maturity of the
Securities; provided, however, (A) that any Capital Stock that would not
constitute Disqualified Stock but for provisions thereof giving holders thereof
the right to require such Person to purchase or redeem
-13-
such Capital Stock upon the occurrence of an "asset sale" or "change of control"
shall not constitute Disqualified Stock if:
(1) the "asset sale" or "change of control" provisions applicable
to such Capital Stock are not more favorable, as measured by
the purchase or redemption price or the breadth of the
definition of the event or events triggering such purchase or
redemption obligation, to the holders of such Capital Stock
than the terms applicable to the Securities and described in
Sections 4.06 and 4.08; and
(2) any such requirement only becomes operative after compliance
with such terms applicable to the Securities, including the
purchase of any Securities tendered pursuant thereto.
and (B) any Capital Stock that would constitute Disqualified Stock solely
because such Capital Stock is issued pursuant to any plan for the benefit of
employees of the Company or Subsidiaries of the Company or by any such plan to
such employees and may be required to be repurchased by the Company in order to
satisfy applicable statutory or regulatory obligations shall not constitute
Disqualified Stock.
The amount of any Disqualified Stock that does not have a fixed
redemption, repayment or repurchase price will be calculated in accordance with
the terms of such Disqualified Stock as if such Disqualified Stock were
redeemed, repaid or repurchased on any date on which the amount of such
Disqualified Stock is to be determined pursuant to this Indenture; provided,
however, that if such Disqualified Stock could not be required to be redeemed,
repaid or repurchased at the time of such determination, the redemption,
repayment or repurchase price will be the book value of such Disqualified Stock
as reflected in the most recent financial statements of such Person.
"Dollar-Denominated Production Payments" means production payment
obligations recorded as liabilities in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"EBITDA" for any period means the sum of Consolidated Net Income,
plus the following to the extent deducted in calculating such Consolidated Net
Income:
(1) all income tax expense of the Company and its consolidated
Restricted Subsidiaries;
(2) Consolidated Interest Expense;
(3) depreciation, depletion, exploration and amortization expense
of the Company and its consolidated Restricted Subsidiaries
(excluding amortization expense attributable to a prepaid
operating activity item that was paid in cash in a prior
period); and
(4) all other non-cash charges of the Company and its consolidated
Restricted Subsidiaries (excluding any such non-cash charge to
the extent that it
-14-
represents an accrual of or reserve for cash expenditures in
any future period);
in each case for such period, and less, to the extent included in calculating
such Consolidated Net Income and in excess of any costs or expenses attributable
thereto and deducted in calculating such Consolidated Net Income, the sum of:
(A) the amount of deferred revenues that are amortized
during such period and are attributable to reserves that
are subject to Volumetric Production Payments; and
(B) amounts recorded in accordance with GAAP as repayments
of principal and interest pursuant to Dollar-Denominated
Production Payments.
Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, and the depreciation, depletion, exploration and amortization and
non-cash charges of, a Restricted Subsidiary shall be added to Consolidated Net
Income to compute EBITDA (1) only to the extent (and in the same proportion,
including by reason of minority interests) that the net income of such
Restricted Subsidiary was included in calculating Consolidated Net Income and
(2) only if a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Restricted Subsidiary
without prior approval (that has not been obtained), pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to such Restricted
Subsidiary or its stockholders.
"Escrow Agent" means Wells Fargo Bank, National Association, in its
capacity as escrow agent under the Escrow Agreement.
"Escrow Agreement" means the Escrow Agreement dated as of April 2,
2004 among Goldman, Sachs & Co., the Trustee and the Escrow Agent.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as
amended.
"Exchange Securities" means the debt securities of the Company
issued pursuant to the Indenture in exchange for, and in an aggregate principal
amount equal to, the Securities, in compliance with the terms of the
Registration Rights Agreement.
"Existing Investments" means assets (including securities) held by
the Company or any of the Restricted Subsidiaries as consideration for an
Investment made on or before the Issue Date or acquired thereafter pursuant to
any agreement or obligation as in effect on the Issue Date.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Issue Date, including those set forth
in:
(1) the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public
Accountants;
-15-
(2) statements and pronouncements of the Financial Accounting
Standards Board;
(3) such other statements by such other entity as approved by a
significant segment of the accounting profession; and
(4) the rules and regulations of the SEC governing the inclusion
of financial statements (including pro forma financial
statements) in periodic reports required to be filed pursuant
to Section 13 of the Exchange Act, including opinions and
pronouncements in staff accounting bulletins and similar
written statements from the accounting staff of the SEC.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any Person and
any obligation, direct or indirect, contingent or otherwise, of such Person:
(1) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness of such Person
(whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities
or services, to take-or-pay or to maintain financial statement
conditions or otherwise); or
(2) entered into for the purpose of assuring in any other manner
the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole
or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business, or any obligation to
the extent it is payable only in Capital Stock of the Guarantor that is not
Disqualified Stock. The term "Guarantee" used as a verb has a corresponding
meaning. The term "Guarantor" shall mean any Person Guaranteeing any
Indebtedness.
"Guaranty Agreement" means a supplemental indenture, in a form
satisfactory to the Trustee, pursuant to which a Subsidiary Guarantor guarantees
the Company's obligations with respect to the Securities on the terms provided
for in this Indenture.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Oil and Natural Gas Hedging Contract, Interest Rate
Agreement or Currency Agreement.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Restricted Subsidiary (whether
by merger, consolidation, acquisition or otherwise) shall be deemed to be
Incurred by such Person at the time it becomes a Restricted
-16-
Subsidiary. The term "Incurrence" when used as a noun shall have a correlative
meaning. Solely for purposes of determining compliance with Section 4.03:
(1) amortization of debt discount or the accretion of principal
with respect to a non-interest bearing or other discount
security;
(2) the payment of regularly scheduled interest in the form of
additional Indebtedness of the same instrument or the payment
of regularly scheduled dividends on Capital Stock in the form
of additional Capital Stock of the same class and with the
same terms;
(3) the obligation to pay a premium in respect of Indebtedness
arising in connection with the issuance of a notice of
redemption or making of a mandatory offer to purchase such
Indebtedness; and
(4) unrealized losses or charges in respect of Hedging Obligations
(including those resulting from the application of FAS 133)
will not be deemed to be the Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(1) the principal in respect of (A) indebtedness of such Person
for money borrowed and (B) indebtedness evidenced by notes,
debentures, bonds or other similar instruments for the payment
of which such Person is responsible or liable, including, in
each case, any premium on such indebtedness to the extent such
premium has become due and payable;
(2) all Capital Lease Obligations of such Person and all
Attributable Debt in respect of Sale/Leaseback Transactions
entered into by such Person;
(3) all obligations of such Person (other than obligations payable
solely in Capital Stock of such Person that is not
Disqualified Stock) issued or assumed as the deferred purchase
price of property, all conditional sale obligations of such
Person and all obligations of such Person under any title
retention agreement (but excluding trade accounts payable and
accrued expenses);
(4) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, bankers' acceptance or
similar credit transactions (other than obligations with
respect to letters of credit securing obligations (other than
obligations described in clauses (1) through (3) above)
entered into in the ordinary course of business of such Person
to the extent such letters of credit are not drawn upon or, if
and to the extent drawn upon, such drawing is reimbursed no
later than the tenth Business Day following payment on the
letter of credit);
-17-
(5) the amount of all obligations of such Person with respect to
the redemption, repayment or other repurchase of any
Disqualified Stock of such Person or, with respect to any
Preferred Stock of any Restricted Subsidiary of such Person
the principal amount of such Preferred Stock to be determined
in accordance with this Indenture (but excluding, in each
case, any accrued dividends) (and the term "Incur
Indebtedness" and similar terms include issuances of such
Disqualified Stock and Preferred Stock);
(6) all obligations of the types referred to in clauses (1)
through (5) of other Persons and all dividends of other
Persons for the payment of which, in either case, such Person
is responsible or liable, directly or indirectly, as obligor,
guarantor or otherwise, including by means of any Guarantee;
(7) all obligations of the types referred to in clauses (1)
through (6) of other Persons secured by any Lien on any
property or asset of such Person (whether or not such
obligation is assumed by such Person), the amount of such
obligation being deemed to be the lesser of the liquidation
value of such property or asset and the amount of the
obligation so secured;
(8) to the extent not otherwise included in this definition,
Hedging Obligations of such Person; and
(9) any Guarantee by such Person of production or payment with
respect to a Production Payment and Reserve Sale;
if and to the extent, in the case of obligations of the types referred to in
clauses (1), (2) and (3) above, such obligations would appear as a liability
upon a balance sheet of such Person prepared in accordance with GAAP.
Notwithstanding the foregoing, the following shall not constitute
"Indebtedness":
(1) accrued expenses and trade accounts payable arising in the
ordinary course of business;
(2) except as expressly provided in clause (9) above, Production
Payments and Reserve Sales;
(3) obligations in respect of farm-in agreements;
(4) obligations arising from guarantees to suppliers, lessors,
licensees, contractors, franchisees or customers incurred in
the ordinary course of business;
(5) any obligations under workers' compensation laws and similar
legislation;
(6) any obligation in respect of any royalty, overriding royalty,
net profits interest, master limited partnership interest or
other interest in oil and
-18-
natural 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; or
(7) any indebtedness which has been defeased in accordance with
GAAP or defeased pursuant to the deposit of cash or Government
Securities (in an amount sufficient to satisfy all such
indebtedness obligations at maturity or redemption, as
applicable, and all payments of interest and premium, if any)
in a trust or account created or pledged for the sole benefit
of the holders of such indebtedness, and subject to no other
Liens, and the other applicable terms of the instrument
governing such indebtedness.
Notwithstanding the foregoing, in connection with the purchase by
the Company or any Restricted Subsidiary of any business, the term
"Indebtedness" will exclude post-closing payment adjustments to which the seller
may become entitled to the extent such payment is determined by a final closing
balance sheet or such payment depends on the performance of such business after
the closing; provided, however, that, at the time of closing, the amount of any
such payment is not determinable and, to the extent such payment thereafter
becomes fixed and determined, the amount is paid within 30 days thereafter.
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, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date; provided,
however, that in the case of Indebtedness sold at a discount, the amount of such
Indebtedness at any time will be the accreted value thereof at such time.
"Indenture" means this Indenture as amended or supplemented from
time to time.
"Independent Qualified Party" means an investment banking firm,
accounting firm or appraisal firm of national standing; provided, however, that
such firm is not an Affiliate of the Company.
"Interest Rate Agreement" means in respect of a Person any interest
rate swap agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect such Person against fluctuations in interest
rates.
"Investment" in any Person means any direct or indirect advance,
loan or other extension of credit (including by way of Guarantee but excluding
any such extension of credit made in the ordinary course of business to any
customer or supplier) or capital contribution to (by means of any transfer of
cash or other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition for value of Capital
Stock, Indebtedness or other similar instruments issued by such Person. Except
as otherwise provided for herein, the amount of an Investment shall be its fair
value at the time the Investment is made and without giving effect to subsequent
changes in value.
-19-
For purposes of the definition of "Unrestricted Subsidiary", the
definition of "Restricted Payment" and Section 4.04:
(1) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair
market value of the net assets of any Subsidiary of the
Company at the time that such Subsidiary is designated an
Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary,
the Company shall be deemed to continue to have a permanent
"Investment" in an Unrestricted Subsidiary equal to an amount
(if positive) equal to (A) the Company's "Investment" in such
Subsidiary at the time of such redesignation less (B) the
portion (proportionate to the Company's equity interest in
such Subsidiary) of the fair market value of the net assets of
such Subsidiary at the time of such redesignation; and
(2) any property transferred to or from an Unrestricted Subsidiary
shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the
Board of Directors.
"Investment Grade Rating" means having both a rating equal to or
higher than BBB- by S&P and a rating equal to or higher than Baa3 by Moody's.
"Issue Date" means April 2, 2004.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions are not required to be open in the State of New York.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any conditional sale or other
title retention agreement or lease in the nature thereof).
"Material Change" means an increase or decrease (excluding changes
that result solely from changes in prices and changes resulting from the
incurrence of previously estimated development costs) of more than 50% during a
fiscal quarter in the discounted future net revenues from proved oil and natural
gas reserves of the Company and its Restricted Subsidiaries, calculated in
accordance with clause (a)(1) of the definition of ACNTA; provided, however,
that the following will be excluded from the calculation of Material Change:
(1) any acquisitions during the fiscal quarter of oil and natural
gas reserves that have been estimated by independent petroleum
engineers and with respect to which a report or reports of
such engineers exist; and
(2) any disposition of properties existing at the beginning of
such fiscal quarter that have been disposed of in compliance
with Section 4.06.
"Moody's" means Moody's Investors Service, Inc.
-20-
"Net Available Cash" from an Asset Disposition means cash payments
received therefrom (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise
and proceeds from the sale or other disposition of any securities received as
consideration, but only as and when received (and, in the case of an Asset
Disposition by an Oil and Gas Royalty Trust, only as and when received by the
Company or any Restricted Subsidiary), but excluding any other consideration
received in the form of assumption by the acquiring Person of Indebtedness or
other obligations relating to such properties or assets or received in any other
non-cash form), in each case net of:
(1) all accounting, engineering, investment banking, brokerage,
legal, title and recording tax expenses, commissions and other
fees and expenses incurred, and all Federal, state,
provincial, foreign and local and other taxes required to be
accrued as a liability under GAAP, as a consequence of such
Asset Disposition, and any relocation expenses incurred or
assumed in connection with such Asset Disposition;
(2) all payments made on any Indebtedness which is secured by any
assets subject to such Asset Disposition, in accordance with
the terms of any Lien upon or other security agreement of any
kind with respect to such assets, or which must by its terms,
or in order to obtain a necessary consent to such Asset
Disposition, or by applicable law, be repaid out of the
proceeds from such Asset Disposition;
(3) all distributions and other payments required to be made to
minority interest holders in Restricted Subsidiaries as a
result of such Asset Disposition; and
(4) the deduction of appropriate amounts provided by the seller as
a reserve for adjustment in respect of the sale price of the
assets that were the subject of such Asset Disposition or as a
reserve, in accordance with GAAP, against any liabilities
associated with the property or other assets disposed in such
Asset Disposition and retained by the Company or any
Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock or Indebtedness, means the cash proceeds of such issuance or sale net of
attorneys' fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"Net Present Value" means, with respect to any proved oil and
natural gas reserves, the discounted future net cash flows associated with such
reserves, determined in accordance with the rules and regulations (including
interpretations thereof) of the SEC in effect on the date of the Offering
Circular.
-21-
"Net Working Capital" means:
(1) all current assets of the Company and its Restricted
Subsidiaries, except current assets from commodity price risk management
activities arising in the ordinary course of business; minus
(2) all current liabilities of the Company and its Restricted
Subsidiaries, except current liabilities included in Indebtedness and
current liabilities from commodity price risk management activities
arising in the ordinary course of business;
in each case determined in accordance with GAAP.
"Non-Recourse Purchase Money Indebtedness" means Indebtedness (other
than Capital Lease Obligations) of the Company or any Subsidiary Guarantor
incurred in connection with the acquisition by the Company or such Subsidiary
Guarantor in the ordinary course of business of fixed assets used in the Oil and
Gas Business (including office buildings and other real property used by the
Company or such Subsidiary Guarantor in conducting its operations) with respect
to which;
(1) the holders of such Indebtedness agree that they will look
solely to the fixed assets so acquired which secure such Indebtedness, and
neither the Company nor any Restricted Subsidiary (a) is directly or
indirectly liable for such Indebtedness or (b) provides credit support,
including any undertaking, Guarantee, agreement or instrument that would
constitute Indebtedness (other than the grant of a Lien on such acquired
fixed assets); and
(2) no default or even of default with respect to such
Indebtedness would cause or permit (after notice or passage of time or
both), any holder of any other Indebtedness of the Company or a Subsidiary
Guarantor to declare a default or event of default on such other
Indebtedness or cause the payment, repurchase, 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 Stated Maturity.
"Obligations" means, with respect to any Indebtedness, all
obligations for principal, premium, interest, penalties, fees, indemnifications,
reimbursements, and other amounts payable pursuant to the documentation
governing such Indebtedness.
"Offering Circular" means the offering circular, dated March 30,
2004, relating the issuance of the Securities.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
-22-
"Oil and Gas Business" means:
(1) the acquisition, exploration, exploitation, development,
operation and disposition of interests in oil, natural gas, other
hydrocarbon and mineral properties;
(2) the gathering, marketing, distribution, treating, processing,
storage, refining, selling and transporting of any production from such
interests or properties and the marketing of oil, natural gas, other
hydrocarbons and minerals obtained from unrelated Persons;
(3) any business relating to or arising from exploration for or
exploitation, development, production, treatment, processing, storage,
refining, transportation, gathering or marketing of oil, natural gas,
other hydrocarbons and minerals and products produced in association
therewith;
(4) any other related energy business, including power generation
and electrical transmission business where fuel required by such business
is supplied, directly or indirectly, from oil, natural gas, other
hydrocarbons and minerals produced substantially from properties in which
the Company or its Restricted Subsidiaries, directly or indirectly,
participates;
(5) any business relating to oil field sales and service; and
(6) any activity necessary, appropriate or incidental to the
activities described in the preceding clauses (1) through (5) of this
definition.
"Oil and Gas Royalty Trust" means a trust that is an Unrestricted
Subsidiary formed by the Company or a Restricted Subsidiary to hold net profits
interests in any of the Company's and its Restricted Subsidiaries' oil and
natural gas properties that, at all times:
(1) holds no assets other than (a) net profits interests in the
Company's and its Restricted Subsidiaries' oil and natural gas properties
and (b) Temporary Cash Investments;
(2) conducts no business or activities other than the holding of
the assets permitted by clause (1) above and the distribution of its
available funds as required by clause (3) below;
(3) distributes all funds (less reasonable reserves, if any, for
operating liabilities as determined by the trustee) held by it to its unit
holders on a pro rata basis no less frequently than monthly;
(4) does not incur, nor permit to exist, directly or indirectly,
any Indebtedness other than Indebtedness Incurred for its routine
administrative expenses;
(5) is not permitted to sell its net profits interests except in
immaterial amounts or when revenue from such interests fall below $1.0
million annually;
-23-
(6) is not permitted to sell its net profits interests except for
cash equal to the fair market value thereof (as determined in good faith
by the trustee of such Oil and Gas Royalty Trust, whose determination
shall be conclusive);
(7) is not permitted to issue Capital Stock except to the Company
or a Restricted Subsidiary in exchange for the conveyance to such Oil and
Gas Royalty Trust of net profits interests in connection with its
formation; and
(8) is governed by a trust agreement that requires the trustee to
operate the Oil and Gas Royalty Trust in compliance with the terms of
clauses (1) through (7) above.
"Oil and Natural Gas Hedging Contract" means any oil and natural gas
hedging agreement, and other agreement or arrangement designed to protect the
Company or any Restricted Subsidiary against fluctuations in oil and natural gas
prices.
"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.
"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 means of actively exploiting,
exploring for, acquiring, developing, processing, gathering, marketing or
transporting oil, natural gas, other hydrocarbons and minerals through
agreements, transactions, interests or arrangements that permit one to share
risks or costs, comply with regulatory requirements regarding local ownership or
satisfy other objectives customarily achieved through the conduct of the Oil and
Gas Business jointly with third parties, including:
(1) ownership interests in oil, natural gas, other hydrocarbon and
mineral properties or gathering, transportation, processing, storage or
related systems; and
(2) entry into, and Investments and expenditures in the form of or
pursuant to, operating agreements, working interests, royalty interests,
mineral leases, processing agreements, farm-in agreements, farm-out
agreements, contracts for the sale, transportation or exchange of oil,
natural gas, other hydrocarbons and minerals, production sharing
agreements, development agreements, area of mutual interest agreements,
unitization agreements, pooling arrangements, joint bidding agreements,
service contracts, joint venture agreements, partnership agreements
(whether general or limited), limited liability company agreements,
subscription agreements, stock purchase agreements, stockholder agreements
and other similar agreements with third parties (including Unrestricted
Subsidiaries).
"Permitted Holders" means:
(1) I. Jon Brumley;
(2) Jon S. Brumley;
-24-
(3) Warburg Pincus Equity Partners L.P.;
(4) trusts, the sole beneficiaries and trustees of which are the
individuals listed in clauses (1) and (2) above or their
immediate family members;
(5) corporations, partnerships and other entities (a) of which the
individuals listed in clauses (1) and (2) above or their
immediate family members are the beneficial owners of all
Capital Stock and other equity or voting interests and (b)
that are controlled by such individuals and their immediate
family members; and
(6) any Affiliates as of the Issue Date or successors of the
entity listed in clause (3) above.
