EXHIBIT 4.1
SOUTHWEST ROYALTIES, INC.
$200,000,000 10 1/2% Senior Notes due 2004, Series A
$200,000,000 10 1/2% Senior Notes due 2004, Series B
Unconditionally Guaranteed by
SOUTHWEST ROYALTIES HOLDINGS, INC.
______________________________________________________
INDENTURE
dated as of October 15, 1997
STATE STREET BANK AND TRUST COMPANY,
as Trustee
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
310(a)(1) 7.10
(a)(2) 7.10, 7.10
(a)(3) N.A.
(a)(4) N.A.
(a)(5) 7.08, 7.10
(b) 7.08, 7.10
11.02
(c) N.A.
311(a) 7.11
(b) 7.11
(c) N.A.
312(a) 2.05
(b) 10.03
(c) 10.03
313(a) 7.06
(b)(1) N.A.
(b)(2) 7.06
(c) 7.06, 10.02
(d) 7.06
314(a) 4.06, 4.08
10.02
(b) 11.02
(c)(1) 10.04
(c)(2) 10.04
(c)(3) N.A.
(d) 11.04
(e) 10.05
(f) N.A.
315(a) 7.01(b)
(b) 7.05, 10.02
(c) 7.01(a)
(d) 7.01(c)
(e) 6.11
(i)
316(a) (last sentence) 2.09
(a)(1)(A) 6.05
(a)(1)(B) 6.04
(a)(2) N.A.
(b) 6.07
(c) 9.04
317(a)(1) 6.08
(a)(2) 6.09
(b) 2.04
318(a) 10.01
(c) 10.01
----------------
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
(ii)
TABLE OF CONTENTS
Page
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ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01 Definitions 1
Section 1.02 Incorporation by Reference of TIA 21
Section 1.03 Rules of Construction 22
ARTICLE TWO
THE NOTES
Section 2.01 Form and Dating 22
Section 2.02 Execution and Authentication; Aggregate Principal Amount 23
Section 2.03 Registrar and Paying Agent 24
Section 2.04 Paying Agent to Hold Assets in Trust 25
Section 2.05 Holder Lists 25
Section 2.06 Transfer and Exchange 25
Section 2.07 Replacement Notes 26
Section 2.08 Outstanding Notes 26
Section 2.09 Treasury Notes 26
Section 2.10 Temporary Notes 27
Section 2.11 Cancellation 27
Section 2.12 Defaulted Interest. 27
Section 2.13 CUSIP Numbers. 28
Section 2.14 Deposit of Monies 28
Section 2.15 Restrictive Legends 28
Section 2.16 Book-Entry Provisions for Global Security 30
Section 2.17 Special Transfer Provisions 31
Section 2.18 Additional Interest Under Registration Rights Agreement 33
ARTICLE THREE
REDEMPTION
Section 3.01 Notices to Trustee 33
Section 3.02 Selection of Notes to Be Redeemed 34
Section 3.03 Optional Redemption 34
Section 3.04 Notice of Redemption. 35
Section 3.05 Effect of Notice of Redemption 36
Section 3.06 Deposit of Redemption Price 36
Section 3.07 Notes Redeemed in Part 36
(iii)
ARTICLE FOUR
COVENANTS
Section 4.01 Payment of Notes 36
Section 4.02 Maintenance of Office or Agency 37
Section 4.03 Corporate Existence 37
Section 4.04 Payment of Taxes and Other Claims 37
Section 4.05 Maintenance of Properties and Insurance 37
Section 4.06 Compliance Certificate; Financial Statements; Notice of
Default 38
Section 4.07 Compliance with Laws 39
Section 4.08 Reports to Holders 39
Section 4.09 Waiver of Stay, Extension or Usury Laws 39
Section 4.10 Limitation on Restricted Payments 40
Section 4.11 Limitation on Transactions with Affiliates. 42
Section 4.12 Limitation on Incurrence of Additional Indebtedness and
Issuances of Disqualified Capital Stock 43
Section 4.13 Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries 44
Section 4.14 Limitation on Designation of Unrestricted Subsidiaries 44
Section 4.15 Change of Control 45
Section 4.16 Limitation on Asset Sales 47
Section 4.17 Limitation on Sale or Issuance of Capital Stock of
Restricted Subsidiaries 50
Section 4.18 Limitations on Liens 50
Section 4.19 Limitation on Lines of Business 50
Section 4.20 Subsidiary Guarantees. 51
Section 4.21 Payment of Existing Secured Debt. 51
ARTICLE FIVE
SUCCESSOR CORPORATION
Section 5.01 Merger, Consolidation and Sale of Assets 51
Section 5.02 Successor Corporation Substituted 53
ARTICLE SIX
REMEDIES
Section 6.01 Events of Default 53
Section 6.02 Acceleration 55
Section 6.03 Other Remedies 56
Section 6.04 Waiver of Past Defaults 56
Section 6.05 Control by Majority 57
Section 6.06 Limitation on Suits 57
Section 6.07 Right of Holders to Receive Payment 57
Section 6.08 Collection Suit by Trustee 57
(iv)
Section 6.09 Trustee May File Proofs of Claim 58
Section 6.10 Priorities 58
Section 6.11 Undertaking for Costs 59
Section 6.12 Restoration of Rights and Remedies 59
ARTICLE SEVEN
TRUSTEE
Section 7.01 Duties of Trustee 59
Section 7.02 Rights of Trustee 60
Section 7.03 Individual Rights of Trustee 61
Section 7.04 Trustee's Disclaimer 61
Section 7.05 Notice of Default 61
Section 7.06 Reports by Trustee to Holders 62
Section 7.07 Compensation and Indemnity 62
Section 7.08 Replacement of Trustee 63
Section 7.09 Successor Trustee by Merger, Etc 64
Section 7.10 Eligibility; Disqualification 64
Section 7.11 Preferential Collection of Claims Against Company 64
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
Section 8.01 Satisfaction and Discharge of the Indenture; Legal Defeasance 65
Section 8.02 Application of Trust Money 67
Section 8.03 Repayment to the Issuer 67
Section 8.04 Reinstatement 67
ARTICLE NINE
MODIFICATION OF THE INDENTURE
Section 9.01 Without Consent of Holders 68
Section 9.02 With Consent of Holders 68
Section 9.03 Compliance with TIA 69
Section 9.04 Revocation and Effect of Consents 69
Section 9.05 Notation on or Exchange of Notes 69
Section 9.06 Trustee 69
ARTICLE TEN
MISCELLANEOUS
Section 10.01 TIA Controls 70
Section 10.02 Notices 70
Section 10.03 Communications by Holders with Other Holders 71
Section 10.04 Certificate and Opinion as to Conditions Precedent 71
Section 10.05 Statements Required in Certificate or Opinion 72
(v)
Section 10.06 Rules by Trustee, Paying Agent, Registrar 72
Section 10.07 Legal Holidays 72
Section 10.08 Governing Law 72
Section 10.09 No Adverse Interpretation of Other Agreements. 73
Section 10.10 No Personal Liability 73
Section 10.11 Successors 73
Section 10.12 Duplicate Originals 73
Section 10.13 Severability 73
Section 10.14 Independence of Covenants 74
ARTICLE ELEVEN
SECURITY
Section 11.01 Grant of Security Interest. 74
Section 11.02 Recording and Opinions 74
Section 11.03 Release of Collateral. 75
Section 11.04 Specified Releases of Collateral 76
Section 11.05 Form and Sufficiency of Release 76
Section 11.06 Purchaser Protected 77
Section 11.07 Authorization of Actions to Be Taken by the
Trustee Under the Security Documents 77
Section 11.08 Authorization of Receipt of Funds by the
Trustee Under the Security Documents 77
ARTICLE TWELVE
GUARANTEES
Section 12.01 Unconditional Guarantees 78
Section 12.02 Limitations on Subsidiary Guarantees 80
Section 12.03 Execution and Delivery of Guarantees 80
Section 12.04 Release of a Subsidiary Guarantor. 80
Section 12.05 Waiver of Subrogation 81
Section 12.06 Immediate Payment 81
Section 12.07 No Set-Off 82
Section 12.08 Obligations Absolute. 82
Section 12.09 Obligations Continuing. 82
Section 12.10 Obligations Not Reduced. 82
Section 12.11 Obligations Reinstated. 82
Section 12.12 Obligations Not Affected. 83
Section 12.13 Waiver. 84
Section 12.14 No Obligation to Take Action Against the Issuer. 84
Section 12.15 Dealing with the Issuer and Others. 84
Section 12.16 Default and Enforcement. 85
Section 12.17 Amendment, Etc. 85
Section 12.18 Acknowledgment. 85
(vi)
Section 12.19 Costs and Expenses. 85
Section 12.20 No Merger or Waiver; Cumulative Remedies. 85
Section 12.21 Survival of Obligations. 86
Section 12.22 Guarantee in Addition to Other Obligations. 86
Section 12.23 Severability. 86
Section 12.24 Successors and Assigns. 86
SIGNATURES 96
EXHIBITS
Exhibit A - Initial Note
Exhibit B - Exchange Note
Exhibit C - Pledge Agreement
Exhibit D - Certificate re transfer to Institutional Accredited Investor
Exhibit E - Certificate re transfer to Non-U.S. Person
Exhibit F - Notation of Guarantee
(vii)
INDENTURE, dated as of October 14, 1997, among Southwest Royalties
Holdings, Inc., a Delaware corporation, as guarantor, Southwest Royalties, Inc.,
a Delaware corporation, as issuer, and State Street Bank and Trust Company, as
Trustee.
R E C I T A L S:
The Issuer has duly authorized the creation of an issue of 10 1/2% Senior
Notes due October 15, 2004, Series A (the "Initial Notes") and 10 1/2% Senior
Notes due October 15, 2004, Series B to be issued in exchange for the Initial
Notes pursuant to the Registration Rights Agreement (the "Exchange Notes") and,
to provide therefor, the Company and the Issuer have duly authorized the
execution and delivery of this Indenture and the Parent Guarantee contained
herein. The Parent Guarantee shall be secured by a first lien and security
interest in the Collateral, subject to release of such Collateral as provided
herein. Upon satisfaction of certain conditions precedent, the Notes shall also
be secured by the unconditional guarantee of payment thereof by other Restricted
Subsidiaries of the Company as herein provided. All things necessary to make
the Notes, when duly issued and executed by the Issuer, and authenticated and
delivered hereunder, the valid obligations of the Issuer, and to make this
Indenture a valid and binding agreement of the Company and the Issuer, have been
done.
Each party hereto agrees as follows for the benefit of each other party and
for the equal and ratable benefit of the Holders of the Notes, without
preference of one series of the Notes over the other.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01 Definitions. As sued in this Indenture (including the
Recitals), the following terms have the following meanings:
"Additional Interest" has the meaning set forth in the Registration Rights
Agreement.
"Adjusted Consolidated Net Income" of the Company for any period means
the Net Income (loss) of the Company and its Restricted Subsidiaries for such
period, determined in accordance with GAAP, excluding (without duplication) the
Net Income of Red Oak or any other Unrestricted Subsidiary which is a
consolidated Subsidiary for such period, reduced by the amount of the deduction
from Net Income of the Company attributable to the minority interest in Red Oak
or any other Unrestricted Subsidiary which is a consolidated Subsidiary for such
period.
"Adjusted Consolidated Net Tangible Assets" means (without duplication),
as of the date of determination, (a) the sum of (i) discounted future net
revenue from proved oil and gas reserves of the Company and its Restricted
Subsidiaries calculated in accordance with Commission guidelines before any
state or federal income taxes, as estimated or audited by independent petroleum
engineers in one or more Reserve Reports prepared as of the end of the Company's
most recently completed fiscal year as increased by, as of the date of
determination, the discounted future net revenue of (A) estimated proved oil and
gas reserves of the Company and its Restricted Subsidiaries attributable to
any acquisition consummated since the effective date of such year-end Reserve
Reports and (B) estimated oil and gas reserves of the Company and its Restricted
Subsidiaries attributable to extensions, discoveries and other additions and
upward revisions of estimates of proved oil and gas reserves due to exploration,
development or exploitation, production or other activities conducted or
otherwise occurring since the effective date of such year-end Reserve Reports
which, in the case of sub-clauses (A) and (B), would, in accordance with
standard industry practice, result in such increases, in each case calculated in
accordance with Commission guidelines (utilizing the prices and costs utilized
in such year-end Reserve Reports), and decreased by, as of the date of
determination, the discounted future net revenue of (C) estimated proved oil and
gas reserves of the Company and its Restricted Subsidiaries produced or disposed
of since the effective date of such year-end Reserve Reports and (D) reductions
in the estimated oil and gas reserves of the Company and its Restricted
Subsidiaries since the effective date of such year-end Reserve Reports
attributable to downward revisions of estimates of proved oil and gas reserves
due to exploration, development or exploitation, production or other activities
conducted or otherwise occurring since the effective date of such year-end
Reserve Reports which would, in accordance with standard industry practice,
result in such revisions, in each case calculated in accordance with Commission
guidelines (utilizing the prices utilized in such year-end Reserve Reports);
provided that, in the case of each of the determinations made pursuant to sub-
clauses (A) through (D) above, such increases and decreases shall be as
estimated by the Company's engineers, except that if there is a Material Change
and in connection with the incurrence of Indebtedness for which the Consolidated
Fixed Charge Coverage Ratio must be determined, all or any part of an increase
in discounted future net revenue resulting from the matters described in sub-
clauses (A) and (B) above is needed to permit the incurrence of such
Indebtedness, then the discounted future net revenue utilized for purposes of
this clause (a) (i) shall be confirmed in writing by independent petroleum
engineers, provided further that, if the events referred to in sub-clauses (C)
and (D) above, when taken alone, would not cause a Material Change, then such
written confirmation need only cover the incremental additions to discounted
future net revenue resulting from the determinations made pursuant to sub-
clauses (A) and (B) above to the extent needed to permit the incurrence of such
Indebtedness, (ii) the capitalized costs that are attributable to oil and gas
properties of the Company and its Restricted Subsidiaries to which no proved oil
and gas reserves are attributed, based on the Company's books and records as of
a date no earlier than the date of the Company's latest annual or quarterly
financial statements, (iii) the Net Working Capital on a date no earlier than
the date of the Company's latest annual or quarterly financial statements and
(iv) the greater of (A) the net book value on a date no earlier than the date of
the Company's latest annual or quarterly financial statements and (B) the
appraised value, as estimated by independent appraisers, of other tangible
assets (including the amount of Investments in unconsolidated Subsidiaries,
Affiliates, other Persons or Unrestricted Subsidiaries) of the Company and its
Restricted Subsidiaries, as of a date no earlier than the date of the Company's
latest audited financial statements, minus (b) the sum of (i) minority
interests, (ii) any non-current portion of gas balancing liabilities of the
Company and its Restricted Subsidiaries reflected in the Company's latest annual
or quarterly financial statements, (iii) the discounted future net revenue,
calculated in accordance with Commission guidelines (utilizing the prices
utilized in the Company's year-end Reserve Reports), attributable to reserves
which are required to be delivered to third parties to fully satisfy the
obligations of the Company and its Restricted Subsidiaries with respect to
Production Payments on the schedules specified with respect thereto, (iv) the
discounted future net revenue, calculated in accordance with Commission
guidelines (utilizing the same prices utilized in the Company's initial or year-
end Reserve Reports), attributable to reserves subject to participation
2
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
and (v) the amount of environmental liabilities payable by the Company or any
Restricted Subsidiary. If the Company changes its method of accounting from the
full cost method to the successful efforts method or a similar method of
accounting, Adjusted Consolidated Net Tangible Assets will continue to be
calculated as if the Company was still using the full cost method of accounting.
"Affiliate" means (i) any Person, directly or indirectly, controlling or
controlled by or under direct or indirect common control with the Company or any
Subsidiary of the Company or any officer, director, or employee of the Company
or any Subsidiary of the Company or of such Person, (ii) the spouse, any
immediate family member, or any other relative who has the same principal
residence of any Person described in clause (i) above, and any Person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with, such spouse, family member or other relative, and (iii) any trust
in which any Person described in clause (i) or (ii), above, is a fiduciary or
has a beneficial interest. For purposes of this definition the term "control"
means (a) the power to direct the management and policies of a Person, directly
or through one or more intermediaries, whether through the ownership of voting
securities, by contract, or otherwise, or (b) the beneficial ownership of 10% or
more of the voting common equity of such Person (on a fully diluted basis) or of
warrants or other rights to acquire such equity (whether or not presently
exercisable).
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Agent Members" has the meaning provided in Section 2.16.
"Asset Sale" means (i) any direct or indirect conveyance, sale, transfer
or other disposition (including through damage or destruction for which
Insurance Proceeds are paid or by condemnation), in one transaction or a series
of related transactions, of any of the properties, businesses or assets of the
Company or any Restricted Subsidiary, whether owned on the Issue Date or
thereafter acquired or (ii) any sale or other disposition by the Company of any
Capital Stock of any Affiliate, Unrestricted Subsidiary or any Subsidiary of the
Company or its Restricted Subsidiaries (other than the Issuer). Notwithstanding
the foregoing, the following will not be deemed to be an Asset Sale: (a) the
conveyance, sale, lease, transfer or other disposition by any of the Company's
Restricted Subsidiaries of any or all of its assets (upon voluntary liquidation
or otherwise) to the Company; (b) the conveyance, sale, lease, transfer or other
disposition by any Restricted Subsidiary of any or all of its assets (upon
voluntary liquidation or otherwise) to another Restricted Subsidiary; (c) non-
material dispositions of assets in the ordinary course of business; (d) Asset
Sales not otherwise permitted by clauses (a) through (c) or (f) and (g) of this
sentence provided that the aggregate proceeds from all such Asset Sales do not
exceed $2.5 million in any twelve-month period; (e) the disposition of all or
substantially all of the assets of (i) the Company and its Restricted
Subsidiaries, taken as a whole, or (ii) the Issuer, if such disposition is
governed by Section 4.15 or Section 5.01; (f) a conveyance, sale, assignment,
lease, license, transfer, abandonment or other disposal by the Company and its
Restricted Subsidiaries of (i) damaged, worn out, unserviceable or other
obsolete property in the ordinary course of business or (ii) other property no
longer necessary for the proper conduct of their business; and (g) the
conveyance, sale, transfer or
3
otherwise disposition by the Company and its Restricted Subsidiaries of crude
oil and natural gas production and refined products in the ordinary course of
business.
"Attributable Indebtedness" in respect of a Sale and Leaseback Transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP or,
in the event that such rate of interest is not reasonably determinable,
discounted at the rate of interest borne by the Notes) of the obligation of the
lessee for net rental payments during the remaining term of the lease included
in such Sale and Leaseback Transaction (including any period for which such
lease has been extended or may, at the option of the lessor, be extended).
"Authenticating Agent" has the meaning provided in Section 2.02.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal, state or
foreign law for the relief of debtors.
"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means any day other than a day on which commercial banks are
authorized or required to close in New York, New York or Hartford, Connecticut.
"Capital Expenditures" of a Person means expenditures (whether paid in
cash or accrued as a liability) by such Person or any of its Subsidiaries that,
in conformity with GAAP, are or would be included in "capital expenditures,"
"additions to property, plant, or equipment" or comparable items in the
consolidated financial statements of such Person consistent with prior
accounting practices.
"Capital Stock" means, with respect to any Person, any capital stock of
such Person and shares, interests, participations, or other ownership interests
(however designated) of such Person and any rights (other than debt securities
convertible into corporate stock), warrants or options to purchase any of the
foregoing, including without limitation, each class of common stock and
preferred stock of such Person, if such Person is a corporation, and each
general or limited partnership interest or other equity interest of such Person,
if such Person is a partnership or limited liability company.
"Capitalized Lease Obligation" means obligations under a lease that are
required to be capitalized for financial reporting purposes in accordance with
GAAP, and the amount of Indebtedness represented by such obligations shall be
the capitalized amount of such obligations, as determined in accordance with
GAAP.
4
"Cash Equivalents" means (a) United States dollars, (b) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than one
year from the date of acquisition, (c) certificates of deposit with maturities
of one year or less from the date of acquisition, bankers' acceptances with
maturities not exceeding one year, and overnight bank deposits, in each case,
with any Eligible Institution, (d) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clauses
(b) and (c) entered into with any Eligible Institution, (e) commercial paper
rated "P-l," "A-l" or the equivalent thereof by Xxxxx'x or S&P,
respectively, and in each case maturing within 180 days after the date of
acquisition, (f) shares of money market funds, including those of the Trustee,
that invest solely in United States dollars and securities of the types
described in clauses (a) through (e), and (g) demand and time deposits and
certificates of deposit with an Eligible Institution or with commercial banks
insured by the Federal Deposit Insurance Corporation.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by merger or
consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries,
taken as a whole, to any person (as such term is used in Section 13(d)(3) of the
Exchange Act) other than to the Company or a Subsidiary Guarantor; (ii) the
sale, lease, transfer, conveyance or other disposition, in one or a series of
related transactions, of all or substantially all of the assets of the Issuer to
any person (as such term is used in Section 13(d)(3) of the Exchange Act) other
than to the Company or a Subsidiary Guarantor; (iii) the Company or the Issuer
consolidates with or merges into another Person or any Person consolidates with,
or merges into, the Company or the Issuer, in any such event pursuant to a
transaction in which the outstanding Voting Stock of the Company or the Issuer
is changed into or exchanged for cash, securities or other property, other than
any such transaction where (a) the outstanding Voting Stock of the Company or
the Issuer is changed into or exchanged for Voting Stock of the surviving or
resulting Person that is Qualified Capital Stock and (b) the holders of the
Voting Stock of the Company or the Issuer immediately prior to such transaction
own, directly or indirectly, not less than a majority of the Voting Stock of the
surviving or resulting Person immediately after such transaction; (iv) the
adoption of a plan relating to the liquidation or dissolution of the Company or
the Issuer not involving a merger or consolidation or a sale or other
disposition of assets described in clause (i) or (ii) above; (v) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any person (as defined above),
excluding the Permitted Holders, becomes the ''beneficial owner'' (as that term
is used in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, of more than 50% of the total voting power of the Company's or the
Issuer's then outstanding Voting Stock; provided that the sale of Voting Stock
of the Company or the Issuer to a Person or Persons acting as underwriters in
connection with a firm commitment underwriting shall not constitute a Change of
Control; or (vi) the first day on which a majority of the members of the Board
of Directors of the Company are not Continuing Directors (other than by action
of the Permitted Holders). For purposes of this definition, any transfer of an
equity interest of an entity that was formed for the purpose of acquiring Voting
Stock of the Company or the Issuer shall be deemed to be a transfer of such
portion of such Voting Stock as corresponds to the portion of the equity of such
entity that has been so transferred.
"Change of Control Offer" has the meaning provided in Section 4.15.
5
"Change of Control Payment Date" has the meaning provided in Section 4.15.
"Change of Control Purchase Price" has the meaning provided in Section
4.15.
"Collateral" has the meaning set forth in Section 11.01.
"Commission" means the Securities and Exchange Commission.
"Company" means Southwest Royalties Holdings, Inc., a Delaware corporation,
until a successor replaces it in accordance with the provisions of this
Indenture and thereafter means such successor.
"Consolidated Fixed Charge Coverage Ratio" on any date means, with
respect to the Company, the ratio, on a pro forma basis, of (i) the aggregate
amount of EBITDA attributable to continuing operations and businesses and
exclusive of the amounts attributable to operations and businesses discontinued
or disposed of, on a pro forma basis as if such operations and businesses were
discontinued or disposed of on the first day of the Reference Period, for the
Reference Period to (ii) the aggregate Consolidated Interest Expense (exclusive
of amounts attributable to discontinued operations and businesses on a pro forma
basis as if such operations and businesses were discontinued or disposed of on
the first day of the Reference Period, but only to the extent that the
obligations giving rise to such Consolidated Interest Expense would no longer be
obligations contributing to Consolidated Interest Expense subsequent to the date
of discontinuation or disposal) during the Reference Period; provided, that for
purposes of such computation, in calculating EBITDA and Consolidated Interest
Expense, (a) the transaction giving rise to the need to calculate the
Consolidated Fixed Charge Coverage Ratio shall be assumed to have occurred on
the first day of the Reference Period, (b) the incurrence of any Indebtedness or
issuance of Disqualified Capital Stock or the retirement of any Indebtedness or
Capital Stock during the Reference Period or subsequent thereto shall be assumed
to have occurred on the first day of such Reference Period, and (c) Consolidated
Interest Expense attributable to any Indebtedness (whether existing or being
incurred) bearing a floating interest rate shall be computed as if the rate in
effect on the date of determination had been the applicable rate for the entire
period, unless the Company or any of its Restricted Subsidiaries is a party to a
Swap Obligation (that remains in effect for the 12-month period after the date
of determination) that has the effect of fixing the interest rate on the date of
computation, in which case such rate (whether higher or lower) shall be used.
"Consolidated Interest Expense" of the Company means, for any period, the
aggregate interest expense (without duplication), during such period in respect
of all Indebtedness of the Company and its Restricted Subsidiaries (including
all commissions, discounts, other fees and charges owed with respect to letters
of credit and banker's acceptance financing and costs associated with Swap
Obligations, but excluding any interest accrued on intercompany payables among
the Company and its Restricted Subsidiaries or among Restricted Subsidiaries for
taxes to the extent the liability for such taxes has been assumed pursuant to
the Tax Sharing Agreement) determined on a consolidated basis in accordance with
GAAP. For purposes of this definition, (x) interest on a Capitalized Lease
Obligation shall be deemed to accrue at an interest rate reasonably determined
to be the rate of interest implicit in such Capitalized Lease Obligation in
accordance with GAAP (including Statement of Financial Accounting Standards No.
