SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- -------
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 1-8094
SEAGULL ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 74-1764876
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1001 FANNIN, SUITE 1700, HOUSTON, TEXAS 77002-6714 (Address of
principal executive offices) (Zip code)
(713) 951-4700
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X. No___.
As of May 11, 1998, 63,030,308 shares of Common Stock, par value $0.10 per
share, were outstanding.
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
INDEX
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Consolidated Financial Statements
<S> <C> <C>
Consolidated Statements of Operations for the Three Months
Ended March 31, 1998 and 1997................................................................. 3
Consolidated Statements of Comprehensive Income
for the Three Months Ended March 31, 1998 and 1997 ........................................... 4
Consolidated Balance Sheets - March 31, 1998 and December 31, 1997............................ 5
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1998 and 1997................................................................. 6
Notes to Consolidated Financial Statements.................................................... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................................................... 11
PART II. OTHER INFORMATION..................................................................................... 16
SIGNATURES...................................................................................................... 17
</TABLE>
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<PAGE>
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------------------------
1998 1997
----------------------- ----------------------
<S> <C> <C>
Revenues:
Oil and gas operations............................................ $ 90,449 $ 125,004
Alaska transmission and distribution.............................. 31,876 34,569
----------------------- ----------------------
122,325 159,573
Costs of Operations:
Operations and maintenance........................................ 39,880 42,871
Alaska transmission and distribution cost of gas sold............. 14,763 16,722
Exploration charges............................................... 10,118 8,953
Depreciation, depletion and amortization.......................... 39,979 42,111
General and administrative........................................ 3,384 2,310
----------------------- ----------------------
108,124 112,967
----------------------- ----------------------
Operating Profit..................................................... 14,201 46,606
Other (Income) Expense:
Interest expense.................................................. 8,547 10,410
Interest income and other......................................... (532) (698)
----------------------- ----------------------
8,015 9,712
----------------------- ----------------------
Income Before Income Taxes........................................... 6,186 36,894
Income Tax Expense................................................... 3,031 19,640
----------------------- ----------------------
Net Income........................................................... $ 3,155 $ 17,254
======================= ======================
Earnings Per Common Share:
Basic............................................................. $ 0.05 $ 0.27
======================= ======================
Diluted........................................................... $ 0.05 $ 0.27
======================= ======================
Weighted Average Number of Common
Shares Outstanding:
Basic............................................................. 63,022 62,784
======================= ======================
Diluted........................................................... 63,480 63,631
======================= ======================
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
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<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------------------------
1998 1997
----------------------- ----------------------
<S> <C> <C>
Net income........................................................... $ 3,155 $ 17,254
Other comprehensive income, net of tax:
Foreign currency translation adjustment........................... - (1,196)
----------------------- ----------------------
Comprehensive income................................................. $ 3,155 $ 16,058
======================= ======================
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
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<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands Except Share and Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
MARCH 31, December 31,
1998 1997
--------------------- ---------------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents............................................... $ 17,729 $ 45,654
Accounts receivable, net................................................ 132,319 147,442
Inventories............................................................. 14,345 13,635
Prepaid expenses and other.............................................. 15,361 16,240
--------------------- ---------------------
Total Current Assets.................................................. 179,754 222,971
Property, Plant and Equipment (successful efforts method)................. 2,107,581 2,053,683
Accumulated Depreciation, Depletion and Amortization...................... 947,956 908,849
--------------------- ---------------------
1,159,625 1,144,834
Other Assets.............................................................. 42,146 43,261
--------------------- ---------------------
Total Assets.............................................................. $ 1,381,525 $ 1,411,066
===================== =====================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Accounts and note payable............................................... $ 141,710 $ 159,138
Accrued expenses........................................................ 34,745 47,625
Current maturities of long-term debt.................................... 7,193 7,097
--------------------- ---------------------
Total Current Liabilities............................................. 183,648 213,860
Long-Term Debt............................................................ 469,016 469,017
Other Noncurrent Liabilities.............................................. 49,800 51,168
Deferred Income Taxes..................................................... 12,495 14,126
Redeemable Bearer Shares.................................................. 15,635 15,691
Commitments and Contingencies............................................. - -
Shareholders' Equity:
Common Stock, $.10 par value; authorized 100,000,000 shares;
issued 63,910,150 shares (1998) and 63,877,442 (1997)................ 6,391 6,388
Additional paid-in capital.............................................. 494,475 493,829
Retained earnings....................................................... 168,090 164,935
Less: note receivable from employee stock ownership plan............... (3,067) (2,990)
Less: treasury stock - 861,314 shares................................. (14,958) (14,958)
--------------------- ---------------------
Total Shareholders' Equity.............................................. 650,931 647,204
--------------------- ---------------------
Total Liabilities and Shareholders' Equity................................. $ 1,381,525 $ 1,411,066
===================== =====================
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
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<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------------------
1998 1997
------------------- -------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income............................................................... $ 3,155 $ 17,254
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization............................... 39,979 42,111
Amortization of deferred financing costs............................... 495 606
Deferred income taxes.................................................. (1,708) 12,494
Dry hole expense....................................................... 2,972 270
Other.................................................................. 167 378
------------------- -------------------
45,060 73,113
Changes in operating assets and liabilities, net of acquisitions:
Decrease in accounts receivable...................................... 14,897 57,137
Decrease (increase) in inventories, prepaid expenses and other....... 1,015 (10,925)
Decrease in accounts payable......................................... (14,928) (25,338)
Decrease in accrued expenses and other............................... (13,041) (20,472)
------------------- -------------------
Net Cash Provided By Operating Activities................................ 33,003 73,515
INVESTING ACTIVITIES:
Capital expenditures..................................................... (58,134) (55,427)
Acquisitions, net of cash acquired....................................... (377) (101)
Proceeds from sales of property, plant and equipment..................... 224 645
------------------- -------------------
Net Cash Used In Investing Activities.................................... (58,287) (54,883)
FINANCING ACTIVITIES:
Proceeds from debt....................................................... 41,095 166,252
Principal payments on debt .............................................. (43,560) (174,147)
Proceeds from sales of common stock...................................... 497 2,171
Other.................................................................... (673) (855)
------------------- -------------------
Net Cash Used In Financing Activities.................................... (2,641) (6,579)
Effect of exchange rate changes on cash.................................... - (54)
------------------- -------------------
Increase (Decrease) In Cash And Cash Equivalents......................... (27,925) 11,999
Cash And Cash Equivalents At Beginning Of Period........................... 45,654 15,284
------------------- -------------------
Cash And Cash Equivalents At End Of Period................................. $ 17,729 $ 27,283
=================== ===================
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
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<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. PRESENTATION OF FINANCIAL INFORMATION
In the opinion of management, the unaudited consolidated financial
statements presented herein contain all adjustments necessary to present fairly
the financial position of Seagull Energy Corporation and Subsidiaries (the
"Company" or "Seagull") as of March 31, 1998, and the results of its operations,
comprehensive income and cash flows for the three months ended March 31, 1998
and 1997. All adjustments made are of a normal, recurring nature. The results of
operations for the three months ended March 31, 1998 are not necessarily
indicative of the results to be expected for the full year.
The financial information presented herein should be read in
conjunction with the consolidated financial statements and notes included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.
Comprehensive Income -- Effective January 1, 1998, the Company adopted
Financial Accounting Standards Board ("FASB") Statement of Financial Accounting
Standard ("SFAS") No. 130, "Reporting Comprehensive Income." This statement
established standards for reporting and display of comprehensive income and its
components in the Company's financial statements. Comprehensive income includes
all changes in the Company's equity except those resulting from investments by
and distributions to owners.
Earnings Per Share -- The following table provides a reconciliation
between basic and diluted earnings (loss) per share (stated in thousands except
per share data):
<TABLE>
<CAPTION>
Weighted Average Earnings
Common Shares Per-Share
Net Income Outstanding Amount
------------------------ ------------------------ -----------
<S> <C> <C> <C>
QUARTER ENDED MARCH 31, 1998:
BASIC..................................... $ 3,155 63,022 $ 0.05
EFFECT OF DILUTIVE STOCK OPTIONS.......... - 458
------------------------ ------------------------
DILUTED................................... $ 3,155 63,480 $ 0.05
======================== ========================
Quarter Ended March 31, 1997:
Basic..................................... $ 17,254 62,784 $ 0.27
Effect of dilutive stock options.......... - 847
------------------------ ------------------------
Diluted................................... $ 17,254 63,631 $ 0.27
======================== ========================
</TABLE>
Weighted average options to purchase 2,460,524 and 1,750,144 shares of
common stock at $17.94 to $26.38 per share were outstanding during 1998 and
1997, respectively, but were not included in the computation of diluted earnings
per share because the options' exercise prices were greater than the average
market price of the common shares. These options expire at various dates from
2003 to 2008.
-7-
<PAGE>
SEAGULL ENERGY CORORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Derivative Financial Instruments -- The Company enters into a variety
of commodity derivative financial instruments (futures contracts, price swaps
and options) only for non-trading purposes as a hedging strategy to manage
commodity prices associated with oil and gas sales and to reduce the impact of
price fluctuations. To qualify as hedges, these instruments must highly
correlate to anticipated future production such that the Company's exposure to
the effects of price changes is reduced. The Company uses the hedge or deferral
method of accounting for these instruments and, as a result, gains and losses on
commodity derivative financial instruments are generally offset by similar
changes in the realized prices of the commodities. Income and costs related to
these hedging activities are recognized in oil and gas revenues when the
commodities are produced. Income and costs on commodity derivative financial
instruments that are closed before the hedged production occurs are also
deferred until the production month originally hedged. In the event of a loss of
correlation between changes in oil and gas reference prices under a commodity
derivative financial instrument and actual oil and gas prices, income or costs
are recognized currently to the extent the financial instrument has not offset
changes in actual oil and gas prices. Any realized income and costs that are
deferred at the balance sheet date and any margin accounts for futures contracts
are included as net current assets. While commodity derivative financial
instruments are intended to reduce the Company's exposure to declines in the
market price of oil and natural gas, the commodity derivative financial
instruments may also limit the Company's gain from increases in those market
prices.
The Company recorded $0.2 million and $8 million for the quarter ended
March 31, 1998 and 1997, respectively, in costs related to equity hedging
activities, including costs related to the monetary production payment hedges of
approximately $0.2 million and $1 million in 1998 and 1997, respectively. By the
end of the first quarter of 1997, the Company's equity hedging activities had
been substantially reduced, leaving primarily the commodity hedges in place as
required by the monetary production payment (related to the 1995 sale of the
Company's Section 29 tax credit-bearing properties) for approximately 11 MMcf
per day through December 1998. The Company also recorded $0.5 million and $0.3
million in hedging costs for 1998 and 1997, respectively, related to third-party
marketing activities. At March 31, 1998, the Company had open natural gas
futures, swaps and option contracts related to its third-party marketing efforts
totaling 14 Bcf related to purchases and 22 Bcf related to sales for the period
from April 1998 through July 1999. At March 31, 1998, the fair value related to
the Company's commodity hedging activities was $0.5 million of costs related to
open contracts.
Accounting Pronouncements -- In June 1997, the FASB issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." This
statement establishes standards for reporting information about operating
segments in annual financial statements and requires selected information about
operating segments be included in interim reports issued to shareholders. In
February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits." This statement establishes
standards for disclosure for pensions and other postretirement benefits in
annual financial statements. These statements are effective for financial
statements for periods beginning after December 15, 1997. As both SFAS Nos. 131
and 132 establish standards for reporting and display, the Company does not
expect the adoption of these statements to have a material impact on its
financial condition or results of operations.
-8-
<PAGE>
SEAGULL ENERGY CORORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
(Amounts in Thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------------
1998 1997
------------------ -------------------
<S> <C> <C>
Cash paid during the period for:
Interest, net of amount capitalized.......................................... $ 16,571 $ 15,988
Income taxes................................................................. $ 4,841 $ 6,432
</TABLE>
NOTE 3. COMMITMENTS AND CONTINGENCIES
Historically, most computer systems (including microprocessors embedded
into field equipment and other machinery) utilized software that processed
transactions using two digits to represent the year of the transaction (i.e., 97
represents the year 1997). This software (including software built into embedded
microprocessors) requires modification to properly process dates beyond December
31, 1999 (the "Year 2000 Issue"). During 1997, the Company utilized both
internal and external resources to reprogram, or replace, and test software for
necessary modifications identified in its assessment of the Year 2000 Issue. By
December 31, 1997, the Company's Year 2000 remediation was substantially
complete and approximately $300,000 had been expensed related to this assessment
and remediation. The Company presently believes that, as a result of these
efforts, the Year 2000 Issue will not have a material adverse effect
attributable to the Company's systems.
The Company has initiated formal communications with all of its
significant suppliers and large customers to determine the extent to which the
Company is vulnerable to those third parties' potential failure to remediate
their own Year 2000 Issue. However, there can be no guarantee that the systems
of other companies, on which the Company's systems rely, will be timely
converted, or that a failure to convert by another company, or a conversion that
is incompatible with the Company's systems, would not have a material adverse
effect on the Company.
NOTE 4. SUBSEQUENT EVENTS
NorAm Litigation -- In April 1998, Seagull, NorAm Gas Transmission Co.
("NorAm") and Arkansas Western Gas Company ("AWG") signed a final Settlement
Agreement (the "Settlement") with respect to NorAm Gas Transmission Co., et al.
v. Seagull Mid-South Inc. (the "NorAm Litigation"). The case relates to
Seagull's termination of a 1956 gas contract which provided for the sale of gas
by Seagull from certain wells in the Aetna Field in Arkansas for approximately
$0.16 per Mcf. NorAm and AWG sought a declaratory judgment that the gas contract
remain in effect with respect to these wells or, in the alternative, that they
receive money damages. NorAm and AWG also sought a declaratory judgment to the
effect that certain additional wells in the Aetna Field (including any new
wells) would be subject to the $0.16 per Mcf price.
The Settlement called for Seagull to make a cash payment and to deliver
gas under a five-year gas sales contract. The Settlement resulted in no further
charges to the Company's income in 1998.
-9-
<PAGE>
SEAGULL ENERGY CORORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Acquisitions -- On March 30, 1998, the Company entered into a Purchase
and Sale Agreement whereby Seagull will purchase the stock of BRG Petroleum,
Inc. ("BRG"), a closely held private company, and the assets of BRG's limited
partnerships and programs (collectively, the "BRG Assets") for $102 million in
cash, subject to final closing adjustments. The Company expects to fund the
acquisition through existing credit facilities. The transaction is expected to
close during the second quarter of 1998.
The BRG Assets include proved oil and gas reserves of 102 billion cubic
feet of natural gas equivalents ("Bcfe"). BRG operates more than 70 percent of
600 currently producing oil and gas wells in approximately 140 fields. Daily
production from the properties net to the combined BRG interests averaged
approximately 18 million cubic feet of gas and 400 barrels of oil and natural
gas liquids in 1997. The most significant of the BRG Assets are concentrated in
East Texas, primarily in Freestone, Upshur, Rusk and Nacogdoches counties.
-10-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
The following discussion is intended to assist in an understanding of
the Company's financial position, results of operations and cash flows for each
of the quarters ended March 31, 1998 and 1997. The Company's accompanying
unaudited consolidated financial statements and the notes thereto and the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997 contain detailed
information that should be referred to in conjunction with the following
discussion.