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in:
(1) (a) the Company, (b) a Restricted Subsidiary or (c) a Person
that will, upon the making of such Investment become a
Restricted Subsidiary; provided, however, that the primary
business of such Restricted Subsidiary is a Related Business,
or (d) another Person if, as a result of such Investment, such
other Person is merged or consolidated with or into, or
transfers or conveys all or substantially all its assets to,
the Company or a Restricted Subsidiary; provided, however,
that the primary business of such Person is a Related
Business;
(2) cash and Temporary Cash Investments;
(3) receivables owing to the Company or any Restricted Subsidiary
if created or acquired in the ordinary course of business and
payable or dischargeable in accordance with customary trade
terms; provided, however, that such trade terms may include
such concessionary trade terms as the Company or any such
Restricted Subsidiary deems reasonable under the
circumstances;
(4) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated
as expenses for accounting purposes and that are made in the
ordinary course of business;
(5) loans or advances to officers, directors and employees made in
the ordinary course of business consistent with past practices
of the Company or such Restricted Subsidiary;
(6) Capital Stock, obligations or securities received in
settlement of debts created in the ordinary course of business
and owing to the Company or any Restricted Subsidiary or in
satisfaction of judgments;
-25-
(7) any Person to the extent such Investment represents the
non-cash portion of the consideration received for an Asset
Disposition as permitted pursuant to Section 4.06 or
consideration received for a disposition not constituting an
Asset Disposition;
(8) any Person where such Investment was acquired by the Company
or any of its Restricted Subsidiaries (a) in exchange for any
other Investment or accounts receivable held by the Company or
any such Restricted Subsidiary in connection with or as a
result of a bankruptcy, workout, reorganization or
recapitalization of the issuer of such other Investment or
accounts receivable or (b) as a result of a foreclosure by the
Company or any of its Restricted Subsidiaries with respect to
any secured Investment or other transfer of title with respect
to any secured Investment in default;
(9) any acquisitions of Capital Stock solely in exchange for
Capital Stock (other than Disqualified Stock) of the Company;
provided, however, that the fair market value of such acquired
Capital Stock, when taken together with all other Capital
Stock acquired pursuant to this clause (9) and at the time
owned by the Company or its Restricted Subsidiaries, does not
exceed $10.0 million;
(10) Hedging Obligations;
(11) obligations of one or more officers, directors or employees of
the Company or any of its Restricted Subsidiaries in
connection with such individual's acquisition of shares of
Capital Stock of the Company (and refinancings of the
principal thereof and accrued interest thereon) so long as no
net cash or other assets of the Company and its Restricted
Subsidiaries are paid by the Company or any of its Restricted
Subsidiaries to such individuals in connection with the
acquisition of any such obligations;
(12) Existing Investments and any Investments made with the
proceeds of any dispositions thereof;
(13) Permitted Business Investments;
(14) Guarantees of performance or other obligations (other than
Indebtedness) arising in the ordinary course in the Oil and
Gas Business, including obligations under oil and natural gas
exploration, development, joint operating, and related
agreements and licenses or concessions related to the Oil and
Gas Business;
(15) Investments in prepaid expenses, negotiable instruments held
for collection or deposit and lease, utility and workers
compensation, performance and similar deposits entered into as
a result of the operations of the business in the ordinary
course of business;
-26-
(16) Investments in a wholly-owned Unrestricted Subsidiary that
constructs and owns an office building for use as the
Company's headquarters in an aggregate amount not to exceed
$10.0 million at any one time outstanding;
(17) Investments in Capital Stock of any Oil and Gas Royalty Trust;
and
(18) Investments in any Person, not otherwise permitted to be made
pursuant to clause (1) through (17), in an aggregate amount,
which when taken together with all other Investments made on
or after the Issue Date pursuant to this clause, does not
exceed $20.0 million at any one time outstanding (after giving
effect to any reductions in the aggregate amount of such
Investments as a result of the disposition thereof, including
through liquidation, repayment or other reduction (but
excluding dividends) for cash, the aggregate amount of such
reductions not to exceed the aggregate amount of such
Investments outstanding and previously made pursuant to this
clause (18).
"Permitted Liens" means the following types of Liens:
(1) Liens securing Senior Indebtedness;
(2) Liens in favor of the Company or a Restricted Subsidiary;
(3) Liens securing the Securities, any Subsidiary Guarantee or
other obligations arising under this Indenture;
(4) Liens existing as of the Issue Date;
(5) Liens for taxes, assessments and governmental charges or
claims either (A) not delinquent or (B) contested in good
faith by appropriate proceedings and as to which the Company
or its Restricted Subsidiaries shall have set aside on its
books such reserves as may be required pursuant to GAAP;
(6) statutory and contractual Liens of landlords and Liens of
carriers, warehousemen, mechanics, suppliers, materialmen,
repairmen and other Liens imposed by law or contract incurred
in the ordinary course of business for sums not delinquent or
being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP
shall have been made in respect thereof;
(7) Liens incurred or deposits or pledges made in the ordinary
course of business in connection with workers' compensation,
unemployment insurance and other types of social security, or
to secure the payment or performance of tenders, statutory or
regulatory obligations, surety and appeal bonds, bids, leases,
government contracts and leases, performance and return of
money bonds and other similar obligations, including letters
of credit and bank guarantees required or requested by the
United States,
-27-
any State thereof or any foreign government or any
subdivision, department, agency, organization or
instrumentality of any of the foregoing in connection with any
contract or statute (exclusive of obligations for the payment
of borrowed money but including lessee or operator obligations
under statutes, governmental regulations, contracts or
instruments related to the ownership, exploration and
production of oil, natural gas, other hydrocarbons and
minerals on state, Federal or foreign lands or waters);
(8) Liens arising out of judgments, decrees, orders or awards not
constituting an Event of Default;
(9) leases, subleases, licenses or sublicenses to third parties
entered into in the ordinary course of business;
(10) Liens on, or related to, assets to secure all or part of the
costs incurred in the ordinary course of the Oil and Gas
Business for the exploration, drilling, development,
production, processing, transportation, marketing, storage or
operation thereof;
(11) Liens on pipeline or pipeline facilities that arise under
operation of law;
(12) Liens arising under operating agreements, joint venture
agreements, partnership agreements, oil, natural gas, other
hydrocarbon and mineral leases, farm-out or farm-in
agreements, division orders, contracts for the sale,
transportation or exchange of oil or natural gas, unitization
and pooling declarations and agreements, area of mutual
interest agreements and other agreements that are customary in
the Oil and Gas Business;
(13) Liens reserved in oil, natural gas, other hydrocarbon and
mineral leases for bonus or rental payments and for compliance
with the terms of such leases;
(14) Liens constituting survey exceptions, encumbrances, easements,
and reservations of, and rights to others for, rights-of-way,
zoning and other restrictions as to the use of real
properties, and minor defects of title which, in the case of
any of the foregoing, do not secure the payment of borrowed
money, and in the aggregate do not materially adversely affect
the value of the assets of the Company and its Restricted
Subsidiaries, taken as a whole, or materially impair the use
of such properties for the purposes for which such properties
are held by the Company or such Subsidiaries;
(15) Liens encumbering assets under construction arising from
progress or partial payments by a customer of the Company or
its Restricted Subsidiaries relating to such assets;
-28-
(16) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual or warranty
requirements of the Company or any of its Restricted
Subsidiaries, including rights of offset and set-off;
(17) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in
respect of bankers' acceptances issued or created for the
account of such Person to facilitate the purchase, shipment or
storage of such inventory or other goods;
(18) Liens arising under this Indenture in favor of the Trustee for
its own benefit and similar Liens in favor of other trustees,
agents and representatives arising under instruments governing
Indebtedness permitted to be incurred under this Indenture;
provided, however, that such Liens are solely for the benefit
of the trustees, agents or representatives in their capacities
as such and not for the benefit of the holders of such
Indebtedness;
(19) set-off, chargeback and other rights of depositary and
collection banks and other regulated financial institutions
with respect to money or instruments of the Company or any of
its Restricted Subsidiaries on deposit with or in the
possession of such institutions;
(20) Liens arising from the deposit of funds or securities in trust
for the purpose of decreasing or defeasing Indebtedness so
long as such deposit of funds or securities and such
decreasing or defeasing of Indebtedness are permitted under
Section 4.04;
(21) 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
Restricted Subsidiary or becomes a Restricted Subsidiary (and
not incurred in anticipation of or in connection with such
transaction), provided that such Liens are not extended to
other Property of the Company or the Restricted Subsidiaries;
(22) any Lien existing on any Property at the time of the
acquisition thereof (and not incurred in anticipation of or in
connection with such transaction), provided that such Liens
are not extended to other Property of the Company or the
Restricted Subsidiaries;
(23) Liens to secure Production Payments that are not prohibited by
this Indenture to the extent such Liens are limited to the
assets that are the subject of such Production Payments; and
(24) Liens to secure a Refinancing Indebtedness incurred to
refinance Indebtedness that was secured by a Lien permitted
under this Indenture and that was incurred in accordance with
the provisions of this Indenture; provided that such Liens do
not extend to or cover any property or assets
-29-
of the Company or any Restricted Subsidiary other than assets
or property securing the Indebtedness so refinanced.
In each case set forth above, notwithstanding any stated limitation
on the assets that may be subject to such Lien, a Permitted Lien on a specified
asset or group or type of assets may include Liens on all improvements,
additions and accessions thereto and all products and proceeds thereof
(including, without limitation, dividends, distributions and increases in
respect thereof).
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any Person,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over shares of Capital Stock of any other class of
such Person.
"principal" of a Security means the principal of the Security plus
the premium, if any, payable on the Security which is due or overdue or is to
become due at the relevant time.
"Production Payments" means, collectively, Dollar-Denominated
Production Payments and Volumetric Production Payments.
"Production Payments and Reserve Sales" means the grant or transfer
to any Person of a Dollar-Denominated Production Payment, Volumetric Production
Payment, royalty, overriding royalty, net profits interest, master limited
partnership interest or other interest in oil and natural 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.
"Public Equity Offering" means an underwritten primary public
offering of common stock of the Company pursuant to an effective registration
statement under the Securities Act.
"Refinance" means, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Indebtedness in exchange or replacement for, such Indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with this Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided, however, that:
(1) such Refinancing Indebtedness has a Stated Maturity no earlier
than the Stated Maturity of the Indebtedness being Refinanced;
-30-
(2) such Refinancing Indebtedness has an Average Life at the time
such Refinancing Indebtedness is Incurred that is equal to or
greater than the Average Life of the Indebtedness being
Refinanced; and
(3) such Refinancing Indebtedness has an aggregate principal
amount (or if Incurred with original issue discount, an
aggregate issue price) that is equal to or less than the
aggregate principal amount (or if Incurred with original issue
discount, the aggregate accreted value) then outstanding or
committed (plus accrued interest thereon and fees and
expenses, including any premium and defeasance costs) under
the Indebtedness being Refinanced;
provided further, however, that Refinancing Indebtedness shall not include (A)
Indebtedness of a Restricted Subsidiary that is not a Subsidiary Guarantor that
Refinances Indebtedness of the Company or (B) Indebtedness of the Company or a
Restricted Subsidiary that Refinances Indebtedness of an Unrestricted
Subsidiary.
"Registration Rights Agreement" means the Registration Rights
Agreement dated April 2, 2004, among the Company, the Subsidiary Guarantors and
Goldman, Sachs & Co., Credit Suisse First Boston LLC, BNP Paribas Securities
Corp., Deutsche Bank Securities Inc., Fleet Securities, Inc., Fortis Investment
Services LLC, J.P. Morgan Securities Inc., KeyBanc Capital Markets, A Division
of McDonald Investments Inc. and Stanford Group Company.
"Related Business" means the Oil and Gas Business and any other
business in which the Company or a Subsidiary was engaged on the Issue Date and
any business related, ancillary or complementary thereto.
"Representative" means, with respect to a Person, any trustee, agent
or representative (if any) for an issue of Senior Indebtedness of such Person.
"Restricted Payment" with respect to any Person means:
(1) the declaration or payment of any dividends or any other
distributions of any sort in respect of its Capital Stock
(including any payment in connection with any merger or
consolidation involving such Person) or similar payment to the
direct or indirect holders of its Capital Stock (other than
dividends or distributions payable solely in its Capital Stock
(other than Disqualified Stock) and dividends or distributions
payable solely to the Company or a Restricted Subsidiary, and
other than pro rata dividends or other distributions (or
dividends or distributions on a basis more favorable to the
Company or to a Restricted Subsidiary) made by a Subsidiary
that is not a Wholly Owned Subsidiary to stockholders (or
owners of an equivalent interest in the case of a Subsidiary
that is an entity other than a corporation));
(2) the purchase, redemption or other acquisition or retirement
for value of any Capital Stock of the Company held by any
Person (other than a Restricted Subsidiary) or of any Capital
Stock of a Restricted Subsidiary
- 31 -
held by any Affiliate of the Company (other than the Company
or a Restricted Subsidiary), including in connection with any
merger or consolidation and including the exercise of any
option to exchange any Capital Stock (other than into Capital
Stock of the Company that is not Disqualified Stock);
(3) the purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value, prior to scheduled
maturity, scheduled repayment or scheduled sinking fund
payment of any Subordinated Obligations of such Person (other
than the purchase, repurchase, redemption, defeasance or other
acquisition of Subordinated Obligations or retirement for
value in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due
within one year of the date of such purchase, repurchase,
redemption, defeasance or other acquisition or retirement for
value); or
(4) the making of any Investment (other than a Permitted
Investment) in any Person.
"Restricted Subsidiary" means any Subsidiary of the Company that is
not an Unrestricted Subsidiary.
"Revolving Credit Facility" means the Credit Agreement dated June
25, 2002, as amended, among the Company, Encore Operating, L.P., Fleet National
Bank, as Administrative Agent, Wachovia Bank, National Association, as
Syndication Agent, Fortis Capital Corp., as Documentation Agent, and the lenders
listed on Schedule I thereto.
"S&P" means Standard and Poor's Ratings Services.
"Sale/Leaseback Transaction" means an arrangement relating to
property owned by the Company or a Restricted Subsidiary on the Issue Date or
thereafter acquired by the Company or a Restricted Subsidiary whereby the
Company or a Restricted Subsidiary transfers such property to a Person and the
Company or a Restricted Subsidiary leases it from such Person.
"SEC" means the U.S. Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured
by a Lien.
"Securities" means the Securities issued under this Indenture.
"Securities Act" means the U.S. Securities Act of 1933, as amended.
"Senior Indebtedness" means with respect to any Person:
(1) Indebtedness of such Person, whether outstanding on the Issue
Date or thereafter Incurred; and
- 32 -
(2) all other Obligations of such Person (including interest
accruing on or after the filing of any petition in bankruptcy
or for reorganization relating to such Person whether or not
post-filing interest is allowed in such proceeding) in respect
of Indebtedness described in clause (1) above;
unless, in the case of clauses (1) and (2), in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such Indebtedness or other obligations are subordinate or pari passu in
right of payment to the Securities or the Subsidiary Guaranty of such Person, as
the case may be; provided, however, that Senior Indebtedness shall not include:
(1) any obligation of such Person to any Subsidiary;
(2) any liability for Federal, state, local or other taxes owed or
owing by such Person;
(3) any accounts payable or other liability to trade creditors
arising in the ordinary course of business (including
Guarantees thereof or instruments evidencing such
liabilities);
(4) any Indebtedness or other Obligation (and any accrued and
unpaid interest in respect thereof) of such Person which is
subordinate or junior in any respect to any other Indebtedness
or other Obligation of such Person;
(5) that portion of any Indebtedness which at the time of
Incurrence is Incurred in violation of this Indenture; or
(6) any Preferred Stock or Disqualified Stock.
"Senior Subordinated Indebtedness" means, with respect to a Person,
the Securities (in the case of the Company), the Subsidiary Guaranty (in the
case of a Subsidiary Guarantor) and any other Indebtedness of such Person that
specifically provides that such Indebtedness is to rank pari passu with the
Securities or such Subsidiary Guaranty, as the case may be, in right of payment
and is not subordinated by its terms in right of payment to any Indebtedness or
other obligation of such Person which is not Senior Indebtedness of such Person.
"Significant Subsidiary" means any Restricted Subsidiary that would
be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02
under Regulation S-X promulgated by the SEC.
"Special Mandatory Redemption Trigger" means the earliest to occur
of the following three events:
(1) June 30, 2004, if the acquisition of Cortez has not been
consummated by such date in conformity in all material
respects with the terms and with satisfaction of all material
conditions of the Cortez Agreement (after giving effect to any
amendment, waiver or modification to any term or
- 33 -
condition, which amendment, waiver or modification does not
have a material adverse effect on the holders of the
Securities);
(2) the abandonment of the acquisition of Cortez under the Cortez
Agreement; or
(3) the termination of the Cortez Agreement.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security 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 Obligation" means, with respect to a Person, any
Indebtedness of such Person (whether outstanding on the Issue Date or thereafter
Incurred) which is subordinate or junior in right of payment to the Securities
or a Subsidiary Guaranty of such Person, as the case may be, pursuant to a
written agreement to that effect.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Voting Stock is at the time owned or controlled,
directly or indirectly, by (1) such Person; (2) such Person and one or more
Subsidiaries of such Person; or (3) one or more Subsidiaries of such Person.
Unless otherwise specified, "Subsidiary" means a Subsidiary of the Company.
"Subsidiary Guarantor" means each Subsidiary of the Company that
executes the Indenture as a guarantor on the Issue Date and each other
Subsidiary of the Company that thereafter guarantees the Securities pursuant to
the terms of the Indenture, in each case unless and until such subsidiary is
released from its obligations under its Subsidiary Guaranty pursuant to the
terms of the Indenture. As of the Issue Date, the Subsidiary Guarantors are EAP
Energy, Inc., EAP Energy Services, L.P., EAP Operating, Inc., EAP Properties,
Inc., Encore Operating, L.P. and Encore Louisiana Operating LLC.
"Subsidiary Guaranty" means a Guarantee by a Subsidiary Guarantor of
the Company's obligations with respect to the Securities.
"Temporary Cash Investments" means any of the following:
(1) any investment in direct obligations of the United States of
America or any agency thereof or obligations guaranteed by the
United States of America or any agency thereof;
(2) investments in demand accounts and time deposit accounts,
bankers acceptances, overnight bank deposits, certificates of
deposit and money market deposits maturing within twelve
months of the date of acquisition thereof issued by a bank or
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trust company which is organized under the laws of the United
States of America, any State thereof or any foreign country
recognized by the United States of America, and which bank or
trust company has capital, surplus and undivided profits
aggregating in excess of $50.0 million (or the foreign
currency equivalent thereof) and has outstanding debt which is
rated "A" (or such similar equivalent rating) or higher by at
least one nationally recognized statistical rating
organization (as defined in Rule 436 under the Securities Act)
or any money-market fund sponsored by a registered broker
dealer or mutual fund distributor;
(3) investments in deposits available for withdrawal on demand
with any commercial bank that 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 (i) all such deposits have been made in such
accounts in the ordinary course of business and (ii) such
deposits do not at any one time exceed $10.0 million in the
aggregate;
(4) repurchase (or reverse repurchase) obligations with a term of
not more than 30 days for underlying securities of the types
described in clause (1) above entered into with a bank meeting
the qualifications described in clause (2) above;
(5) investments in commercial paper, maturing not more than 90
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 foreign country recognized by the United States of America
with a rating at the time as of which any investment therein
is made of "P-1" (or higher) according to Moody's or "A-1" (or
higher) according to S&P; and
(6) investments in securities with maturities of six months or
less from the date of acquisition issued or fully guaranteed
by any state, commonwealth or territory of the United States
of America, or by any political subdivision or taxing
authority thereof, and rated at least "A" by S&P or "A" by
Moody's.
"TIA" or "Trust Indenture Act" means the Trust Indenture Act of 1939
(15 U.S.C. sections 77aaa-77bbbb) as in effect on the date of this Indenture.
"Treasury Rate" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15(519) which has become publicly available at least two Business Days prior
to the date fixed for redemption or, in the case of defeasance, prior to the
date of deposit (or, if such Statistical Release is no longer published, any
publicly available source of similar market data)) most nearly equal to the then
remaining average life to April 15, 2009 or, in the case of defeasance, to
maturity; provided, however, that if the average life to April 15, 2009 or
maturity, as the case may be, of the Securities is not equal to the constant
maturity of a United States Treasury security for which a weekly average yield
is given, the
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Treasury Rate shall be obtained by linear interpolation (calculated to the
nearest one-twelfth of a year) from the weekly average yields of United States
Treasury securities for which such yields are given, except that if the average
life to April 15, 2009 or maturity, as the case may be, of the Securities is
less than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President or
any other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform Commercial Code
as in effect from time to time.
"Unrestricted Subsidiary" means:
(1) 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
(2) 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) to be an Unrestricted Subsidiary
unless such Subsidiary or any of its Subsidiaries own any Capital Stock or
Indebtedness of, 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; 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, such designation would be permitted under Section
4.04. In the case of any designation by the Company of a Person as an
Unrestricted Subsidiary on the first day that such Person is a Subsidiary of the
Company in accordance with the provisions of this Indenture, such designation
shall be deemed to have occurred for all purposes of this Indenture
simultaneously with, and automatically upon, such Person becoming a Subsidiary.
The Board of Directors may designate any Unrestricted Subsidiary to
be a Restricted Subsidiary; provided, however, that immediately after giving
effect to such designation (A) the Company could Incur $1.00 of additional
Indebtedness under Section 4.03(a) and (B) 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 the resolution of the
Board of Directors giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and
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credit of the United States of America is pledged and which are not callable at
the issuer's option.
"Volumetric Production Payments" means production payment
obligations recorded as deferred revenue in accordance with GAAP, together with
all undertakings and obligations in connection therewith.
"Voting Stock" of a Person means all classes of Capital Stock or
other interests (including partnership interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the
Capital Stock of which (other than directors' qualifying shares) is owned by the
Company or one or more Wholly Owned Subsidiaries.
SECTION 1.02. Other Definitions.