13 of the Financial Accounting Standards Board),
6
and (y) Consolidated Interest Expense attributable to any Indebtedness
represented by the guarantee by the Company or a Restricted Subsidiary of such
Person other than with respect to Indebtedness of the Company or a Restricted
Subsidiary of the Company shall be deemed to be the interest expense
attributable to the item guaranteed.
"Consolidation" means, with respect to any Person, the consolidation of the
accounts of the Restricted Subsidiaries of such Person with those of such
Person, all in accordance with GAAP; provided, however, that "consolidation"
shall not include consolidation of the account of any Unrestricted Subsidiary of
such Person with the accounts of such Person. The term "consolidated" has a
correlative meaning to the foregoing.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the Issue Date or (ii) was nominated for election or elected to
such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board of Directors at the time of such
nomination or election.
"Corporate Trust Office" means the office of the Trustee at which at any
particular time its corporate trust business shall be principally administered,
which office at the date of execution of this Indenture is located at 000 Xxxx
Xxxxxx, Xxxxxxxx, Xxxxxxxxxxx 00000.
"Custodian" means any receiver, trustee, assignee, liquidator, sequestrator
or similar official under any Bankruptcy Law.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.
"Default Interest Payment Date" has the meaning provided in Section 2.12.
"Depository" means The Depository Trust Company, its nominees and
successors.
"Disqualified Capital Stock" means with respect to any Person any Capital
Stock of such Person or its Subsidiaries that, by its terms or by the terms of
any security into which it is convertible or exchangeable, is, or upon the
happening of an event or the passage of time would be, required to be redeemed
or repurchased by such Person or its Subsidiaries, including at the option of
the holder, in whole or in part, or has, or upon the happening of an even or
passage of time would have, a redemption or similar payment due, on or prior to
the Stated Maturity Date.
"EBITDA" means for any period the sum of the Adjusted Consolidated Net
Income of the Company for such period, plus the sum, without duplication (and
only to the extent such amounts are deducted from net revenues in determining
such Adjusted Consolidated Net Income of the Company), of (i) the provision for
income taxes for such period for the Company, (ii) depreciation, depletion, and
amortization of the Company for such period and (iii) Consolidated Interest
Expense for such period, determined, in each case, on a consolidated basis for
the Company and its consolidated Subsidiaries otherwise in accordance with GAAP.
7
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500 million and that is rated
"A" (or higher) according to Xxxxx'x or S&P at the time as of which any
investment or rollover therein is made.
"Equity Offering" means any Public Equity Offering or other bona fide
sale of Qualified Capital Stock of Sierra or Red Oak to any Person (other than
the Company or any Affiliate) resulting in Net Proceeds to the Company in excess
of $15,000,000.
"Event of Default" has the meaning provided in Section 6.01.
"Excess Cash" has the meaning given to it in Section 4.16.
"Excess Cash Acceptance Amount" has the meaning given to it in Section
4.16.
"Excess Cash Offer" has the meaning given to it in Section 4.16.
"Excess Cash Offer Amount" has the meaning given to it in Section 4.16.
"Excess Cash Offer Price" has the meaning given to it in Section 4.16.
"Excess Cash Purchase Date" has the meaning given to it in Section 4.16.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the Commission thereunder.
"Exchange Assets" means assets acquired by the Company or any Restricted
Subsidiary in exchange for assets of the Company or any Restricted Subsidiary in
connection with an Asset Sale, which acquired assets include proved reserves
with a value that, together with the cash or Cash Equivalents received therefor
by the Company or such Restricted Subsidiary, is equal to or greater than the
value of the proved reserves included in the assets disposed of by the Company
or such Restricted Subsidiary in connection with such Asset Sale; provided, that
(i) ownership of such assets does not violate Section 4.19 and (ii) during any
fiscal year, the Company and its Restricted Subsidiaries can collectively
acquire assets (other than proved reserves, cash or Cash Equivalents) with a
Fair Market Value of up to $500,000 in exchange for assets of the Company and
the Restricted Subsidiaries with proved reserves, and such assets acquired by
such Person shall constitute "Exchange Assets" hereunder.
"Exchange Notes" has the meaning provided in the preamble to this
Indenture.
"Existing Indebtedness" means, (i) the Securities Purchase Agreement dated
November 5, 1996 between the Company and Joint Energy Development Investments
L.P.; (ii) the Credit Agreement dated August 2, 1995 among Southwest Espero,
Inc., Trust Company of the West and TCW Asset Management Co.; and (iii) Senior
Loan Agreement dated April 13, 1995 among the Company, certain of its
Affiliates, Bank One, Texas, N.A. and Banque Paribas, as amended.
"Fair Market Value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between an informed and willing seller and an informed and willing buyer,
neither of whom is under undue pressure or compulsion to complete the
transaction. Fair Market Value shall be determined by the Board of Directors of
the
8
Company acting reasonably and in good faith and shall be evidenced by a Board
Resolution of the Issuer delivered to the Trustee.
"GAAP" means generally accepted accounting principles as in effect in the
United States on the Issue Date applies on a basis consistent with that used in
the preparation of the audited financial statements of the Company included in
the Offering Circular.
"Global Note" has the meaning provided in Section 2.01.
"Global Note Legend" has the meaning provided in Section 2.15.
"guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
other Person and, without limiting the generally of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchaser or payment of)
such Indebtedness or other obligation of such other Person (whether arising by
virtue of partnership arrangements, or by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain financial
statements conditions or otherwise) or (ii) entered into for purposes of
assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part) (but if in part, only to the extent
thereof); provided, however, that the term "guarantee" shall not include (a)
endorsements for collection or deposit in the ordinary course of business and
(b) guarantees (other than guarantees of Indebtedness) by the Issuer in respect
of assisting one or more Subsidiaries in the ordinary course of their respective
businesses, including without limitation guarantees of trade obligations and
operating leases, on ordinary business terms. The term "guarantee" used as a
verb has a corresponding meaning.
"Guarantee" means the Parent Guarantee and the Subsidiary Guarantees or any
of the foregoing as the context requires.
"Guarantors" means the Company and each Subsidiary Guarantor.
"Holders" means any Person from time to time in whose name any Note is
registered on the Note Register.
"Hydrocarbons" means oil, natural gas, condensate, and natural gas
liquids.
"incur" and "incurrence" have the meanings set forth in Section 4.12.
"Indebtedness" means, with respect to any Person, without duplication (i)
all liabilities, contingent or otherwise, of such Person (a) for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (b) evidenced by bonds, notes, debentures,
or similar instruments or letters of credit or representing the balance deferred
and unpaid of the purchase price of any property acquired by such Person or
services received by such Person, but excluding trade account payables and
accrued liabilities arising in the ordinary course of business that are not
overdue by 90 days or being contested in good faith by appropriate proceedings,
promptly instituted and diligently pursued, (c) evidenced by bankers'
acceptances or similar instruments issued or accepted by banks or Swap
Obligations, (d) for the payment of money relating to a Capitalized Lease
Obligation, (e) for the Attributable Indebtedness
9
associated with any Sale and Leaseback Transaction or (f) for Production
Payments that such Person or any of its Restricted Subsidiaries elect to treat
as Indebtedness; (ii) reimbursement obligations of such Person with respect to
letters of credit; (iii) all liabilities of others of the kind described in the
preceding clause (i) or (ii) that such Person has guaranteed or that is
otherwise its legal liability (to the extent of such guaranty or other legal
liability) other than for endorsements, with recourse, of negotiable instruments
in the ordinary course of business; and (iv) all obligations secured by a Lien
(other than Permitted Liens, except to the extent the obligations secured by
such Permitted Liens are otherwise included in clause (i), (ii) or (iii) of this
definition and are obligations of such Person) to which the property or assets
(including, without limitation, leasehold interests and any other tangible or
intangible property rights) of such Person are subject, regardless of whether
the obligations secured thereby shall have been assumed by or shall otherwise be
such Person's legal liability (but, if such obligations are not assumed by such
Person or are not otherwise such Person's legal liability, the amount of such
Indebtedness shall be deemed to be limited to the Fair Market Value of such
property or assets determined as of the end of the preceding fiscal quarter).
"Indenture" means this Indenture, as amended or supplemented from time to
time in accordance with the terms hereof.
"Initial Notes" has the meaning provided in the preamble to this Indenture.
"Initial Purchasers" means Xxxxxxxxx & Company, Inc., Banc One Capital
Corporation and Paribas Corporation.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"Insurance Proceeds" means the interest in and to all proceeds (net of
costs of collection, including attorneys' fees) which now or hereafter may be
paid under any insurance policies now or hereafter obtained by or on behalf of
the Company or any Restricted Subsidiary in connection with any assets thereof,
together with interest payable thereon and the right to collect and receive the
same, including, without limitation, proceeds of casualty insurance, title
insurance, business interruption insurance and any other insurance now or
hereafter maintained with respect to such assets.
"interest" when used with respect to any Note means the amount of all
interest accruing on such Note, including applicable defaulted interest pursuant
to Section 2.12 and any Additional Interest pursuant to the Registration Rights
Agreement.
"Interest Payment Date" means April 15 and October 15 of each year,
commencing April 15, 1998.
"Interest Rate or Currency Agreement" of any Person means any forward
contract, futures contract, swap, option or other financial agreement or
arrangement (including, without limitation, caps, floors, collars, puts and
similar agreements) relating to, or the value of which is dependent upon,
interest rates or currency exchange rates.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
to the date hereof and from time to time hereafter.
10
"Investment" by any Person in any other Person means (a) the acquisition
(whether for cash, property, services, securities or otherwise) of Capital
Stock, bonds, notes, debentures, partnership, or other ownership interests or
other securities of such other Person or any agreement to make any such
acquisition; (b) the making by such Person of any deposit with, or advance, loan
or other extension of credit to, such other Person (including the purchase of
property from another Person subject to an understanding or agreement,
contingent or otherwise, to resell such property to such other Person) and
(without duplication) any amount committed to be advanced, loaned or extended to
such other Person; (c) the entering into of any guarantee of, or other
contingent obligation with respect to, Indebtedness or other liability of such
other Person; (d) the entering into of any Swap Obligation with such other
Person; or (e) the making of any capital contribution by such Person to such
other Person.
"Investment Grade Rating" means with respect to any Person or issue of
debt securities or preferred stock, a rating in one of the four highest letter
rating categories (without regard to "+" or "-" or other modifiers) by
Moody's or S&P or if any such rating agency has ceased using letter rating
categories or the four highest of such letter rating categories are not
considered to represent "investment grade" ratings, then the comparable
"investment grade" ratings (as designated by any such rating agency).
"Issue Date" means the date of first issuance of the Notes under this
Indenture.
"Issuer" means Southwest Royalties, Inc., a Delaware corporation, until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Legal Defeasance" has the meaning set forth in Section 8.01.
"Legal Holiday" has the meaning provided in Section 10.07.
"Lien" means any mortgage, lien, pledge, charge, security interest, or
other encumbrance of any kind, regardless of whether filed, recorded, or
otherwise perfected under applicable law (including any conditional sale or
other title retention agreement and any lease deemed to constitute a security
interest and any option or other agreement to give any security interest).
"Material Change" means an increase or decrease (excluding changes that
result solely from changes in prices) of more than either (i) 10% from the end
of the immediately preceding quarter in the estimated discounted future net
revenue from proved oil and gas reserves of the Company and its Restricted
Subsidiaries, or (ii) 20% from the end of the immediately preceding year in the
estimated discounted future net revenue from proved oil and gas reserves of the
Company and its Restricted Subsidiaries, in each case calculated in accordance
with clause (a) (i) of the definition of Adjusted Consolidated Net Tangible
Assets; provided, however, that the following shall be excluded from the
calculation of Material Change: (a) any acquisitions of oil and gas reserves
made after the end of the immediately preceding year for which the discounted
future net revenues have been estimated by independent petroleum engineers since
the end of the preceding year and on which a Reserve Report or Reserve Reports
exist and (b) any disposition of properties existing at the beginning of the
current quarter or current year, as the case may be, for purposes of clause (i)
or clause (ii) above, that have been disposed of in accordance with Section
4.16.
"Moody's" means Xxxxx'x Investors Service, Inc. and its successors.
11
"Net Cash Proceeds" means an amount equal to the aggregate amount of cash
and Cash Equivalents received by the Company or any Restricted Subsidiary in
respect of an Asset Sale, less the sum of (i) all reasonable out-of-pocket fees,
commissions, and other expenses incurred in connection with such Asset Sale,
including the amount (estimated in good faith by the Company) of income,
franchise, sales and other applicable taxes to be paid, payable or accrued by
the Company or such Restricted Subsidiary (in each case as estimated in good
faith by the Company without giving effect to tax attributes unrelated to such
Asset Sale) in connection with such Asset Sale, and (ii) the aggregate amount of
cash and Cash Equivalents so received which is used to retire any then existing
Indebtedness of the Company or such Restricted Subsidiary (other than the
Notes), as the case may be, which is secured by a Lien on the property subject
of the Asset Sale or which is required by the terms of such Indebtedness to be
repaid in connection with such Asset Sale.
"Net Income" of any Person for any period means the net income (loss) of
such Person for such period, determined on a consolidated basis in accordance
with GAAP, excluding (without duplication) (i) all extraordinary, unusual and
nonrecurring gains, (ii) the net income, if positive, of any other Person, in
which such Person or any of its consolidated Subsidiaries has an interest,
except to the extent of the amount of any dividends or distributions actually
paid in cash to such Person or a consolidated Subsidiary of such Person during
such period, (iii) the net income, if positive, of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition and (iv) the net income, if positive, of any Subsidiary of such
Person to the extent that the declaration or payment of dividends or similar
distributions is not at the time permitted by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule, or
governmental regulation applicable to such Subsidiary.
"Net Proceeds" means (a) in the case of any sale by a Person of Qualified
Capital Stock or other securities, the aggregate net cash proceeds received by
such Person from the sale of such securities (other than to a Restricted
Subsidiary) after payment of reasonable out-of-pocket expenses, commissions and
discounts incurred in connection therewith, and (b) in the case of any exchange,
exercise, conversion or surrender of any outstanding securities or Indebtedness
of such Person for or into shares of Qualified Capital Stock of such Person, the
net book value of such outstanding securities as adjusted on the books of such
Person or Indebtedness of such Person to the extent recorded in accordance with
GAAP, in each case, on the date of such exchange, exercise, conversion or
surrender (plus any additional amount required to be paid by the holder of such
Indebtedness or securities to such Person upon such exchange, exercise,
conversion or surrender and less (i) any and all payments made to the holders of
such Indebtedness or securities and (ii) all other expenses incurred by such
Person in connection therewith, in each case, in so far as such payments or
expenses are incident to such exchange, exercise, conversion, or surrender).
"Net Working Capital" of any Person means (i) all current assets of such
Person and its Restricted Subsidiaries, minus (ii) all current liabilities of
such Person and its consolidated Subsidiaries other than the current portion of
long term Indebtedness, each item to be determined on a consolidated basis in
conformity with GAAP.
"Net Worth" of any Person means, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly or
annual consolidated balance sheet of such Person and its Restricted Subsidiaries
(which shall be as of a date not more than 90 days prior to the date of such
computation), less any amounts included therein attributable to Disqualified
Capital Stock or any equity security convertible into or exchangeable for
Indebtedness, the cost of treasury stock (not otherwise deducted from
stockholder's equity), and the principal amount of any promissory
12
notes receivable from the sale of the Capital Stock of such Person or any of its
Restricted Subsidiaries each item to be determined in conformity with GAAP.
"Non-U.S. Person" means a Person who is not a U.S. person, as defined in
Regulation S.
"Note Register" means the register maintained by or for the Issuer in
which the Issuer shall provide for the registration of the Notes and the
transfer of the Notes.
"Notes" means the Initial Notes, the Exchange Notes and, if required, the
Private Exchange Notes, treated as a single class of securities, as amended or
supplemented from time to time in accordance with the terms hereof, that are
issued pursuant to this Indenture.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Offering" means the sale by the Issuer of the Initial Notes to the Initial
Purchasers as contemplated by the Offering Circular.
"Offering Circular" means the Confidential Offering Circular dated October
9, 1997 of the Issuer relating to the offering of the Notes.
"Officer" means, with respect to any Person, the Chairman of the Board of
Directors, the Chief Executive Officer, the President, any Vice President, the
Chief Financial Officer, the Treasurer, the Controller, or the Secretary of such
Person, or any other officer designated by the Board of Directors serving in a
similar capacity.
"Officers' Certificate" means a certificate signed by two Officers of the
Company or the Issuer, as applicable, at least one of whom shall be the
principal executive officer, principal accounting officer or principal financial
officer of such Person.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee complying with the requirements of Sections
10.04 and 10.05, as they relate to the giving of an Opinion of Counsel.
"Parent Guarantee" means an unconditional senior guarantee of the Notes
given by the Company pursuant to the terms of this Indenture.
"Paying Agent" has the meaning provided in Section 2.03.
"Payment Default" has the meaning set forth in Section 6.01.
"Permitted Bank Credit Facility" means, with respect to any Person, a
revolving credit or letter of credit facility with a commercial banking
institution, the proceeds of which are used for working capital and other
general corporate purposes, as the same may be amended, extended or refinanced
from time to time.
"Permitted Hedging Transactions" means non-speculative transactions in
futures, forwards, swaps or option contracts (including both physical and
financial settlement transactions) engaged
13
in by the Company and its Restricted Subsidiaries as part of their normal
business operations as a risk-management strategy or hedge against adverse
changes in the prices of natural gas, feedstock or refined products; provided,
that such transactions do not in the case of the Company and its Restricted
Subsidiaries, on a monthly basis, relate to more than 90% of their combined
average net oil and natural gas production per month for the most recent 3-month
period measured at the time of such transaction; provided, further, that, at the
time of such transaction (i) the counter party to any such transaction is an
Eligible Institution or a Person that has an Investment Grade Rating or has an
issue of debt securities or preferred stock outstanding with an Investment Grade
Rating or (ii) such counter party's obligation pursuant to such transaction is
unconditionally guaranteed in full by, or secured by a letter of credit issued
by, an Eligible Institution or a Person that has an Investment Grade Rating or
that has an issue of debt securities or preferred stock outstanding with an
Investment Grade Rating.
"Permitted Holders" means X.X. Xxxxxxx XXX (or his heirs, his estate or
any trust in which he or his immediate family members own, directly or
indirectly, a beneficial interest in excess of 50%).
"Permitted Indebtedness" means, without duplication, each of the
following: (a) the Indebtedness evidenced by the Notes, the Parent Guarantee or
the Subsidiary Guarantees; (b) Indebtedness owed by any Restricted Subsidiary to
the Company or any other Restricted Subsidiary or Indebtedness owed by the
Company to any Restricted Subsidiary; provided that, such Indebtedness is
Subordinated Indebtedness; (c) Indebtedness outstanding under a Permitted Bank
Credit Facility so long as the aggregate principal amount of all Indebtedness
outstanding under all Permitted Bank Credit Facilities for the Company and its
Restricted Subsidiaries does not exceed $50,000,000 less the amount of Net Cash
Proceeds from any Asset Sale applied pursuant to Section 4.16 to repay or prepay
such Indebtedness that results in a permanent reduction relating thereto; (d)
Swap Obligations of the Company or its Restricted Subsidiaries; (e) Indebtedness
outstanding on the Issue Date (and not repaid with the proceeds of the
Offering); (f) other Indebtedness owed by the Company or its Restricted
Subsidiaries in an aggregate principal amount outstanding not to exceed
$1,000,000 at any one time; and (g) Permitted Refinancing Indebtedness.
"Permitted Investment" means, when used with reference to the Company or
any Restricted Subsidiary, (i) trade credit extended to Persons in the ordinary
course of business; (ii) purchases of Cash Equivalents; (iii) Investments by the
Company or its Restricted Subsidiaries in Persons which are Wholly Owned
Restricted Subsidiaries and are engaged in the oil and gas exploration and
production business; (iv) Swap Obligations; (v) advances to officers and
employees of the Company or any Restricted Subsidiary in connection with the
performance of their duties in the ordinary course of business in an amount not
to exceed $500,000 in the aggregate outstanding at any time; (vi) margin
deposits in connection with Permitted Hedging Transactions; (vii) any
Investments outstanding on the Issue Date and Investments in Red Oak by the
Company on the Issue Date in an amount not to exceed $10 million; (viii)
Investments and expenditures made in the ordinary course of business by the
Company or its Restricted Subsidiaries, and of a nature that is or shall have
become customary in, the oil and gas business as a means of actively exploiting,
exploring for, acquiring, developing, processing, gathering, marketing or
transporting oil or gas through agreements, transactions, interests or
arrangements which permit a Person 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, without limitation, (a) ownership interests in
oil and gas properties or gathering systems and (b) Investments and expenditures
in the form of or pursuant to operating agreements, processing
14
agreements, farm-in agreements, farm-out agreements, development agreements,
area of mutual interest agreements, unitization agreements, pooling
arrangements, joint bidding agreements, service contracts, joint venture
agreements, partnership agreements (whether general or limited), subscription
agreements, stock purchase agreements and other similar agreements with third
parties; provided that in the case of any joint venture engaged in processing,
gathering, marketing or transporting oil or gas (i) all Indebtedness of such
joint venture (other than a joint venture that is an Unrestricted Subsidiary)
that would not otherwise constitute Indebtedness of the Company or a Restricted
Subsidiary shall be deemed Indebtedness of such Person in proportion to its
direct or indirect ownership interest in such joint venture and (ii) such joint
venture shall be reasonably calculated to enhance the value of the reserves of
such Person or marketability of production from such reserves; (ix) other
Investments not in excess of $2 million at any time outstanding; (x) loans made
to officers, directors and employees of the Company or any of its Restricted
Subsidiaries approved by the applicable Board of Directors (or by an authorized
officer), the proceeds of which are used solely to purchase stock or to exercise
stock options received pursuant to an employee stock option plan or other
incentive plan, in a principal amount not to exceed the purchase price of such
stock or the exercise price of such stock options, as applicable; and (xi) the
repayment of Indebtedness not to exceed $500,000 in conjunction with the
acquisition of all the Capital Stock of Love Petroleum Company.
"Permitted Liens" with respect to any Person means (a) Liens imposed by
governmental authorities for taxes, assessments, or other charges not yet due or
which are being contested in good faith and by appropriate proceedings, if
adequate reserves with respect thereto are maintained on the books of any of
such Person in accordance with GAAP; (b) statutory Liens of landlords, carriers,
warehousemen, mechanics, materialmen, repairmen, mineral interest owners, or
other like Liens arising by operation of law in the ordinary course of business
provided that (i) the underlying obligations are not overdue for a period of
more than 60 days, or (ii) such Liens are being contested in good faith and by
appropriate proceedings and adequate reserves with respect thereto are
maintained on the books of any of such Person in accordance with GAAP; (c)
deposits of cash or Cash Equivalents to secure the performance of bids, trade
contracts (other than borrowed money), leases, statutory obligations, surety
bonds, performance bonds, and other obligations of a like nature incurred in the
ordinary course of business (or to secure reimbursement obligations or letters
of credit issued to secure such performance or other obligations); (d)
easements, rights-of-way, zoning, similar restrictions and other similar
encumbrances or title defects incurred in the ordinary course of business which,
in the aggregate, are not material in amount and which do not, in any case,
materially detract from the value of the property subject thereto or materially
interfere with the ordinary conduct of the business of such Person; (e) Liens
securing the Parent Guarantee, the Notes, any Subsidiary Guarantee or Permitted
Bank Credit Facilities; (f) pledges or deposits made in the ordinary course of
business in connection with worker's compensation, unemployment insurance, other
types of social security legislation, property insurance and liability
insurance; (g) Liens on the assets of any Person existing at the time such
assets are acquired by such Person, whether by merger, consolidation, purchase
of assets or otherwise so long as such Liens (A) are not created, incurred or
assumed in contemplation of such assets being acquired by such Person and (B) do
not extend to any other assets of such Person; (h) leases or subleases granted
to others that do not materially interfere with the ordinary course of business
of any of such Person, and (i) any extension, renewal or replacement of the
Liens created pursuant to any of clauses (a) through (h); provided that such
Liens would have otherwise been permitted under such clauses, and provided
further that the Liens permitted by this clause (i) do not secure any additional
Indebtedness or encumber any additional property.
15
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any Restricted Subsidiary issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of such Person; provided that: (i) the principal amount (or
accreted value, if applicable) of such Permitted Refinancing Indebtedness does
not exceed the principal amount (or accreted value, if applicable) of the
Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded
(plus the amount of reasonable expenses incurred in connection therewith); (ii)
such Permitted Refinancing Indebtedness (other than Indebtedness under Permitted
Bank Credit Facilities) has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Parent Guarantee, the Notes or any
Subsidiary Guarantee, then such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and is subordinated in
right of payment to, the Parent Guarantee, the Notes or such Subsidiary
Guarantee, as the case may be, on terms at least as favorable to the Holders of
Notes as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and (iv) with
respect to any such Indebtedness of the Company being extended, refinanced,
renewed, replaced, defeased or refunded, such Permitted Refinancing Indebtedness
shall not be incurred by any Restricted Subsidiary.
"Physical Notes" has the meaning provided in Section 2.01.
"Person" means any corporation, individual, joint stock company, joint
venture, partnership, unincorporated association, governmental regulatory
entity, country, state, or political subdivision thereof, trust, municipality,
or other entity.
"Pledge Agreement" means that certain Pledge Agreement, in substantially
the form of Exhibit C, issued by the Company in favor of the Trustee pursuant to
which the Capital Stock in Sierra and Red Oak directly owned by the Company have
been pledged to the Trustee, for the ratable benefit of the Holders of the
Notes.
"Preferred Stock" means, with respect to any Person, any class or classes
(however designated) of Capital Stock of such Person that is preferred as to the
payment of dividends, or as to the distribution of assets upon any voluntary or
involuntary liquidation or dissolution of such Person over shares of Capital
Stock of any other class of such Person.