RESULTS OF OPERATIONS
CONSOLIDATED HIGHLIGHTS
(Amounts in Thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------------------
1998 1997
------------------ ------------------
<S> <C> <C>
Revenues:
Oil and gas operations ..................................................... $ 90,449 $ 125,004
Alaska transmission and distribution........................................ 31,876 34,569
------------------ ------------------
$ 122,325 $ 159,573
================== ==================
Operating profit:
Oil and gas operations ..................................................... $ 8,931 $ 39,079
Alaska transmission and distribution........................................ 9,541 10,466
Corporate................................................................... (4,271) (2,939)
------------------ ------------------
$ 14,201 $ 46,606
================== ==================
Net income.................................................................... $ 3,155 $ 17,254
Net cash provided by operating activities before
changes in operating assets and liabilities................................ $ 45,060 $ 73,113
Net cash provided by operating activities..................................... $ 33,003 $ 73,515
</TABLE>
Revenues decreased $37 million and operating profit declined $32
million from the first quarter of 1997 to the first quarter of 1998 primarily
due to significant decreases in domestic oil and gas prices and decreases in
international oil prices combined with the sale of the Company's Canadian oil
and gas operations. The price decreases were partially offset by higher oil
production from the Company's international operations. Net income decreased
from $17 million for the first quarter of 1997 to $3 million for the same period
in 1998 due to the lower commodity prices discussed above.
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<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
OIL AND GAS OPERATIONS
(Amounts in Thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------------------
1998 1997
------------------- ------------------
<S> <C> <C>
Revenues:
Natural gas................................................................ $ 60,560 $ 85,500
Oil and NGL................................................................ 24,285 30,823
Pipeline and marketing..................................................... 5,604 8,681
------------------- ------------------
90,449 125,004
------------------- ------------------
Production operating expense................................................. 27,444 29,883
Pipeline and marketing expenses.............................................. 6,986 7,691
Exploration charges.......................................................... 10,118 8,953
Depreciation, depletion and amortization..................................... 36,970 39,398
------------------- ------------------
Operating profit........................................................... $ 8,931 $ 39,079
=================== ==================
</TABLE>
The decline in commodity prices was the significant factor in the
decrease in operating profit for the Oil and Gas Operations ("O&G") segment from
$39 million for the first quarter of 1997 to $9 million for the first quarter of
1998. In addition, the first quarter of 1998 reflects the absence of the
Company's Canadian operations which were sold in October 1997. These Canadian
operations contributed approximately $11 million in revenues and $4 million in
operating profit in the first quarter of 1997.
Domestic natural gas prices decreased 18% from $2.60 per Mcf in the
first quarter of 1997 to $2.14 per Mcf for the same period in 1998. This
significant price decrease and a 3% decrease in domestic gas production combined
to create a $15 million decrease in domestic natural gas revenues. Worldwide oil
prices also showed a significant decrease of 34%, from $19.52 per Bbl in 1997's
first quarter to $12.89 per Bbl in 1998. While declining oil prices were the
primary factor for the $7 million decrease in oil revenues, this was partially
offset by a 35% increase in oil production in the U.S. and Egypt as Seagull
realized additional contributions from several new domestic wells and two
Egyptian concessions - Qarun, where additional facilities became operational
during mid 1997, and West Abu Gharadig, which was purchased in late 1997.
The Company recorded $0.2 million and $8 million for the quarter ended
March 31, 1998 and 1997, respectively, in costs related to equity hedging
activities, including costs related to the monetary production payment hedges of
approximately $0.2 million and $1 million in 1998 and 1997, respectively. By the
end of the first quarter of 1997, the Company's equity hedging activities had
been substantially reduced, leaving primarily the commodity hedges in place as
required by the monetary production payment (related to the 1995 sale of the
Company's Section 29 tax credit-bearing properties) for approximately 11 MMcf
per day through December 1998. The Company also recorded $0.5 million and $0.3
million in hedging costs for 1998 and 1997, respectively, related to third-party
marketing activities. At March 31, 1998, the Company had open natural gas
futures, swaps and option contracts
-12-
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
related to its third-party marketing efforts totaling 14 Bcf related to
purchases and 22 Bcf related to sales for the period from April 1998 through
July 1999. At March 31, 1998, the fair value related to the Company's commodity
hedging activities was $0.5 million of costs related to open contracts.
Pipeline and marketing revenues declined $3 million for the first
quarter of 1998 due to a decrease in third party marketing margins and revenues
related to the Company's gas gathering and processing facilities. This decrease
in gas gathering and processing revenues was substantially offset by a decrease
in the related cost of gas.
EXPLORATION AND PRODUCTION OPERATING DATA
(Amounts in thousands except per unit data)
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------------------------------------------------------------------
Net Daily Production Unit Price
1998 1997 1998 1997
---------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Gas Sales (1):
Domestic.............. 292 302 $ 2.14 $ 2.60
Canada (2)............ - 48 - 2.19
Cote d'Ivoire......... 10 5 1.50 1.90
Indonesia............. 12 14 2.81 3.49
---------------- ----------------- ----------------- -----------------
314 369 $ 2.14 $ 2.57
================ ================= ================= =================
Oil and NGL Sales(1):
Domestic.............. 5,054 3,674 $ 13.62 $ 20.75
Canada (2)............ - 877 - 19.56
Egypt................. 10,504 7,861 13.16 19.76
Cote d'Ivoire......... 1,099 1,449 10.31 21.19
Tatarstan............. 3,993 3,413 11.62 16.87
Indonesia............. 276 259 17.79 20.02
Other................. 10 15 12.61 19.40
---------------- ----------------- ----------------- -----------------
20,936 17,548 $ 12.89 $ 19.52
================ ================= ================= =================
(1) Natural gas is stated in MMcf and $ per Mcf. Oil and NGLs are stated in Bbl
and $ per Bbl.
(2) All of the Company's Canadian oil and gas operations were sold in October
1997.
</TABLE>
While production expenses decreased by slightly more than $2 million to
$27 million for the first quarter of 1998, production expenses per equivalent
unit of production improved slightly to $4.16 per Boe in 1998 versus $4.20 per
Boe in 1997. The $2 million decrease is primarily attributable to the absence of
the Company's Canadian operations, partially offset by expenses related to the
increased Egyptian production discussed above.
The decrease in E&P depreciation, depletion and amortization ("DD&A")
expense to $37 million for the first quarter of 1998 from $39 million for the
first quarter of 1997 is primarily due to the sale of
-13-
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
the Company's Canadian operations. The DD&A expense per equivalent unit of
production for oil and gas producing activities remained stable at $5.54 per Boe
for 1998 and $5.48 per Boe for 1997.
ALASKA TRANSMISSION AND DISTRIBUTION
(Amounts in Thousands Except Per Unit Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-------------------------------------------
1998 1997
------------------- -----------------
<S> <C> <C>
Revenues................................................................... $ 31,876 $ 34,569
Cost of gas sold........................................................... 14,763 16,722
------------------- -----------------
Gross margin........................................................... 17,113 17,847
Operations and maintenance expense......................................... 5,450 5,297
Depreciation, depletion and amortization................................... 2,122 2,084
------------------- -----------------
Operating profit....................................................... $ 9,541 $ 10,466
=================== =================
OPERATING DATA:
Degree days (1)........................................................ 3,697 3,720
</TABLE>
(1) A measure of weather severity calculated by subtracting the mean temperature
for each day from 65 degrees Fahrenheit. More degree days equate to colder
weather.
Operating profit of the Alaska Transmission and Distribution segment
for the quarter ended March 31, 1998 decreased $1 million, or approximately 9%,
from that of the prior year quarter, primarily due to decreased volumes. This
decrease in volumes was due to a variety of factors, including a lower number of
degree days.
This segment's business is seasonal with approximately 65%-70% of its
sales made in the first and fourth quarters of each year.
OTHER
General and administrative expenses of $3 million for the 1998 quarter
were greater than 1997's $2 million of G&A expenses primarily due to 1997's
reduction in expenses associated with compensation plans that are tied directly
to the market price of Seagull's common stock as the stock price experienced an
18% decline during the first quarter of 1997. Interest expense decreased almost
$2 million to $9 million in the first quarter of 1998 as a result of lower
average debt balance on the Company's revolving credit facility after the
utilization of the proceeds from the sale of the Canadian operations in late
1997 to pay down existing debt. Income tax expense decreased substantially from
$20 million in 1997 to $3 million in 1998 primarily as a result of the 83%
decrease in income before income taxes.
-14-
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES
(Amounts in Thousands)
Three Months Ended March 31,
------------------------------------------
1998 1997
------------------ -------------------
<S> <C> <C>
Exploration and production:
Leasehold.................................................................. $ 1,608 $ 833
Exploration................................................................ 20,538 21,837
Development................................................................ 32,063 29,771
------------------ -------------------
54,209 52,441
Other oil and gas operations................................................. 556 37
------------------ -------------------
Total oil and gas operations............................................. 54,765 52,478
Alaska transmission and distribution......................................... 1,539 1,405
Corporate ................................................................... 1,830 1,544
------------------ -------------------
$ 58,134 $ 55,427
================== ===================
</TABLE>
Seagull's capital expenditure program is designed to fulfill the
Company's goals of growing its reserve base and production capacity. Capital
expenditures increased by nearly $3 million as expenditures increased related to
the Company's Egyptian operations, partially offset by the sale of the Company's
Canadian operations which had expenditures of $5 million in the first quarter of
1997.
The Company has a revolving credit facility (the "Credit Facility")
with a maximum commitment of $500 million. At March 31, 1998, there were no
amounts borrowed under the Credit Facility and $481 million of the unused
commitment was immediately available.
The Credit Facility contains certain covenants and restrictive
provisions, including limitations on the incurrence of additional debt or liens,
the declaration or payment of dividends and the repurchase or redemption of
capital stock and the maintenance of certain financial ratios. Under the most
restrictive of these provisions, approximately $349 million was available for
payment of cash dividends on common stock or to repurchase common stock as of
March 31, 1998.
On March 30, 1998, the Company entered into a Purchase and Sale
Agreement whereby Seagull will purchase the stock of BRG Petroleum, Inc.
("BRG"), a closely held private company, and the assets of BRG's limited
partnerships and programs (collectively, the "BRG Assets") for $102 million in
cash, subject to final closing adjustments. The Company expects to fund the
acquisition through existing credit facilities. The transaction is expected to
close during the second quarter of 1998.
Management believes that the Company's internally generated funds and
bank borrowing capabilities will be sufficient to finance current and forecasted
operations and the anticipated acquisition of the BRG Assets.
-15-
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
In March 1998, Seagull announced that later in 1998 it may include some
of the less strategic properties located away from its various core assets in a
package of properties to be liquidated.
DEFINED TERMS
Natural gas is stated herein in billion cubic feet ("Bcf"), million
cubic feet ("MMcf") or thousand cubic feet ("Mcf"). Oil, condensate and natural
gas liquids ("NGL") are stated in barrels ("Bbl") or thousand barrels ("MBbl").
MMcfe and Mcfe represent the equivalent of one million and one thousand cubic
feet of natural gas, respectively. Oil, condensate and NGL are converted to gas
at a ratio of one barrel of liquids per six Mcf of gas, based on relative energy
content. MMBoe, MBoe and Boe represent one million barrels, one thousand barrels
and one barrel of oil equivalent, respectively, with six Mcf of gas converted to
one barrel of liquid.
FORWARD LOOKING STATEMENTS
Item 2 of this document includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, as amended. Although Seagull believes that such
forward-looking statements are based upon reasonable assumptions, it can give no
assurance that its expectations will in fact occur. Important factors that could
cause actual results to differ materially from those in the forward-looking
statements include, but are not limited to, the result of the acquisition of the
BRG Assets, political developments in foreign countries, federal and state
regulatory developments, the timing and extent of changes in commodity prices,
the timing and extent of success in discovering, developing and producing or
acquiring oil and gas reserves, the availability of skilled personnel, materials
and equipment, operating hazards attendant to the industry, and conditions of
the capital and equity markets during the periods covered by the forward-looking
statements, as well as the other factors discussed in Seagull's Annual Report on
Form 10-K for the year ended December 31, 1997.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) Exhibits:
<S> <C> <C> <C>
* 4.1 Senior Indenture dated as of July 15, 1993 by and between the Company and The Bank of New York,
as Trustee.
* 4.2 Senior Subordinated Indenture dated as of July 15, 1993 by and between the Company and The Bank
of New York, as Trustee.
*# 10.1 1998 Executive Incentive Plan.
*# 10.2 Employment Agreement dated December 30, 1983 by and between the Company and Barry J. Galt,
Chairman of the Board, President and Chief Executive Officer of the Company.
*# 10.3 Seagull Energy Corporation 1981 Stock Option Plan (Restated).
</TABLE>
-16-
<PAGE>
SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
<TABLE>
<S> <C> <C> <C>
*# 10.4 Seagull Energy Corporation 1983 Stock Option Plan (Restated).
*# 10.5 Seagull Energy Corporation 1986 Stock Option Plan (Restated).
* 10.6 Purchase and Sale Agreement, dated as of March
30, 1998, by and between Seagull Energy Corporation
and The shareholder of BRG Petroleum, Inc.
* 27.1 Financial Data Schedule for 3/31/98.
* 27.2 Restated Financial Data Schedule for 1997 quarterly periods.
* 27.3 Restated Financial Data Schedule for 1996 quarterly periods.
* 27.4 Restated Financial Data Schedule for the years 1996 and 1996.
</TABLE>
(b) There were no reports on Form 8-K filed during the three months ended March
31, 1998.
- ---------------------------
* Filed herewith.
# Identifies management contracts and compensatory plans or arrangements.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEAGULL ENERGY CORPORATION
By: /s/ William L. Transier
William L. Transier
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: May 13, 1998
By: /s/ Gordon L. McConnell
Gordon L. McConnell
Vice President and Controller
(Principal Accounting Officer)
Date: May 13, 1998
-17-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Page
EXHIBIT Number
<S> <C> <C> <C>
* 4.1 Senior Indenture dated as of July 15, 1993 by and between the Company and The
Bank of New York, as Trustee.
* 4.2 Senior Subordinated Indenture dated as of July 15, 1993 by and between the
Company and The Bank of New York, as Trustee.
*# 10.1 1998 Executive Incentive Plan.
*# 10.2 Employment Agreement dated December 30, 1983 by and between the Company and Barry
J. Galt, Chairman of the Board, President and Chief Executive Officer of the
Company.
*# 10.3 Seagull Energy Corporation 1981 Stock Option Plan (Restated).
*# 10.4 Seagull Energy Corporation 1983 Stock Option Plan (Restated).
*# 10.5 Seagull Energy Corporation 1986 Stock Option Plan (Restated).
* 10.6 Purchase and Sale Agreement, dated as of March
30, 1998, by and between Seagull Energy Corporation
and The shareholder of BRG Petroleum, Inc.
* 27.1 Financial Data Schedule for 3/31/98.
* 27.2 Restated Financial Data Schedule for 1997 quarterly periods.
* 27.3 Restated Financial Data Schedule for 1996 quarterly periods.
* 27.4 Restated Financial Data Schedule for the years 1996 and 1996.
- ---------------------------
* Filed herewith.