Defined
Term in Section
---- ----------
"Affiliate Transaction"......................................................... 4.07
"Bankruptcy Law"................................................................ 6.01
"Cash Consideration"............................................................ 4.06(a)(2)
"Change of Control Offer"....................................................... 4.08(b)
"covenant defeasance option".................................................... 8.01(b)
"Custodian"..................................................................... 6.01
"Event of Default".............................................................. 6.01
"Guaranteed Obligation"......................................................... 11.01
"Investment Grade Rating"....................................................... 4.13
"legal defeasance option"....................................................... 8.01(b)
"Legal Holiday"................................................................. 13.08
"Offer"......................................................................... 4.06(b)
"Offer Amount".................................................................. 4.06(c)(2)
"Offer Period".................................................................. 4.06(c)(2)
"Paying Agent".................................................................. 2.03
"Purchase Date"................................................................. 4.06(c)(1)
"Registrar"..................................................................... 2.03
"Special Mandatory Redemption".................................................. 3.03
"Successor Company"............................................................. 5.01
"Suspended Covenants"........................................................... 4.13
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
This Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC;
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"indenture securities" means the Securities;
"indenture security holder" means a Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
and
"obligor" on the indenture securities means the Company and any
other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction. Unless the context otherwise
requires:
(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) unsecured Indebtedness shall not be deemed to be subordinate
or junior to Secured Indebtedness merely by virtue of its
nature as unsecured Indebtedness;
(7) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount
thereof that would be shown on a balance sheet of the issuer
dated such date prepared in accordance with GAAP;
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the
maximum mandatory redemption or mandatory repurchase price
with respect to such Preferred Stock, whichever is greater;
and
(9) all references to the date the Securities were originally
issued shall refer to the Issue Date.
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ARTICLE 2
The Securities
SECTION 2.01. Form and Dating. Provisions relating to the Initial
Securities, the Private Exchange Securities and the Exchange Securities are set
forth in the Rule 144A/Regulation S Appendix attached hereto (the "Appendix"),
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 the Appendix, which is hereby
incorporated in and expressly made a part of this Indenture. The Exchange
Securities, the Private 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 rules,
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 the Appendix 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.
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.
On the Issue Date, the Trustee shall authenticate and deliver $150
million of 6.25% Senior Subordinated Notes Due 2014, and, at any time and from
time to time thereafter, the Trustee shall authenticate and deliver Securities
for original issue in an aggregate principal amount specified in such order, in
each case upon a written order of the Company signed by two Officers or by an
Officer and either an Assistant Treasurer or an Assistant Secretary 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, in the case of an issuance of Additional Securities pursuant
to Section 2.13 after the Issue Date, shall certify that such issuance is in
compliance with Section 4.03.
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.
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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. 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 Wholly Owned Subsidiary incorporated or organized within The
United States of America 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 of 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 Securityholders 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. Securityholder 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 Securityholders. 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 Securityholders.
SECTION 2.06. Transfer and Exchange. The Securities shall be issued
in registered form and shall be transferable only upon the surrender of a
Security for registration of transfer. When a Security is presented to the
Registrar or a co-registrar with a request to register a transfer, the Registrar
shall register the transfer as requested if the requirements of this Indenture
and Section 8-401(a) of the Uniform Commercial Code are met. When Securities are
presented to the Registrar or a co-registrar with a request to exchange them for
an equal principal amount of Securities of other denominations, the Registrar
shall make the exchange as requested if the same requirements are met.
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SECTION 2.07. 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 2.08. 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 2.07, 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.
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 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
Securityholders 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 2.09. 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 2.10. 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 unless
the Company directs the Trustee to deliver canceled Securities to the Company.
The Company may not issue new Securities to replace Securities it has redeemed,
paid or delivered to the Trustee for cancellation.
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SECTION 2.11. 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
Securityholders 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
reasonable satisfaction of the Trustee and shall promptly mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
SECTION 2.12. CUSIP Numbers. The Company in issuing the Securities
may use numbers assigned by the Committee on Uniform Securities Identification
Procedures ("CUSIP") and corresponding International Securities Identification
Numbers ("ISIN") (if then generally in use) and, if so, the Trustee shall use
CUSIP numbers and corresponding "ISIN's" (if then generally in use) 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. The Company shall promptly notify
the Trustee of any change in the CUSIP or ISIN numbers.
SECTION 2.13. Issuance of Additional Securities. The Company shall
be entitled, subject to its compliance with Section 4.03, to issue Additional
Securities under this Indenture which shall have identical terms as the Initial
Securities issued on the Issue Date, other than with respect to the date of
issuance and issue price. The Initial Securities issued on the Issue Date, any
Additional Securities and all Exchange Securities or Private Exchange Securities
issued in exchange therefor shall be treated as a single class for all purposes
under this Indenture.
With respect to any Additional Securities, the Company shall set
forth in a resolution of the Board of Directors and an Officers' Certificate, a
copy of each which shall be delivered to the Trustee, the following information:
(1) the aggregate principal amount of such Additional Securities
to be authenticated and delivered pursuant to this Indenture;
(2) the issue price, the issue date and the CUSIP number of such
Additional Securities; provided, however, that no Additional
Securities may be issued at a price that would cause such
Additional Securities to have "original issue discount" within
the meaning of Section 1273 of the Code; and
(3) whether such Additional Securities shall be Transfer
Restricted Securities and issued in the form of Initial
Securities as set forth in the Appendix to this Indenture or
shall be issued in the form of Exchange Securities as set
forth in Exhibit A.
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ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee. If the Company elects to redeem
Securities pursuant to paragraphs 5 or 7 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 60 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 in its
sole discretion shall deem to be 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 the Trustee selects shall be in
principal 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 at such Holder's registered address, except that a notice of a Special
Mandatory Redemption shall be as set forth in Section 3.07.
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;
(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;
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(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.
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
(subject to the right of Holders of record on the relevant record date to
receive interest due on the related interest payment 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 and
cancellation 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.
SECTION 3.07. Special Mandatory Redemption. Following the occurrence
of a Special Mandatory Redemption Trigger, the Company shall redeem the
Securities as a whole (the "Special Mandatory Redemption"), upon notice as
provided in this Section 3.07, at a redemption price equal to 100% of the
aggregate principal amount thereof plus accrued and unpaid interest to the
redemption date. Notwithstanding the provisions of Section 3.03, notice of such
mandatory redemption shall be given within five Business Days of the date of the
Special Mandatory Redemption Trigger by first-class mail, postage prepaid,
mailed not less than 15 nor more than 30 days prior to the redemption date, to
the Escrow Agent and to each Holder, at such Holder's address appearing in the
Security Register, and such notice shall state:
(1) that the Special Mandatory Redemption Trigger has occurred;
(2) the redemption date, which shall be on or before July 30,
2004;
(3) the redemption price;
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(4) that on the redemption date the redemption price will become
due and payable upon each Security to be redeemed and that
interest thereon will cease to accrue on and after such date;
and
(5) the place or places where each Security is to be surrendered
for payment of the redemption price.
Any notice of redemption given pursuant to this Article 3 may be modified
by the Company to conform with the applicable requirements of the Depositary if
any of the Securities subject to such notice are then represented by one or more
Global Securities.
ARTICLE 4
Covenants
SECTION 4.01. Payment of Securities.
(a) 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 the Paying Agent holds 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 Securityholders on that date pursuant to the terms of this
Indenture.
(b) 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.
SECTION 4.02. SEC Reports. Notwithstanding that the Company may not
be subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company shall file with the SEC (to the extent the SEC will accept such
filings) and provide the Trustee and Securityholders with such annual reports
and such information, documents and other reports as are specified in Sections
13 and 15(d) of the Exchange Act and applicable to a U.S. corporation subject to
such Sections (but, without exhibits in the case of the Securityholders), such
information, documents and other reports to be so filed and provided at the
times specified for the filings of such information, documents and reports under
such Sections. In addition, the Company shall furnish to the Holders of the
Securities and to prospective investors, upon the requests of such Holders, any
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act so long as the Securities are not freely transferable under the
Securities Act. The Company also shall comply with the other provisions of TIA
section 314(a).
SECTION 4.03. Limitation on Indebtedness.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, Incur, directly or indirectly, any Indebtedness; provided,
however, that the Company and the Subsidiary Guarantors will be entitled to
Incur Indebtedness if, on the date of such Incurrence and after giving effect
thereto on a pro forma basis, no Default has occurred and is continuing and the
Consolidated Coverage Ratio exceeds 2.5 to 1.
- 45 -
(b) Notwithstanding the foregoing Section 4.03(a), the Company and
the Restricted Subsidiaries shall be entitled to Incur any or all of the
following Indebtedness:
(1) Indebtedness Incurred by the Company and its Restricted
Subsidiaries pursuant to Credit Facilities; provided, however,
that, immediately after giving effect to any such Incurrence,
the aggregate principal amount of all Indebtedness Incurred
under this clause (1) and then outstanding does not exceed the
greater of (A) $300 million less the sum of all principal
payments since the Issue Date with respect to such
Indebtedness pursuant to Section 4.06(a)(3)(A) and (B) $150
million plus 20% of ACNTA as of the date of such Incurrence;
(2) Indebtedness owed to and held by the Company or a Restricted
Subsidiary; provided, however, that (A) any subsequent
issuance or transfer of any Capital Stock which results in any
such Restricted Subsidiary ceasing to be a Restricted
Subsidiary or any subsequent transfer of such Indebtedness
(other than to the Company or a Wholly Owned Subsidiary) shall
be deemed, in each case, to constitute the Incurrence of such
Indebtedness by the obligor thereon and (B) if the Company or
a Subsidiary Guarantor is the obligor on such Indebtedness,
unless such Indebtedness is owing to the Company or a
Subsidiary Guarantor, such Indebtedness is expressly
subordinated to the prior payment in full in cash of all
obligations with respect to the Securities;
(3) the Securities including the Exchange Securities (but
excluding any Additional Securities) and all Subsidiary
Guaranties;
(4) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (1), (2) or (3) of this
Section 4.03(b));
(5) Indebtedness of a Restricted Subsidiary Incurred and
outstanding on or prior to the date on which such Subsidiary
became a Restricted Subsidiary or was acquired by the Company
(other than Indebtedness Incurred in connection with, or to
provide all or any portion of the funds or credit support
utilized to consummate, the transaction or series of related
transactions pursuant to which such Subsidiary became a
Restricted Subsidiary or was acquired by the Company);
provided, however, that on the date such Subsidiary became a
Restricted Subsidiary or was acquired by the Company and after
giving pro forma effect thereto, the Company would have been
able to Incur at least $1.00 of additional Indebtedness
pursuant to Section 4.03(a);
(6) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to Section 4.03(a) or pursuant to clause (3), (4), or
(5) of this Section 4.03(b) or this clause (6); provided,
however, that to the extent such Refinancing Indebtedness
directly or indirectly Refinances Indebtedness of a Restricted
Subsidiary Incurred pursuant to clause (5) of this Section
4.03(b), such
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Refinancing Indebtedness shall be Incurred only by such
Restricted Subsidiary;
(7) Hedging Obligations consisting of Interest Rate Agreements
directly related to Indebtedness outstanding on the Issue Date
or permitted to be Incurred by the Company and its Restricted
Subsidiaries pursuant to this Indenture;
(8) Hedging Obligations consisting of Oil and Natural Gas Hedging
Contracts and Currency Agreements entered into in the ordinary
course of business for the purpose of limiting risks that
arise in the ordinary course of business of the Company and
its Subsidiaries;
(9) Indebtedness in respect of performance, bid and surety bonds,
including Guarantees and letters of credit functioning as or
supporting such performance, bid and surety bonds, completion
guarantees and other reimbursement obligations provided by the
Company or any Restricted Subsidiary in the ordinary course of
business (in each case other than for an obligation for money
borrowed);
(10) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
drawn against insufficient funds in the ordinary course of
business; provided, however, that such Indebtedness is
extinguished within two Business Days of its Incurrence;
(11) Indebtedness consisting of any Guarantee by the Company or a
Subsidiary Guarantor of Indebtedness of the Company or a
Subsidiary Guarantor outstanding on the Issue Date or
permitted by this Indenture to be Incurred by the Company or a
Subsidiary Guarantor;
(12) Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each
case, Incurred for the purpose of financing all or any part of
the purchase price, cost of construction or improvement or
carrying cost of assets used in the business of the Company
and its Restricted Subsidiaries and related financing costs,
and Refinancing Indebtedness Incurred to Refinance any
Indebtedness Incurred pursuant to this clause, in an aggregate
principal amount at any one time outstanding not to exceed
$25.0 million;
(13) Indebtedness arising from any agreement providing for
indemnities, Guarantees, purchase price adjustments,
holdbacks, contingency payment obligations based on the
performance of the acquired or disposed assets or similar
obligations (other than Guarantees of Indebtedness) Incurred
by any Person in connection with the acquisition or
disposition of assets;
(14) Indebtedness in respect of in-kind obligations relating to net
oil or natural gas balancing positions arising in the ordinary
course of business;
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(15) Non-Recourse Purchase Money Indebtedness Incurred by the
Company and any Subsidiary Guarantors; provided, however, that
immediately after giving effect to any such Incurrence, the
aggregate principal amount of all Non-Recourse Purchase Money
Indebtedness Incurred under this clause (15) and then
outstanding does not exceed $25.0 million; and
(16) Indebtedness of the Company or of any of its Restricted
Subsidiaries in an aggregate principal amount which, when
taken together with all other Indebtedness of the Company and
its Restricted Subsidiaries outstanding on the date of such
Incurrence (other than Indebtedness permitted by clauses (1)
through (15) of this Section 4.03(b) or Section 4.03(a)) does
not exceed $40.0 million of which not more than $20.0 million
may be Indebtedness of Restricted Subsidiaries that are not
Subsidiary Guarantors.
(c) Notwithstanding the foregoing, neither the Company nor any
Subsidiary Guarantor will incur any Indebtedness pursuant to Section 4.03(b) if
the proceeds thereof are used, directly or indirectly, to Refinance any
Subordinated Obligations of the Company or any Subsidiary Guarantor unless such
Indebtedness shall be subordinated to the Securities or the applicable
Subsidiary Guaranty to at least the same extent as such Subordinated
Obligations.
(d) For purposes of determining compliance with this Section 4.03:
(1) any Indebtedness remaining outstanding under the Revolving
Credit Facility after the application of the net proceeds from
the sale of the Securities will be treated as Incurred on the
Issue Date under Section 4.03(b)(1);
(2) in the event that an item of Indebtedness (or any portion
thereof) meets the criteria of more than one of the types of
Indebtedness described above, or is entitled to be incurred in
compliance with the Consolidated Coverage Ratio in Section
4.03(a), the Company, in its sole discretion, may classify
such item of Indebtedness (or any portion thereof) in any
manner that complies with this Section 4.03 and will only be
required to include the amount and type of such Indebtedness
in one of the above clauses; and
(3) the Company will be entitled to divide and classify an item of
Indebtedness in more than one of the types of Indebtedness
described above or as having been incurred in compliance with
the Consolidated Coverage Ratio in Section 4.03(a).
(e) Notwithstanding Sections 4.03(a) and (b), neither the Company
nor any Subsidiary Guarantor will Incur any Indebtedness if such Indebtedness is
subordinate or junior in ranking in right of payment to any Senior Indebtedness
of such Person, as applicable, unless such Indebtedness is Senior Subordinated
Indebtedness or is expressly subordinated in right of payment to Senior
Subordinated Indebtedness of such Person.
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SECTION 4.04. Limitation on Restricted Payments.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary, directly or indirectly, to make a Restricted Payment if at the time
the Company or such Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would
result therefrom);
(2) the Company is not entitled to Incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a); or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments since the Issue Date would exceed the sum
of (without duplication):
(A) 50% of the Consolidated Net Income accrued during the
period (treated as one accounting period) from the
beginning of the fiscal quarter immediately following
the fiscal quarter during which the Issue Date occurs to
the end of the most recent fiscal quarter for which
financial statements of the Company are publicly
available prior to the date of such Restricted Payment
(or, in case such Consolidated Net Income shall be a
deficit, minus 100% of such deficit); plus
(B) 100% of the aggregate Net Cash Proceeds or the fair
market value of property other than cash (including
Capital Stock of Persons engaged in the Oil and Gas
Business or assets used in the Oil and Gas Business)
received by the Company from the issuance or sale of its
Capital Stock (other than Disqualified Stock) subsequent
to the Issue Date (other than an issuance or sale to a
Subsidiary of the Company and other than an issuance or
sale to an employee stock ownership plan or to a trust
established by the Company or any of its Subsidiaries
for the benefit of their employees) and 100% of any cash
capital contribution, or the fair market value of
property other than cash, received by the Company from
its shareholders subsequent to the Issue Date; plus
(C) the aggregate Net Cash Proceeds received by the Company
subsequent to the Issue Date from the issuance or sale
of its Capital Stock (other than Disqualified Stock) to
an employee stock ownership plan or to a trust
established by the Company or any of its Subsidiaries
for the benefit of their employees; provided, however,
that if such employee stock ownership plan or trust
Incurs any Indebtedness to finance the purchase of such
Capital Stock, such aggregate amount shall be limited to
the excess of such Net Cash Proceeds over the amount of
such Indebtedness plus an
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amount equal to any increase in the Consolidated Net
Worth of the Company resulting from principal repayments
made from time to time by such employee stock ownership
plan or trust with respect to such Indebtedness; plus
(D) the amount by which Indebtedness of the Company or any
Restricted Subsidiary is reduced on the Company's
consolidated balance sheet upon the conversion or
exchange subsequent to the Issue Date of any
Indebtedness of the Company or any Restricted Subsidiary
convertible or exchangeable for Capital Stock (other
than Disqualified Stock) of the Company (less the amount
of any cash, or the fair value of any other property,
distributed by the Company upon such conversion or
exchange); provided, however, that the foregoing amount
shall not exceed the Net Cash Proceeds received by the
Company or any Restricted Subsidiary from the sale of
such Indebtedness (excluding Net Cash Proceeds from
sales to a Subsidiary of the Company or to an employee
stock ownership plan or to a trust established by the
Company or any of its Subsidiaries for the benefit of
their employees); plus
(E) an amount equal to the sum of (x) the net reduction in
the Investments (other than Permitted Investments) made
by the Company or any Restricted Subsidiary in any
Person (including any Unrestricted Subsidiary) resulting
from repurchases, repayments or redemptions of such
Investments by such Person, proceeds realized on the
sale of such Investment and proceeds representing the
return of capital (excluding dividends and
distributions), in each case received by the Company or
any Restricted Subsidiary, and (y) to the extent such
Person is an Unrestricted Subsidiary, the portion
(proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets
of such Unrestricted Subsidiary at the time such
Unrestricted Subsidiary is designated a Restricted
Subsidiary; provided, however, that to the extent the
foregoing sum exceeds, in the case of any such Person or
Unrestricted Subsidiary, the amount of Investments
(excluding Permitted Investments) previously made (and
treated as a Restricted Payment) by the Company or any
Restricted Subsidiary in such Person or Unrestricted
Subsidiary, such excess shall not be included in this
clause (E) unless the amount represented by such excess
has not been and will not be taken into account in one
of the foregoing clauses (A), (B), (C) or (D); plus
(F) $25.0 million.
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(b) The preceding provisions will not prohibit:
(1) any Restricted Payment made out of the Net Cash Proceeds
of the substantially concurrent issuance or sale of, or
made by conversion into or exchange for, Capital Stock
of the Company (other than Disqualified Stock and other
than Capital Stock issued or sold to a Subsidiary of the
Company or an employee stock ownership plan or to a
trust established by the Company or any of its
Subsidiaries for the benefit of their employees) or a
substantially concurrent cash capital contribution
received by the Company from one or more of its
shareholders; provided, however, that (A) such
Restricted Payment shall be excluded in the calculation
of the amount of Restricted Payments under Section
4.04(a)(3) and (B) the Net Cash Proceeds from such sale
or such cash capital contribution (to the extent so used
for such Restricted Payment) shall be excluded from the
calculation of amounts under Section 4.04(a)(3)(B);
(2) any purchase, repurchase, redemption, defeasance or
other acquisition or retirement for value of
Subordinated Obligations of the Company or any
Subsidiary Guarantor made by exchange for, or out of the
proceeds of the substantially concurrent Incurrence or
sale of, Indebtedness which is permitted to be Incurred
pursuant to Section 4.03; provided, however, that such
purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value shall be excluded in
the calculation of the amount of Restricted Payments
under Section 4.04(a)(3);
(3) any purchase, repurchase, redemption, defeasance or
other acquisition or retirement for value of
Disqualified Stock of the Company or a Subsidiary
Guarantor made by conversion into or exchange for, or
out of the proceeds of the substantially concurrent
issuance or sale (other than to a Subsidiary of the
Company or an employee stock ownership plan or to a
trust established by the Company or any of its
Subsidiaries for the benefit of their employees) of,
Disqualified Stock of the Company which is permitted to
be issued pursuant to Section 4.03; provided, however,
that such purchase, repurchase, redemption, defeasance
or other acquisition or retirement for value shall be
excluded in the calculation of the amount of Restricted
Payments under Section 4.04(a)(3);
(4) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such
dividend would have complied with this Section 4.04;
provided, however, that at the time of payment of such
dividend, no other Default shall have occurred and be
continuing (or result therefrom); provided further,
however, that such dividend shall be included in the
calculation of the amount of Restricted Payments under
Section 4.04(a)(3) at the time of payment;
(5) so long as no Default has occurred and is continuing,
the purchase, redemption or other acquisition or
retirement for value of shares of Capital
- 51 -
Stock of the Company or any of its Subsidiaries from
employees, former employees, directors or former
directors of the Company or any of its Subsidiaries (or
the respective heirs, estates or permitted transferees
of such employees, former employees, directors or former
directors), pursuant to the terms of the agreements
(including employment agreements) or plans (or
amendments thereto) approved by the Board of Directors
under which such individuals purchase or sell or are
granted the option to purchase or sell, shares of such
Capital Stock; provided, however, that the aggregate
amount of such purchases, redemptions and other
acquisitions and retirements (excluding amounts
representing cancellation of Indebtedness) shall not
exceed $2.0 million in any calendar year; provided
further, however, that such purchases, redemptions and
other acquisitions and retirements shall be excluded in
the calculation of the amount of Restricted Payments
under Section 4.04(a)(3);
(6) repurchases, acquisitions or retirements of shares of
Company common stock deemed to occur upon the exercise
of stock options or similar rights issued under employee
benefit plans when shares are surrendered to pay all or
a portion of the exercise price or to satisfy any
federal income tax obligations; provided, however, that
such repurchases, acquisitions or retirements shall be
excluded in the calculation of the amount of Restricted
Payments under Section 4.04(a)(3);
(7) the payment of cash in lieu of fractional shares of
Capital Stock in connection with any transaction
otherwise permitted under this Section 4.04; provided,
however, that such payment will be excluded in the
calculation of the amount of Restricted Payments under
Section 4.04(a)(3);
(8) payments to dissenting stockholders (x) pursuant to
applicable law or (y) in connection with the settlement
or other satisfaction of legal claims made pursuant to
or in connection with a consolidation, merger or
transfer of assets in connection with a transaction that
is not prohibited by this Indenture; provided, however,
that such payments will be included in the calculation
of the amount of Restricted Payments under Section
4.04(a)(3).