"principal" of any Indebtedness (including the Notes) means the principal
amount of such Indebtedness plus the premium, if any, on such Indebtedness.
"Private Exchange Notes" has the meaning set forth in the Registration
Rights Agreement.
"Private Placement Legend" means the legend initially set forth on the
Initial Notes in the form set forth in Section 2.15.
"Production Payment" means any volumetric or dollar-denominated
production payment or other similar burden on the property of the Company or any
of its Restricted Subsidiaries.
"pro forma" means, with respect to any calculation made or required to be
made pursuant to the terms of this Indenture, a calculation in accordance with
Article 11 of Regulation S-X under the
16
Securities Act, as determined by the Board of Directors of the Issuer in
consultation with its independent public accountants.
"Public Equity Offering" means an underwritten public offering by a
nationally recognized member of the National Association of Securities Dealers
of Qualified Capital Stock of the Issuer or the Company pursuant to an effective
registration statement filed with the Commission pursuant to the Securities Act.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Qualified Institutional Buyer" or "QIB" has the meaning specified in Rule
144A under the Securities Act.
"Record Date" means the Record Dates specified in the Notes.
"Redemption Date" when used with respect to any Note to be redeemed, means
the date fixed for such redemption pursuant to this Indenture and the Notes.
"Redemption Price" when used with respect to any Note to be redeemed, means
the price fixed for such redemption, including principal and premium, if any,
pursuant to this Indenture and the Notes.
"Red Oak" means Midland Red Oak Realty, Inc., a Delaware corporation.
"Reference Period" with regard to any Person means the four full fiscal
quarters of such Person ended on or immediately preceding any date upon which
any determination is to be made pursuant to the terms of the Notes or this
Indenture.
"Registrar" has the meaning provided in Section 2.03.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of the Issue Date among the Company, the Issuer and the Initial
Purchasers.
"Regulation S" means Regulation S under the Securities Act.
"Released Interests" has the meaning provided in Section 11.04(c).
"Reserve Report" means a report prepared by independent petroleum
engineers with respect to Hydrocarbon reserves in accordance with guidelines
published by the Commission.
"Reserved Rights" has the meaning set forth in Section 8.01.
"Restricted Investment" means (i) the designation of a Subsidiary as an
Unrestricted Subsidiary in the manner described in the definition of
Unrestricted Subsidiary and (ii) any Investment other than a Permitted
Investment.
"Restricted Payment" has the meaning set forth in Section 4.10.
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"Restricted Security" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act; provided, however, that the Trustee shall be
entitled to request and conclusively rely on an Opinion of Counsel with respect
to whether any Note constitutes a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Company (including
the Issuer) which is not an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"Sale and Leaseback Transaction" means an arrangement relating to
property owned on the Issue Date or thereafter acquired whereby a Person or a
Subsidiary of such Person transfers such property to another Person and leases
it back from such other Person.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Security Documents" means the Pledge Agreement and each other agreement
evidencing the pledge of assets to secure the Parent Guarantee that may be
entered into on or after the Issue Date pursuant to the terms of this Indenture.
"Sierra" means Sierra Well Service, Inc., a Delaware corporation.
"Significant Subsidiary" means (a) any Restricted Subsidiary having (i)
for the most recent fiscal year of such Subsidiary, consolidated revenues
greater than $10 million or (ii) as at the end of such fiscal year of such
Subsidiary, assets or liabilities greater than $10 million and (b) any group of
Restricted Subsidiaries that, taken together, would constitute a Significant
Subsidiary; provided however, that ''Significant Subsidiary'' shall not include
a joint venture if and so long as an Investment therein would constitute a
Permitted Investment under clause (viii) of the definition thereof.
"Southwest Software" means Midland Southwest Software, Inc., a Delaware
corporation.
"S&P" means Standard & Poor's Rating Services, a division of The XxXxxx-
Xxxx Companies, Inc. and its successors.
"Stated Maturity Date" means October 15, 2004.
"Subordinated Indebtedness" means Indebtedness of the Issuer, the Company
or a Subsidiary Guarantor that (i) requires no payment of principal prior to or
on the Stated Maturity Date and (ii) is expressly subordinate and junior in
right of payment to the Notes, the Parent Guarantee or the Subsidiary
Guarantees, as the case may be.
"Subsidiary" with respect to any Person means (i) a corporation with
respect to which such Person or its Subsidiaries own, directly or indirectly, at
least 50% of such corporation's Voting Stock, or (ii) a partnership in which
such Person or a Subsidiary of such Person is, at the time, a general partner of
such partnership and has more than 50% of the total voting power of partnership
interests, or (iii) any other Person (other than a corporation or a partnership)
in which such Person, one or more Subsidiaries of such Person, or such Person
and one or more Subsidiaries of such Person, directly or indirectly, at the date
of determination thereof has (x) at least a 50% ownership interest
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or (y) the power to elect or direct the election of the directors or other
governing body of such other Person.
"Subsidiary Guarantee" has the meaning set forth in Section 12.01(b).
"Subsidiary Guarantor" means each of the Company's Restricted Subsidiaries
that in the future executes a supplemental indenture in which such Restricted
Subsidiary agrees to be bound by the terms of this Indenture as a Subsidiary
Guarantor; provided, however, that any Person constituting a Subsidiary
Guarantor as described above shall cease to constitute a Subsidiary Guarantor
when its Subsidiary Guarantee is released in accordance with this Indenture.
"Swap Obligation" of any Person means any Interest Rate or Currency
Agreement entered into with one or more financial institutions or one or more
futures exchanges in the ordinary course of business and not for purposes of
speculation that is designed to protect such Person against fluctuations in (x)
interest rates with respect to Indebtedness incurred and which shall have a
notional amount no greater than 100% of the principal amount of the Indebtedness
being hedged thereby or (y) currency exchange rate fluctuations.
"Tax Sharing Agreement" means the Tax Sharing Agreement, dated as of
September 1, 1997, among the Company and other Subsidiaries, as in effect on the
Issue Date and as amended from time to time, provided that any such amendment is
not materially adverse to the Holders of the Notes.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S)77aaa-77bbbb),
as amended, as in effect on the date of this Indenture, except as otherwise
provided in Section 9.03.
"TPI" means Threading Products International, LLC, a Texas limited
liability company.
"Transferred Collateral" has the meaning set forth in Section 11.04(b).
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer this Indenture, or in the case of a
successor trustee, an officer assigned to the department, division or group
performing the corporation trust work of such successor and assigned to
administer this Indenture.
"Trustee" means the party named as such in this Indenture until a successor
replaces it in accordance with the provisions of this Indenture and thereafter
means such successor.
"Unrestricted Non-Recourse Indebtedness" of any Unrestricted Subsidiary
means (i) Indebtedness of such Person that is secured solely (other than with
respect to clause (ii) below) by a Lien upon the stock of an Unrestricted
Subsidiary of such Person and as to which there is no recourse (other than with
respect to clause (ii) below) against such Person or any of its assets other
than against such stock (and the dollar amount of any Indebtedness of such
Person as described in this clause (i) shall be deemed to be zero for purposes
of all other provisions of this Indenture) and (ii) guarantees of the
Indebtedness of Unrestricted Subsidiaries of such Person.
"Unrestricted Subsidiary" means, in respect of the Company, Red Oak; and
in respect of any Person, any other Person ("Other Person") that would, but
for this definition of "Unrestricted Subsidiary" be a Subsidiary of such
Person organized or acquired after the Issue Date as to which all of the
following conditions apply: (i) neither such Person nor any of its other
Subsidiaries
19
provides credit support of any Indebtedness of such Other Person (including any
undertaking, agreement or instrument evidencing such Indebtedness); (ii) such
Other Person is not liable, directly or indirectly, with respect to any
Indebtedness other than Unrestricted Subsidiary Indebtedness; (iii) neither such
Person nor any of its Subsidiaries has made an Investment in such Other Person
unless such Investment was permitted by Section 4.10; and (iv) the Board of
Directors of such Person, as provided below, shall have designated such Other
Person to be an Unrestricted Subsidiary on or prior to the date of organization
or acquisition of such Other Person. Any such designation by the Board of
Directors of such Person shall be evidenced to the Trustee by delivering to the
Trustee a Board Resolution giving effect to such designation and an Officers'
Certificate of the Company certifying that such designation complies with the
foregoing conditions.
"Unrestricted Subsidiary Indebtedness" means, as to any Unrestricted
Subsidiary of any Person, Indebtedness of such Unrestricted Subsidiary (i) as to
which neither such Person nor any Subsidiary of such Person is directly or
indirectly liable (by virtue of such Person or any such Subsidiary being the
primary obligor on, guarantor of, or otherwise liable in any respect to, such
Indebtedness), unless such liability constitutes Unrestricted Non-Recourse
Indebtedness and (ii) which, upon the occurrence of a default with respect
thereto, does not result in, or permit any holder (other than the Company or any
Subsidiary of the Company) of any Indebtedness of such Person or any Subsidiary
of such Person to declare a default on such Indebtedness of such Person or any
Subsidiary of such Person or cause the payment thereof to be accelerated or
payable prior to its Stated Maturity Date, unless, in the case of this clause
(ii), such Indebtedness constitutes Unrestricted Non-Recourse Indebtedness.
"U.S. Government Obligations" means direct obligations of, and obligations
guaranteed by, the United States of America for the payment of which the full
faith and credit of the United States of America is pledged.
"U.S. Legal Tender" means such coin or currency of the Untied States of
America (which if paid by wire transfer, shall be in the form of immediately
available funds) as at the time of payment shall be legal tender for the payment
of public and private debts.
"Voting Stock" means Capital Stock of a Person having generally the right
to vote in the election to directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total of
the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary of
which all the outstanding Voting Stock owned by the Company or another Wholly
Owned Restricted Subsidiary.
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Section 1.02 Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such provision is
incorporated by reference in, and made a part of, this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Issuer, the Company or any
other Guarantor or any other obligor on the Notes.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule and
not otherwise defined herein have the meanings assigned to them therein.
Section 1.03 Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision; and
(6) any reference to a statute, law or regulation means that statute,
law or regulation as amended and in effect from time to time and includes any
successor statute, law or regulation; provided, however, that any reference to
the Bankruptcy Law shall mean the Bankruptcy Law as applicable to the relevant
case.
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ARTICLE TWO
THE NOTES
Section 2.01 Form and Dating.
The Initial Notes and the Trustee's certificate of authentication
relating thereto shall be substantially in the form of Exhibit A hereto. The
Exchange Notes and the Trustee's certificate of authentication relating thereto
shall be substantially in the form of Exhibit B hereto. The Private Exchange
Notes, if required, and the Trustee's certificate of authentication relating
thereto shall be substantially in the form of Exhibit B hereto but shall bear
the Private Placement Legend. The Notes may have notations, legends or
endorsements required by law, stock exchange rule or depository rule or usage.
The Issuer and the Trustee shall approve the form of the Notes and any notation,
legend or endorsement on them. Each Note shall be dated the date of its
issuance and shall show the date of its authentication.
The terms and provisions contained in the Notes, annexed hereto as
Exhibits A and B, shall constitute, and are hereby expressly made, a part of
this Indenture and, to the extent applicable, the Issuer and the Trustee, by
their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
Except for QIBs who elect to take their Notes in the form of Physical
Notes, Initial Notes offered and sold in reliance on Rule 144A, together with
any Initial Notes offered and sold in reliance on Regulation S, shall be issued
initially in the form of one or more permanent global Notes in registered form
(each a "Global Note"), substantially in the form set forth in Exhibit A,
deposited with the Trustee, as custodian for the Depository, duly executed by
the Issuer and authenticated by the Trustee as hereinafter provided and shall
bear the legends set forth in Section 2.15. Except for QIBs who elect to take
their Notes in the form of Physical Notes, Exchange Notes shall be issued
initially in the form of one or more permanent Global Notes, substantially in
the form set forth in Exhibit B, deposited with the Trustee, as custodian for
the Depository, duly executed by the Issuer and authenticated by the Trustee as
hereinafter provided and shall bear the Global Note Legend. The aggregate
principal amount of a Global Note may from time to time be increased or
decreased by adjustments made on the records of the Trustee, as custodian for
the Depository, as hereinafter provided.
Notes issued in exchange for an interest in a Global Note pursuant to
Section 2.16 may be issued in the form of permanent certificated Notes in
registered form in substantially the form set forth in Exhibit A (the "Physical
Notes"). In addition, QIBs may elect to take their Notes in the form of
Physical Notes. Initial Notes offered and sold to Institutional Accredited
Investors and Private Exchange Notes shall be issued in the form of Physical
Notes in substantially the form set forth in Exhibits A and B, respectively, and
shall bear the Private Placement Legend.
The Initial Notes, the Exchange Notes and any Private Exchange Notes
shall be considered to be a single class of securities for all purposes of this
Indenture, including, without limitation, waivers, amendments, redemptions and
offers to repurchase.
Section 2.02 Execution and Authentication; Aggregate Principal Amount.
Two Officers, or an Officer and an Assistant Secretary of the Issuer,
shall sign, or one Officer shall sign and one Officer or an Assistant Secretary
(each of whom shall, in each case, have
22
been duly authorized by all requisite corporate actions) shall attest to, the
Notes for the Issuer by manual or facsimile signature. The corporate seal of the
Issuer shall be affixed to each Note or reproduced thereon.
If any Officer or Assistant Secretary whose signature is on a Note was
an Officer or Assistant Secretary at the time of such execution but no longer
holds that office or position at the time the Trustee authenticates the Note,
the Note shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Notes has been authenticated under this
Indenture.
The Trustee shall authenticate (i) Initial Notes for original issue in
the aggregate principal amount not to exceed $200.0 million and (ii) Exchange
Notes or Private Exchange Notes from time to time for issue only in exchange for
a like principal amount of Initial Notes, in each case upon written order of the
Issuer in the form of an Officers' Certificate of the Issuer. Each such written
order shall specify the amount of Notes to be authenticated and the date on
which the Notes are to be authenticated, whether the Notes are to be Initial
Notes, Exchange Notes or Private Exchange Notes and whether the Notes are to be
issued as Physical Notes or Global Notes or such other information as the
Trustee may reasonably request. In addition, with respect to authentication
pursuant to clause (ii) of the first sentence of this paragraph, the first such
written order from the Issuer shall be accompanied by an Opinion of Counsel of
the Issuer in form and substance reasonably satisfactory to the Trustee stating
that the issuance of the Exchange Notes or Private Exchange Notes, as the case
may be, does not give rise to an Event of Default, complies with this Indenture
and has been duly authorized by the Issuer. The aggregate principal amount of
Notes outstanding at any time may not exceed $200.0 million, except as provided
in Sections 2.07 and 2.08.
The Trustee may appoint an authentication agent (the "Authenticating
Agent") reasonably acceptable to the Issuer to authenticate Notes. Unless
otherwise provided in the appointment, an Authenticating Agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such Authenticating
Agent. An Authenticating Agent has the same rights as an Agent to deal with the
Issuer or with any Affiliate of the Issuer.
The Notes shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof.
Section 2.03 Registrar and Paying Agent.
The Issuer shall maintain an office or agency in New York, New York,
where Notes may be presented or surrendered for payment ("Paying Agent"), and
the Issuer shall also maintain an office or agency, either in New York, New York
or elsewhere in the United States, where (a) Notes may be presented or
surrendered for registration of transfer or for exchange ("Registrar") and (b)
notices and demands to or upon the Issuer in respect of the Notes and this
Indenture may be served. The Registrar shall keep the Note Register. The
Issuer, upon prior written notice to the Trustee, may have one or more co-
Registrars and one more additional Paying Agents reasonably acceptable to the
Trustee. The term "Paying Agent" includes any additional Paying Agent. The
Issuer may act as its own Paying Agent, except that for the purposes of payments
on the Notes pursuant to
23
Sections 4.15 and 4.16, neither the Issuer nor any Affiliate of the Issuer may
act as Paying Agent.
The Issuer shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which agreement shall incorporate the
provisions of the TIA and implement the provisions of this Indenture that relate
to such Agent. The Issuer shall notify the Trustee, in advance, of the name and
address of any such Agent. If the Issuer fails to maintain a Registrar or Paying
Agent, or fails to give the foregoing notice, the Trustee shall act as such.
The Issuer initially appoints the Trustee as Registrar, Paying Agent
and agent for service of demands and notices in connection with the Notes, until
such time as the Trustee has resigned or a successor has been appointed. Any of
the Registrar, the Paying Agent or any other Agent may resign upon 30 days'
notice to the Issuer.
Section 2.04 Paying Agent to Hold Assets in Trust.
The Issuer shall require each Paying Agent other than the Trustee to
agree in writing that such Paying Agent shall hold in trust for the benefit of
the Holders or the Trustee all assets held by the Paying Agent for the payment
of principal of, premium, if any, or interest on, the Notes (whether such assets
have been distributed to it by the Issuer or any other obligor on the Notes),
and the Issuer and the Paying Agent shall notify in writing the Trustee of any
Default by the Issuer in making any such payment. The Issuer at any time may
require a Paying Agent to distribute all assets held by it pursuant hereto to
the Trustee and account for any assets disbursed and the Trustee may at any time
during the continuance of any payment Default, upon written request to a Paying
Agent, require such Paying Agent to distribute all assets held by it pursuant
hereto to the Trustee and to account for any assets distributed. Upon
distribution to the Trustee of all assets that shall have been delivered by the
Issuer to the Paying Agent, the Paying Agent shall have no further liability for
such assets.
Section 2.05 Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders. If the Trustee is not the Registrar, the Issuer shall furnish or
cause the Registrar to furnish to the Trustee before each Record Date and at
such other times as the Trustee may request in writing a list as of such date
and in such form as the Trustee may reasonably require of the names and
addresses of the Holders, which list may be conclusively relied upon by the
Trustee.
Section 2.06 Transfer and Exchange.
When Notes are presented to the Registrar or a co-Registrar with a
request to register the transfer of such Notes or to exchange such Notes for an
equal principal amount of Notes of other authorized denominations, the Registrar
or co-Registrar shall register the transfer or make the exchange as requested if
its requirements for such transaction are met; provided, however, that the Notes
presented or surrendered for registration of transfer or exchange shall be duly
endorsed or accompanied by a written instrument of transfer in form satisfactory
to the Issuer, the Trustee and the Registrar or co-Registrar, duly executed by
the Holder thereof or his attorney duly authorized in writing. To permit
registration of transfers and exchanges, the Issuer shall execute and the
Trustee, upon written demand of the Issuer in the form of an Officer's
Certificate of the Issuer, shall authenticate Notes at the Registrar's or co-
Registrar's request. No service charge shall be made for
24
any registration of transfer or exchange, but the Issuer may require repayment
of a sum sufficient to cover any transfer tax or similar governmental charge
payable in connection therewith (other than any such transfer taxes or similar
governmental charge payable upon exchanges or transfers pursuant to Section
2.10, 4.15, 4.16 or 9.05, in which event the Issuer shall be responsible for the
payment of such tax or charge).
The Registrar or co-Registrar shall not be required to register the
transfer or exchange of any Note (i) during a period beginning at the opening of
business 15 days before the mailing of a notice of redemption of Notes and
ending at the close of business on the day of such mailing and (ii) selected for
redemption in whole or in part pursuant to Article Three, except the unredeemed
portion of any Note being redeemed in part.
Any Holder of a beneficial interest in a Global Note shall, by
acceptance of such Global Note, agree that transfers of beneficial interests in
such Global Notes may be effected only through a book entry system maintained by
the Holder of such Global Note (or its agent), and that ownership of a
beneficial interest in the Note shall be required to be reflected in a book
entry system.
Section 2.07 Replacement Notes.
If a mutilated Note is surrendered to the Trustee or the Holder of a
Note claims that the Note has been lost, destroyed or wrongfully taken, the
Issuer shall issue and the Trustee, upon written demand of the Issuer in the
form of an Officer's Certificate of the Issuer, shall authenticate a replacement
Note if the Trustee's requirements are met. If required by the Trustee or the
Issuer, such Holder must provide an indemnity bond or other indemnity of
reasonable tenor, sufficient in the reasonable judgment of the Issuer, to
protect the Issuer, the Trustee or any Agent from any loss which any of them may
suffer if a Note is replaced. Every replacement Note shall constitute an
additional obligation of the Issuer.
Section 2.08 Outstanding Notes.
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those canceled by it, those delivered to it
for cancellation and those described in this Section 2.08 as not outstanding.
Subject to the provisions of Section 2.09, a Note does not cease to be
outstanding because the Issuer or any of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.07 (other than a mutilated
Note surrendered for replacement), it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Note is held by a
bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender of
such Note and replacement thereof pursuant to Section 2.07.
If (i) by 11:00 a.m. New York City time on a Redemption Date or the
Stated Maturity Date the Paying Agent holds U.S. Legal Tender or (ii) the Issuer
has exercised either Legal Defeasance and deposited U.S. Government Obligations,
in either case, sufficient to pay all of the principal, premium, if any, and
interest due on the Notes payable on that date and is not prohibited from paying
such money to the Holders thereof pursuant to the terms of this Indenture, then
on and after that date such Notes shall be deemed not to be outstanding and
interest on them shall cease to accrue.
25
Section 2.09 Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver, consent or notice, Notes owned by
the Issuer or an Affiliate of the Issuer shall be considered as though they are
not outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes which a Trust Officer of the Trustee actually knows are so owned shall be
so considered. The Issuer shall notify the Trustee, in writing, when it or, to
its knowledge, any of its Affiliates repurchases or otherwise acquires Notes, of
the aggregate principal amount of such Notes so repurchased or otherwise
acquired and such other information as the Trustee may reasonably request and
the Trustee shall be entitled to rely thereon.
Section 2.09 Temporary Notes.
Until definitive Notes are ready for delivery, the Issuer may prepare
and the Trustee shall authenticate temporary Notes upon receipt of a written
order of the Issuer in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of temporary Notes to be authenticated and
the date on which the temporary Notes are to be authenticated. Temporary Notes
shall be substantially in the form of definitive Notes but may have variations
that the Issuer considers appropriate for temporary Notes and so indicates in
the Officers' Certificate. Without unreasonable delay, the Issuer shall
prepare, and the Trustee shall authenticate upon receipt of a written order of
the Issuer pursuant to Section 2.02, definitive Notes in exchange for temporary
Notes.
Section 2.11 Cancellation.
The Issuer at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee,
or at the direction of the Trustee, the Registrar or the Paying Agent, and no
one else, shall cancel and shall dispose, in its customary manner, of all Notes
surrendered for transfer, exchange, payment or cancellation. Subject to Section
2.07, the Issuer may not issue new Notes to replace Notes that have been paid or
delivered to the Trustee for cancellation. If the Issuer shall acquire any of
the Notes, such acquisition shall not operate as a redemption or satisfaction of
the Indebtedness represented by such Notes unless and until the same are
surrendered to the Trustee for cancellation pursuant to this Section 2.11.
Section 2.12 Defaulted Interest.
The Issuer shall pay interest on overdue principal from time to time
on demand at the rate of interest then borne by the Notes. The Issuer shall, to
the extent lawful, pay interest on overdue installments of interest (without
regard to any applicable grace periods) from time to time on demand at the rate
of interest then borne by the Notes. Interest will be computed on the basis of
a 360-day year comprised of twelve 30 day months, and, in the case of a partial
month, the actual number of days elapsed.
If the Issuer defaults in a payment of interest on the Notes, it shall
pay the defaulted interest, plus (to the extent lawful) any interest payable on
the defaulted interest, to the Persons who are Holders on a subsequent special
record date, which special record date shall be the fifteenth day next preceding
the date fixed by the Issuer for the payment of defaulted interest or the next
succeeding Business Day if such date is not a Business Day. The Issuer shall
notify the Trustee in
26
writing of the amount of defaulted interest proposed to be paid on each Note and
the date of the proposed payment (a "Default Interest Payment Date"), and at the
same time the Issuer shall deposit with the Trustee an amount of money equal to
the aggregate amount proposed to be paid in respect of such defaulted interest
or shall make arrangements satisfactory to the Trustee for such deposit on or
prior to the date of the proposed payment, such money when deposited to be held
in trust for the benefit of the Persons entitled to such defaulted interest as
provided in this Section; provided, however, that in no event shall the Issuer
deposit monies proposed to be paid in respect of defaulted interest later than
11:00 a.m. New York City time of the proposed Default Interest Payment Date. At
least 15 days before the subsequent special record date, the Issuer shall mail
(or cause to be mailed) to each Holder, as of a recent date selected by the
Issuer, with a copy to the Trustee, a notice that states the subsequent special
record date, the payment date and the amount of defaulted interest, and interest
payable on such defaulted interest, if any, to be paid. Notwithstanding the
foregoing, any interest which is paid prior to the expiration of the 30-day
period set forth in Section 6.01(a) shall be paid to Holders as of the regular
record date for the Interest Payment Date for which interest has not been paid.
Notwithstanding the foregoing, the Issuer may make payment of any defaulted
interest in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Notes may be listed, and upon such notice
as may be required by such exchange.
Section 2.13 CUSIP Numbers.
The Issuer in issuing the Notes of each series may use a "CUSIP"
number, and, if so, the Trustee shall use the appropriate CUSIP number in
notices of redemption or exchange as a convenience to Holders; provided,
however, that no representation is hereby deemed to be made by the Trustee as to
the correctness or accuracy of the CUSIP number printed in the notice or on the
notes, and that reliance may be placed only on the other identification numbers
printed on the Notes. The Issuer shall promptly notify the Trustee of any change
in a CUSIP number.
Section 2.14 Deposit of Monies.