# Identifies management contracts and compensatory plans or arrangements.
</TABLE>
SEAGULL ENERGY CORPORATION
AND
THE BANK OF NEW YORK
Senior Indenture
Dated as of July 15, 1993
<PAGE>
CROSS REFERENCE SHEET*
Provisions of Trust Indenture Act of 1939 and Indenture to be dated as of
July 15, 1993 between SEAGULL ENERGY CORPORATION and The Bank of New York,
Trustee:
<TABLE>
<CAPTION>
Section of the Act Section of Indenture
<S> <C>
310(a)(1), (2) and (5)............................................................... 6.9
310(a)(3) and (4).................................................................... Inapplicable
310(b)............................................................................... 6.8 and 6.10(a), (b)
and (d)
310(c)............................................................................... Inapplicable
311(a)............................................................................... 6.13(a) and (c)
311(b)............................................................................... 6.13(b) and (c)
311(c)............................................................................... Inapplicable
312(a)............................................................................... 4.1 and 4.2(a)
312(b)............................................................................... 4.2(a) and (b)(i)
and (ii)
312(c)............................................................................... 4.2(c)
313(a)............................................................................... 4.4(a)(i), (ii),
(iii), (iv), (v),
(vi) and (vii)
313(a)(5)............................................................................ Inapplicable
313(b)(1)............................................................................ Inapplicable
313(b)(2)............................................................................ 4.4(b)
313(c)............................................................................... 4.4(c)
313(d)............................................................................... 4.4(d)
314(a)............................................................................... 4.3
314(b)............................................................................... Inapplicable
314(c)(1) and (2).................................................................... 11.5
314(c)(3)............................................................................ Inapplicable
314(d)............................................................................... Inapplicable
314(e)............................................................................... 11.5
314(f)............................................................................... Inapplicable
315(a), (c) and (d).................................................................. 6.1
315(b)............................................................................... 5.8
315(e)............................................................................... 5.9
316(a)(1)............................................................................ 5.7
316(a)(2)............................................................................ Not required
316(a) (last sentence)............................................................... 7.4
316(b)............................................................................... 5.4
317(a)............................................................................... 5.2
317(b)............................................................................... 3.5(a)
318(a)............................................................................... 11.7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE ONE
DEFINITIONS
<S> <C>
Affiliate....................................................................................................... 1
Asset Sale...................................................................................................... 2
Authenticating Agent............................................................................................ 2
Bankruptcy Code................................................................................................. 2
Board of Directors.............................................................................................. 2
Board Resolution................................................................................................ 2
Business Day.................................................................................................... 2
Commission...................................................................................................... 2
Consolidated Net Tangible Assets................................................................................ 2
Corporate Trust Office.......................................................................................... 2
Depositary...................................................................................................... 2
EBITDA.......................................................................................................... 3
EBITDA/Interest Ratio........................................................................................... 3
ENSTAR Alaska................................................................................................... 3
Event of Default................................................................................................ 3
Global Security................................................................................................. 3
Holder.......................................................................................................... 3
Holder of Securities............................................................................................ 3
Securityholder.................................................................................................. 3
Indebtedness.................................................................................................... 3
Indenture....................................................................................................... 4
interest........................................................................................................ 4
Issuer.......................................................................................................... 4
Issuer Order.................................................................................................... 4
Officers' Certificate........................................................................................... 4
Opinion of Counsel.............................................................................................. 4
original issue date............................................................................................. 4
original issue discount......................................................................................... 4
Original Issue Discount Security................................................................................ 5
Outstanding..................................................................................................... 5
Periodic Offering............................................................................................... 5
Person.......................................................................................................... 5
Place of Payment................................................................................................ 5
principal....................................................................................................... 5
principal amount................................................................................................ 6
Principal Property.............................................................................................. 6
record date..................................................................................................... 6
Responsible Officer............................................................................................. 6
Restricted Subsidiary........................................................................................... 6
Sale and Leaseback Transaction.................................................................................. 6
Secured Debt.................................................................................................... 6
Security........................................................................................................ 6
Securities...................................................................................................... 6
Subsidiary...................................................................................................... 6
Trust Indenture Act of 1939..................................................................................... 7
Trustee......................................................................................................... 7
Unrestricted Subsidiary......................................................................................... 7
U.S. Government Obligations..................................................................................... 7
vice president.................................................................................................. 7
Yield to Maturity............................................................................................... 7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE TWO
SECURITIES
<S> <C>
SECTION 2.1 Forms Generally............................................................................... 7
SECTION 2.2 Form of Trustee's Certificate of Authentication............................................... 8
SECTION 2.3 Amount Unlimited, Issuable in Series.......................................................... 8
SECTION 2.4 Authentication and Delivery of Securities..................................................... 10
SECTION 2.5 Execution of Securities....................................................................... 12
SECTION 2.6 Certificate of Authentication................................................................. 12
SECTION 2.7 Denomination and Date of Securities; Payments of Interest..................................... 13
SECTION 2.8 Registration Transfer and Exchange............................................................ 13
SECTION 2.9 Mutilated, Defaced, Destroyed, Lost and Stolen Securities..................................... 15
SECTION 2.10 Cancellation of Securities; Disposition Thereof............................................... 16
SECTION 2.11 Temporary Securities.......................................................................... 16
SECTION 2.12 CUSIP Numbers................................................................................. 16
ARTICLE THREE
COVENANTS OF THE ISSUER
SECTION 3.1 Payment of Principal and Interest............................................................. 16
SECTION 3.2 Offices for Notices and Payments, etc......................................................... 16
SECTION 3.3 No Interest Extension......................................................................... 17
SECTION 3.4 Appointments to Fill Vacancies in Trustee's Office............................................ 17
SECTION 3.5 Provision as to Paying Agent.................................................................. 17
SECTION 3.6 Restriction on Creation of Secured Debt....................................................... 18
SECTION 3.7 Restriction on Sale and Leaseback Transactions................................................ 19
SECTION 3.8 Restriction on Transfer of Principal Property to Unrestricted Subsidiary...................... 20
SECTION 3.9 Restriction on Incurrence of Indebtedness by Restricted Subsidiaries.......................... 20
SECTION 3.10 Limitation on Incurrence of Additional Indebtedness........................................... 21
ARTICLE FOUR
SECURITYHOLDERS LISTS AND REPORTS BY THE
ISSUER AND THE TRUSTEE
SECTION 4.1 Issuer to Furnish Trustee Information as to Names and Addresses of Securityholders............ 21
SECTION 4.2 Preservation and Disclosure of Securityholders Lists.......................................... 21
SECTION 4.3 Reports by the Issuer......................................................................... 22
SECTION 4.4 Reports by the Trustee........................................................................ 23
ARTICLE FIVE
REMEDIES OF THE TRUSTEE AND SECURITY HOLDERS
ON EVENT OF DEFAULT
SECTION 5.1 Events of Default............................................................................. 24
SECTION 5.2 Payment of Securities on Default; Suit Therefor............................................... 26
SECTION 5.3 Application of Moneys Collected by Trustee.................................................... 27
SECTION 5.4 Proceedings by Securityholders................................................................ 28
SECTION 5.5 Proceedings by Trustee........................................................................ 28
SECTION 5.6 Remedies Cumulative and Continuing............................................................ 28
SECTION 5.7 Direction of Proceedings; Waiver of Defaults by Majority of Securityholders................... 29
SECTION 5.8 Notice of Defaults............................................................................ 29
SECTION 5.9 Undertaking to Pay Costs...................................................................... 29
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE SIX
CONCERNING THE TRUSTEE
<S> <C>
SECTION 6.1 Duties and Responsibilities of the Trustee; During Default; Prior to Default.................. 30
SECTION 6.2 Certain Rights of the Trustee................................................................. 30
SECTION 6.3 Trustee Not Responsible for Recitals, Disposition of Securities or Application of
Proceeds Thereof.............................................................................. 31
SECTION 6.4 Trustee and Agents May Hold Securities; Collections, etc...................................... 31
SECTION 6.5 Moneys Held by Trustee........................................................................ 32
SECTION 6.6 Compensation and Indemnification of Trustee and Its Prior Claim............................... 32
SECTION 6.7 Right of Trustee to Rely on Officers' Certificate, etc........................................ 32
SECTION 6.8 Qualification of Trustee; Conflicting Interests............................................... 32
SECTION 6.9 Persons Eligible for Appointment as Trustee................................................... 37
SECTION 6.10 Resignation and Removal; Appointment of Successor Trustee..................................... 37
SECTION 6.11 Acceptance of Appointment by Successor Trustee................................................ 38
SECTION 6.12 Merger, Conversion, Consolidation or Succession to Business of Trustee........................ 39
SECTION 6.13 Preferential Collection of Claims Against the Issuer.......................................... 39
SECTION 6.14 Appointment of Authenticating Agent........................................................... 42
ARTICLE SEVEN
CONCERNING THE SECURITYHOLDERS
SECTION 7.1 Evidence of Action Taken by Securityholders................................................... 43
SECTION 7.2 Proof of Execution of Instruments and of Holding of Securities................................ 43
SECTION 7.3 Holders to be Treated as Owners............................................................... 43
SECTION 7.4 Securities Owned by Issuer Deemed Not Outstanding............................................. 43
SECTION 7.5 Right of Revocation of Action Taken........................................................... 44
SECTION 7.6 Record Date for Consents and Waivers.......................................................... 44
ARTICLE EIGHT
SUPPLEMENTAL INDENTURES
SECTION 8.1 Supplemental Indentures Without Consent of Securityholders.................................... 44
SECTION 8.2 Supplemental Indentures with Consent of Securityholders....................................... 45
SECTION 8.3 Effect of Supplemental Indenture.............................................................. 46
SECTION 8.4 Documents to Be Given to Trustee.............................................................. 47
SECTION 8.5 Notation on Securities in Respect of Supplemental Indentures.................................. 47
ARTICLE NINE
CONSOLIDATION, MERGER, SALE, LEASE, EXCHANGE OR DISPOSITION
SECTION 9.1 Issuer May Consolidate, etc................................................................... 47
SECTION 9.2 Securities to be Secured in Certain Events.................................................... 47
SECTION 9.3 Successor Corporation to be Substituted....................................................... 48
SECTION 9.4 Opinion of Counsel to be Given Trustee........................................................ 48
ARTICLE TEN
SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS
SECTION 10.1 Satisfaction and Discharge of Indenture....................................................... 48
SECTION 10.2 Application by Trustee of Funds Deposited for Payment of Securities........................... 50
SECTION 10.3 Repayment of Moneys Held by Paying Agent...................................................... 51
SECTION 10.4 Return of Moneys Held by Trustee and Paying Agent Unclaimed for Two Years..................... 51
SECTION 10.5 Indemnity for U.S. Government Obligations..................................................... 51
ARTICLE ELEVEN
MISCELLANEOUS PROVISIONS
SECTION 11.1 Partners, Incorporators, Stockholders, Officers and Directors of Issuer Exempt
from Individual Liability.................................................................... 51
SECTION 11.2 Provisions of Indenture for the Sole Benefit of Parties and Holders of Securities............. 51
SECTION 11.3 Successors and Assigns of Issuer Bound by Indenture........................................... 51
SECTION 11.4 Notices and Demands on Issuer, Trustee and Holders of Securities.............................. 51
SECTION 11.5 Officers' Certificates and Opinions of Counsel; Statements to Be Contained Therein............ 52
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 11.6 Payments Due on Saturdays, Sundays and Holidays............................................... 53
SECTION 11.7 Conflict of Any Provision of Indenture with Trust Indenture Act of 1939....................... 53
SECTION 11.8 GOVERNING LAW................................................................................. 53
SECTION 11.9 Counterparts.................................................................................. 53
SECTION 11.10 Effect of Headings............................................................................ 53
ARTICLE TWELVE
REDEMPTION OF SECURITIES AND SINKING FUNDS
SECTION 12.1 Applicability of Article...................................................................... 53
SECTION 12.2 Notice of Redemption; Partial Redemptions..................................................... 53
SECTION 12.3 Payment of Securities Called for Redemption................................................... 54
SECTION 12.4 Exclusion of Certain Securities from Eligibility for Selection for Redemption................. 55
SECTION 12.5 Mandatory and Optional Sinking Funds.......................................................... 55
</TABLE>
<PAGE>
THIS SENIOR INDENTURE, dated as of July 15, 1993 between SEAGULL ENERGY
CORPORATION, a Texas corporation (the "Issuer"), and The Bank of New York, a New
York banking corporation, as trustee (the "Trustee"),
W I T N E S S E T H:
WHEREAS, the Issuer has duly authorized the issuance from time to time of
its unsecured debentures, notes or other evidences of indebtedness to be issued
in one or more series (the "Securities") up to such principal amount or amounts
as may from time to time be authorized in accordance with the terms of this
Indenture;
WHEREAS, the Issuer has duly authorized the execution and delivery of this
Indenture to provide, among other things, for the authentication, delivery and
administration of the Securities; and
WHEREAS, all things necessary to make this Indenture a valid indenture and
agreement according to its terms have been undertaken and completed;
NOW, THEREFORE:
In consideration of the premises and the purchases of the Securities by the
Holders (as hereinafter defined) thereof, the Issuer and the Trustee mutually
covenant and agree for the equal and proportionate benefit of the respective
Holders from time to time of the Securities as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.1 For all purposes of this Indenture and of any indenture
supplemental hereto the following terms shall have the respective meanings
specified in this Section 1.1 (except as otherwise expressly provided or unless
the context otherwise clearly requires). All other terms used in this Indenture
that are defined in the Trust Indenture Act of 1939, including terms defined
therein by reference to the Securities Act of 1933, as amended, shall have the
meanings assigned to such terms in said Trust Indenture Act and in said
Securities Act as in force at the date of this Indenture (except as herein
otherwise expressly provided or unless the context otherwise clearly requires).
All accounting terms used herein and not expressly defined shall have the
meanings assigned to such terms in accordance with generally accepted accounting
principles, and the term "generally accepted accounting principles" means such
accounting principles as are generally accepted at the time of any computation.
The words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision. The expressions "date of this Indenture", "date
hereof", "date as of which this Indenture is dated" and "date of execution and
delivery of this Indenture" and other expressions of similar import refer to the
effective date of the original execution and delivery of this Indenture, viz.
July 15, 1993.
The terms defined in this Article have the meanings assigned to them in
this Article and include the plural as well as the singular.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Asset Sale" for any Person shall mean the sale, lease, conveyance or other
disposition (including without limitation by merger or consolidation, and
whether by operation of law or otherwise) of any of that Person's assets
(including without limitation the sale or other disposition of capital stock of
any Subsidiary of such Person, whether by such Person or by such Subsidiary),
whether owned on the date of this Indenture or subsequently acquired, in one
transaction or a series of related transactions, in which such Person and/or its
Subsidiaries receive cash and/or other consideration (including without
limitation the unconditional assumption of Indebtedness of such Person and/or
its Subsidiaries) having an aggregate fair market value of $5 million or more as
to such transaction or series of transactions; provided, however, that the
following shall not constitute Asset Sales: (i) sales of inventories in the
ordinary course of business or pledges of inventories and of accounts receivable
by the Issuer or its Subsidiaries; (ii) transactions between the Issuer and any
of its wholly owned Subsidiaries or among such wholly owned Subsidiaries; and
(iii) the incurrence of any mortgage, security interest, pledge, lien or
encumbrance that secures Secured Debt as permitted by Section 3.6.
"Authenticating Agent" shall have the meaning set forth in Section 6.14.