(9) upon the occurrence of a Change of Control or an Asset
Disposition and within 60 days after the completion of
the offer to repurchase the Securities pursuant to
Sections 4.06 or 4.08, (including the purchase of all
Securities tendered), any purchase, repurchase,
redemption, defeasance, acquisition or other retirement
for value of Subordinated Obligations required pursuant
to the terms thereof as a result of such Change of
Control or Asset Disposition at a purchase or redemption
price not to exceed 101% of the outstanding principal
amount thereof, plus accrued and unpaid interest
thereon, if any; provided, however, that (A) at the time
of such purchase, repurchase, redemption, defeasance or
other acquisition
- 52 -
or retirement for value, no Default shall have occurred
and be continuing (or would result therefrom), and (B)
such purchase, repurchase, redemption, defeasance or
other acquisition and retirement for value will be
excluded in the calculation of the amount of Restricted
Payments under Section 4.04(a)(3).
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the assets proposed
to be transferred by the Company or such Restricted Subsidiary, as the case may
be, in accordance with the Restricted Payment.
For purposes of determining compliance with this Section 4.04, in
the event that a Restricted Payment meets the criteria of more than one of the
types of Restricted Payments described above, the Company, in its sole
discretion, may order and classify such Restricted Payment in any manner in
compliance with this Section 4.04.
SECTION 4.05. Limitation on Restrictions on Distributions from
Restricted Subsidiaries. The Company shall not, and shall not permit any
Restricted Subsidiary to, create or otherwise cause or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to (a) pay dividends or make any other distributions on
its Capital Stock to the Company or a Restricted Subsidiary or pay any
Indebtedness owed to the Company, (b) make any loans or advances to the Company
or (c) transfer any of its property or assets to the Company, except:
(1) with respect to clauses (a), (b) and (c),
(A) any encumbrance or restriction pursuant to an agreement
governing Indebtedness or Capital Stock and other
agreements or instruments in effect at or entered into
on the Issue Date;
(B) any encumbrance or restriction with respect to a
Restricted Subsidiary pursuant to an agreement relating
to any Indebtedness Incurred by such Restricted
Subsidiary or Capital Stock or other agreement or
instrument of such Restricted Subsidiary in existence on
or prior to the date on which such Restricted Subsidiary
was acquired by the Company or otherwise became a
Restricted Subsidiary (other than Indebtedness Incurred,
Capital Stock issued or agreements or instruments
entered into as consideration in, or to provide all or
any portion of the funds or credit support utilized to
consummate, the transaction or series of related
transactions pursuant to which such Restricted
Subsidiary became a Restricted Subsidiary or was
acquired by the Company) and outstanding on such date;
(C) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing in whole or in part of
Indebtedness Incurred pursuant to an agreement referred
to in subclause (A) or (B) of
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clause (1) of this Section 4.05 or this subclause (C) or
subclause (B) of clause (2) of this Section 4.05 or
contained in any amendment to, or modification,
restatement, renewal, increase, supplement, replacement
or extension of, an agreement referred to in subclause
(A) or (B) of clause (1) of this Section 4.05 or this
clause (C) or subclause (B) of clause (2) of this
Section 4.05; provided, however, that the encumbrances
and restrictions with respect to such Restricted
Subsidiary contained in any such refinancing agreement
or amendment, modification, restatement, renewal,
increase, supplement, replacement or extension agreement
are not materially more restrictive, taken as a whole,
than encumbrances and restrictions with respect to such
Restricted Subsidiary contained in such predecessor
agreements;
(D) any customary encumbrance or restriction with respect to
a Restricted Subsidiary imposed pursuant to a merger
agreement or an agreement entered into for the sale or
disposition of all or substantially all the Capital
Stock or assets of such Restricted Subsidiary pending
the closing of such sale or disposition;
(E) customary encumbrances and restrictions contained in
agreements of the types described in the definition of
the term "Permitted Business Investments;" and
(F) customary supermajority voting provisions and other
customary provisions with respect to the disposition or
distribution of assets, each contained in corporate
charters, bylaws, stockholders' agreements, limited
liability company agreements, partnership agreements,
joint venture agreements and other similar agreements
entered into in the ordinary course of business of the
Company and its Restricted Subsidiaries; and
(2) with respect to clause (c) only,
(A) any such encumbrance or restriction consisting of
customary nonassignment provisions (including provisions
forbidding subletting or sublicensing) in leases
governing leasehold interests and licenses to the extent
such provisions restrict the transfer of the lease or
license or the property leased, or licensed thereunder;
(B) any encumbrance or restriction contained in credit
agreements, security agreements or mortgages securing
Indebtedness of the Company or a Restricted Subsidiary
or in Production Payments and Reserve Sales, to the
extent such encumbrance or restriction restricts the
transfer of the property subject to such credit
agreements, security agreements or mortgages or
Production Payments and Reserve Sales;
- 54 -
(C) encumbrances and restrictions contained in any
agreement, instrument or Capital Stock assumed by the
Company or any of its Restricted Subsidiaries or for
which any of them becomes liable as in effect at the
time of such transaction (except to the extent such
agreement, instrument or Capital Stock was entered into
in connection with or in contemplation of such
transaction), which encumbrances and restrictions are
not applicable to any assets other than assets acquired
in connection with such transaction and all
improvements, additions and accessions thereto and
products and proceeds thereof;
(D) restrictions on cash or other deposits imposed by
customers under contracts entered into in the ordinary
course of business;
(E) encumbrances and restrictions contained in contracts
entered into in the ordinary course of business, not
relating to any Indebtedness, and that do not,
individually or in the aggregate, detract from the value
of, or from the ability of the Company and the
Restricted Subsidiaries to realize the value of,
property or assets of the Company or any Restricted
Subsidiary in any manner material to the Company or any
Restricted Subsidiary;
(F) restrictions on the transfer of property or assets
required by any regulatory authority having jurisdiction
over the Company or such Restricted Subsidiary; and
(G) customary restrictions contained in asset sale
agreements limiting the transfer of such assets pending
the closing of such sale.
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, consummate any Asset Disposition unless:
(1) the Company or such Restricted Subsidiary receives
consideration at the time of such Asset Disposition at least
equal to the fair market value (including as to the value of
all non-cash consideration) (as determined in good faith by
the Board of Directors, an Officer or an officer of such
Restricted Subsidiary with responsibility for such
transaction, which determination shall be conclusive evidence
of compliance with this provision), of the shares and assets
subject to such Asset Disposition;
(2) at least 75% of the consideration thereof received by the
Company or such Restricted Subsidiary is in the form of cash
or cash equivalents, Additional Assets or any combination
thereof (collectively, the "Cash Consideration"); and
- 55 -
(3) an amount equal to 100% of the Net Available Cash from such
Asset Disposition is applied by the Company (or such
Restricted Subsidiary, as the case may be):
(A) first, to the extent the Company elects (or is required
by the terms of any Indebtedness), to prepay, repay,
redeem or purchase Senior Indebtedness of the Company or
any Subsidiary Guarantor or Indebtedness (other than any
Disqualified Stock) of a Wholly Owned Subsidiary that is
not a Subsidiary Guarantor (in each case other than
Indebtedness owed to the Company or an Affiliate of the
Company) within one year from the later of the date of
such Asset Disposition or the receipt of such Net
Available Cash;
(B) second, to the extent of the balance of such Net
Available Cash after application in accordance with
clause (A), to the extent the Company elects, to acquire
Additional Assets or to make capital expenditures in the
Oil and Gas Business within one year from the later of
the date of such Asset Disposition or the receipt of
such Net Available Cash; and
(C) third, to the extent of the balance of such Net
Available Cash after application in accordance with
clauses (A) and (B), to make an offer to the holders of
the Securities (and to holders of other Senior
Subordinated Indebtedness of the Company designated by
the Company) to purchase Securities (and such other
Senior Subordinated Indebtedness of the Company)
pursuant to and subject to the conditions contained in
this Indenture;
provided, however, that in connection with any prepayment,
repayment, purchase, repurchase, redemption, defeasance or
other acquisition or retirement for value of Indebtedness
pursuant to clause (A) or (C) above, the Company or such
Restricted Subsidiary shall permanently retire such
Indebtedness and shall cause the related loan commitment (if
any) to be permanently reduced in an amount equal to the
principal amount so prepaid, repaid or purchased.
Upon any Asset Disposition by an Oil and Gas Royalty Trust in which
the Company or any Restricted Subsidiary owns Capital Stock, the Company or such
Restricted Subsidiary will apply the Net Available Cash therefrom as provided in
Section 4.06(a)(3).
Notwithstanding the foregoing provisions of this Section 4.06, the
Company and the Restricted Subsidiaries will not be required to apply any Net
Available Cash in accordance with this Section 4.06 except to the extent that
the aggregate Net Available Cash from all Asset Dispositions which is not
applied in accordance with this Section 4.06 exceeds $20.0 million. Pending
application of Net Available Cash pursuant to this Section 4.06, such Net
Available Cash shall be invested in Temporary Cash Investments or applied to
temporarily reduce revolving credit indebtedness.
- 56 -
For the purposes of this Section 4.06, the following are deemed to
be cash or cash equivalents:
(1) any liabilities, as shown on the Company's or such Restricted
Subsidiary's most recent consolidated balance sheet, of the
Company or any Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms
subordinated to the Securities or any Subsidiary Guaranty)
that are assumed by the transferee of any such assets pursuant
to (1) a customary novation agreement that releases the
Company or such Restricted Subsidiary from further liability
or (2) an assignment agreement that includes, in lieu of such
a release, the agreement of the transferee or its parent
company to indemnify and hold harmless the Company or such
Restricted Subsidiary from and against any loss, liability or
cost in respect of such assumed liability (provided, however,
that such indemnifying party (or its long-term debt
securities) shall have an Investment Grade Rating (with no
indication of a negative outlook or credit watch with negative
implications, in any case, that contemplates such indemnifying
party (or its long-term debt securities) failing to have an
Investment Grade Rating) at the time the indemnity is entered
into);
(2) any non-Cash Consideration received by the Company or any
Restricted Subsidiary from the transferee that is converted,
monetized, sold or exchanged by the Company or such Restricted
Subsidiary into cash or cash equivalents within 120 days of
receipt.
Notwithstanding the foregoing, the 75% limitation referred to in
Section 4.06(a)(2) shall be deemed satisfied with respect to any Asset
Disposition in which the cash or cash equivalents portion of the consideration
received therefrom, determined in accordance with the foregoing provision on an
after-tax basis, is equal to or greater than what the after-tax proceeds would
have been had such Asset Disposition complied with the aforementioned 75%
limitation.
The requirement of Section 4.06(a)(3)(B) shall be deemed to be
satisfied if an agreement (including a lease, whether a capital lease or an
operating lease) committing to make the acquisitions or expenditures referred to
therein is entered into by the Company or its Restricted Subsidiary within the
time period specified in such clause and such Net Available Cash is subsequently
applied in accordance with such agreement within six months following such
agreement.
(b) In the event of an Asset Disposition that requires the
purchase of Securities (and other Senior Subordinated Indebtedness of the
Company) pursuant to Section 4.06(a)(3)(C), the Company shall make such offer to
purchase Securities (an "Offer") on or before the 366th day after the date of
such Asset Disposition or the receipt of such Net Available Cash, and shall
purchase Securities tendered pursuant to an offer by the Company for the
Securities (and such other Senior Subordinated Indebtedness of the Company) at a
purchase price of 100% of their principal amount (or, in the event such other
Senior Subordinated Indebtedness of the Company was issued with significant
original issue discount, 100% of the
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accreted value thereof) without premium, plus accrued but unpaid interest (or,
in respect of such other Senior Subordinated Indebtedness of the Company, such
lesser price, if any, as may be provided for by the terms of such Senior
Subordinated Indebtedness of the Company) in accordance with the procedures
(including prorating in the event of oversubscription) set forth in this
Indenture. If the aggregate purchase price of the securities tendered exceeds
the Net Available Cash allotted to their purchase, the Company will select the
securities to be purchased on a pro rata basis but in round denominations, which
in the case of the Securities will be denominations of $1,000 principal amount
or multiples thereof. The Company shall not be required to make such an offer to
purchase Securities (and other Senior Subordinated Indebtedness of the Company)
pursuant to this Section 4.06 if the Net Available Cash not applied or invested
as provided in Section 4.06(a)(3)(A) or (B) is less than $20.0 million (which
lesser amount shall be carried forward for purposes of determining whether such
an offer is required with respect to the Net Available Cash from any subsequent
Asset Disposition). Upon completion of such an offer to purchase, Net Available
Cash will be deemed to be reduced by the aggregate amount of such offer.
(c) (1) Promptly, and in any event within 10 days after the
Company becomes obligated to make an Offer, the Company shall deliver to the
Trustee and send, by first-class mail to each Holder, a written notice stating
that the Holder may elect to have his Securities purchased by the Company either
in whole or in part (subject to prorating as described in Section 4.06(b) in the
event the Offer is oversubscribed) in integral multiples of $1,000 of principal
amount, at the applicable purchase price. The notice shall specify a purchase
date not less than 30 days nor more than 60 days after the date of such notice
(the "Purchase Date") and shall contain such information concerning the business
of the Company which the Company in good faith believes will enable such Holders
to make an informed decision (which at a minimum will include (A) the most
recently filed Annual Report on Form 10-K (including audited consolidated
financial statements) of the Company, the most recent subsequently filed
Quarterly Report on Form 10-Q and any Current Report on Form 8-K of the Company
filed subsequent to such Quarterly Report, other than Current Reports describing
Asset Dispositions otherwise described in the information furnished with such
notice (or corresponding successor reports), (B) a description of material
developments in the Company's business subsequent to the date of the latest of
such Reports, and (C) if material, appropriate pro forma financial information)
and all instructions and materials necessary to tender Securities pursuant to
the Offer, together with the information contained in clause (3).
(2) Not later than the date upon which written notice of an Offer
is delivered to the Trustee as provided below, the Company shall deliver to the
Trustee an Officers' Certificate as to (A) the amount of the Offer (the "Offer
Amount"), including information as to any other Senior Subordinated Indebtedness
included in the Offer, (B) the allocation of the Net Available Cash from the
Asset Dispositions pursuant to which such Offer is being made and (C) the
compliance of such allocation with the provisions of Section 4.06(a) and (b). On
such date, the Company shall also irrevocably deposit with the Trustee or with a
Paying Agent (or, if the Company is acting as its own Paying Agent, segregate
and hold in trust) in Temporary Cash Investments, maturing on the last day prior
to the Purchase Date or on the Purchase Date if funds are immediately available
by open of business, an amount equal to the Offer Amount to be held for payment
in accordance with the provisions of this Section. If the Offer includes other
Senior Subordinated Indebtedness, the deposit described in the preceding
sentence may be made with
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any other paying agent pursuant to arrangements satisfactory to the Trustee.
Upon the expiration of the period for which the Offer remains open (the "Offer
Period"), the Company shall deliver to the Trustee for cancellation the
Securities or portions thereof which have been properly tendered to and are to
be accepted by the Company. The Trustee shall, on the Purchase Date, mail or
deliver payment (or cause the delivery of payment) to each tendering Holder in
the amount of the purchase price. In the event that the aggregate purchase price
of the Securities delivered by the Company to the Trustee is less than the Offer
Amount applicable to the Securities, the Trustee shall deliver the excess to the
Company immediately after the expiration of the Offer Period for application in
accordance with this Section 4.06.
(3) Holders electing to have a Security purchased shall be
required to surrender the Security, with an appropriate form duly completed, to
the Company at the address specified in the notice at least three Business Days
prior to the Purchase Date. Holders shall be entitled to withdraw their election
if the Trustee or the Company receives not later than one Business Day prior to
the Purchase Date, a telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the Security which was delivered for
purchase by the Holder and a statement that such Holder is withdrawing his
election to have such Security purchased. Holders whose Securities are purchased
only in part shall be issued new Securities equal in principal amount to the
unpurchased portion of the Securities surrendered.
(4) At the time the Company delivers Securities to the Trustee
which are to be accepted for purchase, the Company shall also deliver an
Officers' Certificate stating that such Securities are to be accepted by the
Company pursuant to and in accordance with the terms of this Section 4.06. A
Security shall be deemed to have been accepted for purchase at the time the
Trustee, directly or through an agent, mails or delivers payment therefor to the
surrendering Holder.
(d) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section 4.06. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.06, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section by virtue of its
compliance with such securities laws or regulations.
SECTION 4.07. Limitation on Affiliate Transactions.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, enter into any transaction (including the purchase, sale, lease
or exchange of any property, employee compensation arrangements or the rendering
of any service) with, or for the benefit of, any Affiliate of the Company (an
"Affiliate Transaction") unless:
(1) the terms of the Affiliate Transaction are no less favorable
to the Company or such Restricted Subsidiary than those that
could reasonably be expected to be obtained at the time of the
Affiliate Transaction in arm's-length dealings with a Person
who is not an Affiliate;
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(2) if such Affiliate Transaction involves an amount in excess of
$10.0 million, the terms of the Affiliate Transaction are set
forth in writing and a majority of the non-employee directors
of the Company disinterested with respect to such Affiliate
Transaction have determined in good faith that the criteria
set forth in clause (1) are satisfied and have approved the
relevant Affiliate Transaction as evidenced by a resolution of
the Board of Directors; and
(3) if such Affiliate Transaction involves an amount in excess of
$25.0 million, the Board of Directors shall also have received
a written opinion from an Independent Qualified Party to the
effect that such Affiliate Transaction is fair, from a
financial standpoint, to the Company and its Restricted
Subsidiaries or is not less favorable to the Company and its
Restricted Subsidiaries than could reasonably be expected to
be obtained at the time in an arm's-length transaction with a
Person who was not an Affiliate.
(b) Section 4.07(a) will not prohibit:
(1) any Investment (other than a Permitted Investment) or other
Restricted Payment, in each case not prohibited to be made
pursuant to Section 4.04;
(2) any issuance of securities, or other payments, awards or
grants in cash, securities or otherwise pursuant to, or the
funding of, employment and severance arrangements, stock
options and stock ownership plans, phantom stock or other
incentive plans approved by the Board of Directors;
(3) loans or advances to officers, directors and employees in the
ordinary course of business of the Company or its Restricted
Subsidiaries, but in any event not to exceed $3.0 million in
the aggregate outstanding at any one time;
(4) any transaction with a Restricted Subsidiary or joint venture
or similar entity which would constitute an Affiliate
Transaction solely because the Company or a Restricted
Subsidiary owns an equity interest in or otherwise controls
such Restricted Subsidiary, joint venture or similar entity;
(5) the issuance or sale of any Capital Stock (other than
Disqualified Stock) of the Company;
(6) reasonable fees and reasonable compensation paid to, and
indemnity and similar arrangements provided on behalf of,
officers, directors and employees of the Company or any
Restricted Subsidiary as determined in good faith by the Board
of Directors or the Company's senior management; and
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(7) any agreement as in effect on the Issue Date or any
renewals, extensions or replacements of any such agreement (so
long as such renewals, extensions or replacements are not less
favorable to the Company or the Restricted Subsidiaries than
the original agreement in effect on the Issue Date) and the
transactions evidenced thereby.
SECTION 4.08. Change of Control.
(a) Upon the occurrence of a Change of Control, then unless the
Company shall have exercised its right to redeem all the Securities each Holder
shall have the right to require that the Company repurchase such Holder's
Securities at a purchase price in cash equal to 101% of the principal amount
thereof on the date of purchase 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), in
accordance with the terms contemplated in Section 4.08(b). In the event that at
the time of such Change of Control the terms of the Senior Indebtedness of the
Company (including the Revolving Credit Facility) restrict or prohibit the
repurchase of Securities following such Change of Control, then prior to the
mailing of the notice to Holders provided for in Section 4.08(b) below but in
any event within 30 days following any Change of Control, the Company shall (1)
repay in full all such Senior Indebtedness or (ii) obtain the requisite consents
under the agreements governing such Senior Indebtedness to permit the repurchase
of the Securities as provided for in Section 4.08(b).