Prior to 11:00 a.m. New York City time on each Interest Payment Date,
Stated Maturity Date, Redemption Date, Change of Control Payment Date and Excess
Cash Purchase Date, the Issuer shall have deposited with the Paying Agent in
immediately available funds U.S. Legal Tender sufficient to make the cash
payments, if any, due on such Interest Payment Date, Stated Maturity Date,
Redemption Date, Change of Control Payment Date and Excess Cash Purchase Date,
as the case may be, in a timely manner which permits the Paying Agent to remit
payment to the Holders on such Interest Payment Date, Stated Maturity Date,
Redemption Date, Change of Control Payment Date and Excess Cash Purchase Date,
as the case may be. At the option of the Issuer, payment of interest on
Physical Notes may be made by wire transfer or by check mailed to the Holders on
or before the relevant Interest Payment Date at their respective addresses as
shown in the Note Register.
Section 2.15 Restrictive Legends.
Each Global Note and Physical Note that constitutes a Restricted
Security, including, without limitation, the Private Exchange Notes, shall bear
the following legend (the "Private Placement Legend") on the face thereof until
after the second anniversary of the later of the Issue Date and the last date on
which the Issuer or any Affiliate of the Issuer was the owner of such Note (or
any predecessor security) (or such other period of time as may be permitted by
Rule 144(k) under the Securities Act or any successor provision thereunder) (or
such longer period of time as may be
27
required under the Securities Act or applicable state securities laws in the
opinion of counsel for the Issuer, unless otherwise agreed by the Issuer and the
Holder thereof):
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE
BENEFIT OF THE ISSUER THAT THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF THE ISSUANCE
HEREOF (OR A PREDECESSOR NOTE HERETO) OR (Y) BY ANY HOLDER THAT WAS AN
AFFILIATE OF THE ISSUER AT THE TIME DURING THE THREE MONTHS PRECEDING THE
DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE ISSUER, (2) SO
LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER
THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE
BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE
OF THIS NOTE), (3) TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS
DEFINED IN RULE 501(a)(1), (2), (3) or (7) UNDER THE SECURITIES ACT (AS
INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF
TRANSFER ON THE REVERSE OF THIS NOTE) THAT IS ACQUIRING THIS SECURITY FOR
INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A CERTIFICATE IN THE FORM
ATTACHED TO THIS NOTE IS DELIVERED BY THE TRANSFEREE TO THE COMPANY AND THE
TRUSTEE, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES
ACT, OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES. AN INSTITUTIONAL ACCREDITED
INVESTOR HOLDING THIS SECURITY AGREES IT WILL FURNISH TO THE ISSUER AND THE
TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THEY MAY REASONABLY
REQUIRED TO CONFIRM THAT THE HOLDER HEREOF, BY PURCHASING THIS NOTE,
REPRESENTS AND AGREES FOR THE BENEFIT OF THE ISSUER THAT IT IS (1) A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) AN
INSTITUTIONAL THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a)(1), (2), (3) or (7) UNDER THE SECURITIES ACT AND THAT IT IS HOLDING
THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION.
THIS SECURITY IS SUBJECT TO A REGISTRATION RIGHTS AGREEMENT DATED AS
OF OCTOBER 14, 1997 AMONG THE COMPANY, THE ISSUER, XXXXXXXXX &
COMPANY, INC., BANC ONE CAPITAL CORPORATION AND
28
PARIBAS CORPORATION, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF
THE ISSUER.
Each Global Note shall also bear the following legend (the "Global
Note Legend") on the face thereof:
THIS SECURITY IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN
THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER
OF THIS SECURITY AS A WHOLE 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) MAY BE REGISTERED EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE. UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY,
A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OR 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.
Section 2.16 Book-Entry Provisions for Global Security.
(a) The Global Notes initially shall (i) be registered in the name of
the Depository or the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear the Global Note Legend
as set forth in Section 2.15.
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depository, or the Trustee as its custodian, or under the
Global Notes, and the Depository may be treated by the Issuer, the Trustee and
any Agent of the Issuer or the Trustee as the absolute owner of such Global Note
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Issuer, the Trustee or any Agent of the Issuer 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 governing the exercise of the
rights of a Holder of any Note.
(b) Transfers of a Global Note shall be limited to transfers in whole,
but not in part, to the Depository, its successors or their respective nominees.
Interests of beneficial owners
29
in a Global Note may be transferred or exchanged for Physical Notes in
accordance with the rules and procedures of the Depository and the provisions of
Section 2.17. In addition, Physical Notes shall be transferred to all beneficial
owners in exchange for their beneficial interests in a Global Note if (i) the
Depository notifies the Issuer that it is unwilling or unable to continue as
Depository for the Global Notes and a successor depositary is not appointed by
the Issuer within 90 days of such notice; or (ii) the Issuer, in its sole
discretion, elects to issue Physical Notes.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in a Global Note to beneficial owners pursuant to paragraph
(b), the Registrar shall (if one or more Physical Notes are to be issued)
reflect on its books and records the date and a decrease in the principal amount
of such Global Note in an amount equal to the principal amount of the beneficial
interest in the Global Note to be transferred, and the Issuer shall execute, and
the Trustee shall authenticate and deliver, one or more Physical Notes of like
tenor and amount.
(d) In connection with the transfer of an entire Global Note to
beneficial owners pursuant to paragraph (b), such Global Note shall be deemed to
be surrendered to the Trustee for cancellation, and the Issuer shall execute,
and the Trustee shall authenticate and deliver, to each beneficial owner
identified by the Depository in exchange for its beneficial interest in the
Global Note, an equal aggregate principal amount of Physical Notes of authorized
denominations.
(e) Any Physical Note constituting a Restricted Security delivered in
exchange for an interest in a Global Note pursuant to paragraph (b) or (c) shall
bear the Private Placement Legend.
(f) The Holder of a Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.
Section 2.17 Special Transfer Provisions.
(a) Transfer to Non-QIB Institutional Accredited Investors and Non-
U.S. Persons. The following provisions shall apply with respect to the
registration of any proposed transfer of a Note constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after the second
anniversary of the Issue Date (provided, however, that neither the Issuer
nor any Affiliate of the Issuer has held any beneficial interest in such
Note, or portion thereof, at any time on or prior to the second anniversary
of the Issue Date) or (y) (1) in the case of a transfer to an Institutional
Accredited Investor which is not a QIB (excluding Non-U.S. Persons), the
proposed transferee has delivered to the Registrar a certificate
substantially in the form of Exhibit D hereto or (2) in the case of a
transfer to a Non-U.S. Person, the proposed transferee has delivered to the
Registrar a certificate substantially in the form of Exhibit E hereto; and
(ii if the proposed transferor is an Agent Member holding a
beneficial interest in the Global Note, upon receipt by the Registrar of
(x) the certificate, if any,
30
required by paragraph (i) above and (y) written instructions given in
accordance with the Depository's and the Registrar's procedures, whereupon
(A) the Registrar shall reflect on its books and records the date
and (if the transfer does not involve a transfer of outstanding
Physical Notes) a decrease in the principal amount of such Global Note
in an amount equal to the principal amount of the beneficial interest
in the Global Note to be transferred, and
(B) the Issuer shall execute, and the Trustee, upon written
demand of the Issuer in the form of an Officer's Certificate of the Issuer,
shall authenticate and deliver, one or more Physical Notes of like tenor
and amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Note constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if such transfer is
being made by a proposed transferor who has checked the box provided for on
the form of Note stating, or has otherwise advised the Issuer and the
Registrar in writing, that the transferee is purchasing the Note for its
own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB within the
meaning of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and represents that it has furnished such information
regarding the Company and the Issuer as such transferee has requested
pursuant to Rule 144A or has determined not to request such information and
that the transferee is aware that the Issuer is relying upon the
transferor's foregoing representations in order to claim the exemption from
registration provided by Rule 144A; and
(ii if the proposed transferee is an Agent Member, and the Notes
to be transferred consist of Physical Notes which after transfer are to be
evidenced by an interest in a Global Note, upon receipt by the Registrar of
written instructions given in accordance with the Depository's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the Global Note in an amount equal to
the principal amount of the Physical Notes to be transferred, and the
Trustee shall cancel the Physical Notes so transferred.
(c) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar shall deliver only Notes that bear the Private Placement Legend
unless (i) the requested transfer is after the second anniversary of the Issue
Date (provided, however, that neither the Issuer nor any Affiliate of the Issuer
has held any beneficial interest in such Note, or portion thereof, at any time
prior to or on the second anniversary of the Issue Date), or (ii) there is
delivered to the Registrar an Opinion of Counsel reasonably satisfactory to the
Issuer and the Trustee to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance with the
provisions of the Securities Act.
31
(d) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.16 or this Section 2.17.
The Issuer shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time during the
Registrar's normal business hours upon the giving of reasonable written notice
to the Registrar.
(e) Transfers of Notes Held by Affiliates. Any certificate (i)
evidencing a Note that has been transferred to an Affiliate of the Issuer within
two years after the Issue Date, as evidenced by a notation on the assignment
form for such transfer or in the representation letter delivered in respect
thereof or (ii) evidencing a Note that has been acquired from an Affiliate
(other than by an Affiliate) in a transaction or a chain of transactions not
involving any public offering, shall, until two years after the last date on
which the Issuer or any Affiliate of the Issuer was an owner of such Note, in
each case, bear a Private Placement Legend in substantially the form set forth
in Section 2.15 hereof, unless otherwise agreed by the Issuer (with written
notice thereof to the Trustee).
Section 2.18 Additional Interest Under Registration Rights Agreement.
Under certain circumstances, the Issuer shall be obligated to pay
Additional Interest to the Holders, all as set forth in Section 4 of the
Registration Rights Agreement. The terms thereof are hereby incorporated herein
by reference.
ARTICLE THREE
REDEMPTION
Section 3.01 Notices to Trustee.
If the Issuer elects to redeem Notes pursuant to Paragraph 5 of the
Notes, it shall notify the Trustee and the Paying Agent in writing of the
Redemption Date and the principal amount of the Notes to be redeemed.
The Issuer shall give each notice provided for in this Section 3.01 60
days before the Redemption Date (unless a shorter notice period shall be
satisfactory to the Trustee, as evidenced in a writing signed on behalf of the
Trustee), together with an Officers' Certificate stating that such redemption
shall comply with the conditions contained herein and in the Notes.
Section 3.02 Selection of Notes to Be Redeemed.
In the event that less than all of the Notes are to be redeemed at any
time, selection of such Notes, or portions thereof, for redemption will be made
by the Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are listed or, if the Notes are
not then listed on a national securities exchange, on a pro rata basis, by lot
or by such other method as the Trustee shall deem fair and appropriate;
provided, however, that no Notes of a principal amount of $1,000 or less shall
be redeemed in part, and provided, further, that if a
32
partial redemption is made with the proceeds of a Public Equity Offering,
selection of the Notes or portions thereof for redemption shall be made by the
Trustee only on a pro rata basis or on as nearly a pro rata basis as is
practicable (subject to the procedures of the Depository), unless such method is
otherwise prohibited.
Section 3.03 Optional Redemption.
At any time, or from time to time, on or prior to October 15, 2000,
the Issuer may, at its option, use all or a portion of the Net Proceeds of one
or more Public Equity Offerings to redeem up to $70.0 million of the aggregate
principal amount of the Notes then outstanding in cash at a Redemption Price
equal to 110.5% of the principal amount of the Notes so redeemed, plus accrued
and unpaid interest, if any, thereon to the Redemption Date; provided, however,
that at least $130.0 million aggregate principal amount of Notes remains
outstanding immediately after giving effect to any such redemption (it being
expressly agreed that for purposes of determining whether this condition is
satisfied, Notes owned by the Issuer or any of its Affiliates shall be deemed
not to be outstanding). In order to effect the foregoing redemption with the
proceeds of any Public Equity Offering, the Issuer shall make such redemption
not more than 60 days after the consummation of any such Public Equity Offering.
The Notes shall also be redeemable, at the Issuer's option, in whole
or in part from time to time, on and after October 15, 2001, at the following
Redemption Prices (expressed as percentages of the outstanding principal amount
thereof) set forth below with respect to the indicated Redemption Date, plus, in
each case, accrued and unpaid interest, if any, thereon to the Redemption Date:
If redeemed during
the 12-month period
beginning October 15 Redemption Price
-------------------- ----------------
2001............................. 105.250%
2002............................. 102.625%
2003 and thereafter.............. 100.000%
Section 3.04 Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date,
the Issuer shall mail or cause to be mailed a notice of redemption by first
class mail to each Holder of Notes to be redeemed at its last address as then
shown on the Note Register, with a copy to the Trustee and any Paying Agent. At
the Issuer's request, the Trustee shall give the notice of redemption in the
Issuer's name and at the Issuer's expense. The Issuer shall provide such
notices of redemption to the Trustee at least five days before the intended
mailing date.
Each notice of redemption shall identify (including the CUSIP number)
the Notes to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest, if any,
to be paid;
33
(3) the name and address of the Paying Agent;
(4) the subparagraph of the Notes pursuant to which such redemption is
being made;
(5) that any Physical Notes called for redemption must be surrendered
to the Paying Agent to collect the Redemption Price plus accrued interest, if
any;
(6) that, unless the Issuer defaults in making the redemption payment,
interest on Notes (or applicable portions thereof) called for redemption ceases
to accrue, on and after the Redemption Date, and the only remaining right of the
Holders of such Notes is to receive payment of the Redemption Price plus accrued
interest as of the Redemption Date, if any, upon surrender to the Paying Agent
of the Notes redeemed;
(7) if any Physical Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the Redemption
Date, and upon surrender of such Physical Note, a new Physical Note or Notes in
the aggregate principal amount equal to the unredeemed portion thereof will be
issued; and
(8) if fewer than all the Notes are to be redeemed, the identification
of any particular Physical Notes (or portions thereof) to be redeemed, as well
as the aggregate principal amount of Notes to be redeemed and the aggregate
principal amount of Notes to be outstanding after such partial redemption.
The Company and the Issuer shall comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the purchase of Notes.
Section 3.05 Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.04,
such notice of redemption shall be irrevocable and Notes called for redemption
become due and payable on the Redemption Date at the Redemption Price plus
accrued interest as of such date, if any. Upon surrender to the Trustee or
Paying Agent, such Notes called for redemption shall be redeemed at the
Redemption Price plus accrued interest thereon to the Redemption Date, but
installments of interest, the maturity of which is on or prior to the Redemption
Date, shall be payable to Holders of record at the close of business on the
relevant record dates referred to in the Notes. Interest shall accrue on or
after the Redemption Date and shall be payable only if the Issuer defaults in
payment of the Redemption Price.
Section 3.06 Deposit of Redemption Price.
On or before 11:00 a.m (New York time) on the Redemption Date and in
accordance with Section 2.14, the Issuer shall deposit with the Paying Agent,
U.S. Legal Tender sufficient to pay the Redemption Price plus accrued interest,
if any, on all Notes to be redeemed on that date in accordance with Section 3.03
hereof and Paragraph 5 of the Notes. The Paying Agent shall promptly return to
the Issuer any U.S. Legal Tender so deposited which is not required for that
purpose, except with respect to monies owed as obligations to the Trustee
pursuant to Article Seven.
34
Unless the Issuer fails to comply with the preceding paragraph and
defaults in the payment of such Redemption Price plus accrued interest, if any,
interest on the Notes to be redeemed will cease to accrue, as the case may be,
on and after the applicable Redemption Date, whether or not such Notes are
presented for payment.
Section 3.07 Notes Redeemed in Part.
Upon surrender of a Note that is to be redeemed in part, the Trustee
shall authenticate for the Holder a new Note or Notes equal in principal amount
to the unredeemed portion of the Note surrendered.
ARTICLE FOUR
COVENANTS
Section 4.01 Payment of Notes; Authentication.
(a) The Issuer shall pay the principal of, premium, if any, and
interest on the Notes on the dates and in the manner provided in the Notes and
this Indenture.
(b) An installment of principal of, premium, if any, or interest on
the Notes shall be considered paid on the date it is due if the Trustee or
Paying Agent (other than the Issuer or any of its Affiliates) holds, prior to
11:00 a.m. New York City time on that date, U.S. Legal Tender designated for and
sufficient to pay the installment in full and is not prohibited from paying such
money to the Holders pursuant to the terms of this Indenture or the Notes.
(c) Notwithstanding anything to the contrary contained in this
Indenture, the Issuer or the Company may, to the extent it is required to do so
by law, deduct or withhold income or other similar taxes imposed by the United
States of America from principal or interest payments hereunder.
(d) The Issuer shall promptly make demand upon the Trustee, in the
form of an Officer's Certificate, to authenticate and deliver Notes as
contemplated in Sections 2.06, 2.07 and 2.16 of this Indenture.
Section 4.02 Maintenance of Office or Agency.
The Issuer shall maintain the office or agency required under Section
2.03. The Issuer shall give prior written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Issuer shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 10.02.
Section 4.03 Corporate Existence.
Except as otherwise permitted by Article Five, the Company shall do or
cause to be done, at its own cost and expense, all things necessary to preserve
and keep in full force and effect its corporate existence and the corporate
existence of each of its Restricted Subsidiaries, including the Issuer, in
accordance with the organizational documents of each such Restricted Subsidiary
and the material rights (charter and statutory) and franchises of each such
Person; provided, however, that
35
the Company shall not be required to preserve, with respect to itself and the
Issuer, any material right or franchise and, with respect to any of its
Restricted Subsidiaries, other than the Issuer, any such existence, material
right or franchise, if the Board of Directors of the Company shall determine in
good faith that the preservation thereof is no longer desirable in the conduct
of the business of the Company and its Restricted Subsidiaries, taken as a
whole.
Section 4.04 Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all material taxes, assessments and
governmental charges (including withholding taxes and any penalties, interest
and additions to taxes) levied or imposed upon the Company or any of its
Subsidiaries or the properties of the Company or any of its Subsidiaries and (b)
all material lawful claims for labor, materials and supplies that, if unpaid,
might by law become a Lien upon the property of the Company or any of its
Subsidiaries; provided, however, that the Company shall not be required to pay
or discharge or cause to be paid or discharged any such tax, assessment, charge
or claim whose amount, applicability or validity is being contested in good
faith by appropriate negotiations or proceedings properly instituted and
diligently conducted for which adequate reserves, to the extent required under
GAAP, have been taken.
Section 4.05 Maintenance of Properties and Insurance.
(a) The Company shall, and shall cause each of its Restricted
Subsidiaries, including the Issuer, to, maintain all properties used or useful
in the conduct of its business in good working order and condition (subject to
ordinary wear and tear) and make all necessary repairs, renewals, replacements,
additions, betterments and improvements thereto and actively conduct and carry
on its business; provided, however, that nothing in this Section 4.05 shall
prevent the Company or any of its Restricted Subsidiaries from discontinuing the
operation and maintenance of any of its properties, if such discontinuance is
(i) in the ordinary course of business pursuant to customary business terms or
(ii) in the good faith judgment of the Board of Directors of the Company,
desirable in the conduct of its or its Restrictive Subsidiaries' businesses and
is not disadvantageous in any material respect to the Holders.
(b) The Company shall provide or cause to be provided, for itself and
each of the Restricted Subsidiaries, including the Issuer, insurance (including
appropriate self-insurance) against loss or damage of the kinds that, in the
good faith judgment of the Company, are adequate and appropriate for the conduct
of the business of the Company and its Restricted Subsidiaries in a prudent
manner, with reputable insurers or with the government of the United States of
America or an agency or instrumentality thereof, in such amounts, with such
deductibles, and by such methods as shall be customary, in the good faith
judgment of the Company, for companies similarly situated in the same industry.
Section 4.06 Compliance Certificate; Financial Statements; Notice of
Default.
(a) The Company and the Issuer shall deliver to the Trustee, within 60
days after the end of each fiscal quarter or 90 days after the end of a fiscal
quarter that is also the end of a fiscal year, an Officers' Certificate to the
effect that responsible Officers of the Company and the Issuer have conducted or
supervised a review of the activities of the Company and its Subsidiaries and of
performance under this Indenture and that, to the best of such Officers'
knowledge, based on their review, the Company and the Issuer have fulfilled all
of their obligations under this Indenture or, if
36
there has been a Default, specifying each Default known to them, its nature and
its status. The Company and the Issuer shall also notify the Trustee of any
changes in the composition of the Board of Directors of the Company or any of
its Subsidiaries or of any amendment to the charter or bylaws of the Company or
any of its Subsidiaries.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the annual financial
statements delivered pursuant to Section 4.08 shall be accompanied by a written
report of the Company's independent certified public accountants (who shall be a
firm of established national reputation) stating (A) that their audit
examination has included a review of the terms of this Indenture and the form of
the Notes as they relate to accounting matters, and (B) that the calculation by
the Company of the financial ratios required to be calculated under this
Indenture are numerically accurate and that the amounts contained in such ratios
and such ratios have been calculated in accordance with the definitions
contained in this Indenture; provided, however, that, without any restriction as
to the scope of the audit examination, such independent certified public
accountants shall not be liable by reason of any failure to obtain knowledge of
any such Default or Event or Default that would not be disclosed in the course
of an audit examination conducted in accordance with generally accepted auditing
standards.
(c) (i) If any Default or Event of Default has occurred and is
continuing or (ii) if any Holder seeks to exercise any remedy hereunder with
respect to a claimed Default under this Indenture or the Notes, the Issuer shall
deliver to the Trustee, at its address set forth in Section 10.02 hereof, by
registered or certified mail, or by facsimile transmission followed by hard copy
by registered or certified mail, an Officers' Certificate specifying such event,
notice or other action within 10 days of its becoming aware of such occurrence.
Section 4.07 Compliance with Laws.
The Company shall comply, and shall cause each of its Restricted
Subsidiaries, including the Issuer, to comply, with all applicable statutes,
rules, regulations, orders and restrictions of the United States of America, all
states and municipalities thereof, and of any governmental department,
commissions, boards, regulatory authority, bureau, agency and instrumentality of
the foregoing, in respect of the conduct of their respective businesses and the
ownership of their respective properties, except for such noncompliance as could
not singly or in the aggregate reasonably be expected to have a material adverse
effect on the financial condition, business, prospects or results of operations
of the Company and its Restricted Subsidiaries taken as a whole.
Section 4.08 Reports to Holders.
The Company and each of its Subsidiaries, including the Issuer, as
applicable, shall deliver to the Trustee within 15 days after filing the same
with the Commission, copies of the quarterly and annual reports and of the
information, documents and other reports, if any, which the Company or such
Subsidiary is required to file with the Commission pursuant to Section 13 or
15(d) of the Exchange Act. 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 Commission, to the extent permitted, and provide the
Trustee and Holders with such annual reports and such information, documents and
other reports specified in Section 13 of the Exchange Act. The Company and the
Issuer shall also comply with the other provisions of (S) 314(a) of the TIA.
37
Concurrently with the reports delivered pursuant to the preceding
paragraph, the Company shall deliver to the Trustee and to each Holder annual
and quarterly financial statements with appropriate footnotes of the Company and
its consolidated Subsidiaries, all prepared and presented in a manner
substantially consistent with those of the Company required by the preceding
paragraph. If, at any time, the Issuer prepares annual and quarterly financial
statements, the Issuer shall deliver to the Trustee and to each Holder such
annual and quarterly financial statements with appropriate footnotes of the
Issuer and its consolidated Subsidiaries, all prepared and presented in a manner
substantially consistent with those of the Company required by the preceding
paragraph.
For so long as any Restricted Security remains outstanding, the
Company and the Issuer shall furnish to the Holders or beneficial holders of the
Notes and prospective purchasers of the Notes designated by the Holders of the
Notes, upon their request, the information required to be delivered to Rule
144(d)(4) under the Exchange Act.
Section 4.09 Waiver of Stay, Extension or Usury Laws.
The Issuer covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law or any usury law
or other law that would prohibit or forgive the Issuer from paying all or any
portion of the principal of, premium, if any, or interest on the Notes as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this Indenture; and (to the
extent that it may lawfully do so) the Issuer hereby expressly waives all
benefit or advantage of any such law and covenants that it shall not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
shall suffer and permit execution of every such power as though no such law had
been enacted.
Section 4.10 Limitation on Restricted Payments.
(a) The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries, including the Issuer, to, directly or indirectly,
(i) declare or pay any dividend on, or make any other
distribution to holders of, any shares of Capital Stock of the Company or
any Restricted Subsidiary (other than dividends or distributions payable
solely in shares of Qualified Capital Stock of the Company or any
Restricted Subsidiary or dividends or distributions payable to the Company
or the Issuer or any Wholly Owned Restricted Subsidiary of the Company or
the Issuer or warrants, rights or options to acquire Qualified Capital
Stock of the Company or any Restricted Subsidiary),
(ii) purchase, redeem or otherwise acquire or retire for value
any such shares of Capital Stock of the Company or any Affiliate (other
than any Capital Stock owned by the Company or any of its Wholly Owned
Restricted Subsidiaries), or any options, warrants or other rights to
acquire such Capital Stock,
(iii) make any principal payment on or repurchase, redeem,
defease or otherwise acquire or retire for value, prior to any scheduled
principal payment, scheduled sinking fund payment or maturity, any
Subordinated Indebtedness, or
(iv) make any Restricted Investment,
38
(such payments or other actions described in clauses (i) through (iv) being
collectively referred to as a "Restricted Payment"), unless at the time of and
after giving effect to the proposed Restricted Payment (the amount of any such
Restricted Payment, if other than cash, shall be the amount determined by the
Board of Directors of the Company, whose determination shall be conclusive and
evidenced by a Board Resolution), (1) no Default or Event of Default shall have
occurred and be continuing, (2) the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in accordance with Section
4.12(a), and (3) the aggregate amount of all Restricted Payments declared or
made after the Issue Date shall not exceed the sum (without duplication) of the
following:
(A) 50% of the Adjusted Consolidated Net Income of the Company accrued on a
cumulative basis during the period commencing with the first full quarter
after the Issue Date and ending on the last day of the Company's last
fiscal quarter ending prior to the date of such proposed Restricted Payment
(or if Adjusted Consolidated Net Income is a loss, minus 100% of such
loss), plus
(B) the aggregate Net Proceeds received after the Issue Date by the Company
or the Issuer from the issuance or sale (other than to any of its
Restricted Subsidiaries) of shares of Qualified Capital Stock of the
Company or the Issuer or any options, warrants or rights to purchase such
shares of Qualified Capital Stock of the Company or the Issuer, plus
(C) the aggregate Net Proceeds received after the Issue Date by the Company
or the Issuer (other than from any of its Restricted Subsidiaries) upon the
exercise of any options, warrants or rights to purchase shares of Qualified
Capital Stock of the Company or the Issuer, plus
(D) the aggregate Net Proceeds received after the Issue Date by the Company
or the Issuer from the issuance or sale (other than to any of its
Restricted Subsidiaries) of Indebtedness or shares of Disqualified Capital
Stock that have been converted into or exchanged for Qualified Capital
Stock of the Company or the Issuer, together with the aggregate cash
received by the Company or the Issuer at the time of such conversion or
exchange, minus
(E) the amount of any write-downs, writeoffs, other negative revaluations,
and other negative extraordinary charges not otherwise reflected in
Adjusted Consolidated Net Income of the Company during such period.