<PAGE>
"Bankruptcy code" means the United States Bankruptcy Code, 11 United States
Code ss.ss. 101 et seq., or any successor statute thereto.
"Board of Directors" means either the Board of Directors of the Issuer or
any committee of such Board duly authorized to act on its behalf.
"Board Resolution" means one or more resolutions, certified by the
secretary or an assistant secretary of the Issuer to have been duly adopted or
consented to by the Board of Directors and to be in full force and effect.
"Business Day" means, with respect to any Security, a day that (a) in the
Place of Payment (or in any of the Places of Payment, if more than one) in which
amounts are payable, as specified in the form of such Security, and (b) in the
city in which the Corporate Trust Office is located, is not a day on which
banking institutions are authorized or required by law or regulation to close.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, as amended,
or, if at any time after the execution and delivery of this Indenture such
Commission is not existing and performing the duties now assigned to it under
the Trust Indenture Act of 1939, then the body performing such duties on such
date.
"Consolidated Net Tangible Assets" means the aggregate amount of assets
included on the most recent consolidated balance sheet of the Issuer and its
Restricted Subsidiaries, less applicable reserves and other properly deductible
items and after deducting therefrom (a) all current liabilities and (b) all
goodwill, trade names, trademarks, patents, unamortized debt discount and
expense and other like intangibles, all in accordance with generally accepted
accounting principles consistently applied.
"Corporate Trust Office" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date as of which this
Indenture is dated, located in New York, New York.
"Depositary" means, with respect to the Securities of any series issuable
or issued in the form of one or more Global Securities, the Person designated as
Depositary by the Issuer pursuant to Section 2.3 until a successor Depositary
shall have become such pursuant to the applicable provisions of this Indenture,
and thereafter "Depositary" shall mean or include each Person who is then a
Depositary hereunder, and, if at any time there is more than one such Person,
"Depositary" as used with respect to the Securities of any such series shall
mean the Depositary with respect to the Global Securities of such series.
"EBITDA" shall mean net earnings (excluding gains and losses on sales and
retirement of assets, non-cash write downs and charges resulting from accounting
convention changes) before deduction for federal and state taxes, interest
expense or depreciation, depletion and amortization expense, all determined in
accordance with generally accepted accounting principles.
"EBITDA/Interest Ratio", on any date, shall mean the ratio of (a) EBITDA of
the Issuer and its Restricted Subsidiaries on a consolidated basis to (b)
interest expense on all Indebtedness of the Issuer and its Restricted
Subsidiaries on a consolidated basis for any twelve-month period ending on the
last day of the most recent calendar quarter; provided, however, that if any
calculation of the Issuer's EBITDA/Interest Ratio requires the use of any
quarter prior to the date of the Indenture, such calculation shall be made on a
pro forma basis, giving effect to the issuance of the Securities and the use of
the net proceeds therefrom, as if the same had occurred at the beginning of the
twelve-month period used to make such calculation; and provided further that if
any such calculation requires the use of any quarter prior to the date that any
Asset Sale was consummated, any Indebtedness described in clause (a) of the
definition of Indebtedness was incurred, any capital stock of the Issuer was
issued in a financing transaction or any acquisition other than in the ordinary
course of business was consummated by the Issuer or any Restricted Subsidiary,
such calculation shall be made on a pro forma basis, giving effect to each such
Asset Sale, incurrence of Indebtedness, issuance of capital stock or
acquisition, as the case may be, and the use of any proceeds therefrom, as if
the same had occurred at the beginning of the twelve-month period used to make
such calculation.
"ENSTAR Alaska" means (i) the division of the Issuer known on the date of
this Indenture as ENSTAR Natural Gas Company, which owns on the date of this
Indenture the gas distribution system in south-central Alaska, or (ii) Alaska
Pipeline Company, an Alaska corporation and a Subsidiary of the Issuer, in each
case together with successors and assigns.
"Event of Default" means any event or condition specified as such in
Section 5.1.
"Global Security" means a Security evidencing all or a part of a series of
Securities issued to the Depositary for such series in accordance with Section
2.3 and bearing the legend prescribed in Section 2.4.
<PAGE>
"Holder" or other similar terms mean, in the case of any Security, the
person in whose name such Security is registered in the security register kept
by the Issuer for that purpose in accordance with the terms hereof.
"Indebtedness" means, with respect to any Person,
(a) (i) the principal of and premium, if any, and interest, if any, on
indebtedness for money borrowed of such Person, indebtedness of such Person
evidenced by bonds, notes, debentures or similar obligations, and any guaranty
by such Person of any indebtedness for money borrowed or indebtedness evidenced
by bonds, notes, debentures or similar obligations of any other Person, whether
any such indebtedness or guaranty is outstanding on the date of this Indenture
or is thereafter created, assumed or incurred, (ii) the principal of and
premium, if any, and interest, if any, on indebtedness incurred, assumed or
guaranteed by such Person in connection with the acquisition by it or any of its
subsidiaries of any other businesses, properties or other assets and (iii) lease
obligations which such Person capitalizes in accordance with Statement of
Financial Accounting Standards No. 13 promulgated by the Financial Accounting
Standards Board or such other generally accepted accounting principles as may be
from time to time in effect;
(b) any other indebtedness of such Person, including any indebtedness
representing the balance deferred and unpaid of the purchase price of any
property or interest therein, including any such balance that constitutes a
trade payable, and any guaranty, endorsement or other contingent obligation of
such Person in respect of any indebtedness of another that is outstanding on the
date of this Indenture or is thereafter created, assumed or incurred by such
Person;
(c) obligations of such Person under interest rate, commodity or currency
swaps, caps, collars, options and similar arrangements;
(d) obligations of such Person for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction; and
(c) any amendments, modifications, refundings, renewals or extensions of
any indebtedness or obligation described as Indebtedness in clauses (a) through
(d) above.
"Indenture" means this instrument as originally executed and delivered or,
if amended or supplemented as herein provided, as so amended or supplemented or
both, including, for all purposes of this instrument and any such supplement,
the provisions of the Trust Indenture Act of 1939 that are deemed to be a part
of and govern this instrument and any such supplement, respectively, and shall
include the forms and terms of particular series of Securities established as
contemplated hereunder.
The term "interest" means, when used with respect to non-interest bearing
Securities (including, without limitation, any Original Issue Discount Security
that by its terms bears interest only after maturity or upon default in any
other payment due on such Security), interest payable after maturity (whether at
stated maturity, upon acceleration or redemption or otherwise) or after the
date, if any, on which the Issuer becomes obligated to acquire a Security,
whether upon conversion, by purchase or otherwise.
"Issuer" means (except as otherwise provided in Section 6.8) Seagull Energy
Corporation, a Texas corporation, and, subject to Article Nine, its successors
and assigns.
"Issuer Order" means a written statement, request or order of the Issuer
which is signed in its name by the chairman of the Board of Directors, the
president or any vice president of the Issuer.
"Officers Certificate", when used with respect to the Issuer, means a
certificate signed by the chairman of the Board of Directors, the president, or
any vice president and by the treasurer, any assistant treasurer, the
controller, any assistant controller, the secretary or any assistant secretary
of the Issuer. Each such certificate shall include the statements provided for
in Section 11.5 if and to the extent required by the provisions of such Section
11.5. One of the officers signing an Officers' Certificate given pursuant to
Section 4.3 shall be the principal executive, financial or accounting officer of
the Issuer.
"Opinion of Counsel" means an opinion in writing signed by the chief
counsel of the Issuer or by such other legal counsel who may be an employee of
or counsel to the Issuer and who shall be satisfactory to the Trustee. Each such
opinion shall include the statements provided for in Section 11.5, if and to the
extent required by the provisions of such Section 11.5.
The term "original issue date" of any Security (or portion thereof) means
the earlier of (a) the date of such Security or (b) the date of any Security (or
portion thereof) for which such Security was issued (directly or indirectly) on
registration of transfer, exchange or substitution.
<PAGE>
The term "original issue discount" of any debt security, including any
Original Issue Discount Security, means the difference between the principal
amount of such debt security and the initial issue price of such debt security
(as set forth in the case of an Original Issue Discount Security on the face of
such Security).
"Original Issue Discount Security" means any Security that provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the maturity thereof pursuant to Section 5.1.
"Outstanding" (except as otherwise provided in Section 6.8), when used with
reference to Securities, shall, subject to the provisions of Section 7.4, mean,
as of any particular time, all Securities authenticated and delivered by the
Trustee under this Indenture, except:
(a) Securities theretofore cancelled by the Trustee or delivered to the
Trustee for cancellation;
(b) Securities (other than Securities of any series as to which the
provisions of Article Ten hereof shall not be applicable), or portions thereof,
for the payment or redemption of which moneys or U.S. Government Obligations (as
provided for in Section 10.1) in the necessary amount shall have been deposited
in trust with the Trustee or with any paying agent (other than the Issuer) or
shall have been set aside, segregated and held in trust by the Issuer for the
Holders of such Securities (if the Issuer shall act as its own paying agent),
provided that, if such Securities, or portions thereof, are to be redeemed prior
to the maturity thereof, notice of such redemption shall have been given as
herein provided, or provision satisfactory to the Trustee shall have been made
for giving such notice; and
(c) Securities which shall have been paid or in substitution for which
other Securities shall have been authenticated and delivered pursuant to the
terms of Section 2.9 (except with respect to any such Security as to which proof
satisfactory to the Trustee is presented that such Security is held by a person
in whose hands such Security is a legal, valid and binding obligation of the
Issuer).
In determining whether the Holders of the requisite aggregate principal
amount of Outstanding Securities of any or all series have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, the
principal amount of an Original Issue Discount Security that shall be deemed to
be Outstanding for such purposes shall be the portion of the principal amount
thereof that would be due and payable as of the date of such determination (as
certified by the Issuer to the Trustee) upon a declaration of acceleration of
the maturity thereof pursuant to Section 5.1.
"Periodic Offering" means an offering of Securities of a series from time
to time, the specific terms of which Securities, including, without limitation,
the rate or rates of interest, if any, thereon, the stated maturity or
maturities thereof and the redemption provisions, if any, with respect thereto,
are to be determined by the Issuer or its agents upon the issuance of such
Securities.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust, estate,
unincorporated organization or government or any agency or political subdivision
thereof.
"Place of Payment", when used with respect to the Securities of any series,
means the place or places where the principal of and interest, if any, on the
Securities of such series are payable as determined in accordance with Section
2.3.
The term "principal" of a debt security, including any Security, means the
amount (including, without limitation, if and to the extent applicable, any
premium and, in the case of an Original Issue Discount Security, any accrued
original issue discount, but excluding interest) that is payable with respect to
such debt security as of any date and for any purpose (including, without
limitation, in connection with any sinking fund, upon any redemption at the
option of the Issuer, upon any purchase or exchange at the option of the Issuer
or the holder of such debt security and upon any acceleration of the maturity of
such debt security).
The term "principal amount" of a debt security, including any Security,
means the principal amount as set forth on the face of such debt security.
"Principal Property" means any real property, manufacturing plant,
processing plant, pipeline, office building, warehouse or other physical
facility, or any other like depreciable or depletable asset of the Issuer or any
Restricted Subsidiary whether owned at July 1, 1993 or thereafter acquired
(other than any facility thereafter acquired for the control or abatement of
atmospheric pollutants or contaminants or water, noise, odor or other pollution)
which in the opinion of the Board of Directors is of material importance to the
total business conducted by the Issuer and its Restricted Subsidiaries, as a
whole; provided, however, that any such property shall not be deemed a Principal
Property if such property does not have a fair value in excess of 3% of the
total assets included on a consolidated balance sheet of the Issuer and its
Restricted Subsidiaries prepared in accordance with generally accepted
accounting principles consistently applied.
The term "record date" shall have the meaning set forth in Section 2.7.
<PAGE>
"Responsible Officer", when used with respect to the Trustee, means any
officer assigned by the Trustee to administer its corporate trust matters.
"Restricted Subsidiary" means (a) any Subsidiary other than an Unrestricted
Subsidiary, and (b) any Subsidiary which was an Unrestricted Subsidiary but
which, subsequent to the date hereof, is designated by the Issuer (by certified
resolution of the Board of Directors delivered to the Trustee) to be a
Restricted Subsidiary; provided, however, that the Issuer may not designate any
such Subsidiary to be a Restricted Subsidiary if the Issuer would thereby breach
any covenant or agreement herein contained (on the assumptions that any
outstanding Indebtedness of such Subsidiary was incurred at the time of such
designation and that any Sale and Leaseback Transaction to which such Subsidiary
is then a party was entered into at the time of such designation).
"Sale and Leaseback Transaction" shall have the meaning set forth in
Section 3.7.
"Secured Debt" means indebtedness for money borrowed by the Issuer or a
Restricted Subsidiary and any other indebtedness of the Issuer or a Restricted
Subsidiary on which interest is paid or payable (other than indebtedness owed by
a Restricted Subsidiary to the Issuer, by a Restricted Subsidiary to another
Restricted Subsidiary or by the Issuer to a Restricted Subsidiary), that in any
such case is secured by (a) a mortgage or other lien on any Principal Property
of the Issuer or a Restricted Subsidiary, or (b) a pledge, lien or other
security interest on any shares of stock or indebtedness of a Restricted
Subsidiary, or (c) in the case of any such indebtedness of the Issuer, a
guaranty by any Restricted Subsidiary. The amount of Secured Debt at any time
outstanding shall be the amount then owing thereon by the Issuer or a Restricted
Subsidiary.
"Securities" or "Securities" (except as otherwise provided in Section 6.8)
has the meaning stated in the first recital of this Indenture or, as the case
may be, Securities that have been authenticated and delivered pursuant to this
Indenture.
"Subsidiary" means any corporation of which the Issuer, or the Issuer and
one or more Subsidiaries, or any one or more Subsidiaries, directly or
indirectly own voting securities entitling any one or more of the Issuer and its
Subsidiaries to elect a majority of the directors, either at all times or, so
long as there is no default or contingency which permits the holders of any
other class or classes of securities to vote for the election of one or more
directors.
"Trust Indenture Act of 1939" (except as otherwise provided in Sections 8.1
and 8.2) means the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990, as in force at the date as of which this Indenture
is originally executed.
"Trustee" means the Person identified as "Trustee" in the first paragraph
hereof and, subject to the provisions of Article Six, shall also include any
successor trustee. "Trustee" shall also mean or include each Person who is then
a trustee hereunder and, if at any time there is more than one such Person,
"Trustee" as used with respect to the Securities of any series shall mean the
trustee with respect to the Securities of such series.
"Unrestricted Subsidiary" means (a) any Subsidiary acquired or organized
after the date hereof, provided, however, that such Subsidiary shall not be a
successor, directly or indirectly, to any Restricted Subsidiary, and (b) any
Subsidiary whose principal business and assets are located outside the United
States of America, its territories and possessions and Canada or are located in
Puerto Rico, and (c) any Subsidiary the principal business of which consists of
financing or assisting in financing the acquisition or disposition of products
of the Issuer or a Subsidiary by dealers, distributors or other customers, and
(d) any Subsidiary the principal business of which is owning, leasing, dealing
in or developing real property, and (e) any Subsidiary substantially all the
assets of which consist of stock or other securities of a Subsidiary or
Subsidiaries of the character described in clauses (a) through (d) of this
paragraph, unless and until such Subsidiary shall have been designated to be a
Restricted Subsidiary pursuant to clause (b) of the definition of "Restricted
Subsidiary".