(b) Unless the Company has exercised its right to redeem all the
Securities and shall have delivered irrevocable notice of redemption to the
Trustee, within 30 days following any Change of Control, the Company shall mail
a notice to each Holder with a copy to the Trustee (the "Change of Control
Offer") stating:
(1) that a Change of Control has occurred and that such Holder has
the right to require the Company to purchase such Holder's Securities at a
purchase price in cash equal to 101% of the principal amount thereof on
the date of purchase 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 on the relevant interest payment date);
(2) the circumstances and relevant facts regarding such Change of
Control (including information with respect to pro forma historical
income, cash flow and capitalization, each after giving effect to such
Change of Control);
(3) the purchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(4) the instructions, as determined by the Company, consistent
with this Section 4.08, that a Holder must follow in order to have its
Securities purchased.
(c) Holders electing to have a Security purchased will be required
to surrender the Security, with an appropriate form duly completed, to the
Company at the address specified in the notice at least three Business Days
prior to the purchase date. Holders will be entitled to withdraw their election
if the Trustee or the Company receives not later than one Business Day prior to
the purchase date, a telegram, telex, facsimile transmission or letter setting
forth the
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name of the Holder, the principal amount of the Security which was delivered for
purchase by the Holder and a statement that such Holder is withdrawing his
election to have such Security purchased.
(d) On the purchase date, all Securities purchased by the Company
under this Section 4.08 shall be delivered by the Company to the Trustee for
cancellation, and the Company shall pay the purchase price plus accrued and
unpaid interest, if any, to the Holders entitled thereto.
(e) Notwithstanding the foregoing provisions of this Section 4.08,
the Company shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in this Indenture applicable to a Change of Control Offer made by the Company
and purchases all Securities validly tendered and not withdrawn under such
Change of Control Offer.
(f) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities as a result of a
Change of Control. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.08, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.08 by virtue of its
compliance with such securities laws or regulations.
SECTION 4.09. Limitation on Liens. The Company shall not, and shall
not permit any Subsidiary Guarantor to, directly or indirectly, create, incur,
assume or suffer to exist or become effective any Lien securing Indebtedness of
any kind except for Permitted Liens, on or with respect to any of its assets,
whether owned at the Issue Date or thereafter acquired, unless (A) in the case
of any Lien securing Subordinated Obligations, the Securities are secured by a
Lien on such assets that is senior in priority to such Lien and (B) in the case
of any other Lien, the Securities are either secured equally and ratably with
such Indebtedness or are secured by a Lien on such assets that is senior in
priority to such Lien.
SECTION 4.10. Future Guarantors. The Company shall cause each
Restricted Subsidiary that Incurs any Indebtedness (other than Indebtedness
Incurred pursuant to and in compliance with the last clause of Section
4.03(b)(16)) to, at the same time, execute and deliver to the Trustee a Guaranty
Agreement pursuant to which such Restricted Subsidiary will Guarantee payment of
the Securities on the same terms and conditions as those set forth in this
Indenture.
SECTION 4.11. 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 4.12. 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 4.13. Suspension of Covenants.
(a) During any period that the Securities have an Investment Grade
Rating and no Default has occurred and is continuing, the Company and the
Restricted Subsidiaries shall not be subject to Sections 4.03(a), (b), (c) or
(d), 4.04, 4.05, 4.06, 4.07, 4.10 or 5.01(a)(3) (collectively, the "Suspended
Covenants").
(b) In the event that the Company and the Restricted Subsidiaries
are not subject to the Suspended Covenants for any period of time as a result of
Section 4.13(a), and subsequently one or both of S&P and Moody's downgrades the
rating assigned to the Securities below BBB-, in the case of S&P, and below
Baa3, in the case of Moody's, then the Company and the Restricted Subsidiaries
will thereafter again be subject to the Suspended Covenants (subject to
subsequent suspension if the Securities again receive an Investment Grade
Rating), and, with respect to Restricted Payments proposed to be made after the
time of such downgrade, the permissibility of such proposed Restricted Payments
will be calculated in accordance with Section 4.04 as though Section 4.04 had
been in effect since the Issue Date.
ARTICLE 5
Successor Company
SECTION 5.01. When Company May Merge or Transfer Assets.
(a) The Company shall not consolidate with or merge with or into,
or convey, transfer or lease, in one transaction or a series of transactions,
directly or indirectly, all or substantially all the assets of the Company and
its Restricted Subsidiaries, taken as a whole, to, any Person, unless:
(1) the resulting, surviving or transferee Person (the "Successor
Company") shall be a Person organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia
and the Successor Company (if not the Company) shall expressly assume, by
an indenture supplemental hereto, executed and delivered to the Trustee,
in form satisfactory to the Trustee, all the obligations of the Company
under the Securities and this Indenture;
(2) immediately after giving pro forma effect to such transaction
(and treating any Indebtedness which becomes an obligation of the
Successor Company or any Subsidiary as a result of such transaction as
having been Incurred by such Successor Company or such Subsidiary at the
time of such transaction), no Default shall have occurred and be
continuing;
(3) immediately after giving pro forma effect to such transaction,
the Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a);
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(4) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and such supplemental
indenture (if any) comply with this Indenture; and
(5) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that the Holders will recognize income, gain or loss
for Federal income tax purposes as a result of such transaction and will
not 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
transaction had not occurred;
provided, however, that Section 5.01(a)(3) will not be applicable (A) to the
Company or a Restricted Subsidiary consolidating with, merging into, conveying,
transferring or leasing all or part of its properties and assets to the Company
or a Subsidiary Guarantor, (B) to the Company merging with an Affiliate of the
Company solely for the purpose and with the sole effect of reincorporating the
Company in another jurisdiction or (C) at a time when the Company and its
Restricted Subsidiaries are not subject to the Suspended Covenants.
For purposes of this Section 5.01, the sale, lease, conveyance,
assignment, transfer or other disposition of all or substantially all of the
properties and assets of one or more Subsidiaries of the Company, which
properties and assets, if held by the Company instead of such Subsidiaries,
would constitute all or substantially all of the properties and assets of the
Company on a consolidated basis, shall be deemed to be the transfer of all or
substantially all of the properties and assets of the Company.
The Successor Company (if not the Company) shall be the successor to
the Company and shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture, and the predecessor
Company, except in the case of a lease, shall be released from the obligation to
pay the principal of and interest on the Securities.
(b) The Company shall not permit any Subsidiary Guarantor to
consolidate with or merge with or into, or convey, transfer or lease, in one
transaction or series of transactions, all or substantially all of its assets to
any Person unless: (1) except in the case of a Subsidiary Guarantor (other than
Encore Operating, L.P. and any Subsidiary Guarantor that directly or indirectly
holds an equity interest in Encore Operating, L.P.) that has been disposed of in
its entirety to another Person (other than to the Company or an Affiliate of the
Company), whether through a merger, consolidation or sale of Capital Stock or
assets, if in connection therewith the Company complies with its obligations
under Section 4.06 in respect of such disposition, the resulting, surviving or
transferee Person (if not such Subsidiary) shall be a Person organized and
existing under the laws of the jurisdiction under which such Subsidiary was
organized or under the laws of the United States of America, or any State
thereof or the District of Columbia, and, if such Person is not already a
Subsidiary Guarantor, such Person shall expressly assume, by a Guaranty
Agreement, in a form satisfactory to the Trustee, all the obligations of such
Subsidiary, if any, under its Subsidiary Guaranty; (2) immediately after giving
effect to such transaction or transactions on a pro forma basis (and treating
any Indebtedness which becomes an obligation of the resulting, surviving or
transferee Person as a result of such transaction as having been issued by such
Person at the time of such transaction),
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no Default shall have occurred and be continuing; and (3) in the event a
Guaranty Agreement is executed and delivered pursuant to clause (1) above, the
Company delivers to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that such consolidation, merger, conveyance, transfer or
lease and such Guaranty Agreement, if any, complies with this Indenture.
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default. An "Event of Default" occurs if:
(1) the Company defaults in any payment of interest on any
Security when the same becomes due and payable, whether or not such
payment shall be prohibited by Article 10, and such default continues for
a period of 30 days;
(2) the Company defaults in the payment of the principal of any
Security when the same becomes due and payable at its Stated Maturity,
upon optional redemption, upon declaration of acceleration or otherwise,
whether or not such payment shall be prohibited by Article 10;
(3) the Company fails to comply with Section 3.07 or 5.01;
(4) the Company fails to comply with Section 4.02, 4.03, 4.04,
4.05, 4.06, 4.07, 4.08, or 4.10 (other than a failure to purchase
Securities when required under Section 4.06 or 4.08) and such failure
continues for 30 days after the notice specified below;
(5) the Company or any Subsidiary Guarantor fails to comply with
any of its agreements in this Indenture (other than those referred to in
clause (1), (2), (3) or (4) above) and such failure continues for 60 days
after the notice specified below;
(6) Indebtedness of the Company, any Subsidiary Guarantor or any
Significant Subsidiary (other than Non-Recourse Purchase Money
Indebtedness) is not paid within any applicable grace period after final
maturity or is accelerated by the holders thereof because of a default and
the total amount of such Indebtedness unpaid or accelerated exceeds $10.0
million; provided, that if such default is cured or waived or any such
acceleration is rescinded, or such Indebtedness is repaid, within a period
of 10 days from the continuance of such default beyond the applicable
grace period or the occurrence of such acceleration, as the case may be,
such Event of Default and any consequential acceleration of the Securities
shall be automatically rescinded, so long as such rescission does not
conflict with any judgment or decree;
(7) the Company, any Subsidiary Guarantor or any Significant
Subsidiary pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
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(B) consents to the entry of an order for relief against it
in an involuntary case;
(C) consents to the appointment of a Custodian of it or for
any substantial part of its property; or
(D) makes a general assignment for the benefit of its
creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company, any Subsidiary
Guarantor or any Significant Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company, any Subsidiary
Guarantor or any Significant Subsidiary or for any substantial part
of its property; or
(C) orders the winding up or liquidation of the Company, any
Subsidiary Guarantor or any Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days; or
(9) any judgment or decree for the payment of money in excess of
$10.0 million above the coverage under applicable insurance policies and
indemnities as to which the relevant insurer or indemnitor has not
disclaimed responsibility is entered against the Company, a Subsidiary
Guarantor or any Significant Subsidiary, remains outstanding for a period
of 60 consecutive days following such judgment or decree and is not
discharged, waived or stayed (the "judgment default provision"); or
(10) a Subsidiary Guaranty ceases to be in full force and effect
(other than in accordance with the terms of such Subsidiary Guaranty) for
five days after notice or a Subsidiary Guarantor denies or disaffirms its
obligations under its Subsidiary Guaranty (the "Guaranty Failure
Provision").
The foregoing will constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
A Default under clauses (4), (5) or (10) is not an Event of Default
until the Trustee or the holders of at least 25% in principal amount of the
outstanding Securities notify the
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Company of the Default and the Company does not cure such Default within the
time specified after receipt of such notice. Such notice must specify the
Default, demand that it be remedied and state that such notice is a "Notice of
Default".
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (6) or (10) and any event which with the
giving of notice or the lapse of time would become an Event of Default under
clause (4), (5) or (9), its status and what action the Company is taking or
proposes to take with respect thereto.
SECTION 6.02. Acceleration. If an Event of Default (other than an
Event of Default specified in Section 6.01(7) or (8) with respect to the
Company) occurs and is continuing, the Trustee by notice to the Company, or the
Holders of at least 25% in principal amount of the outstanding Securities by
notice to the Company and the Trustee, may declare the principal of and accrued
but unpaid interest on all the Securities to be due and payable. Upon such a
declaration, such principal and interest shall be due and payable immediately.
If an Event of Default specified in Section 6.01(7) or (8) with respect to the
Company occurs, the principal of and interest on all the Securities shall ipso
facto become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any Securityholders. The Holders of a majority
in principal amount of the Securities by notice to the Trustee may rescind an
acceleration and its consequences if (i) the rescission would not conflict with
any judgment or decree and (ii) if all existing Events of Default have been
cured or waived except nonpayment of principal or interest that has become due
solely because of acceleration. 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 Securityholder 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 then outstanding (including consents obtained
in connection with a tender offer or exchange for the Securities) by notice to
the Trustee may waive an existing Default with respect to all of the Securities
and its consequences (including, without limitation, waivers obtained in
connection with a tender offer or exchange offer for, or purchases of,
Securities or a solicitations of consents in respect of the Securities) except
(i) a Default in the payment of the principal of or interest on a Security, (ii)
a Default arising from the failure to redeem or purchase any Security when
required pursuant to this Indenture or (iii) a Default in respect of a provision
that under Section 9.02 cannot be amended without the consent of each
Securityholder affected. When a Default is waived, it is deemed cured and shall
cease to exist,
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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 Securityholders 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. Except to enforce the right to
receive payment of principal, premium (if any) or interest when due, no
Securityholder may pursue any remedy with respect to this Indenture or the
Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the
outstanding Securities make a request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable
security or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the
outstanding Securities do not give the Trustee a direction inconsistent
with the request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights
of another Securityholder or to obtain a preference or priority over another
Securityholder.
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(1) or (2) 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.
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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 Securityholders
allowed in any judicial proceedings relative to the Company, its creditors or
its property and, unless prohibited by law or 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 and, if
such money or property has been collected from a Subsidiary Guarantor, to
holders of Senior Indebtedness of such Subsidiary Guarantor, in each case
to the extent required by Articles 10 and 12;
THIRD: to Securityholders 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 Securityholders pursuant to this Section. At least 15 days before such record
date, the Company shall mail to each Securityholder 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.
SECTION 6.12. Waiver of Stay or Extension Laws. The Company (to the
extent it may lawfully do so) shall not at any time insist upon, or plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which 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 shall not hinder, delay or impede
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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 had been enacted.
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.
(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 paragraph does not limit the effect of paragraph (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 paragraphs (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.
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(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 TIA.
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, but may accept
the same as conclusive evidence of the truth and accuracy of such statement or
the correctness of such opinions.
(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.
(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.
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.
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 the 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.
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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
Securityholder 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 a
committee of its Trust Officers in good faith determines that withholding the
notice is not opposed to the interests of Securityholders.
The Trustee shall not be required to take notice or be deemed to
have notice of any Event of Default, except failure of the Company to cause to
be made any required payment to the Trustee, unless the Trustee shall be
specifically notified of such default by the Company or by the Holders of at
least 25% in aggregate principal amount of all Securities then outstanding by a
notice delivered to the Corporate Trust Office of the Trustee and, in the
absence of such notice, the Trustee may conclusively assume no Default exists.
SECTION 7.06. Reports by Trustee to Holders. As promptly as
practicable after each June 15 beginning with the June 15 following the date of
this Indenture, and in any event prior to August 15 in each year, the Trustee
shall mail to each Securityholder a brief report dated as of June 15 that
complies with TIA Section 313(a). The Trustee also shall comply with TIA Section
313(b).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC 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 from time to time reasonable compensation for its services. 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 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 expense (including attorneys' fees) incurred by it in connection
with the 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. Neither the
Company nor any Guarantor need pay for any settlement made without its consent,
which consent will not 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.
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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(7) or (8) with respect to
the Company, the expenses are intended to constitute expenses of administration
under the Bankruptcy Law.
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 may 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 Securityholders. 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 Securityholder
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.
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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.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at
all times satisfy the requirements of TIA Section 310(a). The Trustee shall be a
corporation, bank or banking association organized and doing business under the
laws of the United States of America or any state that is authorized under such
laws to exercise corporate trustee power and 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.
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities; Defeasance.
(a) When (1) the Company delivers to the Trustee all outstanding
Securities (other than Securities replaced pursuant to Section 2.07) for
cancellation or (2) all outstanding Securities have become due and payable,
whether at maturity or on a redemption date as a result of the mailing of a
notice of redemption pursuant to Article 3 hereof and the Company irrevocably
deposits with the Trustee funds sufficient to pay at maturity or upon redemption
all outstanding Securities, including interest thereon to maturity or such
redemption date (other than Securities replaced pursuant to Section 2.07), and
if in either case the Company pays all other sums payable hereunder by the
Company, then this Indenture shall, subject to Section 8.01(c), 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) Subject to Sections 8.01(c) and 8.02, the Company at any time
may terminate (1) all its obligations under the Securities and this Indenture
("legal defeasance option") or (2) its obligations under Sections 4.02, 4.03,
4.04, 4.05, 4.06, 4.07, 4.08 and 4.09 and
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the operation of Sections 6.01(4), 6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but,
in the case of Sections 6.01(7) and (8), with respect only to Significant
Subsidiaries and Subsidiary Guarantors) and the limitations contained in
Sections 5.01(a)(3) ("covenant defeasance option"). The Company may exercise its
legal defeasance option notwithstanding its prior exercise of its covenant
defeasance option.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default with respect
thereto. 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(4), 6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in the case of
Sections 6.01(7) and 6.01(8), with respect only to Significant Subsidiaries and
Subsidiary Guarantors) or because of the failure of the Company to comply with
Section 5.01(a)(3). If the Company exercises its legal defeasance option or its
covenant defeasance option, each Subsidiary Guarantor, if any, shall be released
from all its obligations with respect to its Subsidiary Guaranty.
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.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07 and 7.08 and in
this Article 8 shall survive until the Securities have been paid in full.
Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05 shall
survive.
SECTION 8.02. 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 (the "defeasance
trust") with the Trustee money or U.S. Government Obligations for the
payment of principal of and interest 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 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(7) or (8) with respect to the
Company occurs which is continuing at the end of the 123-day period;
(4) the deposit does not constitute a default under any other
agreement binding on the Company and is not prohibited by Article 10;
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(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 (A) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (B) since the date of this Indenture there
has been a change in the applicable Federal income tax law, in either case
to the effect that, and based thereon such Opinion of Counsel shall
confirm that, the Securityholders 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 Securityholders will not recognize income, gain or loss for
Federal income tax purposes as a result of such covenant defeasance and
will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such covenant
defeasance had not occurred;
(8) the Company delivers to the Trustee an Opinion of Counsel in
the jurisdiction or organization of the Company (if other than the United
States) to the effect that (A) Holders will not recognize income, gain or
loss for income tax purposes of such jurisdiction as a result of such
deposit and defeasance, and will be subject to income tax of such
jurisdiction on the same amounts, and in the same manner and at the same
times as would have been the case if such deposit and defeasance had not
occurred; and
(9) 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 8.03. 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 of and interest on the Securities. Money and securities
so held in trust are not subject to Article 10.
SECTION 8.04. 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 request any money held by them
for the payment of
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principal or interest that remains unclaimed for two years, and, thereafter,
Securityholders entitled to the money must look to the Company for payment as
general creditors.
SECTION 8.05. 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 8.06. 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 and the Subsidiary Guarantors' obligations under
their respective Guarantees 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.
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders. Subject to Section 9.02 of
this Indenture, the Company, the Subsidiary Guarantors and the Trustee may amend
this Indenture or the Securities without notice to or consent of any
Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to add Guarantees with respect to the Securities, including
any Subsidiary Guaranties, to secure the Securities or to confirm the
release, termination or discharge of any Subsidiary Guarantor or any such
Lien when such release, termination or discharge is permitted under this
Indenture;
(5) to add to the covenants of the Company or a Subsidiary
Guarantor for the benefit of the Holders or to surrender any right or
power herein conferred upon the Company or a Subsidiary Guarantor;
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(6) to comply with any requirement of the SEC in connection with
qualifying, or maintaining the qualification of, this Indenture under the
TIA;
(7) to make any change that does not adversely affect in any
material respect the rights of any Securityholder; or
(8) to conform the text of this Indenture or the Securities to any
provision in the Offering Circular in the section "Description of the
Notes" to the extent that such provision in the "Description of the Notes"
was intended to be a verbatim recitation of a provision of this Indenture,
the Guarantees or the Securities.
However, no amendment may be made to the subordination provisions of
this Indenture that adversely affects the rights of any holder of Senior
Indebtedness of the Company or a Subsidiary Guarantor then outstanding unless
such holder of such Senior Indebtedness (or its Representative) consents to such
change or as otherwise permitted by the notes, debentures, bonds or other
similar instruments evidencing such Senior Indebtedness.
The consent of the holders of the Securities is not necessary to
approve the particular form of any proposed amendment. It is sufficient if such
consent approves the substance of the proposed amendment.
After an amendment under this Section 9.01 becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section 9.01.
SECTION 9.02. With Consent of Holders. The Company, the Subsidiary
Guarantors and the Trustee may amend or supplement this Indenture or the
Securities, or waive compliance in a particular instance by the Company with any
provisions hereof or thereof, without notice to any Securityholder but with the
written consent of the Holders of at least a majority in principal amount of the
Securities then outstanding (including consents obtained in connection with a
tender offer or exchange for the Securities). However, without the consent of
each Securityholder affected thereby, an amendment, supplement or waiver may not
(with respect to any Securities held by a non-consenting Holder):
(1) reduce the amount of Securities whose Holders must consent to
an amendment, supplement or waiver;
(2) reduce the rate of or extend the time for payment of interest
on any Security;
(3) reduce the principal amount of or extend the Stated Maturity
of any Security;
(4) reduce the amount payable upon the redemption of any Security
or change the time at which any Security may or is required to be redeemed
in accordance with Article 3;
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(5) make any Security payable in money other than that stated in
the Security;
(6) impair the right of any Securityholder to receive payment of
principal of and interest on such Securityholder's securities on or after
the due dates therefor or to institute suit for the enforcement of any
payment on or with respect to such Securityholder's Securities;
(7) make any change in Section 6.04 or 6.07 or the second sentence
of this Section 9.02;
(8) make any change in the ranking or priority of any Security
that would adversely affect the Securityholders; or
(9) make any change in any Subsidiary Guaranty that would
adversely affect the Securityholders in any material respect.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
After an amendment under this Section 9.02 becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment, supplement or waiver. The failure to give such notice to all
Securityholders, or any defect therein, shall not impair or affect the validity
of an amendment, supplement or waiver under this Section 9.02.