(b) Notwithstanding the foregoing paragraph (a) of this Section 4.10,
the Company and its Restricted Subsidiaries, including the Issuer, may take the
following actions so long as (in the case of clauses (2), (3), (4), (5) and (7)
below) no Default or Event of Default shall have occurred and be continuing:
(1) the payment of any dividend on Capital Stock of the Company or any
Restricted Subsidiary within 60 days after the date of declaration thereof,
if at such declaration date such declaration complied with the provisions
of Section 4.10(a);
(2) the repurchase, redemption or other acquisition or retirement of
any shares of any class of Capital Stock of the Company or any Restricted
Subsidiary, in exchange for, or out of the aggregate Net Proceeds from, a
substantially concurrent issue and sale (other than to a Restricted
Subsidiary) of shares of Qualified Capital Stock of the Company or the
Issuer;
39
(3) the repurchase, redemption, repayment, defeasance or other
acquisition or retirement for value of any Subordinated Indebtedness in
exchange for, or out of the aggregate Net Proceeds from, a substantially
concurrent issue and sale (other than to a Restricted Subsidiary) of (i)
Subordinated Indebtedness (provided such Indebtedness is on terms no less
favorable to the Holders of the Notes than the terms of the Subordinated
Indebtedness being redeemed) or (ii) shares of Qualified Capital Stock of
the Company or the Issuer;
(4) the repurchase, redemption or other acquisition of any Capital
Stock of any Affiliate organized as a limited partnership in which the
Company or the Issuer is a general partner pursuant to a redemption which
is mandatory under the terms of such partnership's limited partnership
agreement;
(5) the repurchase or other acquisition of any Capital Stock of any
Restricted Subsidiary, whether in one or a series of substantially
contemporaneous transactions, which causes such Person to become a Wholly
Owned Restricted Subsidiary of the Company;
(6) the payment on behalf of any Subsidiary or Affiliate of its
allocated pro rata costs associated with the issuance of the Notes and any
Investment in Capital Stock of such Person taken by the Company in payment
thereof;
(7) the distribution or dividend by the Company to its stockholders of
the shares of Capital Stock of Red Oak directly owned by the Company,
provided at the time of such distribution or dividend (and after giving
effect thereto):
(i) the Consolidated Fixed Charge Coverage Ratio for the
Company's Reference Period for which internal financial statements are
available immediately preceding the date of such distribution would have
been at least 3.0 to 1.0; and
(ii) the Company's Adjusted Consolidated Net Tangible Assets are
equal to or greater than 200% of the consolidated Indebtedness of the
Company and its Restricted Subsidiaries.
(c) The actions described in clause (1) of Section 4.10(b) shall be
Restricted Payments that shall be permitted to be made in accordance with
Section 4.10(b) but shall reduce the amount that would otherwise be available
for Restricted Payments under clause (3) of Section 4.10(a), provided that any
dividend paid pursuant to clause (1) of Section 4.10(b) shall reduce the amount
that would otherwise be available under clause (3) of Section 4.10(a) when
declared, but not also when subsequently paid pursuant to clause (1) of Section
4.10(b), and provided that any Net Proceeds received under clause (2) or (3)(ii)
of Section 4.10(b) shall not be included in subclauses (B) or (C) of clause (3)
of Section 4.10(a).
Section 4.11 Limitation on Transactions with Affiliates.
The Company shall not, and shall not permit any of its Subsidiaries
to, enter directly or indirectly into, or permit to exist, any transaction or
series of related transactions with or for the benefit of any Affiliate except
for transactions made in good faith, the terms of which are fair and reasonable
to the Company or such Subsidiary, as the case may be, and are at least as
favorable as the terms which could be obtained by the Company or such
Subsidiary, as the case may be, in a
40
comparable transaction made on an arm's length basis with Persons who are not
Affiliates and the Company delivers to the Trustee: (i) with respect to any
transaction or series of transactions with an Affiliate involving aggregate
consideration in excess of $1 million, an Officers' Certificate certifying that
such transaction or transactions comply with this Section 4.11, (ii) with
respect to any transaction or series of transactions with an Affiliate involving
aggregate consideration in excess of $2 million, a resolution of the Board of
Directors set forth in an Officers' Certificate certifying that such transaction
or transactions comply with this Section 4.11 and that such transaction or
transactions have been approved in good faith by a majority of the members of
the Board of Directors who are independent (which resolution shall be conclusive
evidence of compliance with this provision), provided that if there is not a
majority of independent directors able to approve such transaction, the Company
shall also deliver an opinion as to the fairness to the Company or such
Subsidiary of such transaction or transactions from a financial point of view
issued by an investment banking firm of recognized national standing, which
opinion shall be conclusive evidence of compliance with this provision; and
(iii) with respect to any transaction or series of transactions with an
Affiliate involving aggregate consideration in excess of $5 million, an
Officers' Certificate as described in subclause (ii) above and an opinion as to
the fairness to the Company or such Subsidiary of such transaction or
transactions from a financial point of view issued by an investment banking firm
of recognized national standing, which resolution and opinion shall be
conclusive evidence of compliance with this provision; provided, however, that
this Section 4.11 shall not restrict: (1) transactions between the Company and
any of its Restricted Subsidiaries or transactions between Restricted
Subsidiaries of the Company, (2) transactions pursuant to the Tax Sharing
Agreement and the Security Documents, (3) Restricted Payments permitted by
Section 4.10, (4) any employee compensation arrangements by the Company or any
of its Subsidiaries which has been approved by a majority of the Company's
disinterested directors and found in good faith by such directors to be in the
best interests of the Company or such Subsidiary, as the case may be; and (5)
customary directors' fees and indemnification and similar arrangements.
Section 4.12 Limitation on Incurrence of Additional Indebtedness and
Issuances of Disqualified Capital Stock.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee, or
otherwise become liable for, contingently or otherwise (to "incur" or, as
appropriate, an "incurrence"), any Indebtedness or issue any Disqualified
Capital Stock, except that the Company or a Restricted Subsidiary may incur
Indebtedness and the Company or the Issuer may issue shares of Disqualified
Capital Stock if:
(a) the Consolidated Fixed Charge Coverage Ratio for the Company's
Reference Period for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is
incurred or such Disqualified Capital Stock is issued would have been (i)
at least 2.0 to 1.0 if such additional Indebtedness is incurred or such
Disqualified Capital Stock is issued during the period commencing on the
Issue Date and ending on December 31, 1998 or (ii) at least 2.5 to 1.0 if
such additional Indebtedness is incurred or such Disqualified Capital Stock
is issued at any time thereafter;
(b) no Default or Event of Default shall have occurred and be
continuing at the time such additional Indebtedness is incurred or such
Disqualified Capital Stock is issued or would occur as the result of such
incurrence of such additional Indebtedness or the issuance of such
Disqualified Capital Stock; and
41
(c) the Company's Adjusted Consolidated Net Tangible Assets are equal
to or greater than 150% of the consolidated Indebtedness of the Company and
its Restricted Subsidiaries.
Notwithstanding the foregoing, if no Default or Event of Default shall have
occurred and be continuing at the time or as a consequence of the incurrence of
such Indebtedness, the Company and any Restricted Subsidiary, including the
Issuer, may incur Permitted Indebtedness.
Any Indebtedness incurred or Disqualified Capital Stock issued by any
Person that is not a Subsidiary of the Company or any of its Restricted
Subsidiaries, as the case may be, which Indebtedness or Disqualified Capital
Stock is outstanding at the time such Person becomes a Restricted Subsidiary of,
or is merged into, or consolidated with the Company or such Restricted
Subsidiary, as the case may be, shall be deemed to have been incurred or issued,
as the case may be, at the time such Person becomes a Restricted Subsidiary of,
or is merged into, or consolidated with the Company or such Restricted
Subsidiary.
For purposes of determining any particular amount of Indebtedness
under this Section 4.12, guarantees of Indebtedness otherwise included in the
determination of such amount shall not also be included.
Section 4.13 Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries, including the Issuer, to, directly or indirectly, create, or
permit or suffer to exist or become effective any consensual encumbrance or
restriction on the ability of any Restricted Subsidiary of the Company to (a)
pay dividends or make other distributions on its Capital Stock to the Company or
any of its other Restricted Subsidiaries, (b) make loans or advances or pay any
Indebtedness or other obligations owed to the Company or to any other Restricted
Subsidiary, or (c) transfer any of its properties or assets to the Company or to
any other Restricted Subsidiary, except encumbrances and restrictions existing
under (i) this Indenture, any Permitted Bank Credit Facility as in effect on the
Issue Date and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, provided that
such amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are no more restrictive with respect to
such dividend and other payment or transfer restrictions than those contained in
the Permitted Bank Credit Facility as in effect on the Issue Date and (ii) any
agreement of a Person acquired by the Company or a Restricted Subsidiary of the
Company, which restrictions existed at the time of acquisition, were not put in
place in anticipation of such acquisition, and are not applicable to any Person
or property, other than the Person or any property of the Person so acquired.
Section 4.14 Limitation on Designation of Unrestricted Subsidiaries;
Ownership of Restricted Subsidiaries.
The Board of Directors of the Company may designate any Restricted
Subsidiary (other than the Issuer) to be an Unrestricted Subsidiary if such
designation would not cause a Default or an Event of Default and following such
designation, the Company could incur $1.00 of additional Indebtedness pursuant
to Section 4.12(a). For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries in the Subsidiary so
42
designated which have not been repaid in cash will be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under clause (3) of Section 4.10(a). All such
outstanding Investments will be deemed to constitute Restricted Investments in
an amount equal to the greater of the Fair Market Value or book value of such
Investments at the time of such designation. Such designation will only be
permitted if such Restricted Payment would be permitted at such time and if such
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
The Board of Directors of the Company or any Restricted Subsidiary may
designate any Unrestricted Subsidiary of such Person (other than Red Oak) as a
Restricted Subsidiary of such Person; provided that, (a) if the Unrestricted
Subsidiary has any Indebtedness outstanding or is otherwise liable for any
Indebtedness or has a negative Net Worth, then immediately after giving pro
forma effect to such designation, such Person could incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to Section
4.12(a) (assuming, for purposes of this calculation, that each dollar of
negative Net Worth is equal to one dollar of Indebtedness), (b) all Indebtedness
of such Unrestricted Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Person on the date such Unrestricted Subsidiary becomes a
Restricted Subsidiary, and (c) no Default or Event of Default would occur or be
continuing after giving effect to such designation. Any such designation by the
Board of Directors shall be evidenced to the Trustee by the filing with the
Trustee of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing conditions and setting forth in reasonable detail the underlying
calculations. In the event that any Subsidiary Guarantor is designated an
Unrestricted Subsidiary in accordance with this Section 4.14, such Subsidiary's
Subsidiary Guarantee will be released.
Notwithstanding any provisions of this Section 4.14, all Subsidiaries
of an Unrestricted Subsidiary shall be Unrestricted Subsidiaries.
The Company agrees and covenants that all of the Capital Stock of each
Restricted Subsidiary (other than the Issuer, TPI and Southwest Software) shall
be owned, whether directly or indirectly, by the Company; and that the Issuer
shall remain a Restricted Subsidiary so long as any of the Notes remains
outstanding.
Section 4.15 Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder shall have
the right, at such Holder's option, subject to the terms and conditions of this
Indenture, to require the Issuer to repurchase all or any part of such Holder's
Notes pursuant to an irrevocable, unconditional offer (a "Change of Control
Offer") as described below at a cash purchase price equal to 101% of the
principal amount thereof (the "Change of Control Purchase Price"), plus
accrued and unpaid interest thereon to a date that is no later than 60 Business
Days after the occurrence of such Change of Control (the date on which the
repurchase is effected being referred to herein as the "Change of Control
Payment Date").
(b) The Issuer shall notify the Trustee within five Business Days
after each date upon which a Change of Control has occurred. Within 20 Business
Days after the occurrence of each Change of Control, the Issuer shall make a
Change of Control Offer to the Holders of Notes to purchase all of the Notes at
the Change of Control Purchase Price, plus accrued and unpaid interest thereon
to the Change of Control Payment Date, by sending written notice of a Change of
Control
43
Offer, by first class mail, to each Holder at its registered address, with a
copy to the Trustee, which notice shall govern the terms of the Change of
Control Offer. The notice to the Holders shall contain all instructions and
materials necessary to enable such Holders to tender Notes pursuant to the
Change of Control Offer. Such notice shall state:
(i) that the Change of Control Offer is being made pursuant to
this Section 4.15, that all Notes tendered and not withdrawn will be
accepted for payment and that the Change of Control Offer shall remain open
for a period of 20 Business Days or for such longer period as may be
required by law;
(ii the Change of Control Purchase Price (including the amount
of any accrued interest) and the Change of Control Purchase Date;
(ii that any Note not tendered will continue to accrue interest;
(iv that, unless the Issuer defaults in making payment therefor,
any Note accepted for payment pursuant to the Change of Control Offer shall
cease to accrue interest, after the Change of Control Payment Date;
(v) that Holders electing to have a Physical Note purchased
pursuant to a Change of Control Offer will be required to surrender the
Note, with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Note completed, to the Paying Agent at the address specified
in the notice prior to the close of business on the third Business Day
prior to the Change of Control Payment Date;
(vi that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than the second Business Day prior to
the Change of Control Payment Date, a telegram, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Notes the Holder delivered for purchase and a statement that such Xxxxxx is
withdrawing his election to have such Notes purchased;
(vi that Holders whose Physical Notes are purchased only in part
will be issued new Physical Notes in a principal amount equal to the
unpurchased portion of the Physical Notes surrendered; provided, however,
that each Physical Note purchased and each new Physical Note issued shall
be in an original principal amount of $1,000 or integral multiples thereof;
and
(vi the circumstances and relevant facts regarding such Change
of Control.
(c) On or before the Change of Control Payment Date, the Issuer shall,
to the extent lawful, (i) accept for payment Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent in accordance with Section 2.14 U.S. Legal Tender sufficient to pay the
purchase price plus accrued interest, if any, of all Notes so tendered and (iii)
deliver to the Trustee any Physical Notes so accepted together with an Officers'
Certificate stating the Notes or portions thereof being purchased by the Issuer.
Upon receipt by the Paying Agent of the monies specified in clause (ii) above
and a copy of the Officers' Certificate specified in clause (iii) above, the
Paying Agent shall promptly mail to the Holders of Notes so accepted payment in
an amount equal to the purchase price plus accrued interest, if any; the Trustee
44
shall promptly cancel all Notes so accepted by the Issuer pursuant to the Change
of Control Offer; and the Trustee, upon written demand of the Issuer in the form
of an Officer's Certificate of the Issuer, shall promptly authenticate and mail
to the Holders of any Physical Notes so accepted new Physical Notes equal in
principal amount to any unpurchased portion of the Physical Notes surrendered.
Any Physical Notes not so accepted shall be promptly mailed by the Paying Agent
to the Holder thereof. For purposes of this Section 4.15, the Trustee shall act
as the Paying Agent. The Issuer shall publicly announce the results of the
Change of Control Offer on or as soon as practicable after the Change of Control
Purchase Date.
The Issuer 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
Issuer and repurchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
Neither the Board of Directors of the Issuer nor the Trustee may waive
the provisions of this Section 4.15 relating to the Issuer's obligation to make
a Change of Control Offer.
To the extent applicable and if required by law, the Company and the
Issuer shall comply with Section 14 of the Exchange Act, the provisions of
Regulation 14E and any other tender offer rules under the Exchange Act and other
securities laws, rules, and regulations which may then be applicable to any
offer by the Issuer to repurchase the Notes at the option of Holders upon a
Change of Control; and, if such laws, rules, and regulations require or prohibit
any action inconsistent with the provisions of this Section 4.15, compliance by
the Company and the Issuer with such laws, rules, and regulations will not
constitute a breach of the Issuer's obligations with respect to the provisions
of this Section 4.15 by virtue thereof.
Section 4.16 Limitation on Asset Sales.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, consummate an Asset Sale unless:
(i) the Company or such Restricted Subsidiary, as the case may
be, receives consideration at the time of such Asset Sale at least equal to
the Fair Market Value (as determined in good faith by resolution of the
Board of Directors set forth in an Officers' Certificate delivered to the
Trustee, which determination shall be conclusive evidence of compliance
with this provision) of the assets or Capital Stock being sold or issued or
otherwise disposed of; and
(ii) at least 75% of the value of the consideration for such
Asset Sales consists of cash, Cash Equivalents or Exchange Assets or any
combination thereof; provided that the amount of any liabilities (as shown
on the Company's or such Restricted Subsidiary's most recent balance sheet)
of the Company or any Restricted Subsidiary (other than contingent
liabilities and liabilities that are Subordinated Indebtedness or otherwise
by their terms subordinated to the Notes, the Parent Guarantee or the
Subsidiary Guarantees) that are assumed by the transferee of such assets
pursuant to a customary novation agreement that releases the Company and
such Restricted Subsidiary from further liability shall also be deemed to
be cash for purposes of this provision.
45
(b) Within 365 days after the receipt of any Net Cash Proceeds from an
Asset Sale, the Company or such Restricted Subsidiary may apply such Net Cash
Proceeds, at its option, in any order or combination: (a) to repay and
permanently reduce Indebtedness outstanding under any Permitted Bank Credit
Facility to which it, the Issuer or any other Restricted Subsidiary of the
Company is a party, (b) to make Capital Expenditures or (c) to make other
acquisitions of assets to be used in the Company's and its Restricted
Subsidiaries' oil and gas business. Pending the final application of any such
Net Cash Proceeds, the Company or such Restricted Subsidiary may temporarily
invest such Net Cash Proceeds in any manner that is not prohibited by the terms
of this Indenture. Any Net Cash Proceeds from Asset Sales that are not applied
as provided in clauses (a) through (c) of this clause (b) will (after expiration
of the relevant periods) be deemed to constitute "Excess Cash."
(c) When the amount of Excess Cash exceeds $10 million, the Issuer or
the Company shall make an irrevocable, unconditional offer (an "Excess Cash
Offer") to the Holders to purchase the maximum amount of Notes which could be
acquired by application of such amount of Excess Cash as described herein (the
"Excess Cash Offer Amount"), in cash at the purchase price equal to 100% of
the principal amount thereof (the "Excess Cash Offer Price"), together with
accrued and unpaid interest to the Excess Cash Purchase Date.
(d) Notice of an Excess Cash Offer will be sent at least 30 and not
more than 60 days prior to the Excess Cash Purchase Date, by first-class mail,
by the Issuer or the Company to each Holder at the address on the Note Register,
with a copy to the Trustee. Such notice will set forth a date on which the Notes
tendered shall be accepted (the "Excess Cash Purchase Date") and the Excess
Cash Offer shall remain open for at least 20 Business Days and close no later
than 30 Business Days after the date such notice is given. The notice shall
contain all instructions and materials necessary to enable such Holders to
tender Notes pursuant to the Excess Cash Offer and shall state the following
terms:
(i) that the Excess Cash Offer is being made pursuant to this
Section 4.16 and that all Notes or portions thereof properly tendered will
be accepted for payment; provided, however, that if the aggregate principal
amount of Notes tendered in a Excess Cash Offer plus any accrued interest
at the expiration of such offer exceeds the aggregate amount of the Excess
Cash Offer, the offeror shall select the Notes to be purchased on a pro
rata basis with such adjustments as may be deemed appropriate by the
Company (so that only Notes in denominations of $1,000 or multiples thereof
shall be purchased) and that the Excess Cash Offer shall remain open for a
period of 20 Business Days or such longer period as may be required by law;
(ii the Excess Cash Offer Price (including the amount of any
accrued interest) and the Excess Cash Purchase Date;
(ii that any Note not tendered will continue to accrue interest;
(iv that, unless the Company or the Issuer defaults in making
payment therefor, any Note accepted for payment pursuant to the Excess Cash
Offer shall cease to accrue interest, after the Excess Cash Purchase Date;
(v) that Holders electing to have a Physical Note purchased
pursuant to a Excess Cash Offer will be required to surrender the Note,
with the form entitled "Option
46
of Holder to Elect Purchase" on the reverse of the Note completed, to the
Paying Agent at the address specified in the notice prior to the close of
business on the third Business Day prior to the Excess Cash Purchase Date;
(vi that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than the second Business Day prior to
the Excess Cash Purchase Date, a telegram, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Notes the
Holder delivered for purchase and a statement that such Xxxxxx is
withdrawing his election to have such Note purchased; and
(vi that Holders whose Physical Notes are purchased only in part
will be issued new Physical Notes in a principal amount equal to the
unpurchased portion of the Physical Notes surrendered; provided, however,
that each Physical Note purchased and each new Physical Note issued shall
be in an original principal amount of $1,000 or integral multiples thereof.
(e) On or before the Excess Cash Purchase Date, the offeror shall (i)
accept for payment Notes or portions thereof tendered pursuant to the Excess
Cash Offer which are to be purchased in accordance with clause (d)(i) above,
(ii) deposit with the Paying Agent in accordance with Section 2.14 U.S. Legal
Tender sufficient to pay the purchase price plus accrued interest, if any, of
all Notes to be purchased and (iii) deliver to the Trustee any Physical Notes so
accepted together with an Officers' Certificate stating the Notes or portions
thereof being purchased by the offeror. Upon receipt by the Paying Agent of the
monies specified in clause (ii) above and a copy of the Officers' Certificate
specified in clause (iii) above, the Paying Agent shall promptly mail to the
Holders of Notes so accepted payment in an amount equal to the purchase price
plus accrued interest, if any; the Trustee shall promptly cancel all Notes
accepted by the offeror pursuant to the Excess Cash Offer; and the Trustee shall
promptly authenticate and mail to the Holders of any Physical Notes so accepted
new Physical Notes equal in principal amount to any unpurchased portion of the
Physical Notes surrendered. Any Physical Notes not so accepted shall be
promptly mailed by the Paying Agent to the Holder thereof. For purposes of this
Section 4.16, the Trustee shall act as the Paying Agent. The Issuer or the
Company shall publicly announce the results of the Excess Cash Offer on or as
soon as practicable after the Excess Cash Purchase Date.
(f) If the amount required to acquire all Notes tendered by Holders
pursuant to the Excess Cash Offer (the "Excess Cash Acceptance Amount") shall
be less than the aggregate Excess Cash Offer Amount, then the excess of the
Excess Cash Offer Amount over the Excess Cash Acceptance Amount may be used by
the Company or any Restricted Subsidiary in any manner permitted by this
Indenture. Upon consummation of any Excess Cash Offer made in accordance with
the terms of this Indenture, the amount of Excess Cash shall be reduced to zero.
(g) To the extent applicable and if required by law, the Issuer and
the Company shall comply with Section 14 of the Exchange Act, the provisions of
Regulation 14E and any other tender offer rules under the Exchange Act and other
securities laws, rules, and regulations which may then be applicable to any
Excess Cash Offer by the Issuer or the Company; and, if such laws, rules, and
regulations require or prohibit any action inconsistent with the foregoing,
compliance by the Issuer or the Company with such laws, rules, and regulations
will not constitute a breach of its obligations with respect to the foregoing.
47
Section 4.17 Limitation on Sale or Issuance of Capital Stock of Restricted
Subsidiaries.
The Company shall not sell or otherwise dispose of any shares of
Capital Stock of any Restricted Subsidiary (other than the Issuer), and shall
not permit any Restricted Subsidiary (other than the Issuer), directly or
indirectly, to issue or sell or otherwise dispose of any of its Capital Stock
except (a) to the Company or a Wholly Owned Restricted Subsidiary, or (b) if all
shares of Capital Stock of such Restricted Subsidiary are sold or otherwise
disposed of. In connection with any sale or disposition of Capital Stock of any
Restricted Subsidiary, the Company shall be required to comply with Section
4.16, and in the case of a sale of the Issuer, Section 4.15 and Article Five.
Section 4.18 Limitations on Liens.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, incur, or suffer to exist any Lien upon any of their
respective properties or assets, whether now owned or hereafter acquired, other
than Permitted Liens.
Section 4.19 Limitation on Lines of Business.
The Company shall not engage in any line of business other than to act
as a holding company for the Issuer, Sierra and Red Oak and such other business
activities as are reasonably related or incidental thereto. The Company shall
not permit any Restricted Subsidiaries, including the Issuer, to engage in any
line of business other than the oil and gas exploration and production business,
such other business activities as are reasonably related or incidental thereto
and any other business activities of the Company and its Restricted Subsidiaries
conducted as of the Issue Date.
Section 4.20 Subsidiary Guarantees.