"U.S Governement Obligations" shall have the meaning set forth in Section
10.1(B).
The term,"vice president" when used with respect to the Issuer or the
Trustee, means any vice president, regardless of whether designated by a number
or a word or words added before or after the title "vice president."
"Yield to Maturity" means the yield to maturity on a series of Securities,
calculated at the time of issuance of such series, or, if applicable, at the
most recent redetermination of interest on such series, and calculated in
accordance with generally accepted financial practice or as otherwise provided
in the terms of such series of Securities.
<PAGE>
ARTICLE TWO
SECURITIES
SECTION 2.1 Forms Generally. The Securities of each series shall be
substantially in such form (not inconsistent with this Indenture) as shall be
established by or pursuant to one or more Board Resolutions (as set forth in a
Board Resolution or, to the extent established pursuant to rather than set forth
in a Board Resolution, an Officers' Certificate detailing such establishment) or
in one or more indentures supplemental hereto, in each case with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture, and may have imprinted or otherwise
reproduced thereon such legend or legends or endorsements, not inconsistent with
the provisions of this Indenture, as may be required to comply with any law or
with any rules or regulations pursuant thereto, or with any rules of any
securities exchange or to conform to general usage, all as may be determined by
the officers executing such Securities, as evidenced by their execution of such
Securities.
The definitive Securities shall be printed, lithographed or engraved on
steel engraved borders or may be produced in any other manner, all as determined
by the officers executing such Securities as evidenced by their execution of
such Securities.
SECTION 2.2 Form of Trustee's Certificate of Authentication. The Trustee's
certificate of authentication on all Securities shall be substantially as
follows:
This is one of the Securities of the series designated herein referred to
in the within mentioned Indenture.
The Bank of New York, as Trustee
By ________________________________
Authorized Signatory
If at any time there shall be an Authenticating Agent appointed with
respect to any series of Securities, then the Securities of such series shall
bear, in addition to the Trustee's certificate of authentication, an alternate
Certificate of Authentication which shall be substantially as follows:
This is one of the Securities of the series designated herein referred to
in the within mentioned Indenture.
The Bank of New York, as Trustee
By_______________________________
as Authenticating Agent
By_______________________________
Authorized Signatory
SECTION 2.3 Amount Unlimited, Issuable in Series. The aggregate principal
amount of Securities which may be authenticated and delivered under this
Indenture is unlimited.
The Securities may be issued in one or more series and the Securities of
each such series shall rank equally and pari passu with the Securities of each
other series and with all other unsecured and unsubordinated debt of the Issuer.
There shall be established in or pursuant to one or more Board Resolutions (and,
to the extent established pursuant to rather than set forth in a Board
Resolution, in an Officers' Certificate detailing such establishment) or
established in one or more indentures supplemental hereto, prior to the initial
issuance of Securities of any series:
(1) the designation of the Securities of the series, which shall
distinguish the Securities of such series from the Securities of all
other series;
(2) any limit upon the aggregate principal amount of the
Securities of the series that may be authenticated and delivered under
this Indenture (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Securities of the series pursuant to Section 2.8, 2.9, 2.11, 8.5 or
12.3);
(3) the date or dates on which the principal of the Securities of
the series is payable;
<PAGE>
(4) the rate or rates at which the Securities of the series shall
bear interest, if any, the date or dates from which any such interest
shall accrue, on which any such interest shall be payable and on which
a record shall be taken for the determination of Holders to whom any
such interest is payable or the method by which such rate or rates or
date or dates shall be determined or both;
(5) the place or places where and the manner in which the
principal of and interest, if any, on Securities of the series shall
be payable (if other than as provided in Section 3.2) and the office
or agency for the Securities of the series maintained by the Issuer
pursuant to Section 3.2;
(6) the right, if any, of the Issuer to redeem, purchase or repay
Securities of the series, in whole or in part, at its option and the
period or periods within which, the price or prices (or the method by
which such price or prices shall be determined or both) at which, the
form or method of payment therefor if other than in cash and any terms
and conditions upon which and the manner in which (if different from
the provisions of Article Twelve) Securities of the series may be so
redeemed, purchased or repaid, in whole or in part, pursuant to any
sinking fund or otherwise;
(7) the obligation, if any, of the Issuer to redeem, purchase or
repay Securities of the series in whole or in part pursuant to any
mandatory redemption, sinking fund or analogous provisions or at the
option of a Holder thereof and the period or periods within which the
price or prices (or the method by which such price or prices shall be
determined or both) at which, the form or method of payment therefor
if other than in cash and any terms and conditions upon which and the
manner in which (if different from the provisions of Article Twelve)
Securities of the series shall be redeemed, purchased or repaid, in
whole or in part, pursuant to such obligation;
(8) if other than denominations of $1,000 and any integral
multiple thereof, the denominations in which Securities of the series
shall be issuable;
(9) if other than the principal amount thereof, the portion of
the principal amount of Securities of the series which shall be
payable upon acceleration of the maturity thereof;
(10) whether Securities of the series will be issuable as Global
Securities;
(11) if the Securities of such series are to be issuable in
definitive form (whether upon original issue or upon exchange of a
temporary Security of such series) only upon receipt of certain
certificates or other documents or satisfaction of other conditions,
the form and terms of such certificates, documents or conditions;
(12) any trustees, depositaries, authenticating or paying agents,
transfer agents or registrars or any other agents with respect to the
Securities of such series;
(13) any deleted, modified or additional events of default or
remedies or any additional covenants with respect to the Securities of
such series;
(14) whether the provisions of Section 10.1(C) will be applicable
to Securities of such series;
(15) any provision relating to the issuance of Securities of such
series at an original issue discount (including, without limitation,
the issue price thereof, the rate or rates at which such original
issue discount shall accrue, if any, and the date or dates from or to
which or period or periods during which such original issue discount
shall accrue at such rate or rates);
(16) if the amounts of payments of principal of and interest on
the Securities of such series are to be determined with reference to
an index, the manner in which such amounts shall be determined; and
(17) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture).
All Securities of any one series shall be substantially identical, except
as to denomination and except as may otherwise be provided by or pursuant to the
Board Resolution or Officers' Certificate referred to above or as set forth in
any such indenture supplemental hereto. All Securities of any one series need
not be issued at the same time and may be issued from time to time, consistent
with the terms of this Indenture, if so provided by or pursuant to such Board
Resolution, such Officers' Certificate or in any such indenture supplemental
hereto.
Any such Board Resolution or Officers' Certificate referred to above with
respect to Securities of any series filed with the Trustee on or before the
initial issuance of the Securities of such series shall bc incorporated herein
by reference with respect to Securities of such series and shall thereafter be
deemed to be a part of the Indenture for all purposes relating to Securities of
such series as fully as if such Board Resolution or Officers' Certificate were
set forth herein in full.
<PAGE>
SECTON 2.4 Authentication and Delivery of Securities. The Issuer may
deliver Securities of any series executed by the Issuer to the Trustee for
authentication together with the applicable documents referred to below in this
Section 2.4, and the Trustee shall thereupon authenticate and deliver such
Securities to, or upon the order of, the Issuer (contained in the Issuer Order
referred to below in this Section 2.4) or pursuant to such procedures acceptable
to the Trustee and to such recipients as may be specified from time to time by
an Issuer Order. The maturity date, original issue date, interest rate, if any,
and any other terms of the Securities of such series shall be determined by or
pursuant to such Issuer Order and procedures. If provided for in such procedures
and agreed to by the Trustee, such Issuer Order may authorize authentication and
delivery pursuant to oral instructions from the Issuer or its duly authorized
agent, which instructions shall be promptly confirmed in writing. In
authenticating the Securities of such series and accepting the additional
responsibilities under this Indenture in relation to such Securities, the
Trustee shall be entitled to receive (in the case of subparagraphs (2), (3) and
(4) below only at or before the time of the first request of the Issuer to the
Trustee to authenticate Securities of such series) and (subject to Section 6.1)
shall be fully protected in relying upon, unless and until such documents have
been superseded or revoked:
(1) an Issuer Order requesting such authentication and setting
forth delivery instructions if the Securities of such series are not
to be delivered to the Issuer, provided that, with respect to
Securities of a series subject to a Periodic Offering, (a) such Issuer
Order may be delivered by the Issuer to the Trustee prior to the
delivery to the Trustee of such Securities for authentication and
delivery, (b) the Trustee shall authenticate and deliver Securities of
such series for original issue from time to time, in an aggregate
principal amount not exceeding the aggregate principal amount
established for such series, pursuant to an Issuer Order or pursuant
to procedures acceptable to the Trustee as may be specified from time
to time by an Issuer Order, (c) the maturity date or dates, original
issue date or dates, interest rate or rates, if any, and any other
terms of Securities of such series shall be determined by an Issuer
Order or pursuant to such procedures, (d) if provided for in such
procedures, such Issuer Order may authorize authentication and
delivery pursuant to oral or electronic instructions from the Issuer
or its duly authorized agent or agents, which oral instructions shall
be promptly confirmed in writing and (e) after the original issuance
of the first Security of such series to be issued, any separate
request by the Issuer that the Trustee authenticate Securities of such
series for original issuance will be deemed to be a certification by
the Issuer that it is in compliance with all conditions precedent
provided for in this Indenture relating to the authentication and
delivery of such Securities;
(2) the Board Resolution, Officers' Certificate or executed
supplemental indenture referred to in Sections 2.1 and 2.3 by or
pursuant to which the forms and terms of the Securities of such series
were established;
(3) an Officers' Certificate setting forth the form or forms and
terms of the Securities stating that the form or forms and terms of
the Securities have been established pursuant to Sections 2.1 and 2.3
and comply with this Indenture and covering such other matters as the
Trustee may reasonably request; and
(4) at the option of the Issuer, either an Opinion of Counsel, or
a letter from legal counsel addressed to the Trustee permitting it to
rely on an Opinion of Counsel, substantially to the effect that:
(a) the form or forms of the Securities of such series have
been duly authorized and established in conformity with the
provisions of this Indenture;
(b) in the case of an underwritten offering, the terms of
the Securities of such series have been duly authorized and
established in conformity with the provisions of this Indenture,
and, in the case of an offering that is not underwritten, certain
terms of the Securities of such series have been established
pursuant to a Board Resolution, an Officers' Certificate or a
supplemental indenture in accordance with this Indenture, and
when such other terms as are to be established pursuant to
procedures set forth in an Issuer Order shall have been
established, all such terms will have been duly authorized by the
Issuer and will have been established in conformity with the
provisions of this Indenture;
(c) when the Securities of such series have been executed by
the Issuer and authenticated by the Trustee in accordance with
the provisions of this Indenture and delivered to and duly paid
for by the purchasers thereof, they will have been duly issued
under this Indenture and will be valid and legally binding
obligations of the Issuer, enforceable in accordance with their
respective terms, and will be entitled to the benefits of this
Indenture; and
(d) the execution and delivery by the Issuer of, and the
performance by the Issuer of its obligations under, the
Securities of such series will not contravene any provision of
applicable law or the articles of incorporation or bylaws of the
Issuer or any agreement or other instrument binding upon the
Issuer or any of its Subsidiaries that is material to the Issuer
and its Subsidiaries, considered as one enterprise, or, to such
counsel's knowledge after the inquiry indicated therein, any
judgment, order or decree of any governmental agency or any court
having jurisdiction over the Issuer or any Subsidiary, and no
consent, approval or authorization of any governmental body or
agency is required for the performance by the Issuer of its
obligations under the Securities, except such as are specified
and have been obtained and such as may be required by the
securities or blue sky laws of the various states in connection
with the offer and sale of the Securities.
<PAGE>
In rendering such opinions, such counsel may qualify any opinions as to
enforceability by stating that such enforceability may be limited by bankruptcy,
insolvency, reorganization, liquidation, moratorium and other similar laws
affecting the rights and remedies of creditors and is subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). Such counsel may rely, as to all matters
governed by the laws of jurisdictions other than the State of Texas and the
federal law of the United States, upon opinions of other counsel (copies of
which shall be delivered to the Trustee), who shall be counsel reasonably
satisfactory to the Trustee, in which case the opinion shall state that such
counsel believes that both such counsel and the Trustee are entitled so to rely.
Such counsel may also state that, insofar as such opinion involves factual
matters, such counsel has relied, to the extent such counsel deems proper, upon
certificates of officers of the Issuer and its Subsidiaries and certificates of
public officials.
The Trustee shall have the right to decline to authenticate and deliver any
Securities of any series under this Section 2.4 if the Trustee, being advised by
counsel, determines that such action may not lawfully be taken by the Issuer or
if the Trustee in good faith by its board of directors or board of trustees,
executive committee or a trust committee of directors or trustees or Responsible
Officers shall determine that such action would expose the Trustee to personal
liability to existing Holders or would adversely affect the Trustee's own
rights, duties or immunities under the Securities, this Indenture or otherwise.
If the Issuer shall establish pursuant to Section 2.3 that the Securities
of a series are to be issued in the form of one or more Global Securities, then
the Issuer shall execute and the Trustee shall, in accordance with this Section
2.4 and the Issuer Order with respect to such series, authenticate and deliver
one or more Global Securities that (i) shall represent and shall be denominated
in an amount equal to the aggregate principal amount of all of the Securities of
such series to be issued in the form of Global Securities and not yet cancelled,
(ii) shall be registered in the name of the Depositary for such Global Security
or Securities or the nominee of such Depositary, (iii) shall be delivered by the
Trustee to such Depositary or pursuant to such Depositary's instructions, and
(iv) shall bear a legend substantially to the following effect: "Unless and
until it is exchanged in whole or in part for Securities in definitive
registered form, this Security may not be transferred except as a whole by the
Depositary to the nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary."
Each Depositary designated pursuant to Section 2.3 must, at the time of its
designation and at all times while it serves as Depositary, be a clearing agency
registered under the Securities Exchange Act of 1934, as amended, and any other
applicable statute or regulation.
SECTION 2.5 Execution of Securities. The Securities shall be signed on
behalf of the Issuer by the chairman of the Board of Directors, the president,
any vice president or the treasurer of the Issuer, under its corporate seal
which may, but need not, be attested by its secretary or one of its assistant
secretaries. Such signatures may be the manual or facsimile signatures of the
present or any future such officers. The seal of the Issuer may be in the form
of a facsimile thereof and may be impressed, affixed, imprinted or otherwise
reproduced on the Securities. Typographical and other minor errors or defects in
any such reproduction of the seal or any such signature shall not affect the
validity or enforceability of any Security that has been duly authenticated and
delivered by the Trustee.
In case any officer of the Issuer who shall have signed any of the
Securities shall cease to be such officer before the Security so signed shall be
authenticated and delivered by the Trustee or disposed of by the Issuer, such
Security nevertheless may be authenticated and delivered or disposed of as
though the person who signed such Security had not ceased to be such officer of
the Issuer; and any Security may be signed on behalf of the Issuer by such
persons as, at the actual date of the execution of such Security, shall be the
proper officers of the Issuer, although at the date of the execution and
delivery of this Indenture any such person was not such an officer.