SECTION 9.03. Compliance with Trust Indenture Act. Every amendment
to this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. A
consent to an amendment, a supplement or a waiver by a Holder of a Security
shall bind the Holder and every subsequent Holder of that Security or portion of
the Security that evidences the same debt as the consenting Holder's Security,
even if notation of the consent, supplement 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, supplement or
waiver becomes effective. After an amendment, a supplement or waiver becomes
effective, it shall bind every Securityholder, unless it makes a change
described in any of clauses (1) through (9) of Section 9.02. In that case, the
amendment or waiver shall bind each Holder of a Security who has consented to it
and any subsequent Holder of such Security or any Security that evidences all or
any part of the same debt as the consenting Holder's Security. An amendment or
waiver becomes effective upon the execution of such amendment or waiver by the
Trustee.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Securityholders entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who were
Securityholders 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
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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
SECTION 10.01. Agreement To Subordinate. The Company agrees, and
each Securityholder by accepting a Security agrees, that the Indebtedness
evidenced by the Securities is subordinated in right of payment, to the extent
and in the manner provided in this Article 10, to the prior payment of all
Senior Indebtedness of the Company and that the subordination is for the benefit
of and enforceable by the holders of such Senior Indebtedness. The Securities
shall in all respects rank pari passu with all other Senior Subordinated
Indebtedness of the Company and only Indebtedness of the Company which is Senior
Indebtedness of the Company shall rank senior to the Securities in accordance
with the provisions set forth herein. All provisions of this Article 10 shall be
subject to Section 10.12.
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SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets of the Company to creditors upon a total
or partial liquidation or a total or partial dissolution of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property:
(1) holders of Senior Indebtedness of the Company shall be
entitled to receive payment in full in cash of such Senior Indebtedness
before Securityholders shall be entitled to receive any payment of
principal of or interest on the Securities; and
(2) until such Senior Indebtedness is paid in full in cash, any
payment or distribution to which Securityholders would be entitled but for
this Article 10 shall be made to holders of such Senior Indebtedness as
their interests may appear, except that Securityholders may receive shares
of stock and any debt securities that are subordinated to such Senior
Indebtedness to at least the same extent as the Securities.
SECTION 10.03. Default on Senior Indebtedness of the Company. The
Company shall not pay the principal of or interest on the Securities or make any
deposit pursuant to Section 8.01 and may not purchase, redeem or otherwise
retire any Securities (collectively, "pay the Securities") if either of the
following (a "Payment Default") occurs (1) any Obligation on any Designated
Senior Indebtedness of the Company is not paid in full in cash when due; or (2)
any other default on Designated Senior Indebtedness of the Company occurs and
the maturity of such Designated Senior Indebtedness is accelerated in accordance
with its terms unless, in either case, the Payment Default has been cured or
waived and any such acceleration has been rescinded or such Designated Senior
Indebtedness has been paid in full in cash; provided, however, that the Company
shall be entitled to pay the Securities without regard to the foregoing if the
Company and the Trustee receive written notice approving such payment from the
Representative of any Designated Senior Indebtedness with respect to which the
Payment Default has occurred and is continuing. During the continuance of any
default (other than a Payment Default) with respect to any Designated Senior
Indebtedness of the Company pursuant to which the maturity thereof may be
accelerated immediately without further notice (except such notice as may be
required to effect such acceleration) or the expiration of any applicable grace
periods, the Company shall not pay the Securities for a period (a "Payment
Blockage Period") commencing upon the receipt by the Trustee of (with a copy to
the Company) written notice (a "Blockage Notice") of such default from the
Representative of such Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter. The Payment
Blockage Period shall end earlier if such Payment Blockage Period is terminated
(1) by written notice to the Trustee and the Company from the Person or Persons
who gave such Blockage Notice; (2) because the default giving rise to such
Blockage Notice is cured, waived or otherwise no longer continuing; or (3)
because such Designated Senior Indebtedness has been discharged or repaid in
full in cash. Notwithstanding the provisions described in the immediately
preceding two sentences (but subject to the provisions contained in the first
sentence of this Section), unless the holders of such Designated Senior
Indebtedness or the Representative of such Designated Senior Indebtedness shall
have accelerated the maturity of such Designated Senior Indebtedness, the
Company shall be entitled to resume payments on the Securities after termination
of such Payment Blockage Period. The Securities shall not be subject to more
than one Payment Blockage Period in any consecutive 360-day period, irrespective
of the number of defaults with respect to Designated Senior Indebtedness of the
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Company during such period, except that if any Blockage Notice is delivered to
the Trustee by or on behalf of holders of Designated Senior Indebtedness of the
Company (other than holders of the Bank Indebtedness), a Representative of
holders of Bank Indebtedness may give another Blockage Notice within such
period. However, in no event may the total number of days during which any
Payment Blockage Period or Periods is in effect exceed 179 days in the aggregate
during any consecutive 360-day period, and there must be 181 days during any
consecutive 360-day period during which no Payment Blockage Period is in effect.
For purposes of this Section, no default or event of default which existed or
was continuing on the date of the commencement of any Payment Blockage Period
with respect to the Designated Senior Indebtedness of the Company initiating
such Payment Blockage Period shall be, or be made, the basis of the commencement
of a subsequent Payment Blockage Period by the Representative of such Designated
Senior Indebtedness unless such default or event of default shall have been
cured or waived for a period of not less than 90 consecutive days.
SECTION 10.04. Acceleration of Payment of Securities. If payment of
the Securities is accelerated because of an Event of Default, the Company or the
Trustee shall promptly notify the holders of the Designated Senior Indebtedness
of the Company (or their Representatives) of the acceleration.
SECTION 10.05. When Distribution Must Be Paid Over. If a
distribution is made to Securityholders that because of this Article 10 should
not have been made to them, the Securityholders who receive the distribution
shall hold it in trust for holders of Senior Indebtedness of the Company and pay
it over to them as their interests may appear.
SECTION 10.06. Subrogation. After all Senior Indebtedness of the
Company is paid in full and until the Securities are paid in full,
Securityholders shall be subrogated to the rights of holders of such Senior
Indebtedness to receive distributions applicable to such Senior Indebtedness. A
distribution made under this Article 10 to holders of such Senior Indebtedness
which otherwise would have been made to Securityholders is not, as between the
Company and Securityholders, a payment by the Company on such Senior
Indebtedness.
SECTION 10.07. Relative Rights. This Article 10 defines the relative
rights of Securityholders and holders of Senior Indebtedness of the Company.
Nothing in this Indenture shall:
(1) impair, as between the Company and Securityholders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Securities in accordance with their
terms; or
(2) prevent the Trustee or any Securityholder from exercising its
available remedies upon a Default, subject to the rights of holders of
Senior Indebtedness of the Company to receive distributions otherwise
payable to Securityholders.
SECTION 10.08. Subordination May Not Be Impaired by Company. No
right of any holder of Senior Indebtedness of the Company to enforce the
subordination of the Indebtedness evidenced by the Securities shall be impaired
by any act or failure to act by the Company or by its failure to comply with
this Indenture.
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SECTION 10.09. Rights of Trustee and Paying Agent. Notwithstanding
Section 10.03, the Trustee or Paying Agent shall continue to make payments on
the Securities and shall not be charged with knowledge of the existence of facts
that under this Article 10 would prohibit the making of any such payments
unless, not less than two Business Days prior to the date of such payment, a
Trust Officer of the Trustee receives notice satisfactory to it that such
payments are prohibited by this Article 10. The Company, the Registrar or
co-registrar, the Paying Agent, a Representative or a holder of Senior
Indebtedness of the Company shall be entitled to give the notice; provided,
however, that, if an issue of Senior Indebtedness of the Company has a
Representative, only the Representative shall be entitled to give the notice.
The Trustee in its individual or any other capacity shall be
entitled to hold Senior Indebtedness of the Company with the same rights it
would have if it were not Trustee. The Registrar and co-registrar and the Paying
Agent shall be entitled to do the same with like rights. The Trustee shall be
entitled to all the rights set forth in this Article 10 with respect to any
Senior Indebtedness of the Company which may at any time be held by it, to the
same extent as any other holder of such Senior Indebtedness; and nothing in
Article 7 shall deprive the Trustee of any of its rights as such holder. Nothing
in this Article 10 shall apply to claims of, or payments to, the Trustee under
or pursuant to Section 7.07.
SECTION 10.10. Distribution or Notice to Representative. Whenever
any Person is to make a distribution or give a notice to holders of Senior
Indebtedness of the Company, such Person shall be entitled to make such
distribution or give such notice to their Representative (if any).
SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit
Right To Accelerate. The failure to make a payment pursuant to the Securities by
reason of any provision in this Article 10 shall not be construed as preventing
the occurrence of a Default. Nothing in this Article 10 shall have any effect on
the right of the Securityholders or the Trustee to accelerate the maturity of
the Securities.
SECTION 10.12. Trust Moneys and Escrow Funds Not Subordinated.
Notwithstanding anything contained herein to the contrary, payments from either
(i) money or the proceeds of U.S. Government Obligations held in trust under
Article 8 by the Trustee for the payment of principal of and interest on the
Securities or (ii) any funds received by the Trustee or Paying Agent from the
Escrow Agent following the Special Mandatory Redemption Trigger shall not be
subordinated to the prior payment of any Senior Indebtedness of the Company or
subject to the restrictions set forth in this Article 10, and none of the
Securityholders shall be obligated to pay over any such amount to the Company or
any holder of Senior Indebtedness of the Company or any other creditor of the
Company.
SECTION 10.13. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article 10, the Trustee and the Securityholders
shall be entitled to rely (1) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 10.02
are pending, (2) upon a certificate of the liquidating trustee or agent or other
Person making such payment or distribution to the Trustee or to the
Securityholders or (3) upon the Representatives of Senior Indebtedness of the
Company for the purpose of ascertaining the Persons entitled to participate in
such payment or distribution, the holders of
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such Senior Indebtedness and other Indebtedness of the Company, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article 10. In the event that
the Trustee determines, in good faith, that evidence is required with respect to
the right of any Person as a holder of Senior Indebtedness of the Company to
participate in any payment or distribution pursuant to this Article 10, the
Trustee shall be entitled to request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of such Senior
Indebtedness held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and other facts pertinent to the
rights of such Person under this Article 10, and, if such evidence is not
furnished, the Trustee shall be entitled to defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all
actions or omissions of actions by the Trustee pursuant to this Article 10.
SECTION 10.14. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Securityholders and the holders of
Senior Indebtedness of the Company as provided in this Article 10 and appoints
the Trustee as attorney-in-fact for any and all such purposes.
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness of the Company. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness of the Company and shall
not be liable to any such holders if it shall mistakenly pay over or distribute
to Securityholders or the Company or any other Person, money or assets to which
any holders of Senior Indebtedness of the Company shall be entitled by virtue of
this Article 10 or otherwise.
SECTION 10.16. Reliance by Holders of Senior Indebtedness of the
Company on Subordination Provisions. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Indebtedness of the Company, whether such Senior Indebtedness was created or
acquired 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
such Senior Indebtedness shall be deemed conclusively to have relied on such
subordination provisions in acquiring and continuing to hold, or in continuing
to hold, such Senior Indebtedness.
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 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 "Guaranteed
Obligations"). Each Subsidiary Guarantor further agrees that the
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Guaranteed 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 Guaranteed Obligations and also
waives notice of protest for nonpayment. Each Subsidiary Guarantor waives notice
of any default under the Securities or the Guaranteed 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 Guaranteed 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
Guaranteed Obligations; or (f) except as set forth in Section 11.06, any change
in the ownership of such Subsidiary Guarantor.
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 Guaranteed Obligations.
Except as expressly set forth in Sections 8.01(b), 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
Guaranteed 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 Guarantee 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 or interest on any Guaranteed
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 or interest on any Guaranteed Obligation
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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 Guaranteed
Obligation, each Subsidiary Guarantor hereby promises to and shall, 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 (1) the unpaid
amount of such Guaranteed Obligations, (2) accrued and unpaid interest on such
Guaranteed Obligations (but only to the extent not prohibited by law) and (3)
all other monetary Guaranteed Obligations of the Company to the Holders and the
Trustee.
Each Subsidiary Guarantor agrees that, as between it, on the one
hand, and the Holders and the Trustee, on the other hand, (x) the maturity of
the Guaranteed Obligations 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 Guaranteed Obligations as
provided in Article 6, such Guaranteed Obligations (whether or not due and
payable) shall forthwith become due and payable by such Subsidiary Guarantor for
the purposes of this Section 11.01.
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 11.01.
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.
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
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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. Upon (a) the sale or
other disposition (including by way of consolidation or merger) of all of the
Capital Stock of a Subsidiary Guarantor, (b) the sale or disposition of all or
substantially all the assets of such Subsidiary Guarantor or (c) the designation
of such Subsidiary Guarantor as an Unrestricted Subsidiary (in each case other
than a sale or disposition to the Company or an Affiliate of the Company), such
Subsidiary Guarantor shall be deemed released from all obligations under this
Article 11 without any further action required on the part of the Trustee or any
Holder. At the request of the Company, the Trustee shall execute and deliver an
appropriate instrument evidencing such release.
ARTICLE 12
Subordination of Subsidiary Guaranties
SECTION 12.01. Agreement To Subordinate. Each Subsidiary Guarantor
agrees, and each Securityholder by accepting a Security agrees, that the
Indebtedness evidenced by such Subsidiary Guarantor's Subsidiary Guaranty is
subordinated in right of payment, to the extent and in the manner provided in
this Article 12, to the prior payment of all Senior Indebtedness of such
Subsidiary Guarantor and that the subordination is for the benefit of and
enforceable by the holders of such Senior Indebtedness. The Obligations of a
Subsidiary Guarantor shall in all respects rank pari passu with all other Senior
Subordinated Indebtedness of such Subsidiary Guarantor and only Senior
Indebtedness of such Subsidiary Guarantor (including such Subsidiary Guarantor's
Guaranty of Senior Indebtedness of the Company) shall rank senior to the
Obligations of such Subsidiary Guarantor in accordance with the provisions set
forth herein.
SECTION 12.02. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets of any Subsidiary Guarantor to creditors
upon a total or partial liquidation or a total or partial dissolution of such
Subsidiary Guarantor or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to such Subsidiary Guarantor or its
property:
(1) holders of Senior Indebtedness of such Subsidiary Guarantor
shall be entitled to receive payment in full in cash of such Senior
Indebtedness before Securityholders shall be entitled to receive any
payment pursuant to the Subsidiary Guaranty of such Subsidiary Guarantor;
and
(2) until the Senior Indebtedness of any Subsidiary Guarantor is
paid in full in cash, any payment or distribution to which Securityholders
would be entitled but for this Article 12 shall be made to holders of such
Senior Indebtedness as their interests may appear, except that
Securityholders may receive shares of stock and any debt securities of
such Subsidiary Guarantor that are subordinated to such Senior
Indebtedness to at least the same extent as Subsidiary Guaranty.
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SECTION 12.03. Default on Senior Indebtedness of Subsidiary
Guarantor. No Subsidiary Guarantor shall make its Subsidiary Guaranty or
purchase, redeem or otherwise retire or defease any Securities or other
Obligations (collectively, "pay its Subsidiary Guaranty") if either of the
following (a "Payment Default") occurs (1) any Obligation on any Designated
Senior Indebtedness of such Subsidiary Guarantor is not paid in full in cash
when due; or (2) any other default on Designated Senior Indebtedness of such
Subsidiary Guarantor occurs and the maturity of such Designated Senior
Indebtedness is accelerated in accordance with its terms; unless, in either
case, the Payment Default has been cured or waived and any such acceleration has
been rescinded or such Designated Senior Indebtedness has been paid in full in
cash; provided, however, that any Subsidiary Guarantor shall be entitled to pay
its Subsidiary Guaranty without regard to the foregoing if such Subsidiary
Guarantor and the Trustee receive written notice approving such payment from the
Representative of any Designated Senior Indebtedness with respect to which the
Payment Default has occurred and is continuing. During the continuance of any
default (other than a Payment Default) with respect to any Designated Senior
Indebtedness of such Subsidiary Guarantor pursuant to which the maturity thereof
may be accelerated immediately without further notice (except such notice as may
be required to effect such acceleration) or the expiration of any applicable
grace periods, such Subsidiary Guarantor shall not pay its Subsidiary Guaranty
for a period (a "Payment Blockage Period") commencing upon the receipt by the
Trustee of (with a copy to such Subsidiary Guarantor) written notice (a
"Blockage Notice") of such default from the Representative of such Designated
Senior Indebtedness specifying an election to effect a Payment Blockage Period
and ending 179 days thereafter. The Payment Blockage Period shall end earlier if
such Payment Blockage Period is terminated (1) by written notice to the Trustee
and such Subsidiary Guarantor from the Person or Persons who gave such Blockage
Notice; (2) because the default giving rise to such Blockage Notice is cured,
waived or otherwise no longer continuing; or (3) because such Designated Senior
Indebtedness has been discharged or repaid in full in cash. Notwithstanding the
provisions described in the immediately preceding two sentences (but subject to
the provisions contained in the first sentence of this Section), unless the
holders of such Designated Senior Indebtedness giving such Payment Notice or the
Representative of such Designated Senior Indebtedness shall have accelerated the
maturity of such Designated Senior Indebtedness, any Subsidiary Guarantor shall
be entitled to resume payments pursuant to its Subsidiary Guaranty after
termination of such Payment Blockage Period. No Subsidiary Guarantor shall be
subject to more than one Blockage Period in any consecutive 360-day period,
irrespective of the number of defaults with respect to Designated Senior
Indebtedness of such Subsidiary Guarantor during such period, except that if any
Blockage Notice is delivered to the Trustee by or on behalf of holders of
Designated Senior Indebtedness of such Subsidiary Guarantor (other than holders
of the Bank Indebtedness), a Representative of holders of Bank Indebtedness may
give another Blockage Notice within such period. However, in no event may the
total number of days during which any Payment Blockage Period or Periods is in
effect exceed 179 days in the aggregate during any consecutive 360-day period,
and there must be 181 days during any consecutive 360-day period during which no
Payment Blockage Period is in effect. For purposes of this Section, no default
or event of default which existed or was continuing on the date of the
commencement of any Payment Blockage Period with respect to the Designated
Senior Indebtedness of such Subsidiary Guarantor initiating such Payment
Blockage Period shall be, or be made, the basis of the commencement of a
subsequent Payment Blockage Period by the Representative of such
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Designated Senior Indebtedness unless such default or event of default shall
have been cured or waived for a period of not less than 90 consecutive days.
SECTION 12.04. Demand for Payment. If a demand for payment is made
on a Subsidiary Guarantor pursuant to Article 11, the Trustee shall promptly
notify the holders of the Designated Senior Indebtedness of such Subsidiary
Guarantor (or their Representatives) of such demand.
SECTION 12.05. When Distribution Must Be Paid Over. If a
distribution is made to Securityholders that because of this Article 12 should
not have been made to them, the Securityholders who receive the distribution
shall hold it in trust for holders of Senior Indebtedness of the applicable
Subsidiary Guarantor and pay it over to them or their Representatives as their
interests may appear.
SECTION 12.06. Subrogation. After all Senior Indebtedness of a
Subsidiary Guarantor is paid in full and until the Securities are paid in full,
Securityholders shall be subrogated to the rights of holders of such Senior
Indebtedness to receive distributions applicable to Senior Indebtedness of such
Subsidiary Guarantor. A distribution made under this Article 12 to holders of
such Senior Indebtedness which otherwise would have been made to Securityholders
is not, as between the relevant Subsidiary Guarantor and Securityholders, a
payment by such Subsidiary Guarantor on such Senior Indebtedness.
SECTION 12.07. Relative Rights. This Article 12 defines the relative
rights of Securityholders and holders of Senior Indebtedness of a Subsidiary
Guarantor. Nothing in this Indenture shall:
(1) impair, as between a Subsidiary Guarantor and Securityholders,
the obligation of such Subsidiary Guarantor, which is absolute and
unconditional, to pay its Subsidiary Guaranty to the extent set forth in
Article 11; or
(2) prevent the Trustee or any Securityholder from exercising its
available remedies upon a default by such Subsidiary Guarantor under its
Subsidiary Guaranty, subject to the rights of holders of Senior
Indebtedness of such Subsidiary Guarantor to receive distributions
otherwise payable to Securityholders.
SECTION 12.08. Subordination May Not Be Impaired by Company. No
right of any holder of Senior Indebtedness of any Subsidiary Guarantor to
enforce the subordination of the Subsidiary Guaranty of such Subsidiary
Guarantor shall be impaired by any act or failure to act by such Subsidiary
Guarantor or by its failure to comply with this Indenture.