The Company shall cause each Significant Subsidiary of the Company
(other than the Issuer), whether now existing or hereafter formed or acquired,
to (a) execute and deliver to the Trustee a supplemental indenture in form
reasonably satisfactory to the Trustee pursuant to which such Restricted
Subsidiary shall unconditionally guarantee all of the Issuer's obligations under
the Notes and this Indenture on the terms set forth in this Indenture and (b)
deliver to the Trustee an Opinion of Counsel and an Officers' Certificate,
stating that such supplemental indenture has been duly authorized, executed and
delivered by such Restricted Subsidiary and constitutes a legal, valid, binding
and enforceable obligation of such Restricted Subsidiary. Thereafter, such
Restricted Subsidiary shall be a Subsidiary Guarantor for all purposes of this
Indenture.
If any Restricted Subsidiary (other than the Issuer) incurs any
Indebtedness (other than to the Company or the Issuer), the Company shall cause
such Restricted Subsidiary, within 10 days following the incurrence of such
Indebtedness, to (a) execute and deliver to the Trustee a supplemental indenture
in form reasonably satisfactory to the Trustee pursuant to which such Restricted
Subsidiary shall unconditionally guarantee all of the Issuer's obligations under
the Notes and this Indenture on the terms set forth in this Indenture and (b)
deliver to the Trustee an Opinion of Counsel and an Officers' Certificate,
stating that such supplemental indenture has been duly authorized, executed and
delivered by such Restricted Subsidiary and constitutes a legal, valid, binding
and enforceable obligation of such Restricted Subsidiary. Thereafter, such
Restricted Subsidiary shall be a Subsidiary Guarantor for all purposes of this
Indenture.
Section 4.21 Payment of Existing Secured Debt.
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Concurrently with purchase of the Initial Notes by the Initial
Purchasers, the Company shall cause the Issuer to, and the Issuer shall, pay in
full the Existing Indebtedness; provided that, as of the Issue Date, the Issuer
may keep outstanding no more than $100,000 of the Existing Indebtedness owed to
Bank One, Texas, N.A.
ARTICLE FIVE
SUCCESSOR CORPORATION
Section 5.01 Merger, Consolidation and Sale of Assets.
The Company shall not consolidate with or merge with or into any other
Person or, directly or indirectly, sell, lease, assign, transfer, or convey all
or substantially all of its assets (computed on a consolidated basis), to
another Person or group of Persons acting in concert, whether in a single
transaction or through a series of related transactions, unless (i) either (a)
the Company is the continuing Person or (b) the resulting, surviving, or
transferee entity is a corporation organized under the laws of the United
States, any state thereof, or the District of Columbia, and shall expressly
assume all of the obligations of the Company under this Indenture, the Parent
Guarantee and the Security Documents by appropriate documents supplemental
hereto and thereto, executed and delivered to the Trustee on or prior to the
consummation of such transaction, in form satisfactory to the Trustee; (ii) no
Default or Event of Default shall exist or shall occur immediately after giving
effect to such transaction; (iii) immediately after giving effect to such
transaction on a pro forma basis, the Net Worth of the resulting, surviving or
transferee entity is at least equal to the Net Worth of the Company immediately
prior to such transaction; and (iv) except for a consolidation or merger of the
Company with or into any Wholly Owned Restricted Subsidiary (including the
Issuer), the resulting, surviving or transferee entity would immediately
thereafter be permitted to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to Section 4.12(a). For purposes of
this Section 5.01, the Consolidated Fixed Charge Coverage Ratio shall be
determined on a pro forma consolidated basis (giving effect to the transaction)
for the Reference Period immediately preceding such transaction.
The Issuer shall not consolidate with or merge with or into any other
Person, or, directly or indirectly, sell, lease, assign, transfer, or convey all
or substantially all of its assets (computed on a consolidated basis), to
another Person or group of Persons acting in concert, whether in a single
transaction or through a series of related transactions, unless (i) either (a)
the Issuer is the continuing Person or (b) the resulting, surviving, or
transferee entity is a corporation organized under the laws of the United
States, any state thereof, or the District of Columbia, and shall expressly
assume all of the obligations of the Issuer under this Indenture and the Notes
by a supplemental indenture, executed and delivered to the Trustee on or prior
to the consummation of such transaction, in form satisfactory to the Trustee;
(ii) no Default or Event of Default shall exist or shall occur immediately after
giving effect to such transaction; (iii) immediately after giving effect to such
transaction on a pro forma basis, the Net Worth of the resulting, surviving or
transferee entity is at least equal to the Net Worth of the Issuer immediately
prior to such transaction; (iv) except for a consolidation or merger of the
Issuer with or into the Company or any Wholly Owned Restricted Subsidiary, the
resulting, surviving or transferee entity would immediately thereafter be
permitted to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to Section 4.12(a); (v) the Company shall have
executed and delivered to the Trustee, in form satisfactory to the Trustee, a
supplemental indenture confirming its obligation to pay the principal of,
premium, if any, and interest on the Notes pursuant to the Parent Guarantee and
to perform all its covenants hereunder and under the Parent Guarantee; (vi) each
Subsidiary Guarantor shall have
49
executed and delivered to the Trustee, in form satisfactory to the Trustee, a
supplemental indenture confirming its obligations to pay the principal of,
premium, if any, and interest on the Notes pursuant to its Subsidiary Guarantee;
(vii) the Trustee shall have received an Opinion of Counsel to the effect that
such consolidation, merger, sale, assignment, conveyance, transfer or lease will
not result in the Issuer being required to make any deduction for or on account
of taxes from payments made under or in respect of the Notes. For purposes of
this Section 5.01, the Consolidated Fixed Charge Coverage Ratio shall be
determined on a pro forma consolidated basis (giving effect to the transaction)
for the Reference Period immediately preceding such transaction.
The Company shall not permit or allow any Subsidiary Guarantor to
consolidate with or merge with or into any other Person or, directly or
indirectly, sell, lease, assign, transfer, or convey all or substantially all of
its assets (computed on a consolidated basis), to another Person or group of
Persons acting in concert, whether in a single transaction or through a series
of related transactions, unless (i) the Person formed by or surviving any such
consolidation or merger (if other than such Subsidiary Guarantor) or the
transferee entity (A) is a corporation organized and existing under the laws of
the United States of America, any state thereof, or the District of Columbia and
(B) expressly assumes all the obligations of such Subsidiary Guarantor pursuant
to a supplemental indenture, in a form satisfactory to the Trustee, under the
Notes and this Indenture, (ii) immediately before and after giving effect to
such transaction, no Default or Event of Default exists and immediately after
giving effect to such transaction, the resulting, surviving or transferee entity
could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to Section 4.12(a), and (iii) such Subsidiary Guarantor or the Person
formed by or surviving any such consolidation or merger or the transferee entity
on a pro forma basis will have Net Worth (immediately after the transaction)
equal to or greater than the Net Worth of such Subsidiary Guarantor immediately
preceding the transaction; provided that, the foregoing shall not apply to a
merger, consolidation, sale or other such transaction between Subsidiary
Guarantors, between the Issuer and any Subsidiary Guarantor or between the
Company and any Subsidiary Guarantor.
In connection with any consolidation, merger, sale, lease, assignment,
transfer or conveyance that is subject to the provisions of this Section 5.01,
the Company shall deliver to the Trustee, in form and substance satisfactory to
the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating
that such transaction and the supplemental indenture (or, in the case of the
Company, any other supplemental document delivered pursuant to this Section
5.01) comply with this Section 5.01 and that all conditions precedent in this
Indenture provided for in relation to such transaction have been complied with.
Section 5.02 Successor Corporation Substituted.
Upon any consolidation, combination or merger, sale, assignment,
conveyance, lease or transfer in accordance with Section 5.01, in which either
the Company or the Issuer is not the continuing corporation, the resulting,
surviving or transferee entity shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture and the
Parent Guarantee or the Issuer under this Indenture and the Notes, as
applicable, with the same effect as if such resulting, surviving or transferee
entity had been named as the Company or the Issuer herein and therein, as
applicable, and thereafter (except in the case of a lease) the predecessor
corporation shall be relieved of all further obligations and covenants under
this Indenture, the Parent Guarantee and the Notes.
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ARTICLE SIX
REMEDIES
Section 6.01 Events of Default.
An "Event of Default" means any of the following events:
(a) the failure to pay interest (including any Additional Interest) on
any Notes when the same becomes due and payable and such default continues for a
period of 30 days:
(b) the failure to pay the principal of or premium, if any, on any
Notes, when the same becomes due and payable, at maturity, upon redemption, by
acceleration or otherwise (including the failure to make a payment to purchase
Notes tendered pursuant to a Change of Control Offer or an Excess Cash Offer);
(c) a default in the performance or breach of the provisions of
Section 5.01, failure to make or consummate a Change of Control Offer in
accordance with Section 4.15, or failure to make or consummate an Excess Cash
Offer in accordance with Section 4.16;
(d) a default in the observance or performance of any covenant or
agreement contained in this Indenture, the Notes or any Guarantee which default
continues for a period of 30 days after the Issuer receives written notice
specifying the default (and demanding that such default be remedied) from the
Trustee or the Issuer and the Trustee receive such a notice from the Holders of
at least 25% of the outstanding principal amount of the Notes;
(e) a default in the observance or performance of any covenant or
agreement contained in the Security Documents which default continues for a
period of 30 days after the Issuer receives written notice specifying the
default (and demanding that such default be remedied) from the Trustee or the
Issuer and the Trustee receive such a notice from the Holders of least 25% of
the outstanding principal amount of the Notes;
(f) a default which extends beyond any stated period of grace
applicable thereto (including any extension thereof) under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness of the Company or of any Restricted
Subsidiary, including the Issuer, having a principal amount in excess of $1
million, whether such Indebtedness now exists or is created after the Issue
Date, or a failure to pay any such Indebtedness at its stated maturity;
(g) one or more judgments in an aggregate amount in excess of
$1,000,000 (unless covered by insurance by a reputable insurer as to which the
insurer has acknowledged coverage) shall have been rendered against the Company
or any of its Restricted Subsidiaries, including the Issuer, and such judgments
remain undischarged, unvacated, unpaid or unstayed for a period of 60 days after
such judgment or judgments become final and non-appealable;
(h) the Notes, this Indenture or any the Security Document shall, at
any time, cease to be in full force and effect (unless released by the Trustee
or where no material adverse effect on the Holders would result) or shall be
declared null and void, or the validity or enforceability thereof shall be
contested by the Company or any of its Affiliates, or any of the Liens intended
to be created by the Security Documents, shall cease to be or shall not be a
valid and perfected Lien having
51
the priority contemplated thereby (other than by reason of release in accordance
with the terms of this Indenture);
(i) the Company or any of its Significant Subsidiaries, including the
Issuer, pursuant to or under or within the meaning of any Bankruptcy Law:
(i) commences a voluntary case or proceeding;
(ii consents to the entry of an order for relief against it in
an involuntary case or proceeding;
(ii consents to the appointment of a Custodian of it or for all
or substantially all of its property;
(iv makes a general assignment for the benefit of its creditors;
or
(v) shall generally not pay its debts when such debts become due
or shall admit in writing its inability to pay its debts generally; or
(j) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any Significant
Subsidiary, including the Issuer, in an involuntary case or proceeding;
(ii appoints a Custodian of the Company or any Significant
Subsidiary, including the Issuer, for all or substantially all of its
properties; or
(ii orders the liquidation of the Company or any Significant
Subsidiary, including the Issuer;
(k) any of the Guarantees ceases to be in full force and effect or any
of the Guarantees is declared to be null and void or invalid and unenforceable
or any Guarantor denies or disaffirms its liability under its Guarantee (other
than by reason of release of a Subsidiary Guarantor in accordance with the terms
of this Indenture).
Section 6.02 Acceleration.
Upon the happening of any Event of Default specified in Section 6.01
(other than an Event of Default specified in Section 6.01(i) or (j)), the
Trustee may, or the Holders of at least 25% in aggregate principal amount of
outstanding Notes may, declare the principal of, premium, if any, and accrued
and unpaid interest on all the Notes to be due and payable by notice in writing
to the Issuer (and the Trustee if given by the Holders) specifying the
respective Event of Default and that it is a "notice of acceleration," and the
same shall become immediately due and payable. If an Event of Default of the
type described in Section 6.01(i) or (j) occurs, then such amount shall ipso
facto become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any Holder.
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At any time after a declaration of acceleration with respect to the
Notes as described in the preceding paragraph, the Holders of a majority in
aggregate principal amount of the Notes then outstanding by written notice to
the Issuer and the Trustee may rescind and cancel such declaration and its
consequences (a) if the rescission would not conflict with any judgment or
decree, (b) if all existing Events of Default have been cured or waived except
nonpayment of principal of, premium, if any, or interest that has become due
solely because of such acceleration, (c) to the extent the payment of such
interest is lawful, interest on overdue installments of interest and overdue
principal and premium, if any, which have become due otherwise than by such
declaration of acceleration, has been paid, (d) if the Issuer has paid the
Trustee its reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (e) in the event of the cure or waiver of an
Event of Default of the type described in Section 6.01 (i) or (j), the Trustee
shall have received an Officers' Certificate and an Opinion of Counsel that such
Event of Default has been cured or waived; provided, however, that such counsel
may rely, as to matters of fact, on a certificate or certificates of Officers of
the Company or the Issuer. No such rescission shall affect any subsequent
Default or impair any right consequent thereto.
Notwithstanding the foregoing, if an Event of Default specified in
Section 6.01(f) hereof shall have occurred and be continuing, such Event of
Default and any consequential acceleration shall be automatically rescinded if
the Indebtedness that is the subject of such Event of Default has been repaid,
or if the default relating to such Indebtedness is waived or cured and if such
Indebtedness has been accelerated, then the holders thereof have rescinded their
declaration of acceleration in respect of such Indebtedness (provided, in each
case, that such repayment, waiver, cure or rescission is effected within a
period of 10 days from the continuation of such default beyond the applicable
grace period (including any extension thereof) or the occurrence of such
acceleration), and written notice of such repayment or cure or waiver and
rescission, as the case may be, shall have been given to the Trustee by the
Issuer and countersigned by the holders of such Indebtedness or a trustee,
fiduciary or agent for such holders or other evidence satisfactory to the
Trustee of such events is provided to the Trustee, within 30 days after any such
acceleration in respect of the Notes and so long as such rescission of any such
acceleration of the Notes does not conflict with any judgment or decree as
certified to the Trustee by the Issuer.
Section 6.03 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of the principal of, premium, if any, or interest on the Notes or to
enforce the performance of any provision of the Notes or this Indenture.
All rights of action and claims under this Indenture or the Notes may
be enforced by the Trustee even if it does not possess any of the Notes or does
not produce any of them in the proceeding. A delay or omission by the Trustee
or any Holder 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 to the extent permitted by law.
Section 6.04 Waiver of Past Defaults.
Prior to the declaration of acceleration of the Notes, the Holders of
not less than a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may, on behalf of the Holders of all the
Notes, waive any existing Default or Event of Default and its
53
consequences under this Indenture, except a Default or Event of Default
specified in Section 6.01(a) or (b) or in respect of any provision hereof which
cannot be modified or amended without the consent of all of the Holders so
affected pursuant to Section 9.02. When a Default or Event of Default is so
waived, it shall be deemed cured and shall cease to exist. This Section 6.04
shall be in lieu of (S) 316(a)(1)(B) of the TIA and such (S) 316(a)(1)(B) of the
TIA is hereby expressly excluded from this Indenture and the Notes, as permitted
by the TIA.
Section 6.05 Control by Majority.
Holders of the Notes may not enforce this Indenture or the Notes
except as provided in this Article Six and under the TIA. The Holders of not
less than a majority in aggregate principal amount of the outstanding Notes
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust of
power conferred on the Trustee, provided, however, that the Trustee may refuse
to follow any direction (a) that conflicts with any rule of law or this
Indenture, (b) that the Trustee determines may be unduly prejudicial to the
rights of another Holder, or (c) that may expose the Trustee to personal
liability for which reasonable indemnity provided to the Trustee against such
liability shall be inadequate; provided, further, however, that the Trustee may
take any other action deemed proper by the Trustee that is not inconsistent with
such direction or this Indenture. This Section 6.05 shall be in lieu of (S)
316(a)(1)(A) of the TIA, and such (S) 316(a)(1)(A) of the TIA is hereby
expressly excluded from this Indenture and the Notes, as permitted by the TIA.
Section 6.06 Limitation on Suits.
No Holder of any Notes shall have any right to institute any
proceeding with respect to this Indenture or the Notes or any remedy hereunder,
unless (i) the Holders of at least 25% in aggregate principal amount of the
outstanding Notes have made written request, and offered reasonable indemnity,
to the Trustee to institute such proceeding as Trustee under the Notes and this
Indenture, (ii) the Trustee has failed to institute such proceeding within 30
days after receipt of such notice, request and offer of indemnity and (iii) the
Trustee, within such 30-day period, has not received directions inconsistent
with such written request by Holders of not less than a majority in aggregate
principal amount of the outstanding Notes.
The foregoing limitations shall not apply to a suit instituted by a
Holder of a Note for the enforcement of the payment of the principal of,
premium, if any, or interest on, such Notes on or after the respective due dates
expressed or provided for in such Note.
A Holder may not use this Indenture to prejudice the rights of any
other Holders or to obtain priority or preference over such other Holders.
Section 6.07 Right of Holders to Receive Payment.
Notwithstanding any other provision in this Indenture, the right of
any Holder of a Note to receive payment of the principal of, premium, if any,
and interest on such Note, on or after the respective due dates expressed or
provided for in such Note, or to bring suit for the enforcement of any such
payment on or after the respective due dates, is absolute and unconditional and
shall not be impaired or affected without the consent of the Holder.
54
Section 6.08 Collection Suit by Trustee.
If an Event of Default specified in Section 6.01 (a) or (b) occurs and
is continuing, the Trustee may recover judgment in its own name and as trustee
of an express trust against the Issuer, or any other obligor on the Notes, for
the whole amount of the principal of, premium, if any, and accrued interest,
remaining unpaid, together with interest on overdue principal and, to the extent
that payment of such interest is lawful, interest on overdue installments of
interest, in each case at the rate per annum provided for by the Notes and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
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 (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents, counsel, accountants and
experts) and the Holders allowed in any judicial proceedings relative to the
Company or any of its Restricted Subsidiaries, including the Issuer, or any
other obligor upon the Notes, their creditors or their property and shall be
entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same, and any
Custodian in any such judicial proceedings is hereby authorized by each Holder
to make such 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 to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
Section 6.10 Priorities.
If the Trustee collects any money pursuant to this Article Six it
shall pay out such money in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for interest accrued on the Notes, ratably,
without preference or priority of any kind, according to the amounts due
and payable on the Notes for interest, if any;
Third: to Holders for the principal amounts (including any premium)
owing under the Notes, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for the principal
thereof (including any premium); and
Fourth: the balance, if any, to the Issuer or to any other Person as
may be directed by any court of competent jurisdiction.
55
The Trustee, upon prior written notice to the Issuer, may fix a record
date and payment date for any payment to Holders pursuant to this Section 6.10.
Section 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court may in its discretion require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to any suit by the Trustee, any suit by a
Holder pursuant to Section 6.06, or a suit by a Holder or Holders of more than
10% in aggregate principal amount of the outstanding Notes.
Section 6.12 Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture or any Note and such proceeding has
been discontinued or abandoned for any reason, or has been determined adversely
to the Trustee or to such Holder, then and in every such case the Company, the
Issuer, the other Guarantors, the Trustee and the Holders shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had been
instituted.
ARTICLE SEVEN
TRUSTEE
Section 7.01 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture and
use the same degree of care and skill in its exercise thereof as a prudent man
would exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties as are specifically set
forth in this Indenture and no covenants or obligations shall be implied in
this Indenture that are adverse to the Trustee.
(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,
in the case of any such certificates or opinions that by any provision
hereof are specifically required to be furnished to the Trustee, the
Trustee shall examine the certificates and opinions to determine whether or
not they conform to the requirements of this Indenture, but need not verify
the truth or accuracy of the statements made therein.
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(c) Notwithstanding anything to the contrary herein contained, 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 Section 7.01(b).
(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.
(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 6.02, 6.04 or 6.05.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any 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 for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to Section 7.01 (a), (b), (c) and (d) and Section 7.02.
(f) The Trustee shall not be liable for interest on any money or
assets received by it except as the Trustee may agree in writing with the
Issuer. Assets held in trust by the Trustee need not be segregated from other
assets except to the extent required by law.
Section 7.02 Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely and shall be fully protected in acting or
refraining from acting upon any document believed by it to be genuine and to
have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel of its selection and may require an Officers' Certificate or an
Opinion of Counsel, which shall conform to Sections 10.04 and 10.05. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action that it takes or
omits to take in good faith which it reasonably believes to be authorized or
within its rights or powers.
(e) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, notice, request, direction, consent, order, bond, debenture, or other
paper or document, but the Trustee, in its discretion, may
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makes such further inquiry or investigation into such facts or matters as it may
see fit; and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled, upon reasonable notice to the Company, to
examine the books, records, and premises of the Company and its Subsidiaries,
personally or by agent or attorney and to consult with the Officers and
representatives of the Company and its Subsidiaries, including the Company's
accountants and attorneys.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee security or indemnity
reasonably satisfactory to the Trustee against the costs, expenses and
liabilities which may be incurred by it in compliance with such request, order
or direction.
(g) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
(h) Delivery of reports, information and documents to the Trustee
under Section 4.08 is for informational purposes only and the Trustee's receipt
of the foregoing shall not constitute constructive notice of any information
contained therein or determinable from information contained therein, including
the Company's compliance with any of its covenants hereunder (as to which the
Trustee is entitled to rely exclusively on Officers' Certificates).
Section 7.03 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company and any of its
Subsidiaries, including the Issuer, or Affiliates, with the same rights it would
have if it were not Trustee. Any 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 makes no representation as to the validity or adequacy of
this Indenture or the Notes, and it shall not be accountable for the Issuer's
use of the proceeds from the Notes, and it shall not be responsible for any
statement of the Company or the Issuer in this Indenture or the Notes other than
the Trustee's certificate of authentication.
Section 7.05 Notice of Default.
If a Default or an Event of Default occurs and is continuing and if it
is known to a Trust Officer, the Trustee shall mail to each Holder notice of the
uncured Default or Event of Default within 90 days after obtaining knowledge
thereof. Except in the case of a Default or an Event of Default in payment of
principal of, premiums, if any, or interest on, any Note, including an
accelerated payment or a Default in payment on the Change of Control Payment
Date pursuant to a Change of Control Offer or on the Excess Cash Purchase Date
pursuant to a Excess Cash Offer, the Trustee may withhold the notice if and so
long as its Board of Directors, the executive committee of its Board of
Directors or a committee of its directors and/or Trust Officers in good faith
determines that withholding the notice is in the interest of the Holders. The
foregoing sentence of this Section 7.05 shall be in lieu of the proviso to (S)
315(b) of the TIA and such proviso to (S) 315(b) of the TIA is hereby expressly
excluded from this Indenture and the Notes, as permitted by the TIA.
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Section 7.06 Reports by Trustee to Holders.
Within 60 days after May 15 of each year beginning with 1998, the
Trustee shall, to the extent that any of the events described in TIA (S) 313(a)
occurred with the previous twelve months, but not otherwise, mail to each Holder
a brief report dated as of such date that complies with TIA (S) 313(a). The
Trustee also shall comply with TIA (S)(S) 313(b), (c) and (d).
A copy of each report at the time of its mailing to Holders shall be
mailed to the Company and the Issuer and filed with the Commission and each
stock exchange, if any, on which the Notes are listed.
The Company and the Issuer shall promptly notify the Trustee if the
Notes become listed on any stock exchange and the Trustee shall comply with TIA
(S) 313(d).
Section 7.07 Compensation and Indemnity.
The Issuer shall pay to the Trustee from time to time such
compensation for its services as has been agreed to in writing signed by the
Issuer and the Trustee. The Trustee's compensation shall not be limited by any
law on compensation of a trustee of an express trust. The Issuer shall reimburse
the Trustee upon request for all reasonable out-of-pocket expenses incurred or
made by it in connection with the performance of its duties under this
Indenture. Such expenses shall include the reasonable fees and expenses of the
Trustee's agents, counsel, accountants and experts.
The Issuer shall indemnify each of the Trustee (or any predecessor
Trustee) and its agents, employees, stockholders, Affiliates and directors and
officers for, and hold them each harmless against, any and all loss, liability,
damage, claim or expense (including reasonable fees and expenses of counsel),
including taxes (other than taxes based on the income of the Trustee) incurred
by them, except for such actions to the extent caused by any negligence, bad
faith or willful misconduct on their part, arising out of or in connection with
the acceptance of administration of this trust including the reasonable costs
and expenses of defending themselves against any claim or liability in
connection with the exercise or performance of any of their rights, powers or
duties hereunder or under any Security Document. The Trustee shall notify the
Issuer promptly of any claim asserted against the Trustee for which it may seek
indemnity. At the Trustee's sole discretion, the Issuer shall defend the claim
and the Trustee shall cooperate and may participate in the defense, provided,
however, that any settlement of a claim shall be approved in writing by the
Trustee if such settlement would result in an admission of liability by the
Trustee or if such settlement would not be accompanied by a full release of the
Trustee for all liability arising out of the events giving rise to such claims.
Alternatively, the Trustee may at its option have separate counsel of its own
choosing and the Issuer shall pay the reasonable fees and expenses of such
counsel.
To secure the Issuer's payment obligations in this Section 7.07, the
Trustee shall have a Lien prior to the Notes on all assets or money held or
collected by the Trustee, in its capacity as Trustee, except the Collateral and
any other assets or money held in trust to pay principal of or premium, if any,
or interest on particular Notes.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(i) or (j) occurs, such expenses and the
compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law.
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The provisions of this Section 7.07 shall survive the termination of
this Indenture.
Section 7.08 Replacement of Trustee.