SECTION 2.6 Certificate of Authentication. Only such Securities as shall
bear thereon a certificate of authentication substantially in the form
hereinbefore recited, executed by the Trustee by the manual signature of one of
its authorized signatories, or its Authenticating Agent, shall be entitled to
the benefits of this Indenture or be valid or obligatory for any purpose. The
execution of such certificate by the Trustee or its Authenticating Agent upon
any Security executed by the Issuer shall be conclusive evidence that the
Security so authenticated has been duly authenticated and delivered hereunder
and that the Holder is entitled to the benefits of this Indenture. Each
reference in this Indenture to authentication by the Trustee includes
authentication by an agent appointed pursuant to Section 6.14.
SECTION 2.7 Denomination and Date of Securities; Payments of Interest. The
Securities of each series shall be issuable in registered form in denominations
established as contemplated by Section 2.3 or, with respect to the Securities of
any series, if not so established, in denominations of $1,000 and any integral
multiple thereof. The Securities of each series shall be numbered, lettered or
otherwise distinguished in such manner or in accordance with such plan as the
officers of the Issuer executing the same may determine with the approval of the
Trustee, as evidenced by the execution and authentication thereof.
Each Security shall be dated the date of its authentication. The Securities
of each series shall bear interest, if any, from the date, and such interest, if
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any, shall be payable on the dates, established as contemplated by Section 2.3.
The Person in whose name any Security of any series is registered at the
close of business on any record date applicable to a particular series with
respect to any interest payment date for such series shall be entitled to
receive the interest, if any, payable on such interest payment date
notwithstanding any transfer or exchange of such Security subsequent to the
record date and prior to such interest payment date, except if and to the extent
the Issuer shall default in the payment of the interest due on such interest
payment date for such series, in which case such defaulted interest shall be
paid to the Persons in whose names Outstanding Securities for such series are
registered (a) at the close of business on a subsequent record date (which shall
be not less than five Business Days prior to the date of payment of such
defaulted interest) established by notice given by mail by or on behalf of the
Issuer to the Holders of Securities not less than 15 days preceding such
subsequent record date or (b) as determined by such other procedure as is
mutually acceptable to the Issuer and the Trustee. The term "record date" as
used with respect to any interest payment date (except a date for payment of
defaulted interest) for the Securities of any series shall mean the date
specified as such in the terms of the Securities of such series established as
contemplated by Section 2.3, or, if no such date is so established, if such
interest payment date is the first day of a calendar month, the fifteenth day of
the next preceding calendar month or, if such interest payment date is the
fifteenth day of a calendar month, the first day of such calendar month, whether
or not such record date is a Business Day.
SECTION 2.8 Registration Transfer and Exchange. The Issuer will keep at
each office or agency to be maintained for the purpose as provided in Section
3.2 for each series of Securities a register or registers in which, subject to
such reasonable regulations as it may prescribe, it will provide for the
registration of Securities of each series and the registration of transfer of
Securities of such series. Each such register shall be in written form in the
English language or in any other form capable of being converted into such form
within a reasonable time. At all reasonable times such register or registers
shall be open for inspection and available for copying by the Trustee.
Upon due presentation for registration of transfer of any Security of any
series at any such office or agency to be maintained for the purpose as provided
in Section 3.2, the Issuer shall execute and the Trustee shall authenticate and
deliver in the name of the transferee or transferees a new Security or
Securities of the same series, maturity date, interest rate, if any, and
original issue date in authorized denominations for a like aggregate principal
amount.
All Securities presented for registration of transfer shall (if so required
by the Issuer or the Trustee) be duly endorsed by, or be accompanied by a
written instrument or instruments of transfer in form satisfactory to the Issuer
and the Trustee duly executed by, the Holder or his attorney duly authorized in
writing.
At the option of the Holder thereof, Securities of any series (other than a
Global Security, except as set forth below) may be exchanged for a Security or
Securities of such series having authorized denominations and an equal aggregate
principal amount, upon surrender of such Securities to be exchanged at the
agency of the Issuer that shall be maintained for such purpose in accordance
with Section 3.2. All Securities surrendered upon any exchange or transfer
provided for in this Indenture shall be promptly cancelled and returned to the
Issuer.
The Issuer may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any
registration of transfer of Securities. No service charge shall be made for any
such transaction or for any exchange of Securities of any series as contemplated
by the immediately preceding paragraph.
The Issuer shall not be required to exchange or register a transfer of (a)
any Securities of any series for a period of 15 days next preceding the first
mailing or publication of notice of redemption of Securities of such series to
be redeemed, (b) any Securities selected, called or being called for redemption,
in whole or in part, except, in the case of any Security to be redeemed in part,
the portion thereof not so to be redeemed or (c) any Security if the Holder
thereof has exercised his right, if any, to require the Issuer to repurchase
such Security in whole or in part, except the portion of such Security not
required to be repurchased.
Notwithstanding any other provision of this Section 2.8, unless and until
it is exchanged in whole or in part for Securities in definitive registered
form, a Global Security representing all or a part of the Securities of a series
may not be transferred except as a whole by the Depositary for such series to a
nominee of such Depositary or by a nominee of such Depositary to such Depositary
or another nominee of such Depositary or by such Depositary or any such nominee
to a successor Depositary for such series or a nominee of such successor
Depositary.
If at any time the Depositary for any Securities of a series represented by
one or more Global Securities notifies the Issuer that it is unwilling or unable
to continue as Depositary for such Securities or if at any time the Depositary
for such Securities shall no longer be eligible under Section 2.4, the Issuer
shall appoint a successor Depositary with respect to such Securities. If a
successor Depositary for such Securities is not appointed by the Issuer within
90 days after the Issuer receives such notice or becomes aware of such
ineligibility, the Issuer's election pursuant to Section 2.3 that such
Securities be represented by one or more Global Securities shall no longer be
effective and the Issuer shall execute, and the Trustee, upon receipt of an
Issuer Order for the authentication and delivery of definitive Securities of
such series, will authenticate and deliver Securities of such series in
definitive registered form, in any authorized denominations, in an aggregate
principal amount equal to the principal amount of the Global Security or
Securities representing such Securities in exchange for such Global Security or
Securities.
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The Issuer may at any time and in its sole discretion determine that the
Securities of any series issued in the form of one or more Global Securities
shall no longer be represented by a Global Security or Securities. In such event
the Issuer shall execute, and the Trustee, upon receipt of an Issuer Order for
the authentication and delivery of definitive Securities of such series, shall
authenticate and deliver, Securities of such series in definitive registered
form, in any authorized denominations, in an aggregate principal amount equal to
the principal amount of the Global Security or Securities representing such
Securities, in exchange for such Global Security or Securities.
If specified by the Issuer pursuant to Section 2.3 with respect to
Securities represented by a Global Security, the Depositary for such Global
Security may surrender such Global Security in exchange in whole or in part for
Securities of the same series in definitive registered form on such terms as are
acceptable to the Issuer and such Depositary. Thereupon, the Issuer shall
execute, and the Trustee shall authenticate and deliver, without service charge,
(i) to the Person specified by such Depositary, a new Security or
Securities of the same series, of any authorized denominations as requested
by such Person, in an aggregate principal amount equal to and in exchange
for such Person's beneficial interest in the Global Security; and
(ii) to such Depositary a new Global Security in a denomination equal
to the difference, if any, between the principal amount of the surrendered
Global Security and the aggregate principal amount of Securities
authenticated and delivered pursuant to clause (i) above.
Upon the exchange of a Global Security for Securities in definitive
registered form in authorized denominations, such Global Security shall be
cancelled by the Trustee or an agent of the Issuer or the Trustee. Securities in
definitive registered form issued in exchange for a Global Security pursuant to
this Section 2.8 shall be registered in such names and in such authorized
denominations as the Depositary for such Global Security, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee or an agent of the Trustee or the Issuer or an agent of the
Issuer. The Trustee or such agent shall deliver at its office such Securities to
or as directed by the Persons in whose names such Securities are so registered.
All Securities issued upon any transfer or exchange of Securities shall be
valid and legally binding obligations of the Issuer, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such transfer or exchange.
SECTION 2.9 Mutilated, Defaced, Destroyed, Lost and Stolen Securities. In
case any temporary or definitive Security shall become mutilated, defaced or be
destroyed, lost or stolen, the Issuer in its discretion may execute, and upon
the written request of any officer of the Issuer, the Trustee shall authenticate
and deliver a new Security of the same series, maturity date, interest rate, if
any, and original issue date, bearing a number or other distinguishing symbol
not contemporaneously outstanding, in exchange and substitution for the
mutilated or defaced Security, or in lieu of and in substitution for the
Security so destroyed, lost or stolen. In every case the applicant for a
substitute Security shall furnish to the Issuer and to the Trustee and any agent
of the Issuer or the Trustee such security or indemnity as may be required by
the Trustee or the Issuer to indemnify and defend and to save each of the
Trustee and the Issuer harmless and, in every case of destruction, loss or
theft, evidence to their satisfaction of the destruction, loss or theft of such
Security and of the ownership thereof and in the case of mutilation or
defacement, shall surrender the Security to the Trustee or such agent.
Upon the issuance of any substitute Security, the Issuer may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses (including the fees
and expenses of the Trustee or its agent) connected therewith. In case any
Security which has matured or is about to mature or has been called for
redemption in full shall become mutilated or defaced or be destroyed, lost or
stolen, the Issuer may instead of issuing a substitute Security, pay or
authorize the payment of the same (without surrender thereof except in the case
of a mutilated or defaced Security), if the applicant for such payment shall
furnish to the Issuer and to the Trustee and any agent of the Issuer or the
Trustee such security or indemnity as any of them may require to hold each of
them harmless, and, in every case of destruction, loss or theft, the applicant
shall also furnish to the Issuer and the Trustee and any agent of the Issuer or
the Trustee evidence to the Trustee's satisfaction of the destruction, loss or
theft of such Security and of the ownership thereof.
Every substitute Security of any series issued pursuant to the provisions
of this Section by virtue of the fact that any such Security is destroyed, lost
or stolen shall constitute an additional contractual obligation of the Issuer,
whether or not the destroyed, lost or stolen Security shall be at any time
enforceable by anyone and shall be entitled to all the benefits of (but shall be
subject to all the limitations of rights set forth in) this Indenture equally
and proportionately with any and all other Securities of such series duly
authenticated and delivered hereunder. All Securities shall be held and owned
upon the express condition that, to the extent permitted by law, the foregoing
provisions are exclusive with respect to the replacement or payment of
mutilated, defaced, destroyed, lost or stolen Securities and shall preclude any
and all other rights or remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement or payment of
negotiable instruments or other securities without their surrender.
SECTON 2.10 Cancellation of Securities; Disposition Thereof. All Securities
<PAGE>
surrendered for payment, redemption, registration of transfer or exchange, or
for credit against any payment in respect of a sinking or analogous fund, if
surrendered to the Issuer or any agent of the Issuer or the Trustee or any agent
of the Trustee, shall be delivered to the Trustee or its agent for cancellation
or, if surrendered to the Trustee, shall be cancelled by it; and no Securities
shall be issued in lieu thereof except as expressly permitted by any of the
provisions of this Indenture. The Trustee or its agent shall return cancelled
Securities to the Issuer. If the Issuer or its agent shall acquire any of the
Securities, such acquisition shall not operate as a redemption or satisfaction
of the indebtedness represented by such Securities unless and until the same are
delivered to the Trustee or its agent for cancellation.
SECTION 2.11 Temporary Securities. Pending the preparation of definitive
Securities for any series, the Issuer may execute and the Trustee shall
authenticate and deliver temporary Securities for such series (printed,
lithographed, typewritten or otherwise reproduced, in each case in form
satisfactory to the Trustee). Temporary Securities of any series shall be
issuable in any authorized denomination, and substantially in the form of the
definitive Securities of such series but with such omissions, insertions and
variations as may be appropriate for temporary Securities, all as may be
determined by the Issuer with the concurrence of the Trustee as evidenced by the
execution and authentication thereof. Temporary Securities may contain such
references to any provisions of this Indenture as may be appropriate. Every
temporary Security shall be executed by the Issuer and be authenticated by the
Trustee upon the same conditions and in substantially the same manner, and with
like effect, as the definitive Securities. Without unreasonable delay the Issuer
shall execute and shall furnish definitive Securities of such series and
thereupon temporary Securities of such series may be surrendered in exchange
therefor without charge at each office or agency to be maintained by the Issuer
for that purpose pursuant to Section 3.2 and the Trustee shall authenticate and
deliver in exchange for such temporary Securities of such series an equal
aggregate principal amount of definitive Securities of the same series having
authorized denominations. Until so exchanged, the temporary Securities of any
series shall be entitled to the same benefits under this Indenture as definitive
Securities of such series, unless otherwise established pursuant to Section 2.3.
SECTION 2.12 CUSIP Numbers. The Issuer in issuing the Securities may use
"CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Holders; provided
that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers.
ARTICLE THREE
COVENANTS OF THE ISSUER
SECTION 3.1 Payment of Principal and Interest. The Issuer covenants and
agrees that it will duly and punctually pay or cause to be paid the principal of
and interest, if any, on each of the Securities at the place, at the respective
times and in the manner provided in the Securities.
SECTION 3.2 Offices for Notices and Payments, etc. So long as any of the
Securities are Outstanding, the Issuer will maintain in each Place of Payment,
an office or agency where the Securities may be presented for payment, an office
or agency where the Securities may be presented for registration of transfer and
for exchange as in this Indenture provided, and an office or agency where
notices and demands to or upon the Issuer in respect of the Securities or of
this Indenture may be served. In case the Issuer shall at any time fail to
maintain any such office or agency, or shall fail to give notice to the Trustee
of any change in the location thereof, presentation may be made and notice and
demand may be served in respect of the Securities or of this Indenture at the
Corporate Trust Office. The Issuer hereby initially designates the Corporate
Trust Office for each such purpose and appoints the Trustee as registrar and
paying agent and as the agent upon whom notices and demands may be served with
respect to the Securities.
SECTION 3.3 No Interest Extension. In order to prevent any accumulation of
claims for interest after maturity thereof, the Issuer will not directly or
indirectly extend or consent to the extension of the time for the payment of any
claim for interest on any of the Securities and will not directly or indirectly
be a party to or approve any such arrangement by the purchase or funding of said
claims or in any other manner; provided, however, that this Section 3.3 shall
not apply in any case where an extension shall be made pursuant to a plan
proposed by the Issuer to the Holders of all Securities of any series then
Outstanding.
SECTION 3.4 Appointments to Fill Vacancies in Trustee's Office. The Issuer,
whenever necessary to avoid or fill a vacancy in the office of the Trustee, will
appoint, in the manner provided in Section 6.10, a Trustee, so that there shall
at all times be a Trustee hereunder.
SECTION 3.5 Provision as to Paying Agent. (a) If the Issuer shall appoint a
paying agent other than the Trustee, it will cause such paying agent to execute
and deliver to the Trustee an instrument in which such agent shall agree with
the Trustee, subject to the provisions of this Section 3.5,
(1) that it will hold all sums held by it as such agent for the
<PAGE>
payment of the principal of or interest, if any, on the Securities (whether
such sums have been paid to it by the Issuer or by any other obligor on the
Securities) in trust for the benefit of the Holders of the Securities and
the Trustee; and
(2) that it will give the Trustee notice of any failure by the Issuer
(or by any other obligor on the Securities) to make any payment of the
principal of or interest, if any, on the Securities when the same shall be
due and payable; and
(3) that it will, at any time during the continuance of any such
failure, upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust by such paying agent.