SECTION 12.09. Rights of Trustee and Paying Agent. Notwithstanding
Section 12.03, the Trustee or Paying Agent shall continue to make payments on
any Subsidiary Guaranty and shall not be charged with knowledge of the existence
of facts that would prohibit the making of any such payments unless, not less
than two Business Days prior to the date of such payment, a Trust Officer of the
Trustee receives written notice satisfactory to it that such payments are
prohibited by this Article 12. The Company, the relevant Subsidiary Guarantor,
the Registrar or co-registrar, the Paying Agent, a Representative or a holder of
Senior Indebtedness of such Subsidiary Guarantor shall be entitled to give the
notice; provided, however, that, if an issue of
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Senior Indebtedness of any Subsidiary Guarantor has a Representative, only the
Representative shall be entitled to give the notice.
The Trustee in its individual or any other capacity shall be
entitled to hold Senior Indebtedness of any Subsidiary Guarantor with the same
rights it would have if it were not the Trustee. The Registrar and co-registrar
and the Paying Agent may do the same with like rights. The Trustee shall be
entitled to all the rights set forth in this Article 12 with respect to any
Senior Indebtedness of any Subsidiary Guarantor which may at any time be held by
it, to the same extent as any other holder of such Senior Indebtedness; and
nothing in Article 7 shall deprive the Trustee of any of its rights as such
holder. Nothing in this Article 12 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 7.07.
SECTION 12.10. Distribution or Notice to Representative. Whenever
any Person is to make a distribution or give a notice to holders of Senior
Indebtedness of any Subsidiary Guarantor, such Person shall be entitled to make
such distribution or give such notice to their Representative (if any).
SECTION 12.11. Article 12 Not To Prevent Events of Default or Limit
Right To Demand Payment. The failure to make a payment pursuant to a Subsidiary
Guaranty by reason of any provision in this Article 12 shall not be construed as
preventing the occurrence of a Default. Nothing in this Article 12 shall have
any effect on the right of the Securityholders or the Trustee to make a demand
for payment on any Subsidiary Guarantor pursuant to its Subsidiary Guaranty.
SECTION 12.12. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article 12, the Trustee and the Securityholders
shall be entitled to rely (1) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 12.02
are pending, (2) upon a certificate of the liquidating trustee or agent or other
Person making such payment or distribution to the Trustee or to the
Securityholders or (3) upon the Representatives for the holders of Senior
Indebtedness of any Subsidiary Guarantor for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the holders of
such Senior Indebtedness and other indebtedness of such Subsidiary Guarantor,
the amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article 12. In the
event that the Trustee determines, in good faith, that evidence is required with
respect to the right of any Person as a holder of Senior Indebtedness of any
Subsidiary Guarantor to participate in any payment or distribution pursuant to
this Article 12, the Trustee shall be entitled to request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Indebtedness of such Subsidiary Guarantor held by such Person, the extent
to which such Person is entitled to participate in such payment or distribution
and other facts pertinent to the rights of such Person under this Article 12,
and, if such evidence is not furnished, the Trustee shall be entitled to defer
any payment to such Person pending judicial determination as to the right of
such Person to receive such payment. The provisions of Sections 7.01 and 7.02
shall be applicable to all actions or omissions of actions by the Trustee
pursuant to this Article 12.
SECTION 12.13. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such action as may
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be necessary or appropriate to acknowledge or effectuate the subordination
between the Securityholders and the holders of Senior Indebtedness of any
Subsidiary Guarantor as provided in this Article 12 and appoints the Trustee as
attorney-in-fact for any and all such purposes.
SECTION 12.14. Trustee Not Fiduciary for Holders of Senior
Indebtedness of Subsidiary Guarantor. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness of any Subsidiary Guarantor
and shall not be liable to any such holders if it shall mistakenly pay over or
distribute to Securityholders or the Company or any other Person, money or
assets to which any holders of such Senior Indebtedness shall be entitled by
virtue of this Article 12 or otherwise.
SECTION 12.15. Reliance by Holders of Senior Indebtedness of
Subsidiary Guarantors on Subordination Provisions. Each Securityholder by
accepting a Security acknowledges and agrees that the foregoing subordination
provisions are, and are intended to be, an inducement and a consideration to
each holder of any Senior Indebtedness of any Subsidiary Guarantor, whether such
Senior Indebtedness was created or acquired 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 on such subordination provisions in acquiring and continuing to
hold, or in continuing to hold, such Senior Indebtedness.
ARTICLE 13
Miscellaneous
SECTION 13.01. Trust Indenture Act Controls. If any provision of
this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 13.02. Notices. Any notice or communication shall be in
writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company or any Subsidiary Guarantor:
Encore Acquisition Company
777 Main Street
Suite 1400
Fort Worth, TX 76102
Attention: Roy W. Jageman
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if to the Trustee:
Wells Fargo Bank, National Association
505 Main Street
Suite 301
Fort Worth, TX 76102
Attention: Corporate Trust Administration
The Company, any Subsidiary Guarantor or the Trustee by notice to
the other may designate additional or different addresses for subsequent notices
or communications.
Any notice or communication mailed to a Securityholder shall be
mailed to the Securityholder at the Securityholder's address as it appears on
the registration books of the Registrar and shall be sufficiently given if so
mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 13.03. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, any Subsidiary Guarantor, the Trustee, the Registrar
and anyone else shall have the protection of TIA Section 312(c).
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take or refrain
from taking any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 13.05. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;
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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 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 such
individual, such covenant or condition has been complied with.
SECTION 13.06. 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.
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar. The
Trustee may make reasonable rules for action by or a meeting of Securityholders.
The Registrar and the Paying Agent may make reasonable rules for their
functions.
SECTION 13.08. 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, Texas or Minnesota. 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 13.09. Governing Law. This Indenture and the Securities
shall be governed by, and construed in accordance with, the laws of the State of
New York 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 13.10. 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 under the
Securities or this Indenture or of such Subsidiary Guarantor under its
Subsidiary Guaranty 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 Securityholder waives and releases all such liability. The waiver and
release shall be part of the consideration for the issue of the Securities.
SECTION 13.11. Successors. All agreements of the Company in this
Indenture and the Securities shall bind their respective successors. All
agreements of the Trustee in this Indenture shall bind its successors.
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SECTION 13.12. Multiple Originals. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
SECTION 13.13. 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 written above.
ENCORE ACQUISITION COMPANY,
By /s/ Roy W. Jageman
---------------------------------------------
Roy W. Jageman
Executive Vice
President & Chief
Financial Officer
EAP ENERGY, INC.,
By /s/ Roy W. Jageman
--------------------------------------------
Roy W. Jageman
Executive Vice
President & Chief
Financial Officer
EAP ENERGY SERVICES, L.P.,
By EAP Energy, Inc.,
its general partner
By /s/ Roy W. Jageman
----------------------------------------
Roy W. Jageman
Executive Vice
President & Chief
Financial Officer
EAP OPERATING, INC.,
By /s/ Roy W. Jageman
---------------------------------------------
Roy W. Jageman
Executive Vice
President & Chief
Financial Officer
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EAP PROPERTIES, INC.,
By /s/ Robert A. Sagedy
---------------------------------------------
Robert A. Sagedy
Vice President
ENCORE OPERATING, L.P.,
By EAP Operating, Inc.,
its general partner
By /s/ Roy W. Jageman
----------------------------------------
Roy W. Jageman
Executive Vice
President & Chief
Financial Officer
ENCORE OPERATING LOUISIANA LLC,
By /s/ Tom Olle
---------------------------------------------
Tom Olle
President
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WELLS FARGO BANK, NATIONAL ASSOCIATION,
By /s/ Melissa Scott
---------------------------------------------
Name: Melissa Scott
Title: Vice President
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RULE 144A/REGULATION S APPENDIX
PROVISIONS RELATING TO INITIAL SECURITIES,
PRIVATE EXCHANGE SECURITIES
AND EXCHANGE SECURITIES
1. Definitions
1.1 Definitions
For the purposes of this Appendix the following terms shall have the
meanings indicated below:
"Depository" means The Depository Trust Company, its nominees and
their respective successors.
"Exchange Securities" means (1) the 6.25% Senior Subordinated Notes
Due 2014 issued pursuant to the Indenture in connection with the Registered
Exchange Offer pursuant to the Registration Rights Agreement and (2) Additional
Securities, if any, issued pursuant to a registration statement filed with the
SEC under the Securities Act.
"Initial Purchasers" means (1) with respect to the Initial
Securities issued on the Issue Date, Goldman, Sachs & Co., Credit Suisse First
Boston LLC, BNP Paribas Securities Corp., Deutsche Bank Securities Inc., Fleet
Securities, Inc., Fortis Investment Services LLC, J.P. Morgan Securities Inc.,
KeyBanc Capital Markets, A Division of McDonald Investments Inc. and Stanford
Group Company and (2) with respect to each issuance of Additional Securities,
the Persons purchasing such Additional Securities under the related Purchase
Agreement.
"Initial Securities" means (1) $150 million aggregate principal
amount of 6.25% Senior Subordinated Notes Due 2014 issued on the Issue Date and
(2) Additional Securities, if any, issued in a transaction exempt from the
registration requirements of the Securities Act.
"Private Exchange" means the offer by the Company, pursuant to
the Registration Rights Agreement, to the Initial Purchasers to issue and
deliver to each Initial Purchaser, in exchange for the Initial Securities held
by the Initial Purchaser as part of its initial distribution, a like aggregate
principal amount of Private Exchange Securities.
"Private Exchange Securities" means any 6.25% Senior
Subordinated Notes Due 2014 issued in connection with a Private Exchange.
"Purchase Agreement" means (1) with respect to the Initial
Securities issued on the Issue Date, the Purchase Agreement dated March 30,
2004, among the Company, the Subsidiary Guarantors and the Initial Purchasers,
and (2) with respect to each issuance of Additional Securities, the purchase
agreement or underwriting agreement among the Company and the Persons purchasing
such Additional Securities.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Registered Exchange Offer" means the offer by the Company,
pursuant to the Registration Rights 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 Rights Agreement" means (1) with respect to the
Initial Securities issued on the Issue Date, the Registration Rights Agreement
dated April 2, 2004 among the Company, the Subsidiary Guarantors and the Initial
Purchasers, and (2) with respect to each issuance of Additional Securities
issued in a transaction exempt from the registration requirements of the
Securities Act, the registration rights agreement, if any, among the Company and
the Persons purchasing such Additional Securities under the related Purchase
Agreement.
"Securities" means the Initial Securities, the Exchange
Securities and the Private Exchange Securities, treated as a single class.
"Securities Act" means the Securities Act of 1933.
"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 or Private Exchange Securities pursuant to the a Registration Rights
Agreement.
"Transfer Restricted Securities" means Securities that bear or
are required to bear the legend set forth in Section 2.3(b)hereto.
1.2 Other Definitions
Defined in
Term Section:
---- --------
"Agent Members" ............ 2.1(b)
"Global Security" .......... 2.1(a)
"Regulation S" ............. 2.1(a)
"Restricted Global Security" 2.1(a)
"Rule 144A" ................ 2.1(a)
2. The Securities.
2.1 (a) Form and Dating. Initial Securities offered and sold to a QIB in
reliance on Rule 144A under the Securities Act ("Rule 144A") or in reliance on
Regulation S under the Securities Act ("Regulation S"), in each case as provided
in the Purchase Agreement, and Private Exchange Securities, as provided in the
Registration Rights 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 "Restricted Global Security"),
which shall be deposited on behalf of the purchasers of the Initial Securities
represented thereby with the Trustee, at its
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principal corporate trust office,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 hereinafter provided. 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. Exchange Securities shall be issued in global
form (with the global securities legend set forth in Exhibit 1 hereto) or in
certificated form at the option of the Holders thereof from time to time.
Exchange Securities issued in global form and Restricted Global Securities are
sometimes referred to in this Appendix as "Global Securities."
(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), authenticate and deliver initially one or more Global
Securities that (a) shall be registered in the name of the Depository for such
Global Security or Global Securities or the nominee of such Depository and (b)
shall 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 such Global Security, and the Company, the
Trustee and any agent of the Company or the Trustee shall be entitled to treat
the Depository 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 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.
(c) Certificated Securities. Except as provided in this Section 2.1 or
Section 2.3 or 2.4, owners of beneficial interests in Restricted Global
Securities shall not be entitled to receive physical delivery of certificated
Securities.
2.2 Authentication. The Trustee shall authenticate and deliver: (1) on
the Issue Date, an aggregate principal amount of $150 million 6.25% Senior
Subordinated Notes Due 2014, (2) any Additional Securities for an original issue
in an aggregate principal amount specified in the written order of the Company
pursuant to Section 2.02 of the Indenture and (3) Exchange Securities or Private
Exchange Securities for issue only in a Registered Exchange Offer or a Private
Exchange, respectively, pursuant to a Registration Rights Agreement, for a like
principal amount of Initial Securities, in each case upon a written order of the
Company signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary 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, in the case of any issuance of
Additional Securities pursuant to Section 2.13 of the Indenture, shall certify
that such issuance is in compliance with Section 4.03 of the Indenture.
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2.3 Transfer and Exchange.
(a) 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 Depositary 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 (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 Restricted Global Security is exchanged
for Securities in certificated registered form pursuant to Section 2.4 of this
Appendix, prior to the consummation of a Registered Exchange Offer or the
effectiveness of a Shelf Registration Statement with respect to such 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.
(b) Legend.
(i) Except as permitted by the following paragraphs (ii), (iii)
and (iv), each Security certificate evidencing the Restricted Global
Securities (and all Securities issued in exchange therefor or in
substitution thereof) shall bear a legend in substantially the following
form:
THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A
PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
A QUALIFIED INSTITUTIONAL BUYER, IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A (2) IN AN OFFSHORE TRANSACTION COMPLYING
WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT,
(3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
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ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (4) TO AN
INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR (5) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B)
IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF
THE UNITED STATES AND OTHER JURISDICTIONS.
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Restricted
Global Security) pursuant to Rule 144 under the Securities Act, the
Registrar shall permit the transferee thereof to exchange such Transfer
Restricted Security for a certificated Security that does not bear the
legend set forth above and rescind any restriction on the transfer of such
Transfer Restricted Security, if the transferor thereof certifies in
writing to the Registrar that such sale or transfer was made in reliance
on Rule 144 (such certification to be in the form set forth on the reverse
of the Security).
(iii) After a transfer of any Initial Securities or Private Exchange
Securities pursuant to and during the period of the effectiveness of a
Shelf Registration Statement with respect to such Initial Securities or
Private Exchange Securities, as the case may be, all requirements
pertaining to legends on such Initial Security or such Private Exchange
Security will cease to apply, the requirements requiring any such Initial
Security or such Private Exchange Security issued to certain Holders be
issued in global form will cease to apply, and a certificated Initial
Security or Private Exchange Security or an Initial Security or Private
Exchange Security in global form, in each case without restrictive
transfer legends, will be available to the transferee of the Holder of
such Initial Securities or Private Exchange Securities upon exchange of
such transferring Holder's certificated Initial Security or Private
Exchange Security or directions to transfer such Holder's interest in the
Global Security, as applicable.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Securities, all requirements pertaining to such
Initial Securities that Initial Securities issued to certain Holders be
issued in global form will still apply with respect 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.
(v) Upon the consummation of a Private Exchange with respect to
the Initial Securities, all requirements pertaining to such Initial
Securities that Initial Securities issued to certain Holders be issued in
global form will still apply with respect to Holders of such Initial
Securities that do not exchange their Initial Securities, and Private
Exchange Securities in global form with the global securities legend and
the Restricted Securities Legend set forth in Exhibit 1 hereto will be
available to Holders that exchange such Initial Securities in such Private
Exchange.
(c) Cancellation or Adjustment of Global Security. At such time as
all beneficial interests in a Global Security have either been exchanged for
certificated Securities,
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redeemed, purchased 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 Securities, redeemed, purchased 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.
(d) 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 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 (other than any such transfer
taxes, assessments or similar governmental charge payable upon exchange or
transfer pursuant to Sections 3.06, 4.08 and 9.05 of the Indenture).
(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 Business Days before the mailing of a notice of an offer to
repurchase or redeem Securities or 15 Business 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.
(e) 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
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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 the same to determine substantial compliance as to form with the
express requirements hereof.
2.4 Certificated Securities.
(a) A Restricted 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 Depository for such Restricted
Global Security or if at any time such Depository ceases to be a "clearing
agency" registered under the Exchange Act and a successor depositary is not
appointed by the Company within 90 days of such notice, (ii) an Event of Default
has occurred and is continuing or (iii) the Company, in its sole discretion,
notifies the Trustee in writing that it elects to cause the issuance of
certificated Securities under this Indenture.
(b) Any Restricted Global Security that is transferable to the
beneficial owners thereof pursuant to this Section 2.4 shall be surrendered by
the Depository to the Trustee located at its principal corporate trust office in
the Borough of Manhattan, The City of New York, to be so transferred, in whole
or from time to time in part, without charge, and the Trustee shall authenticate
and deliver, upon such transfer of each portion of such Restricted Global
Security, an equal aggregate principal amount of certificated Initial Securities
of authorized denominations. Any portion of a Restricted Global Security
transferred pursuant to this Section shall be executed, authenticated and
delivered only in denominations of $1,000 principal amount and any integral
multiple thereof and registered in such names as the Depository shall direct.
Any certificated Initial Security or Private Exchange Security delivered in
exchange for an interest in the Restricted Global Security shall, except as
otherwise provided by Section 2.3(b), bear the restricted securities legend set
forth in Exhibit 1 hereto.
(c) Subject to the provisions of Section 2.4(b), the registered
Holder of a Global Security shall be entitled to grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Securities.
-7-
(d) In the event of the occurrence of either of the events
specified in Section 2.4(a), the Company shall promptly make available to the
Trustee a reasonable supply of certificated Securities in definitive, fully
registered form without interest coupons.
-8-
EXHIBIT 1
to
RULE 144A/REGULATION S APPENDIX
[FORM OF FACE OF INITIAL SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITARY 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.
[Restricted Securities Legend]
THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903
OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE), (4) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A
TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR
(5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
(B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE
UNITED STATES AND OTHER JURISDICTIONS.
No. CUSIP No. ______________
ISIN No. ______________
$_____________
6.25% Senior Subordinated Notes Due 2014
Encore Acquisition Company, a Delaware corporation, promises to pay
to Cede & Co., or registered assigns, the principal sum of Dollars on April 15,
2014.
Interest Payment Dates: April 15 and October 15.
Record Dates: April 1 and October 1.
Additional provisions of this Security are set forth on the other
side of this Security.
-2-
IN WITNESS WHEREOF, the parties have caused this instrument to be
duly executed.
Dated:
ENCORE ACQUISITION COMPANY,
By _____________________________
Name:
Title:
-3-
Dated:
TRUSTEE'S CERTIFICATE
OF AUTHENTICATION
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
By _________________________________
Authorized Signatory
-4-
[FORM OF] REVERSE SIDE OF [INITIAL] SECURITY
6.25% Senior Subordinated Security Due 2014
1. Interest
Encore Acquisition Company, 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; provided,
however, that if a Registration Default (as defined in the Registration Rights
Agreement) occurs, additional interest will accrue on this Security at a rate of
0.25% per annum (increasing by an additional 0.25% per annum after each
consecutive 90-day period that occurs after the date on which such Registration
default occurs up to a maximum additional interest rate of 1.00%) 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. The
Company will pay interest semiannually on April 15 and October 15 of each year,
commencing April 15, 2004. 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 April 2, 2004. 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 April 1 or October 1 next 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. 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 a certificated Security will be made 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, Wells Fargo Bank, National Association, a United States
banking association (the "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
Subsidiaries may act as Paying Agent, Registrar or co-registrar.
-5-
4. Indenture
The Company issued the Securities under an Indenture dated as of
April 2, 2004 ("Indenture"), among the Company, the 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 Securityholders are referred to the Indenture and the Act for a
statement of those terms.
The Securities are general unsecured obligations of the Company. The
Company shall be entitled, subject to its compliance with Section 4.03 of the
Indenture, to issue Additional Securities pursuant to Section 2.13 of the
Indenture. The Initial Securities issued on the Issue Date, any Additional
Securities and all Exchange Securities or Private Exchange Securities issued in
exchange therefor will be treated as a single class for all purposes under the
Indenture. The Indenture contains covenants that limit the ability of the
Company and its subsidiaries to incur additional indebtedness; pay dividends or
distributions on, or redeem or repurchase capital stock; make investments; issue
or sell capital stock of subsidiaries; engage in transactions with affiliates;
create liens on assets; transfer or sell assets; guarantee indebtedness;
restrict dividends or other payments of subsidiaries; and consolidate, merge or
transfer all or substantially all of its assets and the assets of its
subsidiaries. During any period that the Securities have an Investment Grade
Rating from both S&P and Moody's and no Default has occurred and is continuing,
certain covenants will be suspended. These covenants are subject to important
exceptions and qualifications.
5. Optional Redemption
Except as set forth below, the Company shall not be entitled to
redeem the Securities at its option prior to April 15, 2009.
On and after April 15, 2009, the Company shall be entitled at its
option to redeem all or a portion of the Securities upon not less than 30 nor
more than 60 days' notice, at the redemption prices (expressed in percentages of
principal amount on the redemption date), plus accrued interest to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date), if
redeemed during the 12-month period commencing on April 15 of the years set
forth below:
Redemption
Period Price
- ------------------- ----------
2009 103.125%
2010 102.083%
2011 101.042%
2012 and thereafter 100.000%
In addition, prior to April 15, 2007, the Company shall be entitled
at its option on one or more occasions to redeem Securities (which includes
Additional Securities, if any) in an
-6-
aggregate principal amount not to exceed 35% of the aggregate principal amount
of the Securities (which includes Additional Securities, if any) issued prior to
the redemption date at a redemption price (expressed as a percentage of
principal amount) of 106.250%, plus accrued and unpaid interest to the
redemption date, with the net cash proceeds from one or more Public Equity
Offerings; provided, however, that (1) at least 65% of such aggregate principal
amount of Securities (which includes Additional Securities, if any) remains
outstanding immediately after the occurrence of each such redemption (other than
Securities held, directly or indirectly, by the Company or its Affiliates); and
(2) each such redemption occurs within 180 days after the date of the related
Public Equity Offering.