The Trustee may resign at any time by so notifying the Issuer. The
Holders of a majority in aggregate principal amount of the outstanding Notes may
remove the Trustee and appoint a successor Trustee with the Issuer's consent, by
so notifying the Issuer and the Trustee. The Issuer 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 becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Issuer shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in aggregate principal
amount of the outstanding Notes may appoint a successor Trustee to replace the
successor Trustee appointed by the Issuer.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuer. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the Lien provided in Section 7.07, 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 Issuer shall mail notice of such successor Trustee's appointment
to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuer or the
Holders of at least 10% in aggregate principal amount of the outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding any resignation or replacement of the Trustee pursuant
to this Section 7.08, the Issuer's obligations under Section 7.07 shall continue
for the benefit of the retiring Trustee.
Section 7.09 Successor Trustee by Xxxxxx, Etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee
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corporation is otherwise eligible hereunder, be the successor Trustee; provided,
however, that such corporation shall be otherwise qualified and eligible under
this Article Seven.
Section 7.10 Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA (S)(S) 310(a)(1), (2) and (5). The Trustee (or, in the case
of a Trustee that is a corporation included in a bank holding company system,
the related bank holding company) shall have a combined capital and surplus of
at least $150 million as set forth in its most recent published annual report of
condition, and have an office or agency in the City of New York sufficient to
permit payments on the Notes in such City as required by Section 2.03. In
addition, if the Trustee is a corporation included in a bank holding company
system, the Trustee, independently of such bank holding company, shall meet the
capital requirements of TIA (S) 310(a)(2). The Trustee shall comply with TIA (S)
310(b); provided, however, that there shall be excluded from the operation of
TIA (S) 310(b)(1) any indenture or indentures under which other securities, or
certificates of interest or participation in other securities, of the Issuer are
outstanding, if the requirements for such exclusion set forth in TIA (S)
310(b)(1) are met. The provisions of TIA (S) 310 shall apply to the Issuer, as
obligor of the Notes.
Section 7.11 Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein. The
provisions of TIA (S) 311(a) shall apply to the Issuer, as obligor on the Notes.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
Section 8.01 Satisfaction and Discharge of the Indenture; Legal Defeasance.
This Indenture, the Parent Guarantee, any Subsidiary Guarantee and
each of the Security Documents will cease to be of further effect as to all
outstanding Notes, and the Trustee, at the Issuer's request and expense, shall
execute and deliver proper instruments acknowledging satisfaction and discharge
of this Indenture, when (a) either (i) all Notes, theretofore authenticated and
delivered (except lost, stolen or destroyed Notes which have been replaced or
paid and Notes for whose payment money has theretofore been deposited in trust
or segregated and held in trust by the Issuer and thereafter repaid to the
Issuer or discharged from such trust) have been delivered to the Trustee for
cancellation or (ii) all Notes not therefore delivered to the Trustee for
cancellation have become due and payable and the Issuer has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Issuer directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be; (b)
the Issuer has paid all other sums payable under this Indenture by the Issuer;
and (c) the Issuer has delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel stating that all conditions precedent under this Indenture
relating to the satisfaction and discharge of this Indenture have been complied
with; provided, however, that such counsel may rely, as to matters of fact, on a
certificate or certificates of Officers of the Issuer.
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Notwithstanding the satisfaction and discharge of this Indenture
pursuant to the preceding paragraph of this Section 8.01, the obligations of the
Issuer to the Trustee under Section 7.07 and, if funds shall have been deposited
with the Trustee pursuant to such paragraph, the obligations of the Trustee
under Section 8.02 and 8.03 shall survive.
The Issuer may, at its option and at any time, elect to have its
obligations and the corresponding obligations of each Guarantor discharged with
respect to the outstanding Notes ("Legal Defeasance"). Such Legal Defeasance
means that the Issuer shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Notes and satisfied all of its
obligations with respect to the Notes (except as to (i) rights of registration
of transfer, substitution, and exchange of Notes and the Issuer's right of
optional redemption, (ii) rights of Holders to receive payments of principal of,
premium, if any, and interest on the Notes (but not the Change of Control
Purchase Price or the Excess Cash Offer Price), solely from the trust fund
described in this Article Eight and as more fully set forth below, where such
payments are due (or at such time as the Notes would be subject to redemption at
the option of the Issuer in accordance with this Indenture), (iii) the rights,
obligations and immunities of the Trustee under this Indenture, and (iv) the
rights and obligations of the Issuer under this Article Eight (the foregoing
exceptions (i) through (iv) are collectively referred to as the "Reserved
Rights")).
In order to exercise Legal Defeasance:
(a) the Issuer must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders cash in United States dollars, non-callable U.S.
Government Obligations, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants or investment bank, to pay the principal of, premium, if any, and
interest on the Notes on the stated date for payment thereof or on the
applicable Redemption Date, as the case may be, and at such time the Issuer must
specify to the Trustee whether the Notes are being defeased to the Stated
Maturity Date or to a particular Redemption Date;
(b) the Issuer shall have delivered to the Trustee an Opinion of
Counsel (who may be outside counsel to the Issuer but shall not be employed by
the Company or any Affiliate) acceptable to the Trustee confirming that (i) the
Issuer has received from, or there has been published by, the Internal Revenue
Service a ruling or (ii) since the date of this Indenture, there has been a
change in the applicable federal income tax law, in either case to the effect
that, and based thereon such Opinion of Counsel shall confirm that, the Holders
will not recognize income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred;
(c) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Events of Default under
Section 6.01(i) or (j) from bankruptcy or insolvency events are concerned, at
any time in the period ending on the 91st day after the date of deposit (or one
day after such other greater period of time in which any such deposit may remain
subject to set aside or avoidance under applicable Bankruptcy Law, e.g., one
year after such deposit);
(d) such Legal Defeasance shall not result in a breach or violation
of, or constitute a default under this Indenture or any other agreement or
instrument to which the Company or any of its Restricted Subsidiaries (including
the Issuer) is a party or by which the Company or any its Restricted
Subsidiaries (including the Issuer) is bound;
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(e) the Company and the Issuer shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the Company or
the Issuer with the intent of preferring the Holders over any other creditors of
the Company or the Issuer or with the intent of defeating, hindering, delaying
or defrauding any other creditors of the Company, the Issuer or others;
(f) the Issuer shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance have been complied
with; provided, however, that such counsel may rely, as to matters of fact, on a
certificate or certificates of Officers of the Issuer; and
(g) the Issuer shall have delivered to the Trustee an Opinion of
Counsel (who may be outside counsel to the Issuer but shall not be employed by
the Company or any Affiliate) to the effect that (i) after the passage of 90
days (or any greater period of time in which any such deposit of trust funds may
remain subject to any Bankruptcy Law insofar as such law applies to the Issuer
or any Guarantor) following such deposit, such funds will not be subject to set
aside or avoidance under any Bankruptcy Law or other similar laws affecting
creditors' rights generally and (ii) such deposit will not result in the Issuer
or any Guarantor, the trust or the Trustee being subject to regulation under the
Investment Company Act of 1940, as amended.
Section 8.02 Application of Trust Money.
The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or
U.S. Government Obligations deposited with it pursuant to Section 8.01, and
shall apply the deposited U.S. Legal Tender and the money from U.S. Government
Obligations in accordance with this Indenture to the payment of the principal
of, premium, if any, and interest on the Notes. The Trustee shall be under no
obligation to invest said U.S. Legal Tender or U.S. Government Obligations
except as it may agree in writing with the Issuer.
The Issuer shall pay and indemnify the Trustee against any tax, fee or
other charge imposed or assessed against the U.S. Legal Tender or U.S.
Government Obligations deposited pursuant to Section 8.01 or the principal,
premium, if any, and interest received in respect thereof other than any such
tax, fee or other charge which by law is for the account of the Holders of
outstanding Notes.
Section 8.03 Repayment to the Issuer.
Subject to Section 8.01, the Trustee and the Paying Agent shall
promptly pay to the Issuer upon request any excess U.S. Legal Tender or U.S.
Government Obligations held by them at any time and thereupon shall be relieved
from all liability with respect to such money. The Trustee and the Paying Agent
shall pay to the Issuer upon request any money held by them for the payment of
principal, premium, if any, or interest that remains unclaimed for one year;
provided, however, that the Trustee or such Paying Agent, before being required
to make any payment, may at the expense of the Issuer cause to be published once
in a newspaper of general circulation in the City of New York or mail to each
Holder entitled to such money notice that such money remains unclaimed and that
after a date specified therein which shall be at least 30 days from the date of
such publication or mailing any unclaimed balance of such money then remaining
will be repaid to the Issuer. After payment to the Issuer, Holders entitled to
such money must look to the Issuer for payment as general creditors unless an
applicable law designates another Person.
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Section 8.04 Reinstatement.
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance with Section 8.01 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 Issuer's obligations under this Indenture and the Notes, any
Guarantor's obligations under its Guarantee and the obligations and Liens under
the Security Documents shall be revived and reinstated as though no deposit had
occurred pursuant to Section 8.01 until such time as the Trustee or Paying Agent
is permitted to apply all such U.S. Legal Tender or U.S. Government Obligations
in accordance with Section 8.01; provided, however, that if the Issuer has made
any payment of interest or premium on or principal of any Notes because of the
reinstatement of its obligations, the Issuer shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the U.S. Legal Tender
or U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE NINE
MODIFICATION OF THE INDENTURE
Section 9.01 Without Consent of Holders.
Subject to the provisions of Section 9.02, the Company, the Issuer,
the Subsidiary Guarantors and the Trustee may modify or amend, waive or
supplement the provisions of this Indenture (including the Notes and any
Guarantee) without notice to or consent of any Holder: (a) to cure any
ambiguity, defect or inconsistency; (b) to comply with Section 5.01 or Section
12.04 of this Indenture; (c) to provide for uncertificated Notes in addition to
certificated Notes; (d) to comply with any requirements of the Commission in
order to effect or maintain the qualification of this Indenture under the TIA;
(e) to make any change that would provide any additional benefits or rights in
favor of the Holders; or (f) to make any other change with respect to matters or
questions arising under this Indenture, provided that such change shall not
adversely affect the interests of the Holders.
Section 9.02 With Consent of Holders.
The provisions of this Indenture (including the Notes and any
Guarantee) may be modified or amended with the consent of the Holders of not
less than a majority of the aggregate principal amount of the then outstanding
Notes, provided that no such modification or amendment may, without the consent
of the Holders of not less than 66% of the aggregate principal amount of the
Notes then outstanding, (i) prior to the date on which a Change of Control Offer
is required to be made, reduce the Change of Control Purchase Price or alter the
provisions of Section 4.15, or (ii) prior to the date upon which an Excess Cash
Offer is required to be made, reduce the Excess Cash Offer Price or alter the
provisions of Section 4.16 in a manner adverse to the Holders; provided further
that no such modification or amendment may, without the consent of the Holders
of all of the Notes then outstanding, directly or indirectly, (i) change the
Stated Maturity Date or the date any installment of principal of, or any
installment of interest on, any Note is due, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or change the place of payment where, or the coin or
currency in which, any Note or any premium or the interest thereon is payable or
impair the right to institute suit for the enforcement of any such payment on or
after the stated maturity date thereof (or, in the case of redemption, on or
after the Redemption Date), or, (x) after the date upon which a Change of
Control Offer is required to be
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made, reduce the Change of Control Purchase Price or alter the provisions of
Section 4.15 or (y) after the date upon which an Excess Cash Offer is required
to be made, reduce the Excess Cash Offer Price or alter the provisions of
Section 4.16 in a manner adverse to the Holders, (ii) reduce the percentage of
the outstanding Notes whose consent is required for any such amendment,
supplemental indenture, or waiver provided for in this Indenture, (iii) modify
the provisions of Section 6.04, except to increase any required percentage or to
provide that certain other provisions of this Indenture cannot be modified or
waived without the consent of all Holders of the Notes, (iv) adversely affect
the ranking of the Notes, the Parent Guarantee or the Subsidiary Guarantees; or
(v) release any Collateral from the Liens created pursuant to the Security
Documents or release the Parent Guarantee or any Subsidiary Guarantee, in any
case otherwise than in accordance with the terms of this Indenture.
Section 9.03 Compliance with TIA.
Every amendment, waiver or supplement of this Indenture shall comply
with the TIA as then in effect; provided, however, that this Section 9.03 shall
not of itself require that this Indenture or the Trustee be qualified under the
TIA or constitute any admission or acknowledgment by any party hereto that any
such qualification is required prior to the time this Indenture and the Trustee
are required by the TIA to be so qualified.
Section 9.04 Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder's Note, even if notation of the consent is not made on any
Note. Subject to the following paragraph, any such Holder or subsequent Holder
may revoke the consent as to such Holder's Note or portion of such Note by
notice to the Trustee or the Company and the Issuer received before the date on
which the Trustee receives an Officers' Certificate certifying that the Holders
of the requisite principal amount of Notes have consented (and not theretofore
revoked such consent) to the amendment, supplement or waiver. An amendment,
supplement or waiver becomes effective upon receipt by the Trustee of such
Officers' Certificate and evidence of consent by the Holders of the requisite
percentage in aggregate principal amount of outstanding Notes.
The Issuer may, but shall not be obligated to, fix a Record Date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which Record Date shall be at least 30 days prior to the
first solicitation of such consent. If a Record Date is fixed, then
notwithstanding the second sentence of the immediately preceding paragraph,
those Persons who were Holders at such Record Date (or their duly designated
proxies), and only those Persons, shall be entitled to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
Record Date. No such consent shall be valid or effective for more than 90 days
after such Record Date unless consents from Holders of the requisite percentage
in principal amount of outstanding Notes required hereunder for the
effectiveness of such consents shall have also been given and not revoked within
such 90 day period.
Section 9.05 Notation on or Exchange of Notes.
If an amendment, supplement or waiver to the provisions of this
Indenture changes the terms of a Note, the Trustee may require the Holder of
such Note to deliver it to the Trustee. The
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Trustee may place an appropriate notation on the Note about the changed terms
and return it to the Holder. Alternatively, if the Issuer or the Trustee so
determines, the Issuer in exchange for the Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms.
Section 9.06 Trustee.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine; provided, however, that the Trustee
may, but shall not be obligated to, execute any such amendment, supplement or
waiver which affects the Trustee's own rights, duties or immunities under this
Indenture. In executing such amendment, supplement or waiver, the Trustee shall
be entitled to receive indemnity reasonably satisfactory to it and shall be
fully protected in relying upon an Opinion of Counsel and an Officers'
Certificate of the Issuer, each stating that no Event of Default shall occur as
a result of such amendment, supplement or waiver and that the execution of any
amendment, supplement or waiver authorized pursuant to this Article Nine is
authorized or permitted by this Indenture, provided the legal counsel delivering
such Opinion of Counsel may rely as to matters of fact on one or more Officers'
Certificates of the Issuer. Such Opinion of Counsel shall not be an expense of
the Trustee.
ARTICLE TEN
MISCELLANEOUS
Section 10.01 TIA 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; provided, however, that this Section
10.01 shall not of itself require that this Indenture or the Trustee be
qualified under the TIA or constitute any admission or acknowledgment by any
party hereto that any such qualification is required prior to the time this
Indenture and the Trustee are required by the TIA to be so qualified.
Section 10.02 Notices.
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by telecopier or registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
if to the Company or the Issuer:
c/o Southwest Royalties Holdings, Inc.
Southwest Royalties Building
000 X. Xxx Xxxxxx
Xxxxxxx, Xxxxx 00000-0000
Telecopier Number: (000) 000-0000
Attn: X.X. Xxxxxxx, III
with a copy to:
Xxxxx, Xxxxxxxx, Xxxxxxx & Xxxxxxxx
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
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Chattanooga, TN 37450-1800
Telecopier Number: (000) 000-0000
Attn: X. Xxxxxx Xxxxxx, Jr.
if to the Trustee:
State Street Bank and Trust Company
000 Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Telecopier Number: (000) 000-0000
Attn: Corporate Trust Administration
Ref: Southwest Royalties Indenture 1997
Each of the Company, the Issuer and the Trustee by written notice to
the other may designate additional or different addresses for notices to such
Person. Any notice or communication to the Company, the Issuer or the Trustee
shall be deemed to have been given or made as of the date so delivered if hand
delivered; when receipt is acknowledged, if faxed; and five (5) calendar days
after mailing, if sent by registered or certified mail, postage prepaid (except
that a notice of change of address shall not be deemed to have been given until
actually received by the addressee).
Any notice or communication mailed to a Holder shall be mailed to him
by first class mail or other equivalent means at his address as it appears on
the registration books of the Registrar ten (10) days prior to such mailing and
shall be sufficiently given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
Section 10.03 Communications by Holders with Other Holders.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company,
the Issuer, the Trustee, the Registrar and any other Person shall have the
protection of TIA (S) 312(c).
Section 10.04 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company or the Issuer to the
Trustee to take any action under this Indenture, the Company or the Issuer, as
the case may be, shall furnish to the Trustee:
(1) an Officers' Certificate, in form and substance satisfactory to
the Trustee, stating that, in the opinion of the signers, all conditions
precedent to be performed by the Company or the Issuer, as the case may be,
provided for in this Indenture relating to the proposed action have been
complied with; and
(2) an Opinion of Counsel, in form and substance satisfactory to the
Trustee, stating that, in the opinion of such counsel, all such conditions
precedent to be performed by the Company or the Issuer, as the case may be,
provided for in this Indenture relating to the
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proposed action have been complied with (which counsel, as to factual
matters, may rely on an Officers' Certificate).
Section 10.05 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.06, shall include:
(1) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is reasonably necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether or not, in the opinion of each such
Person, such condition or covenant has been complied with.
Section 10.06 Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules in accordance with the Trustee's
customary practices for action by or at a meeting of Holders. The Paying Agent
or Registrar may make reasonable rules for its functions.
Section 10.07 Legal Holidays.
A "Legal Holiday" used with respect to a particular place of payment
is a Saturday, a Sunday or a day on which banking institutions in New York, New
York, Hartford, Connecticut, or at such place of payment are not required to be
open. If a payment date is a Legal Holiday at such place, payment may be made
at such place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period.
Section 10.08 Governing Law.
THIS INDENTURE, THE GUARANTEES AND THE NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK. Each of the parties
hereto agrees to submit to the non-exclusive jurisdiction of the competent
courts of the State of New York sitting in the City of New York or the Untied
States District Court for the Southern District of New York, in any action or
proceeding arising out of or relating to this Indenture or the Notes. The
Company and the Issuer each hereby irrevocably designates CT Corporation System,
located at 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as its designee, appointee
and agent to receive, for and on its behalf, service of process in the State of
New York in any legal action or proceeding with respect to this Indenture, the
Notes,
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the Parent Guarantee or the Security Documents to which either is a party. It is
understood that a copy of such process served on such agent will be promptly
forwarded by overnight courier to the Company and/or the Issuer, as the case may
be, at its respective address set forth opposite its signature below, but the
failure of such party, as the case may be, to receive such copy shall not affect
in any way the service of such process. The Company and the Issuer further
irrevocably consent to the service of process of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to it, as the case may be, at its
said address, such service to become effective 30 days after such mailing.
Nothing herein shall affect the right of the Trustee or any Holder of a Note to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Company or the Issuer in any other
jurisdiction.
Section 10.09 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any of its Subsidiaries, including the Issuer.
Any such indenture, loan or debt agreement may not be used to interpret this
Indenture.
Section 10.10 No Personal Liability.
No director, officer, employee or stockholder, as such, of the
Company, the Issuer or any other Subsidiary of the Company, shall have any
liability for any obligations of the Company, the Issuer or any Subsidiary
Guarantor under the Notes, the Parent Guarantee, any Subsidiary Guarantee, this
Indenture, the Security Documents or the Registration Rights Agreement or for
any claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
Section 10.11 Successors.
All agreements of the Company, the Issuer and any Subsidiary
Guarantor in this Indenture or the Notes or under any Guarantee, as the case may
be, shall bind its successors. All agreements of the Trustee in this Indenture
shall bind its successors.
Section 10.12 Duplicate Originals.
All parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together shall represent the
same agreement.
Section 10.13 Severability.
In case any one or more of the provisions in this Indenture or in the
Notes shall be held invalid, illegal or unenforceable, in any respect for any
reason, the validity, legality and enforceability of any such provision in every
other respect and of the remaining provisions shall not in any way be affected
or impaired thereby, it being intended that all of the provisions hereof shall
be enforceable to the full extent permitted by law.
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Section 10.14 Independence of Covenants.
All covenants and agreements in this Indenture and the Notes shall be
given independent effect so that if any particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or otherwise be within the limitations of, another covenant shall
not avoid the occurrence of a Default or an Event of Default if such action is
taken or condition exists.
ARTICLE ELEVEN
SECURITY
Section 11.01 Grant of Security Interest.
In order to secure the obligations of the Company under the Parent
Guarantee, the Company hereby covenants to execute and deliver the Pledge
Agreement concurrently with this Indenture. The Pledge Agreement shall grant to
the Trustee a security interest in the shares of Sierra and Red Oak directly
owned by the Company and the other collateral therein described (collectively
referred to herein as the "Collateral") and when executed and delivered shall be
deemed hereby incorporated by reference herein to the same extent and as fully
as if set forth in their entirety at this place, and reference is made hereby to
the Pledge Agreement for a more complete description of the terms and provisions
thereof. Each Holder, by accepting a Note, agrees to all of the terms and
provisions of the Pledge Agreement and the Trustee agrees to all of the terms
and provisions of the Pledge Agreement.
Section 11.02 Recording and Opinions.
(a) The Company shall take or cause to be taken all action required to
perfect, maintain, preserve and protect the Lien in the Collateral granted by
the Security Documents, including, without limitation, the filing of financing
statements, continuation statements and any instruments of further assurance, in
such manner and in such places as may be required by law fully to preserve and
protect the rights of the Holders and the Trustee under this Indenture and the
Security Documents to all property comprising the Collateral. The Company shall
from time to time promptly pay all financing and continuation statement
recording and/or filing fees, charges and taxes relating to this Indenture, the
Security Documents, any amendments thereto and any other instruments of further
assurance required pursuant to the Security Documents.
(b) The Company or the Issuer shall furnish to the Trustee, at closing
and at such other time as required by (S) 314(b) of the TIA, Opinion(s) of
Counsel either (a) substantially to the effect that, in the opinion of such
counsel, this Indenture and the grant of a Lien in the Collateral intended to be
made by the Security Documents and all other instruments of further assurance,
including, without limitation, financing statements, have been properly recorded
and filed to the extent necessary to perfect the Lien in the Collateral created
by the Security Documents and reciting the details of such action, and stating
that as to the Lien created pursuant to the Security Documents, such recordings
and filings are the only recordings and filings necessary to give notice thereof
and that no re-recordings or refilings are necessary to maintain such notice
(other than as stated in such opinion), or (b) to the effect that, in the
opinion of such counsel, no such action is necessary to perfect such Lien.
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(c) To the extent required by the TIA, the Company shall furnish to
the Trustee on September 1 in each year, beginning with 1999, an Opinion of
Counsel, dated as of such date, either (i)(A) stating that, in the opinion of
such counsel, action has been taken with respect to the recording, filing, re-
recording and refiling of all supplemental indentures, financing statements,
continuation statements and other documents as is necessary to maintain the Lien
of the Security Documents and reciting with respect to the Lien in the
Collateral the details of such action or referring to prior Opinions of Counsel
in which such details are given, and (B) stating that, based on relevant laws as
in effect on the date of such Opinion of Counsel, all financing statements,
continuation statements and other documents have been executed and filed that
are necessary as of such date and during the succeeding 24 months fully to
maintain the Lien of the Holders and the Trustee hereunder and under the
Security Documents with respect to the Collateral, or (ii) stating that, in the
opinion of such counsel, no such action is necessary to maintain such Lien.
Section 11.03 Release of Collateral.
(a) The Trustee, in its capacity as secured party under the Security
Documents, shall not at any time release Collateral from the Lien created by
this Indenture and the Security Documents unless such release is in accordance
with the provisions of this Indenture and the Security Documents.
(b) At any time when an Event of Default shall have occurred and be
continuing, no release of Collateral pursuant to the provisions of this
Indenture and the Security Documents shall be effective as against the Holders
of the Notes.
(c) The release of any Collateral from the terms of the Security
Documents shall not be deemed to impair the security under this Indenture in
contravention of the provisions hereof if and to the extent the Collateral is
released pursuant to this Indenture and the Security Documents. To the extent
applicable, the Company shall cause TIA (S) 314(d) relating to the release of
property from the Lien of the Security Documents and relating to the
substitution therefor of any property to be subjected to the Lien of the
Security Documents to be complied with. Any certificate or opinion required by
XXX (S) 314(d) may be made by an Officer of the Company, except in cases where
XXX (S) 314(d) requires that such certificate or opinion be made by an
independent Person, which Person shall be an independent engineer, appraiser or
other expert selected or approved by the Trustee in the exercise of reasonable
care. A Person is "independent" if such Person (a) is in fact independent, (b)
does not have any direct financial interest or any material indirect financial
interest in the Company, the Issuer or in any Affiliate of the Company and (c)
is not an officer, employee, promoter, underwriter, trustee, partner or director
or person performing similar functions to any of the foregoing for either the
Company or the Issuer. The Trustee shall be entitled to receive and rely upon a
certificate provided by any such Person confirming that such Person is
independent within the foregoing definition.
Section 11.04 Specified Releases of Collateral.
(a) The Company shall be entitled to obtain a full release of all of
the Collateral from the Lien of this Indenture and of the Security Documents
upon compliance with the conditions precedent set forth in Section 8.01 for
satisfaction and discharge of this Indenture or for Legal Defeasance pursuant to
Section 8.01. Upon delivery by the Company to the Trustee of an Officers'
Certificate and an Opinion of Counsel, each to the effect that such conditions
precedent have been complied with (and which may be the same Officers'
Certificate and Opinion of Counsel required
71
by Article Eight), the Trustee shall forthwith take all necessary action (at the
request of and the expense of the Company) to release and reconvey to the
Company all of the Collateral, and shall deliver such Collateral in its
possession to the Company, including, without limitation, the execution and
delivery of releases and satisfactions wherever required.