(b) If the Issuer shall act as its own paying agent, it will, on or before
each due date of the principal of or interest, if any, on the Securities, set
aside, segregate and hold in trust for the benefit of the Holders of the
Securities a sum sufficient to pay such principal or interest, if any, so
becoming due and will notify the Trustee of any failure to take such action and
of any failure by the Issuer (or by any other obligor under the Securities) to
make any payment of the principal of or interest, if any, on the Securities when
the same shall become due and payable.
(c) Anything in this Section 3.5 to the contrary notwithstanding, the
Issuer may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be paid to
the Trustee all sums held in trust by it, or any paying agent hereunder, as
required by this Section 3.5, such sums to be held by the Trustee upon the
trusts herein contained.
(d) Anything in this Section 3.5 to the contrary notwithstanding, any
agreement of the Trustee or any paying agent to hold sums in trust as provided
in this Section 3.5 is subject to Sections 10.3 and 10.4.
(e) Whenever the Issuer shall have one or more paying agents, it will, on
or before each due date of the principal of or interest, if any, on any
Securities, deposit with a paying agent a sum sufficient to pay the principal or
interest, if any, so becoming due, such sum to be held in trust for the benefit
of the Persons entitled to such principal or interest, if any, and (unless such
paying agent is the Trustee) the Issuer will promptly notify the Trustee of its
action or failure so to act.
SECTION 3.6 Restriction on Creation of Secured Debt. So long as any of the
Securities are outstanding, the Issuer shall not at any time create, incur,
assume or guarantee, and shall not cause, suffer or permit a Restricted
Subsidiary to create, incur, assume or guarantee, any Secured Debt without
making effective provision (and the Issuer covenants that in such case it will
make or cause to be made such effective provision) whereby the Securities then
Outstanding and any other indebtedness of or guaranteed by the Issuer or such
Restricted Subsidiary then entitled thereto, subject to applicable priorities of
payment, shall be secured by such mortgage, security interest, pledge, lien or
encumbrance equally and ratably with any and all other obligations and
indebtedness thereby secured, so long as any such other obligations and
indebtedness shall be so secured; provided, that if any such mortgage, security
interest, pledge, lien or encumbrance securing such indebtedness ceases to
exist, such equal and ratable security for the benefit of the Holders of
Securities shall automatically cease to exist without any further action;
provided further that if such indebtedness is expressly subordinated to the
Securities, the mortgage, security interest, pledge, lien or encumbrance
securing such indebtedness shall be subordinate and junior to the mortgage,
security interest, pledge, lien or encumbrance securing the Securities with the
same relative priority as such indebtedness shall have with respect to the
Securities; provided further, that the foregoing covenants shall not be
applicable to the following:
(a)(i) Any mortgage, security interest, pledge, lien or encumbrance on any
property hereafter acquired (including acquisition through merger or
consolidation) or constructed by the Issuer or a Restricted Subsidiary and
created contemporaneously with, or within twelve months after, such acquisition
or the completion of construction to secure or provide for the payment of all or
any part of the purchase price of such property or the cost of construction
thereof, as the case may be; or (ii) any mortgage on property (including any
unimproved portion of partially improved property) of the Issuer or a Restricted
Subsidiary created within twelve months of completion of construction of a new
plant or plants on such property to secure all or part of the cost of such
construction if, in the opinion of the Board of Directors, such property or such
portion thereof was prior to such construction substantially unimproved for the
use intended by the Issuer; or (iii) the acquisition of property subject to any
mortgage, security interest, pledge, lien or encumbrance upon such property
existing at the time of acquisition thereof, whether or not assumed by the
Issuer or such Restricted Subsidiary; or (iv) any mortgage, security interest,
pledge, lien or encumbrance existing on the property or on the outstanding
shares or indebtedness of a corporation or other entity at the time such
corporation or other entity shall become a Restricted Subsidiary; or (v) any
mortgage, security interest, pledge, lien or encumbrance on property of a
corporation or other entity existing at the time such corporation or other
entity is merged into or consolidated with the Issuer or a Restricted Subsidiary
or at the time of a sale, lease or other disposition of the properties of a
corporation or other entity as an entirety or substantially as an entirety to
the Issuer or a Restricted Subsidiary; or
(b) Mortgages on property of the Issuer or a Restricted Subsidiary in favor
of the United States of America or any State thereof or any foreign government,
or any department, agency or instrumentality or political subdivision of any
thereof, to secure partial, progress, advance or other payments pursuant to any
contract or statute or to secure any indebtedness incurred for the purpose of
financing all or any part of the purchase price or the cost of construction of
the property subject to such mortgages; or
<PAGE>
(c) Any mortgage, security interest, pledge, lien or encumbrance existing
on property owned by the Issuer or any of its Subsidiaries on the date of this
Indenture; or
(d) Any mortgage, security interest, pledge, lien or encumbrance created
pursuant to the creation of trusts or other arrangements funded solely with
cash, cash equivalents or other marketable investments or securities of the type
customarily subject to such arrangements in customary financial practice with
respect to long-term or medium-term indebtedness for money borrowed, the sole
purpose of which is to make provision for the retirement or defeasance, without
prepayment of Indebtedness; or
(e) Any mortgage, security interest, pledge, lien or encumbrance on the
assets or properties of ENSTAR Alaska; or
(f) Any extension, renewal or replacement (or successive extensions,
renewals or replacements) in whole or in part of any mortgage, security
interest, pledge, lien or encumbrance referred to in the foregoing subparagraphs
(a) through (e); provided, however, that the principal amount of Secured Debt
secured thereby shall not exceed the principal amount outstanding at the time of
such extension, renewal or replacement, and that such extension, renewal or
replacement shall be limited to the property which secured the mortgage,
security interest, pledge, lien or encumbrance so extended, renewed or replaced
and additions to such property.
Notwithstanding the foregoing provisions of this Section 3.6, the Issuer
and any one or more Restricted Subsidiaries may create, incur, assume or
guarantee Secured Debt which would otherwise be subject to the foregoing
restrictions in an aggregate amount that, without duplication, together with all
other Secured Debt of the Issuer and its Restricted Subsidiaries which would
otherwise be subject to the foregoing restrictions (not including Secured Debt
permitted to be secured under subparagraphs (a) through (f) above) and the
aggregate value of the Sale and Leaseback Transactions (as defined in Section
3.7) in existence at such time (not including Sale and Leaseback Transactions
the proceeds of which have been or will be applied in accordance with clause (b)
of Section 3.7) and all Indebtedness for money borrowed of Restricted
Subsidiaries in existence at such time (not including Indebtedness permitted to
be incurred under subparagraphs (a) through (e) of Section 3.9), does not at the
time exceed 10% of Consolidated Net Tangible Assets (excluding ENSTAR Alaska).
Solely for purposes of subparagraphs (a) through (f) above, the term "mortgage"
shall include any arrangements in connection with a production payment or
similar financing arrangement.
SECTION 3.7 Restriction on Sale and Leaseback Transactions. The Issuer will
not, and will not permit any Restricted Subsidiary to, sell or transfer (except
to the Issuer or to one or more Restricted Subsidiaries, or both) any Principal
Property owned by it and which has been in full operation for more than 120 days
prior to such sale or transfer with the intention (i) of taking back a lease on
such property (other than a lease for a period not exceeding 36 months) and (ii)
that the use by the Issuer or such Restricted Subsidiary of such property will
be discontinued on or before the expiration of the term of such lease (any such
transaction being herein referred to as a "Sale and Leaseback Transaction"),
unless (a) the Issuer or such Restricted Subsidiary would be entitled, pursuant
to the provisions of Section 3.6, to incur Secured Debt equal in amount to the
amount realized or to be realized upon such sale or transfer secured by a
mortgage on the property to be leased without equally and ratably securing the
Securities, or (b) the Issuer or a Restricted Subsidiary shall apply an amount
equal to the value of the property so leased to the retirement (other than any
mandatory retirement), within 120 days of the effective date of any such
arrangement, of indebtedness for money borrowed by the Issuer or any Restricted
Subsidiary (other than such indebtedness owned by the Issuer or any Restricted
Subsidiary) which was recorded as funded debt as of the date of its creation and
which, in the case of such indebtedness of the Issuer, is not subordinate and
junior in right of payment to the prior payment of the Securities; provided,
however, that the amount to be so applied to the retirement of such indebtedness
shall be reduced by (i) the aggregate principal amount of any Securities
delivered within 120 days of the effective date of any such arrangement to the
Trustee for retirement and cancellation, and (ii) the aggregate principal amount
of such indebtedness (other than the Securities) retired by the Issuer or a
Restricted Subsidiary within 120 days of the effective date of any such
arrangement.
The term "value" shall mean, with respect to a Sale and Leaseback
Transaction, as of any particular time, the amount equal to the greater of (i)
the net proceeds of the sale of the property leased pursuant to such Sale and
Leaseback Transaction, or (ii) the fair value of such property at the time of
entering into such Sale and Leaseback Transaction, as determined by the Board of
Directors, in either case divided first by the number of full years of the term
of the lease and then multiplied by the number of full years of such term
remaining at the time of determination, without regard to any renewal or
extension options contained in the lease.
SECTON 3.8 Restriction on Transfer of Principal Property to Unrestricted
Subsidiary. The Issuer will not itself, and will not permit any Restricted
Subsidiary to, transfer (whether by merger, consolidation or otherwise) any
Principal Property to any Unrestricted Subsidiary, except for fair value as
determined by the Board of Directors, unless it shall apply an amount equal to
the fair value of such property at the time of such transfer, as so determined,
to the retirement (other than any mandatory retirement), within 10 days of the
effective date of such transfer, of indebtedness for money borrowed by the
<PAGE>
Issuer or any Restricted Subsidiary (other than such indebtedness owned by the
Issuer or any Restricted Subsidiary) which was recorded as funded debt as of the
date of its creation and which, in case of such indebtedness of the Issuer, is
not subordinate and junior in right of payment to the prior payment of the
Securities; provided, however, that the amount to be so applied to the
retirement of such indebtedness shall be reduced by (i) the aggregate principal
amount of any Securities delivered within 10 days of the effective date of any
such arrangement to the Trustee for retirement and cancellation, and (ii) the
aggregate principal amount of such indebtedness (other than Securities) retired
by the Issuer or a Restricted Subsidiary within 10 days of the effective date of
any such arrangement.
SECTION 3.9 Restriction on Incurrence of Indebtedness by Restricted
Subsidiaries. So long as any of the Securities are outstanding, the Issuer shall
not at any time permit any Restricted Subsidiary to create, incur, assume or
guarantee any Indebtedness for money borrowed; provided that the foregoing
covenant shall not be applicable to the following:
(a) any Indebtedness of ENSTAR Alaska;
(b) any Secured Debt that is permitted to be created, incurred,
assumed or guaranteed pursuant to subparagraphs (a) through (f) of Section
3.6;
(c) any Indebtedness of a Restricted Subsidiary existing at the time
such Restricted Subsidiary was acquired by the Issuer (including without
limitation Indebtedness incurred by such Restricted Subsidiary in
connection with its acquisition by the Issuer);
(d) intercompany Indebtedness owed to the Issuer by any Restricted
Subsidiary and intercompany Indebtedness owed to any wholly owned
Subsidiary of the Issuer by any Restricted Subsidiary; or
(e) any extension, renewal or replacement (or successive extensions,
renewals or replacements) in whole or in part of any Indebtedness referred
to in the foregoing subparagraphs (a) through (d); provided, however, that
the principal amount of Indebtedness so extended, renewed or replaced shall
not exceed the principal amount outstanding at the time of such extension,
renewal or replacement.
Notwithstanding the foregoing provisions of this Section 3.9, any one or
more Restricted Subsidiaries may create, incur, assume or guarantee Indebtedness
that would otherwise be subject to the foregoing restrictions in an aggregate
amount that, without duplication, together with all Indebtedness of Restricted
Subsidiaries in existence at such time (not including Indebtedness permitted
under subparagraphs (a) through (e) above), all Secured Debt of the Issuer and
its Restricted Subsidiaries in existence at such time (not including Secured
Debt permitted to be secured under subparagraphs (a) through (f) of Section 3.6)
and the aggregate value of Sale and Leaseback Transactions (as defined in
Section 3.7) in existence at such time (not including Sale and Leaseback
Transactions the proceeds of which have been or will be applied in accordance
with clause (b) of Section 3.7) does not at the time exceed 10% of Consolidated
Net Tangible Assets of the Issuer and its Restricted Subsidiaries (excluding
ENSTAR Alaska).
SECTION 3.10 Limitation on Incurrence of Additional Indebtedness. So long
as any of the Securities are outstanding, the Issuer shall not, and shall not
permit any Restricted Subsidiary to, create, incur, assume, guarantee or
otherwise become obligated with respect to any Indebtedness described in clause
(a) of the definition of Indebtedness, unless, after giving effect thereto, the
Issuer's EBITDA/Interest Ratio on the date thereof would be at least 2.5 to 1.0,
determined on a pro forma basis as if the incurrence of such additional
Indebtedness and the application of the net proceeds therefrom had occurred at
the beginning of the twelve-month period used to calculate the Issuer's
EBITDA/Interest Ratio; provided that the foregoing covenant shall not be
applicable to the following:
(a) (i) Indebtedness of the Issuer or any Restricted Subsidiary
outstanding on the date of this Indenture or (ii) Indebtedness of the
Issuer or any Restricted Subsidiary under a revolving credit facility to
the extent that the aggregate commitment thereunder does not exceed $475
million, the maximum aggregate commitment for the Issuer's revolving credit
facility on the date of this Indenture;
(b) intercompany Indebtedness owed to the Issuer by any Restricted
Subsidiary and intercompany Indebtedness owed to any wholly owned
Subsidiary of the Issuer by any Restricted Subsidiary; or
(c) any extension, renewal or replacement (or successive extensions,
renewals or replacements) in whole or in part of any Indebtedness referred
to in the foregoing subparagraphs (a) through (b); provided, however, that
the principal amount of Indebtedness so extended, renewed or replaced shall
not exceed the principal amount outstanding at the time of such extension,
renewal or replacement.
<PAGE>
ARTICLE FOUR
SECURITYHOLDERS LISTS AND
REPORTS BY THE ISSUER AND THE TRUSTEE
Issuer to Furnish Trustee Information as to Names and Addresses of
Securityholders. The Issuer and any other obligor on the Securities covenant and
agree that they will furnish or cause to be furnished to the Trustee a list in
such form as the Trustee may reasonably require of the names and addresses of
the Holders of the Securities of each series:
(a) semiannually and not more than 15 days after each March 1 and September
1, and
(b) at such other times as the Trustee may request in writing, within 30
days after receipt by the Issuer of any such request, provided that if and so
long as the Trustee shall be the registrar for such series, such list shall not
be required to be furnished.
SECTION 4.2 Preservation and Disclosure of Securityholders Lists. (a) The
Trustee shall preserve, in as current a form as is reasonably practicable, all
information as to the names and addresses of the Holders of each series of
Securities (i) contained in the most recent list furnished to it as provided in
Section 4.1, and (ii) received by it in the capacity of registrar or paying
agent for such series, if so acting. The Trustee may destroy any list furnished
to it as provided in Section 4.1 upon receipt of a new list so furnished.