Prior to April 15, 2009, the Company may at its option redeem all
(but not less than all) the Securities (which includes the Additional
Securities, if any) at a redemption price equal to the sum of:
(1) the principal amount thereof, plus
(2) accrued and unpaid interest, if any, to the redemption date,
plus
(3) the Applicable Premium at the redemption date.
6. Notice of Redemption
Except as described in paragraph 7 below, notice of redemption will
be mailed at least 30 days but not more than 60 days before the redemption date
to each Holder of Securities to be redeemed at its registered address.
Securities in denominations larger than $1,000 principal amount 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. Escrow; Special Mandatory Redemption
The Initial Purchasers of the Initial Securities have deposited the
gross proceeds of the offering thereof with the Escrow Agent on the Issue Date.
The Escrow Agent will hold such funds pursuant to the Escrow Agreement, and,
subject to the conditions set forth in the Escrow Agreement, it will either
disburse such funds to the Company and the Initial Purchasers or disburse them
to the Trustee or the Paying Agent for application to the mandatory redemption
of the Initial Securities following the Special Mandatory Redemption Trigger.
Following the occurrence of a Special Mandatory Redemption Trigger,
the Company shall redeem the Securities as a whole, upon notice as provided
below, at a redemption price equal to 100% of the aggregate principal amount
thereof plus accrued and unpaid interest to the redemption date. Notwithstanding
the provisions of paragraph 6, notice of such mandatory redemption shall be
given within five Business Days of the date of the Special Mandatory Redemption
Trigger by first-class mail, postage prepaid, mailed not less than 15 nor more
than 30 days prior to the redemption date, to the Escrow Agent and to each
Holder, at such Holder's address appearing in the Security Register, and such
notice shall state:
-7-
(1) that the Special Mandatory Redemption Trigger has occurred;
(2) the redemption date, which shall be on or before July 30,
2004;
(3) the redemption price;
(4) that on the redemption date the redemption price will become
due and payable upon each Security to be redeemed and that
interest thereon will cease to accrue on and after such date;
and
(5) the place or places where each Security is to be surrendered
for payment of the redemption price.
Any notice of redemption given pursuant to this paragraph 7 may be
modified by the Company to conform with the applicable requirements of the
Depositary if any of the Securities subject to such notice are then represented
by one or more Global Securities.
8. Put Provisions
Upon a Change of Control, then unless the Company shall have
exercised its right to redeem all the Securities, any Holder of Securities will
have the right to cause the Company to repurchase all or any part of the
Securities of such Holder at a repurchase 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 repurchase (subject to the right of holders of record on the
relevant record date to receive interest due on the related interest payment
date) as provided in, and subject to the terms of, the Indenture.
9. 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. The Company agrees, and each Securityholder 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.
10. Guaranty
The payment by the Company of the principal of, and premium and
interest on, the Securities is fully and unconditionally guaranteed on a joint
and several senior subordinated basis by each of the Subsidiary Guarantors.
11. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 principal amount and whole multiples of $1,000. A Holder
may transfer or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes and fees required
-8-
by law or permitted by the Indenture. The Registrar need not register the
transfer or exchange of 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 any Securities for a period of 15 days before a selection of
Securities to be redeemed or 15 days before an interest payment date.
12. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner
of it for all purposes.
13. 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 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.
14. Discharge and Defeasance
Subject to certain conditions, the Company at any time shall be
entitled to 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 and interest on the Securities to
redemption or maturity, as the case may be.
15. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture and the Securities may be amended or supplemented, and compliance with
any provision of the Indenture may be waived, 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 Securityholder, the Company, the Subsidiary
Guarantors and the Trustee shall be entitled to amend or supplement the
Indenture or the Securities to cure any ambiguity, omission, defect or
inconsistency, or to comply with Article 5 of the Indenture, or to provide for
uncertificated Securities in addition to or in place of certificated Securities,
or to add guarantees with respect to the Securities, including Subsidiary
Guaranties, or to secure the Securities, or to confirm the release, termination
or discharge of any Subsidiary Guarantor or any such Lien when such release,
termination or discharge is permitted under the Indenture, or to add additional
covenants or surrender rights and powers conferred on the Company or the
Subsidiary Guarantors, or to comply with any request of the SEC in connection
with qualifying the Indenture under the Act, or to make any change that does not
adversely affect in any material respect the rights of any Securityholder, or to
conform the text of the Indenture or the Securities to any provision in the
Offering Circular in the section "Description of Notes" to the extent that such
provision in the "Description of Notes" was intended to be a verbatim recitation
of a provision of the Indenture, the Guarantees or the Securities.
-9-
16. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for 30
days in payment of interest on the Securities; (ii) default in payment of
principal on the Securities at maturity, upon redemption pursuant to paragraphs
5 and 7 of the Securities, upon acceleration or otherwise, or failure by the
Company to redeem or purchase Securities when required; (iii) failure by the
Company or any Subsidiary Guarantor to comply with other agreements in the
Indenture or the Securities, in certain cases subject to notice and lapse of
time; (iv) certain accelerations (including failure to pay within any grace
period after final maturity) of other Indebtedness of the Company or any
Significant Subsidiary (other than Non-Recourse Purchase Money Indebtedness) if
the amount accelerated (or so unpaid) exceeds $10.0 million, provided that such
acceleration is not rescinded within a period of 10 days from the occurrence of
such acceleration; (v) certain events of bankruptcy or insolvency with respect
to the Company and the Significant Subsidiaries; (vi) certain judgments or
decrees for the payment of money in excess of $10.0 million; and (vii) certain
defaults with respect to Subsidiary Guaranties. If an Event of Default occurs
and is continuing, the Trustee or the Holders of at least 25% in principal
amount of the Securities may declare all the Securities to be due and payable
immediately. Certain events of bankruptcy or insolvency are Events of Default
which will result in the Securities being due and payable immediately upon the
occurrence of such Events of Default.
Securityholders 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 indemnity or security
satisfactory to it. 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 Securityholders notice of any
continuing Default (except a Default in payment of principal or interest) if it
determines that withholding notice is not opposed to the interest of the
Holders.
17. Trustee Dealings with the Company
Subject to certain limitations imposed by the 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.
18. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company or the Trustee shall not have any liability for any obligations of the
Company 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 Securityholder waives and releases all such liability. The waiver
and release are part of the consideration for the issue of the Securities.
-10-
19. 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.
20. Abbreviations
Customary abbreviations may be used in the name of a Securityholder
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).
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 Securityholders. 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.
22. Holders' Compliance with Registration Rights Agreement
Each Holder of a Security, by acceptance hereof, acknowledges and
agrees to the provisions of the Registration Rights Agreement, including the
obligations of the Holders with respect to a registration and the
indemnification of the Company to the extent provided therein.
23. 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.
The Company will furnish to any Securityholder upon written request
and without charge to the Securityholder a copy of the Indenture which has in it
the text of this Security in larger type. Requests may be made to:
Encore Acquisition Company
777 Main Street
Suite 1400
Fort Worth, TX 76102
Attention: Roy W. Jageman
-11-
________________________________________________________________________________
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security on the
books of the Company. The agent may substitute another to act for him.
________________________________________________________________________________
Date: ___________________ Your Signature: _____________________________________
________________________________________________________________________________
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) [ ] in the United States to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act
of 1933) pursuant to and in compliance with Rule 144A
under the Securities Act of 1933;
(2) [ ] 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;
(3) [ ] pursuant to an exemption from registration provided by
Rule 144 under the Securities Act of 1933; or
(4) [ ] pursuant to an effective registration statement 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 (2) or (3) is checked, the Trustee shall be entitled to 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
-12-
transaction not subject to, the registration requirements of the
Securities Act, such as the exemption provided by Rule 144 under such Act.
______________________________________
Signature
Signature Guarantee:
_____________________________________ ______________________________________
Signature must be guaranteed Signature
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
- --------------------------------------------------------------------------------
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,
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-
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have
been made:
Amount of decrease Amount of increase in Principal amount of Signature of
in Principal amount Principal amount of this Global Security authorized officer
of this Global this Global following such of Trustee or
Date of Exchange Security Security decrease or increase) Securities Custodian
-14-
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 4.08 of the Indenture, check the box:
[ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount
in principal amount: $__________
Date: _______________ Your Signature: _________________________________________
(Sign exactly as your name appears on the
other side of this Security.)
Signature Guarantee: ___________________________________________________________
(Signature must be guaranteed)
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
-15-
EXHIBIT A
[FORM OF FACE OF [EXCHANGE] SECURITY
[OR PRIVATE EXCHANGE SECURITY]]*/**
__________________
*/ If the Security is to be issued in global form add the Global Securities
Legend from Exhibit 1 to Appendix A and the attachment from such Exhibit 1
captioned "[TO BE ATTACHED TO GLOBAL SECURITIES] - SCHEDULE OF INCREASES OR
DECREASES IN GLOBAL SECURITY".
**/ If the Security is a Private Exchange Security issued in a Private Exchange
to an Initial Purchaser holding an unsold portion of its initial allotment, add
the Restricted Securities Legend from Exhibit 1 to Appendix A and replace the
Assignment Form included in this Exhibit A with the Assignment Form included in
such Exhibit 1.
No. CUSIP No. ______________
ISIN No. ______________
$_____________
6.25% Senior Subordinated Notes Due 2014
Encore Acquisition Company, a Delaware corporation, promises to pay
to _______________________, or registered assigns, the principal sum of
________________ Dollars on April 15, 2014.
Interest Payment Dates: April 15 and October 15.
Record Dates: April 1 and October 1.
Additional provisions of this Security are set forth on the other
side of this Security.
Dated:
ENCORE ACQUISITION COMPANY,
By _____________________________
Name:
Title:
By _____________________________
Name:
Title:
TRUSTEE'S CERTIFICATE
OF AUTHENTICATION
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
By _____________________________
Authorized Signatory
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[FORM OF] REVERSE SIDE OF [EXCHANGE] SECURITY
[OR PRIVATE EXCHANGE SECURITY]
6.25% Senior Subordinated Security Due 2014
1. Interest
Encore Acquisition Company, 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[; provided,
however, that if a Registration Default (as defined in the Registration Rights
Agreement) occurs, additional interest will accrue on this Security at a rate of
..25% per annum (increasing by an additional .25% per annum after each
consecutive 90-day period that occurs after the date on which such Registration
Default occurs up to a maximum additional interest rate of 1.00% per annum) 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.](1) The
Company will pay interest semiannually on April 15 and October 15 of each year,
commencing April 15, 2004. 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 April 2, 2004. 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 April 1 or October 1 next 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, if any, and interest) will be
made by wire transfer of immediately available funds to the accounts specified
by The Depository Trust Company. The Company will make all payments in respect
of a certificated Security (including principal, premium, if any, and interest)
by mailing a check to the registered address of each Holder thereof; provided,
however, that payments on a certificated Security will be made 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).
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(1) Insert if at the date of issuance of the Exchange Security or Private
Exchange Security (as the case may be) any Registration Default has
occurred with respect to the related Initial Securities during the
interest period in which such date of issuance occurs.
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3. Paying Agent and Registrar
Initially, Wells Fargo Bank, National Association, a United States
banking association (the "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
Subsidiaries may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated April 2,
2004 ("Indenture"), among the Company, the 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 Securityholders are referred to the Indenture and the Act for a statement of
those terms.
The Securities are general unsecured obligations of the Company. The
Company shall be entitled, subject to its compliance with Section 4.03 of the
Indenture, to issue Additional Securities pursuant to Section 2.13 of the
Indenture. The Initial Securities issued on the Issue Date, any Additional
Securities and all Exchange Securities or Private Exchange Securities issued in
exchange therefor will be treated as a single class for all purposes under the
Indenture. The Indenture contains covenants that limit the ability of the
Company and its subsidiaries to incur additional indebtedness; pay dividends or
distributions on, or redeem or repurchase capital stock; make investments; issue
or sell capital stock of subsidiaries; engage in transactions with affiliates;
create liens on assets; transfer or sell assets; guarantee indebtedness;
restrict dividends or other payments of subsidiaries; and consolidate, merge or
transfer all or substantially all of its assets and the assets of its
subsidiaries; and engage in business activities unrelated to its current
activities. During any period that the Securities have an Investment Grade
Rating from both S&P and Moody's and no Default has occurred and is continuing,
certain covenants will be suspended. These covenants are subject to important
exceptions and qualifications.
5. Optional Redemption
Except as set forth below, the Company shall not be entitled to
redeem the Securities at its option prior to April 15, 2009.
On and after April 15, 2009, the Company shall be entitled at its
option to redeem all or a portion of the Securities upon not less than 30 nor
more than 60 days' notice, at the redemption prices (expressed in percentages of
principal amount, on the redemption date) plus accrued interest to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date), if
redeemed during the 12-month period commencing on April 15 of the years set
forth below:
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Redemption
Period Price
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2009 103.125%
2010 102.083%
2011 101.042%
2012 and thereafter 100.000%
In addition, prior to April 15, 2007, the Company shall be entitled
at its option on one or more occasions to redeem Securities (which includes
Additional Securities, if any) in an aggregate principal amount not to exceed
35% of the aggregate principal amount of the Securities (which includes
Additional Securities, if any) issued prior to the redemption date at a
redemption price (expressed as a percentage of principal amount) of 106.250%,
plus accrued and unpaid interest to the redemption date, with the net cash
proceeds from one or more Public Equity Offerings; provided, however, that (1)
at least 65% of such aggregate principal amount of Securities (which includes
Additional Securities, if any) remains outstanding immediately after the
occurrence of each such redemption (other than Securities held, directly or
indirectly, by the Company or its Affiliates); and (2) each such redemption
occurs within 180 days after the date of the related Public Equity Offering.
Prior to April 15, 2009, the Company may at its option redeem all
(but not less than all) the Securities (which includes the Additional
Securities, if any) at a redemption price equal to the sum of:
(1) the principal amount thereof, plus
(2) accrued and unpaid interest, if any, to the redemption date,
plus
(3) the Applicable Premium at the redemption date.
6. Notice of Redemption
Except as described in paragraph 7 below, notice of redemption will
be mailed at least 30 days but not more than 60 days before the redemption date
to each Holder of Securities to be redeemed at its registered address.
Securities in denominations larger than $1,000 principal amount 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. Escrow; Special Mandatory Redemption
The Initial Purchasers of the Initial Securities have deposited the
gross proceeds of the offering thereof with the Escrow Agent on the Issue Date.
The Escrow Agent will hold such funds pursuant to the Escrow Agreement, and,
subject to the conditions set forth in the Escrow Agreement, it will either
disburse such funds to the Company and the Initial Purchasers
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or disburse them to the Trustee or the Paying Agent for application to the
mandatory redemption of the Initial Securities following the Special Mandatory
Redemption Trigger.
Following the occurrence of a Special Mandatory Redemption Trigger,
the Company shall redeem the Securities as a whole, upon notice as provided
below, at a redemption price equal to 100% of the aggregate principal amount
thereof plus accrued and unpaid interest to the redemption date. Notwithstanding
the provisions of paragraph 6, notice of such mandatory redemption shall be
given within five Business Days of the date of the Special Mandatory Redemption
Trigger by first-class mail, postage prepaid, mailed not less than 15 nor more
than 30 days prior to the redemption date, to the Escrow Agent and to each
Holder, at such Holder's address appearing in the Security Register, and such
notice shall state:
(1) that the Special Mandatory Redemption Trigger has occurred;
(2) the redemption date, which shall be on or before July 30,
2004;
(3) the redemption price;
(4) that on the redemption date the redemption price will become
due and payable upon each Security to be redeemed and that
interest thereon will cease to accrue on and after such date;
and
(5) the place or places where each Security is to be surrendered
for payment of the redemption price.
Any notice of redemption given pursuant to this paragraph 7 may be
modified by the Company to conform with the applicable requirements of the
Depositary if any of the Securities subject to such notice are then represented
by one or more Global Securities.
8. Put Provisions
Upon a Change of Control, then unless the Company shall have
exercised its right to redeem all the Securities, any Holder of Securities will
have the right to cause the Company to repurchase all or any part of the
Securities of such Holder at a repurchase 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 repurchase (subject to the right of holders of record on the
relevant record date to receive interest due on the related interest payment
date) as provided in, and subject to the terms of, the Indenture.
9. 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. The Company agrees, and each Securityholder 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.
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10. Guaranty
The payment by the Company of the principal of, and premium and
interest on, the Securities is fully and unconditionally guaranteed on a joint
and several senior subordinated basis by each of the Subsidiary Guarantors.
11. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 principal amount and whole multiples of $1,000. A Holder
may transfer or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes and fees required by law
or permitted by the Indenture. The Registrar need not register the transfer of
or exchange 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 any Securities for a period of 15 days before a selection of Securities to be
redeemed or 15 days before an interest payment date.
12. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner
of it for all purposes.
13. 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 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.
14. Discharge and Defeasance
Subject to certain conditions, the Company at any time shall be
entitled to 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 and interest on the Securities to
redemption or maturity, as the case may be.
15. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture and the Securities may be amended or supplemented, and compliance with
any provision of the Indenture may be waived, 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 Securityholder, the Company, the Subsidiary
Guarantors and the Trustee shall be entitled to amend or supplement the
Indenture or the Securities to cure any ambiguity, omission, defect or
inconsistency, or to comply with Article 5 of the Indenture, or to provide for
uncertificated Securities in addition to or in place of certificated Securities,
or to add
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guarantees with respect to the Securities, including Subsidiary Guaranties, or
to secure the Securities, or to confirm the release, termination or discharge of
any Subsidiary Guarantor or any such Lien when such release, termination or
discharge is permitted under the Indenture, or to add additional covenants or
surrender rights and powers conferred on the Company or the Subsidiary
Guarantors, or to comply with any request of the SEC in connection with
qualifying the Indenture under the Act, or to make any change that does not
adversely affect in any material respect the rights of any Securityholder, or to
conform the text of the Indenture or the Securities to any provision in the
Offering Circular in the section "Description of Notes" to the extent that such
provision in the "Description of Notes" was intended to be a verbatim recitation
of a provision of the Indenture, the Guarantees or the Securities.
16. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for 30
days in payment of interest on the Securities; (ii) default in payment of
principal on the Securities at maturity, upon redemption pursuant to paragraphs
5 and 7 of the Securities, upon acceleration or otherwise, or failure by the
Company to redeem or purchase Securities when required; (iii) failure by the
Company or any Subsidiary Guarantor to comply with other agreements in the
Indenture or the Securities, in certain cases subject to notice and lapse of
time; (iv) certain accelerations (including failure to pay within any grace
period after final maturity) of other Indebtedness of the Company or any
Significant Subsidiary (other than Non-Recourse Purchase Money Indebtedness) if
the amount accelerated (or so unpaid) exceeds $10.0 million, provided that such
acceleration is not rescinded within a period of 10 days from the occurrence of
such acceleration; (v) certain events of bankruptcy or insolvency with respect
to the Company and the Significant Subsidiaries; (vi) certain judgments or
decrees for the payment of money in excess of $10.0 million; and (vii) certain
defaults with respect to Subsidiary Guaranties. If an Event of Default occurs
and is continuing, the Trustee or the Holders of at least 25% in principal
amount of the Securities may declare all the Securities to be due and payable
immediately. Certain events of bankruptcy or insolvency are Events of Default
which will result in the Securities being due and payable immediately upon the
occurrence of such Events of Default.
Securityholders 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 indemnity or security
satisfactory to it. 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 Securityholders notice of any
continuing Default (except a Default in payment of principal or interest) if it
determines that withholding notice is not opposed to the interest of the
Holders.
17. Trustee Dealings with the Company
Subject to certain limitations imposed by the 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.
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18. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company or the Trustee shall not have any liability for any obligations of the
Company 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 Securityholder waives and releases all such liability. The waiver
and release are part of the consideration for the issue of the Securities.
19. 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.
20. Abbreviations
Customary abbreviations may be used in the name of a Securityholder
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).
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 Securityholders. 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.
22. Holders' Compliance with Registration Rights Agreement
Each Holder of a Security, by acceptance hereof, acknowledges and
agrees to the provisions of the Registration Rights Agreement, including the
obligations of the Holders with respect to a registration and the
indemnification of the Company to the extent provided therein.
23. 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.
The Company will furnish to any Securityholder upon written request
and without charge to the Securityholder a copy of the Indenture which has in it
the text of this Security in larger type. Requests may be made to:
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Encore Acquisition Company
777 Main Street
Suite 1400
Fort Worth, TX 76102
Attention: Roy W. Jageman
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________________________________________________________________________________
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security on the books of the
Company. The agent may substitute another to act for him.
________________________________________________________________________________
Date:_____________________ Your Signature: ____________________________________
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
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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 4.08 of the Indenture, check the box:
[ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount
in principal amount: $__________
Date: _______________ Your Signature: _________________________________________
(Sign exactly as your name appears on the
other side of this Security.)
Signature Guarantee: ___________________________________________________________
(Signature must be guaranteed)
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
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