(b) In the event of an Equity Offering involving the sale of any of
the Capital Stock of either Red Oak or Sierra directly owned by the Company
("Transferred Collateral"), which sale is in accordance with all applicable
provisions of this Indenture, the Company shall be entitled to obtain a full
release of all of the Transferred Collateral from the Lien of this Indenture and
the Security Documents. Upon delivery by the Company to the Trustee of an
Officers' Certificate and an Opinion of Counsel, each to the effect that such
provisions of this Indenture have been complied with, the Trustee shall
forthwith take all necessary action (at the request and expense of the Issuer)
to release and reconvey to the Company or its designee all of the Transferred
Collateral, and shall deliver such Transferred Collateral in its possession to
the Company or its designee, including, without limitation, the execution and
delivery of releases and satisfactions wherever required.
(c) The Company shall be entitled to obtain a release of, and the
Trustee shall release, all other items of Collateral (the "Released Interests")
upon compliance with the condition precedent that the Company shall have
satisfied all applicable conditions precedent to any such release set forth in
the applicable Security Documents and shall have delivered to the Trustee the
following:
(i) An Officers' Certificate certifying that such release
complies with the terms and conditions of the applicable Security
Documents; and
(ii) All certificates, opinions and other documentation required
by the TIA or this Indenture, if any.
Upon compliance by the Company with the conditions precedent set forth
above, the Trustee shall cause to be released and reconveyed to the Company the
Released Interests.
Section 11.05 Form and Sufficiency of Release.
In the event that any Person has sold, exchanged, or otherwise
disposed of or proposes to sell, exchange or otherwise dispose of any portion of
the Collateral that may be sold, exchanged or otherwise disposed of, and the
Company requests the Trustee to furnish a written disclaimer, release or quit-
claim of any interest in such property under this Indenture and the Security
Documents, the Trustee, in its capacity as secured party under the Security
Documents, shall execute, acknowledge and deliver to the Company (in proper
form) such an instrument promptly after satisfaction of the conditions set forth
herein for delivery of any such release. Notwithstanding the preceding
sentence, all purchasers and grantees of any property or rights purporting to be
released herefrom shall be entitled to rely upon any release executed by the
Trustee hereunder as sufficient for the purpose of this Indenture and as
constituting a good and valid release of the property therein described from the
Lien of this Indenture or of the Security Documents.
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Section 11.06 Purchaser Protected.
No purchaser or grantee of any property or rights purporting to be
released herefrom shall be bound to ascertain the authority of the Trustee to
execute the release or to inquire as to the existence of any conditions herein
prescribed for the exercise of such authority; nor shall any purchaser or
grantee or any property or rights permitted by this Indenture to be sold or
otherwise disposed of by the Company be under any obligation to ascertain or
inquire into the authority of the Issuer to make such sale or other disposition.
Section 11.07 Authorization of Actions to Be Taken by the Trustee Under
the Security Documents.
Subject to the provisions of the applicable Security Document, (a) the
Trustee may, in its sole discretion and without the consent of the Holders, take
all actions it deems necessary or appropriate in order to (i) enforce any of the
terms of the Security Documents and (ii) collect and receive any and all amounts
payable in respect of the Obligations of the Company and/or the Issuer hereunder
and (b) the Trustee shall have power to institute and to maintain such suits and
proceedings as it may deem expedient to prevent any impairment of the Collateral
by any act that may be unlawful or in violation of the Security Documents or
this Indenture, and such suits and proceedings as the Trustee may deem expedient
to preserve or protect its interests and the interests of the Holders in the
Collateral (including the power to institute and maintain suits or proceedings
to restrain the enforcement of or compliance with any legislative or other
governmental enactment, rule or order that may be unconstitutional or otherwise
invalid if the enforcement of, or compliance with, such enactment, rule or order
would impair the security interest thereunder or be prejudicial to the interests
of the Holders or of the Trustee).
Section 11.08 Authorization of Receipt of Funds by the Trustee Under the
Security Documents.
The Trustee is authorized to receive any funds for the benefit of the
Holders distributed under the Security Documents, and to make further
distributions of such funds to the Holders in accordance with the provisions of
Section 6.10 and the other provisions of this Indenture.
ARTICLE TWELVE
GUARANTEES
Section 12.01 Unconditional Guarantees.
(a) The Company hereby unconditionally and irrevocably guarantees, on
a senior basis (such guarantee to be referred to herein as the "Parent
Guarantee") to each Holder of a Note authenticated and delivered by the Trustee
and to the Trustee and its successors and assigns, irrespective of the validity
and enforceability of this Indenture, the Notes or the Obligations of the Issuer
or any Subsidiary Guarantors to the Holders or the Trustee hereunder or
thereunder, that:
(i) the principal of, premium, if any, and interest on the Notes
(and any Additional Interest payable thereon) shall be duly and punctually
paid in full when due, whether at maturity, upon redemption at the option
of Holders pursuant to the provisions of the Notes relating thereto, by
acceleration or otherwise, and interest (to the extent permitted by law) on
the overdue principal, premium, if any, and interest, if any, on the Notes
and all
73
other Obligations of the Issuer to the Holders or the Trustee hereunder
(including amounts due the Trustee under Section 7.07 hereof) and all other
Obligations shall be promptly paid in full or performed, all in accordance
with the terms hereof and thereof; and
(ii) in case of any extension of time of payment or renewal of
any Notes or any of such other Obligations, the same shall be promptly paid
in full when due or performed in accordance with the terms of the extension
or renewal, whether at maturity, by acceleration or otherwise.
Failing payment when due of any amount so guaranteed, or failing performance of
any other Obligation of the Issuer to the Holders under this Indenture or under
the Notes, for whatever reason, the Company shall be obligated to pay, or to
perform or cause the performance of, the same immediately. An Event of Default
under this Indenture or the Notes shall constitute an event of default under
this Parent Guarantee and shall entitle the Holders of Notes to accelerate the
Obligations of the Company in the same manner and to the same extent as the
Obligations of the Issuer.
(b) Subject to the provisions of this Article Twelve, each future
Subsidiary Guarantor, if any, shall, jointly and severally, unconditionally and
irrevocably guarantee, on a senior basis (such guarantee to be referred to
herein as a "Subsidiary Guarantee") to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the Notes or
the Obligations of the Issuer, the Company or any other Subsidiary Guarantors to
the Holders or the Trustee hereunder or thereunder, that:
(i) the principal of, premium, if any, and interest on the Notes
(and any Additional Interest payable thereon) shall be duly and punctually
paid in full when due, whether at maturity, upon redemption at the option
of Holders pursuant to the provisions of the Notes relating thereto, by
acceleration or otherwise, and interest (to the extent permitted by law) on
the overdue principal, premium, if any, and interest, if any, on the Notes
and all other Obligations of the Issuer to the Holders or the Trustee
hereunder (including amounts due the Trustee under Section 7.07 hereof) and
all other Obligations shall be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and
(ii) in case of any extension of time of payment or renewal of
any Notes or any of such other Obligations, the same shall be promptly paid
in full when due or performed in accordance with the terms of the extension
or renewal, whether at maturity, by acceleration or otherwise.
Failing payment when due of any amount so guaranteed, or failing performance of
any other Obligation of the Issuer to the Holders under this Indenture or under
the Notes, for whatever reason, each Subsidiary Guarantor shall be obligated to
pay, or to perform or cause the performance of, the same immediately. An Event
of Default under this Indenture or the Notes shall constitute an event of
default under each such Subsidiary Guarantee, and shall entitle the Holders of
Notes to accelerate the Obligations of the Subsidiary Guarantors in the same
manner and to the same extent as the Obligations of the Issuer.
(c) Each Guarantor agrees that its Obligations under its Guarantee are
and shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this
74
Indenture, the absence of any action to enforce the same, any waiver or consent
by any Holder of the Notes with respect to any provisions thereof, any release
of any other Guarantor, the recovery of any judgment against the Issuer, any
action to enforce the same, whether or not a notation of any Guarantee is
affixed to any particular Note, or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a guarantor. Each
Guarantor waives the benefit of diligence, presentment, demand of payment,
filing of claims with a court in the event of insolvency or bankruptcy of the
Company or the Issuer, any right to require a proceeding first against the
Issuer, protest, notice and all demands whatsoever and covenants that its
Guarantee shall not be discharged except by complete performance of the
Obligations contained in the Notes, this Indenture, the Parent Guarantee and the
Subsidiary Guarantees. Each Guarantee is and shall be a guarantee of payment and
not of collection. If any Holder or the Trustee is required by any court or
otherwise to return to the Issuer or to any Guarantor, or any Custodian acting
in relation to the Issuer or such Guarantor, any amount paid by the Issuer or
such Guarantor to the Trustee or such Holder, the Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and effect. Each
Guarantor further agrees that, as between it, on the one hand, and the Holders
of Notes and the Trustee, on the other hand, (a) subject to this Article Twelve,
the maturity of the Obligations guaranteed may be accelerated as provided in
Article Six hereof for the purposes of its Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
Obligations guaranteed thereby, and (b) in the event of any acceleration of such
Obligations as provided in Article Six hereof, such Obligations (whether or not
due and payable) shall forthwith become due and payable by each Guarantor for
the purpose of its Guarantee.
(d) Subject to the terms of Section 12.05, each Guarantor that makes a
payment or distribution under its Guarantee shall be entitled to a contribution
from each other Guarantor in a pro rata amount, based on the net assets of each
Guarantor, determined in accordance with GAAP.
Section 12.02 Limitations on Subsidiary Guarantees.
The obligations of each Subsidiary Guarantor under its Subsidiary
Guarantee will be limited to the maximum amount which, after giving effect to
all other contingent and fixed liabilities of such Subsidiary Guarantor and
after giving effect to any collections from or payments made by or on behalf of
any other Subsidiary Guarantor in respect of the obligations of such Subsidiary
Guarantor under its Subsidiary Guarantee or pursuant to its contribution
obligations under this Indenture, will result in the obligations of such
Subsidiary Guarantor under the Subsidiary Guarantee not constituting a
fraudulent conveyance or fraudulent transfer under federal or state law.
Section 12.03 Execution and Delivery of Guarantees.
To further evidence each Guarantee referred to in Section 12.01, each
Guarantor agrees that a notation of such Guarantee, substantially in the form of
Exhibit F herein, may be endorsed on each Note authenticated and delivered by
the Trustee. Such notation shall be executed on behalf of each Guarantor by
either manual or facsimile signature of two Officers of each Guarantor, each of
whom, in each case, shall have been duly authorized to so execute by all
requisite corporate action. The validity and enforceability of any Guarantee
shall not be affected by the fact that a notion thereof is not affixed to any
particular Note.
Each Guarantor agrees that its Guarantee set forth in Section 12.01
shall remain in full force and effect notwithstanding any failure to endorse on
each Note a notation of such Guarantee.
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If an Officer of a Guarantor whose signature is on a notation no
longer holds that office at the time the Trustee authenticates the Note on which
such notation is endorsed or at any time thereafter, such Guarantor's Guarantee
of such Note shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the applicable Guarantee set
forth in this Indenture on behalf of each Guarantor.
Section 12.04 Release of a Subsidiary Guarantor.
(a) If no Default exists or would exist under this Indenture, in the
event of (i) the designation of any Subsidiary Guarantor as an Unrestricted
Subsidiary, (ii) a sale or other disposition of all or substantially all of the
properties or assets of any Subsidiary Guarantor to a third party or an
Unrestricted Subsidiary, by way of merger, consolidation or otherwise with or
into any Person in compliance with Article Five (in each case, other than to
Company, the Issuer or a Restricted Subsidiary), or (iii) a sale or other
disposition of all of the Capital Stock of any Subsidiary Guarantor, then such
Subsidiary Guarantor (in the event of such a designation or a sale or other
disposition, by way of such a merger, consolidation or otherwise, or a
disposition of all of the Capital Stock of such Subsidiary Guarantor) or the
Person acquiring such properties or assets (in the event of a sale or other
disposition of all or substantially all of the properties or assets of such
Subsidiary Guarantor) will be released from all Obligations under this Article
Twelve and its Subsidiary Guarantee without any further action required on the
part of the Trustee or any Holder; provided that any Net Cash Proceeds of such
sale or other disposition are applied in accordance with the covenant described
under Section 4.16, and provided, further, however, that any such termination
shall occur only to the extent that all obligations of such Subsidiary Guarantor
under all of its guarantees of, and under all of its pledges of assets or other
security interests that secure, any other Indebtedness of the Company or its
Restricted Subsidiaries shall also terminate upon such release, sale or
disposition. Any Subsidiary Guarantor not so released or the entity surviving
such Subsidiary Guarantor, as applicable, shall remain or be liable under its
Subsidiary Guarantee as provided in this Article Twelve.
(b) The Trustee shall deliver an appropriate instrument evidencing the
release of a Subsidiary Guarantor upon receipt of a request by the Company or
such Subsidiary Guarantor accompanied by an Officers' Certificate and an Opinion
of Counsel certifying as to the compliance with this Section 12.04, provided the
legal counsel delivering such Opinion of Counsel may rely as to matters of fact
on one or more Officers' Certificates of the Company.
Except as set forth in Articles Four and Five and this Section 12.04,
nothing contained in this Indenture or in any of the Notes shall prevent any
consolidation or merger of a Subsidiary Guarantor with or into the Company, the
Issuer or another Subsidiary Guarantor or shall prevent any sale or conveyance
of the property of a Subsidiary Guarantor as an entirety or substantially as an
entirety to the Company, the Issuer or another Subsidiary Guarantor.
Section 12.05 Waiver of Subrogation.
Until this Indenture is discharged and all of the Notes are discharged
and paid in full, each Guarantor irrevocably waives and agrees not to exercise
any claim or other rights which it may hereafter acquire against the Issuer that
arise from the existence, payment, performance or enforcement of the Issuer's
Obligations under the Notes or this Indenture and such Guarantor's
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Obligations under its Guarantee and this Indenture, in any such instance
including, without limitation, any right of subrogation, reimbursement,
exoneration, contribution, indemnification, and any right to participate in any
claim, remedy or right arises in equity, or under contract, statute or common
law, including, without limitation, the right to take or receive from the
Issuer, directly or indirectly, in cash or other property or by set-off or in
any other manner, payment or security on account of such claim or other rights.
If any amount shall be paid to any Guarantor in violation of the preceding
sentence and any amounts owing to the Trustee or the Holders of Notes under the
Notes, this Indenture, or any other document or instrument delivered under or in
connection with such agreements or instruments, shall not have been paid in
full, such amount shall have been deemed to have been paid to such Guarantor for
the benefit of, and held in trust for the benefit of, the Trustee or the Holders
and shall forthwith be paid to the Trustee for the benefit of itself or such
Holders to be credited and applied to the obligations in favor of the Trustee or
the Holders, as the case may be whether matured or unmatured, in accordance with
the terms of this Indenture. Each Guarantor acknowledges that it will receive
direct and indirect benefits from the financing arrangements contemplated by
this Indenture and that the waiver set forth in this Section 12.05 is knowingly
made in contemplation of such benefits.
Section 12.06 Immediate Payment.
Each Guarantor agrees to make immediate payment to the Trustee on
behalf of the Holders of all Obligations owing or payable to the respective
Holders upon receipt of a demand for payment therefor by the Trustee to such
Guarantor in writing.
Section 12.07 No Set-Off.
Each payment to be made by a Guarantor hereunder in respect of the
Obligations shall be payable in the currency or currencies in which such
Obligations are denominated, and shall be made without set-off, counterclaim,
reduction or diminution of any kind or nature.
Section 12.08 Obligations Absolute.
The Obligations of each Guarantor are absolute and unconditional and
any monies or amounts expressed to be owing or payable by each Guarantor which
may not be recoverable from such Guarantor on the basis of a Guarantee shall be
recoverable from such Guarantor as a primary obligor and principal debtor in
respect thereof.
Section 12.09 Obligations Continuing.
The Obligations of each Guarantor are and shall be continuing and
shall remain in full force and effect until all the Obligations have been paid
and satisfied in full or until earlier released in accordance with Section
12.04. Each Guarantor agrees with the Trustee that it will from time to time
deliver to the Trustee suitable acknowledgments of this continued liability
hereunder and under any other instrument or instruments in such form as counsel
to the Trustee may advise and as will prevent any action brought against it in
respect of any default hereunder being barred by an statute of limitations now
or hereafter in force and, in the event of the failure of a Guarantor so to do,
it hereby irrevocably appoints the Trustee the attorney and agent of such
Guarantor to make, execute and deliver such written acknowledgment or
acknowledgments or other instruments as may from time to time become necessary
or advisable, in the judgment of the Trustee on the advice of counsel, to fully
maintain and keep in force the liability of such Guarantor under its Guarantee.
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Section 12.10 Obligations Not Reduced.
The Obligations of each Guarantor shall not be satisfied, reduced or
discharged solely by the payment of such principal, premium, if any, interest,
fees and other monies or amounts as may at any time prior to discharge of this
Indenture pursuant to Article Eight be or become owing or payable under or by
virtue of or otherwise in connection with the Notes or this Indenture.
Section 12.11 Obligations Reinstated.
The Obligations of each Guarantor shall continue to be effective or
shall be reinstated, as the case may be, if at any time any payment which would
otherwise have reduced the Obligations of any Guarantor (whether such payment
shall have been made by or on behalf of the Issuer or by or on behalf of a
Guarantor) is rescinded or reclaimed from any of the Holders upon the
insolvency, bankruptcy, liquidation or reorganization of the Company, the Issuer
or any Subsidiary Guarantor or otherwise, all as though such payment had not
been made. If demand for, or acceleration of the time for, payment by the
Issuer is stayed upon the insolvency, bankruptcy, liquidation or reorganization
of the Issuer, all such indebtedness otherwise subject to demand for payment or
acceleration shall nonetheless by payable by each Guarantor as provided herein.
Section 12.12 Obligations Not Affected.
The Obligations of each Guarantor shall not be affected, impaired or
diminished in any way by any act, omission, matter or thing whatsoever,
occurring before, upon or after any demand for payment (and whether or not known
or consented to by any Guarantor or any of the Holders) which, but for this
provision, might constitute a whole or partial defense to a claim against any
Guarantor under its Guarantee or might operate to release or otherwise exonerate
any Guarantor from any of its Obligations or otherwise affect such Obligations,
whether occasioned by default of any of the Holders or otherwise, including,
without limitation:
(a) any limitation of status or power, disability, incapacity or other
circumstance relating to the Issuer or any other Person, including any
insolvency, bankruptcy, liquidation, reorganization, readjustment, composition,
dissolution, winding-up or other proceeding involving or affecting either Issuer
or any other person;
(b) any irregularity, defect, unenforceability or invalidity in
respect of any indebtedness or other Obligation of the Issuer or any other
Person under this Indenture, the Notes or any other document or instrument;
(c) any failure of the Issuer, whether or not without fault on its
part, to perform or comply with any of the provisions of this Indenture or the
Notes, or to give notice thereof to a Guarantor;
(d) the taking or enforcing or exercising or the refusal or neglect to
take or enforce or exercise any right or remedy from or against the Issuer or
any other Person or their respective assets or the release or discharge of any
such right or remedy;
(e) the granting of time, renewals, extensions, compromises,
concessions, waivers, releases, discharges and other indulgences to the Issuer
or any other Person;
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(f) any change in the time, manner or place of payment of, or in any
other term of, any of the Notes, or any other amendment, variation, supplement,
replacement or waiver of, or any consent to departure from, any of the Notes or
this Indenture, including, without limitation, any increase or decrease in the
principal amount of or premium, if any, or interest on any of the Notes;
(g) any change in the ownership, control, name, objects, businesses,
assets, capital structure or constitution of the Issuer or a Guarantor;
(h) any merger or amalgamation of the Issuer or a Guarantor with any
Person or Persons;
(i) the occurrence of any change in the laws, rules, regulations or
ordinances of any jurisdiction by an present or future action of any
governmental authority or court amending, varying, reducing or otherwise
affecting, or purporting to amend, vary, reduce or otherwise affect, any of the
Obligations of the Issuer under this Indenture or the Notes or the Obligations
of a Guarantor under its Guarantee, and
(j) any other circumstance, including release of any Subsidiary
Guarantor pursuant to Section 12.04 (other than by complete, irrevocable
payment) that might otherwise constitute a legal or equitable discharge or
defense of the Issuer under this Indenture or the Notes or of a Guarantor in
respect of its Guarantee.
Section 12.13 Waiver.
Without in any way limiting the provisions of Section 12.01 hereof,
each Guarantor waives notice of acceptance hereof, notice of any liability of
any Guarantor under its Guarantee, notice or proof of reliance by the Holders
upon the Obligations of any Guarantor, and diligence, presentment, demand for
payment on the Issuer, protest, notice of dishonor or non-payment of any of the
Issuer's Obligations under this Indenture or the Notes, or other notice or
formalities to the Issuer or any Guarantor of any kind whatsoever.
Section 12.14 No Obligation to Take Action Against the Issuer.
Neither the Trustee nor any other Person shall have any obligation to
enforce or exhaust any rights or remedies or to take any other steps under any
security for the Issuer's Obligations under this Indenture or the Notes, or
against the Issuer or any other Person or any property of the Issuer or any
other Person before the Trustee is entitled to demand payment and performance by
any or all Guarantors of their liabilities and obligations under their
Guarantees or under this Indenture.
Section 12.15 Dealing with the Issuer and Others.
The Holders, without releasing, discharging, limiting or otherwise
affecting in whole or in part the obligations and liabilities of any Guarantor
hereunder and without the consent of or notice to any Guarantor, may
(a) grant time, renewals, extensions, compromises, concessions,
waivers, releases, discharges and other indulgences to the Issuer or any other
Person;
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(b) take or abstain from taking security or collateral from the Issuer
or from perfecting security or collateral of the Company;
(c) release, discharge, compromise, realize, enforce or otherwise deal
with or do any act or thing in respect of (with or without consideration) any
and all collateral, mortgages or other security given by the Issuer or any third
party with respect to the Issuer's Obligations under, or matters contemplated
by, this Indenture or the Notes;
(d) accept compromises or arrangements from the Issuer;
(e) apply all monies at any time received from the Issuer or from any
security upon such part of the Issuer's Obligations under this Indenture or the
Notes as the Holders may see fit or change any such application in whole or in
part from time to time as the Holders may see fit; and
(f) otherwise deal with, or waive or modify their right to deal with,
the Issuer and all other Persons and any security as the Holders or the Trustee
may see fit.
Section 12.16 Default and Enforcement.
If any Guarantor fails to pay in accordance with Section 12.06 hereof,
the Trustee may proceed in its name as trustee hereunder in the enforcement of
its Guarantee and such Guarantor's Obligations thereunder and hereunder by any
remedy provided by law, whether by legal proceedings or otherwise, and to
recover from such Guarantor the Issuer's Obligations under this Indenture and
the Notes.
Section 12.17 Amendment, Etc.
No amendment, modification or waiver of any provision of this
Indenture relating to any Guarantor or consent to any departure by any Guarantor
or any other Persons from any such provision will in any event be effective
unless it is signed by such Guarantor and the Trustee.
Section 12.18 Acknowledgment.
Each Guarantor acknowledges communication of the terms of this
Indenture and the Notes and consents to and approves of the same.
Section 12.19 Costs and Expenses.
Each Guarantor agrees to pay on demand by the Trustee any and all
costs, fees and expenses (including, without limitation, legal fees on a
solicitor and client basis) incurred by the Trustee, its agents, advisors and
counsel or any of the Holders in enforcing any of their rights under any
Guarantee.
Section 12.20 No Merger or Waiver; Cumulative Remedies.
No Guarantee shall operate by way of merger of any of the obligations
of a Guarantor under any other agreement, including, without limitation, this
Indenture. No failure to exercise and no delay in exercising, on the part of
the Trustee or the Holders, any right, remedy, power or
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privilege hereunder or under the Notes, shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder or under this Indenture or the Notes preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges in each Guarantee and under this
Indenture, the Notes and any other document or instrument between a Guarantor
and/or the Issuer and the Trustee are cumulative and not exclusive of any
rights, remedies, powers and privilege provided by law.
Section 12.21 Survival of Obligations.
Without prejudice to the survival of any of the other obligations of
each Guarantor, the obligations of each Guarantor under Section 12.01 shall
survive the payment in full of the Issuer's Obligations under this Indenture and
the Notes and shall be enforceable against such Guarantor without regard to and
without giving effect to any defense, right of offset or counterclaim available
to or which may be asserted by the Issuer or any Guarantor.
Section 12.22 Guarantee in Addition to Other Obligations.
The obligations of each Guarantor under its Guarantee and this
Indenture are in addition to and not in substitution for any other obligations
to the Trustee or to any of the Holders in relation to this Indenture or the
Notes and any other guarantees or security at any time held by or for the
benefit of any of them.
Section 12.23 Severability.
Any provision of this Article Twelve which is prohibited or
unenforceable in any jurisdiction shall not invalidate the remaining provisions
and any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any jurisdiction unless its
removal would substantially defeat the basic intent, spirit and purpose of this
Indenture and this Article Twelve.
Section 12.24 Successors and Assigns.
Each Guarantee shall be binding upon and inure to the benefit of each
Guarantor and the Trustee and the Holders and their respective successors and
permitted assigns, except that no Guarantor may assign any of its obligations
hereunder or thereunder except as expressly permitted by the terms of this
Indenture.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
SOUTHWEST ROYALTIES HOLDINGS, INC.
By:
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Name:
Title:
SOUTHWEST ROYALTIES, INC.
By:
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Name:
Title:
STATE STREET BANK AND TRUST COMPANY
By:
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Name:
Title:
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