(b) In case three or more Holders of Securities (hereinafter referred to as
"applicants") apply in writing to the Trustee and furnish to the Trustee
reasonable proof that each such applicant has owned a Security for a period of
at least six months preceding the date of such application, and such application
states that the applicants desire to communicate with other Holders of
Securities of a particular series (in which case the applicants must all hold
Securities of such series) or with Holders of all Securities with respect to
their rights under this Indenture or under such Securities and such application
is accompanied by a copy of the form of proxy or other communication which such
applicants propose to transmit, then the Trustee shall, within five Business
Days after the receipt of such application, at its election, either
(i) afford to such applicants access to the information preserved
at the time by the Trustee in accordance with the provisions of
subsection (a) of this Section 4.2, or
(ii) inform such applicants as to the approximate number of
Holders of Securities of such series or of all Securities, as the case
may be, whose names and addresses appear in the information preserved
at the time by the Trustee, in accordance with the provisions of
subsection (a) of this Section 4.2, and as to the approximate cost of
mailing to such Securityholders the form of proxy or other
communication, if any, specified in such application.
If the Trustee shall elect not to afford to such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to each Securityholder of such series or all Holders of Securities, as the
case may be, whose name and address appears in the information preserved at the
time by the Trustee in accordance with the provisions of subsection (a) of this
Section 4.2 a copy of the form of proxy or other communication which is
specified in such request, with reasonable promptness after a tender to the
Trustee of the material to be mailed and of payment, or provision for the
payment, of the reasonable expenses of mailing, unless within five days after
such tender, the Trustee shall mail to such applicants and file with the
Commission, together with a copy of the material to be mailed, a written
statement to the effect that, in the opinion of the Trustee, such mailing would
be contrary to the best interests of the Holders of Securities of such series or
of all Securities, as the case may be, or would be in violation of applicable
law. Such written statement shall specify the basis of such opinion. If the
Commission, after opportunity for a hearing upon the objections specified in the
written statement so filed, shall enter an order refusing to sustain any of such
objections or if, after the entry of an order sustaining one or more of such
objections, the Commission shall find, after notice and opportunity for hearing,
that all the objections so sustained have been met, and shall enter an order so
declaring, the Trustee shall mail copies of such material to all such
Securityholders with reasonable promptness after the entry of such order and the
renewal of such tender; otherwise the Trustee shall be relieved of any
obligation or duty to such applicants respecting their application.
(c) Each and every Holder of Securities, by receiving and holding the same,
agrees with the Issuer and the Trustee that neither the Issuer nor the Trustee
nor any agent of the Issuer or the Trustee shall be held accountable by reason
of the disclosure of any such information as to the names and addresses of the
Holders of Securities in accordance with the provisions of subsection (b) of
this Section 4.2, regardless of the source from which such information was
derived, and that the Trustee shall not be held accountable by reason of mailing
any material pursuant to a request made under such subsection (b).
<PAGE>
SECTION 4.3 Reports by the Issuer. The Issuer covenants:
(a) to file with the Trustee, within 15 days after the Issuer is required
to file the same with the Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as the Commission may from time to time by rules and regulations
prescribe) which the Issuer may be required to file with the Commission pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as
amended; or, if the Issuer is not required to file information, documents or
reports pursuant to either of such Sections, then to file with the Trustee and
the Commission, in accordance with rules and regulations prescribed from time to
time by the Commission, such of the supplementary and periodic information,
documents and reports which may be required pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended, in respect of a debt security
listed and registered on a national securities exchange as may be prescribed
from time to time in such rules and regulations;
(b) to file with the Trustee and the Commission, in accordance with rules
and regulations prescribed from time to time by the Commission, such additional
information, documents and reports with respect to compliance by the Issuer with
the conditions and covenants provided for in this Indenture as may be required
from time to time by such rules and regulations;
(c) to transmit by mail to the Holders of Securities within 30 days after
the filing thereof with the Trustee, in the manner and to the extent provided in
Section 4.4(c), such summaries of any information, documents and reports
required to be filed by the Issuer pursuant to subsections (a) and (b) of this
Section 4.3 as may be required to be transmitted to such Holders by rules and
regulations prescribed from time to time by the Commission; and
(d) furnish to the Trustee, not less than annually, a brief certificate
from the principal executive officer, principal financial officer or principal
accounting officer as to his knowledge of the Issuer's compliance with all
conditions and covenants under this Indenture. For purposes of this subsection
(d), such compliance shall be determined without regard to any period of grace
or requirement of notice provided under this Indenture.
SECTION 4.4 Reports by the Trustee. (a) Within 60 days after January 1 of
each year commencing with the year 1994, the Trustee shall transmit by mail to
the Holders of Securities, as provided in subsection (c) of this Section, a
brief report dated as of such January 1 with respect to any of the following
events which may have occurred within the last 12 months (but if no such event
has occurred within such period, no report need be transmitted):
(i) any change to its eligibility under Section 6.9 and its
qualification under Section 6.8;
(ii) the creation of, or any material change to, a relationship
specified in paragraph (i) through (x) of Section 6.8 (c);
(iii) the character and amount of any advances (and if the
Trustee elects so to state, the circumstances surrounding the making
thereof) made by the Trustee (as such) which remain unpaid on the date
of such report and for the reimbursement of which it claims or may
claim a lien or charge, prior to that of the Securities of any series,
on any property or funds held or collected by it as Trustee, except
that the Trustee shall not be required (but may elect) to report such
advances if such advances so remaining unpaid aggregate not more than
1/2 of 1% of the principal amount of all Securities Outstanding on the
date of such report;
(iv) the amount, interest rate, if any, and maturity date of all
other indebtedness owing by the Issuer (or by any other obligor on the
Securities) to the Trustee in its individual capacity on the date of
such report, with a brief description of any property held as
collateral security therefor, except any indebtedness based upon a
creditor relationship arising in any manner described in Section
6.13(b) (2), (3), (4) or (6);
(v) any change to the property and funds, if any, physically in
the possession of the Trustee (as such) on the date of such report;
(vi) any additional issue of Securities which the Trustee has not
previously reported; and
(vii) any action taken by the Trustee in the performance of its
duties under this Indenture which it has not previously reported and
which in its opinion materially affects the Securities, except action
in respect of a default, notice of which has been or is to be withheld
by it in accordance with the provisions of Section 5.8.
(b) The Trustee shall transmit to the Securityholders of each series, as
provided in subsection (c) of this Section 4.4, a brief report with respect to
the character and amount of any advances (and if the Trustee elects so to state,
the circumstances surrounding the making thereof) made by the Trustee, as such,
since the date of the last report transmitted pursuant to the provisions of
subsection (a) of this Section 4.4 (or if no such report has yet been so
<PAGE>
transmitted, since the date of this Indenture) for the reimbursement of which it
claims or may claim a lien or charge prior to that of the Securities of such
series on property or funds held or collected by it as Trustee and which it has
not previously reported pursuant to this subsection (b), except that the Trustee
shall not be required (but may elect) to report such advances if such advances
remaining unpaid at any time aggregate 10% or less of the principal amount of
all Securities Outstanding at such time, such report to be transmitted within 90
days after such time.
(c) Reports pursuant to this Section shall be transmitted by mail:
(i) to all Holders of Securities, as the names and addresses of
such Holders appear upon the registry books of the Issuer; and
(ii) to all other Persons to whom such reports are required to be
transmitted pursuant to Section 313(c) of the Trust Indenture Act of
1939.
(d) A copy of each such report shall, at the time of such transmission to
Securityholders, be furnished to the Issuer and be filed by the Trustee with
each stock exchange upon which the Securities of any applicable series are
listed and also with the Commission. The Issuer agrees to promptly notify the
Trustee with respect to any series when and as the Securities of such series
become admitted to trading on any national securities exchange.
ARTICLE FIVE
REMEDIES OF THE TRUSTEE AND SECURITY HOLDERS
ON EVENT OF DEFAULT
SECTION 5.1 Events of Default. "Event of Default", wherever used herein
with respect to Securities of any series, means any one or more of the following
events (whatever the reason for such Event of Default), unless it is either
inapplicable to a particular series or it is specifically deleted or modified in
or pursuant to the Board Resolution or supplemental indenture establishing such
series of Securities or in the form of Security, for such series:
(a) default in the payment of any installment of interest upon any of the
Securities of such series as and when the same shall become due and payable, and
continuance of such default for a period of 30 days; or
(b) default in the payment of the principal of or premium, if any, of the
Securities of such series as and when the same shall become due and payable
either at maturity, upon redemption, by declaration or otherwise; or
(c) default in the payment or satisfaction of any sinking fund or other
purchase obligation with respect to Securities of such series, as and when such
obligation shall become due and payable as in this Indenture expressed; or
(d) failure on the part of the Issuer duly to observe or perform any other
of the covenants or agreements on the part of the Issuer in the Securities of
such series or in this Indenture continued for a period of 60 days after the
date on which written notice of such failure, requiring the same to be remedied,
shall have been given to the Issuer by the Trustee by certified or registered
mail, or to the Issuer and the Trustee by the Holders of at least 25% in
aggregate principal amount of the Securities of such series then Outstanding; or
(e) without the consent of the Issuer a court having jurisdiction shall
enter an order for relief with respect to the Issuer under the Bankruptcy Code
or without the consent of the Issuer a court having jurisdiction shall enter a
judgment, order or decree adjudging the Issuer a bankrupt or insolvent, or enter
an order for relief for reorganization, arrangement, adjustment or composition
of or in respect of the Issuer under the Bankruptcy Code or applicable state
insolvency law and the continuance of any such judgment, order or decree is
unstayed and in effect for a period of 90 consecutive days; or
(f) the Issuer shall institute proceedings for entry of an order for relief
with respect to the Issuer under the Bankruptcy Code or for an adjudication of
insolvency, or shall consent to the institution of bankruptcy or insolvency
proceedings against it, or shall file a petition seeking, or seek or consent to
reorganization, arrangement, composition or relief under the Bankruptcy Code or
any applicable state law, or shall consent to the filing of such petition or to
the appointment of a receiver, custodian, liquidator, assignee, trustee,
sequestrator or similar official of the Issuer or of substantially all of its
property, or the Issuer shall make a general assignment for the benefit of
creditors as recognized under the Bankruptcy Code; or
(g) default under any bond, debenture, note or other evidence of
Indebtedness for money borrowed by the Issuer or any Subsidiary or under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for money borrowed by the
Issuer or any Subsidiary, whether such Indebtedness exists on the date hereof or
shall hereafter be created, which default shall have resulted in such
Indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise have become due and payable, or any default in payment
of such Indebtedness (after the expiration of any applicable grace periods and
the presentation of any debt instruments, if required), if the aggregate amount
of all such Indebtedness that has been so accelerated and with respect to which
there has been such a default in payment shall exceed $25,000,000, without each
such default and acceleration having been rescinded or annulled within a period
of ten days after there shall have been given to the Issuer by the Trustee by
certified or registered mail, or to the Issuer and the Trustee by the Holders of
at least 25% in aggregate principal amount of the Securities of such series then
<PAGE>
Outstanding, a written notice specifying each such default and requiring the
Issuer to cause each such default and acceleration to be rescinded or annulled
and stating that such notice is a "Notice of Default" hereunder; or
(h) any other Event of Default provided with respect to the Securities of
such series.
If an Event of Default with respect to Securities of any series then
Outstanding occurs and is continuing, then and in each and every such case,
unless the principal of all of the Securities of such series shall have already
become due and payable, either the Trustee or the Holders of not less than 25%
in aggregate principal amount of the Securities of such series then Outstanding,
by notice in writing to the Issuer (and to the Trustee if given by
Securityholders), may declare the principal (or, if the Securities of such
series are Original Issue Discount Securities, such portion of the principal
amount as may be specified in the terms of such series) of all the Securities of
such series and the interest, if any, accrued thereon to be due and payable
immediately, and upon any such declaration the same shall become and shall be
immediately due and payable, notwithstanding anything to the contrary contained
in this Indenture or in the Securities of such series. This provision, however,
is subject to the condition that, if at any time after the unpaid principal
amount (or such specified amount) of the Securities of such series shall have
been so declared due and payable and before any judgment or decree for the
payment of the moneys due shall have been obtained or entered as hereinafter
provided, the Issuer shall pay or shall deposit with the Trustee a sum
sufficient to pay all matured installments of interest, if any, upon all of the
Securities of such series and the principal of any and all Securities of such
series which shall have become due otherwise than by acceleration (with interest
on overdue installments of interest, if any, to the extent that payment of such
interest is enforceable under applicable law and on such principal at the rate
borne by the Securities of such series to the date of such payment or deposit)
and the reasonable compensation, disbursements, expenses and advances of the
Trustee, and any and all defaults under this Indenture, other than the
nonpayment of such portion of the principal amount of and accrued interest, if
any, on Securities of such series which shall have become due by acceleration,
shall have been cured or shall have been waived in accordance with Section 5.7
or provision deemed by the Trustee to be adequate shall have been made therefor,
then and in every such case the Holders of a majority in aggregate principal
amount of the Securities of such series then Outstanding, by written notice to
the Issuer and to the Trustee, may rescind and annul such declaration and its
consequences; but no such rescission and annulment shall extend to or shall
affect any subsequent default, or shall impair any right consequent thereon. If
any Event of Default with respect to the Issuer specified in Section 5.1(e) or
5.1(f) occurs, all unpaid principal amount (or, if the Securities of any series
then Outstanding are Original Issue Discount Securities, such portion of the
principal amount as may be specified in the terms of each such series) and
accrued interest on all Securities of each series then Outstanding shall ipso
facto become and be immediately due and payable without any declaration or other
act by the Trustee or any Securityholder.
If the Trustee shall have proceeded to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned because
of such rescission or annulment or for any other reason or shall have been
determined adversely to the Trustee, then and in every such case the Issuer, the
Trustee and the Securityholders shall be restored respectively to their several
positions and rights hereunder, and all rights, remedies and powers of the
Issuer, the Trustee and the Securityholders shall continue as though no such
proceeding had been taken.
Except with respect to an Event of Default pursuant to Section 5.1 (a), (b)
or (c), the Trustee shall not be charged with knowledge of any Event of Default
unless written notice thereof shall have been given to a Responsible Officer by
the Issuer, a paying agent or any Securityholder.
SECTION 5.2 Payment of Securities on Default; Suit Therefor. The Issuer
covenants that (a) if default shall be made in the payment of any installment of
interest upon any of the Securities of any series then Outstanding as and when
the same shall become due and payable, and such default shall have continued for
a period of 30 days, or (b) if default shall be made in the payment of the
principal of any of the Securities of such series as and when the same shall
have become due and payable, whether at maturity of the Securities of such
series or upon redemption or by declaration or otherwise, then, upon demand of
the Trustee, the Issuer will pay to the Trustee, for the benefit of the Holders
of the Securities, the whole amount that then shall have become due and payable
on all such Securities of such series for principal or interest, if any, or
both, as the case may be, with interest upon the overdue principal and (to the
extent that payment of such interest is enforceable under applicable law) upon
the overdue installments of interest, if any, at the rate borne by the
Securities of such series; and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including a
reasonable compensation to the Trustee, its agents, attorneys and counsel, and
any expenses or liabilities incurred by the Trustee hereunder other than through
its negligence or bad faith.
If the Issuer shall fail forthwith to pay such amounts upon such demand,
the Trustee, in its own name and as trustee of an express trust, shall be
entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Issuer or any other obligor on the
Securities of such series and collect in the manner provided by law out of the
property of the Issuer or any other obligor on the Securities of such series,
wherever situated, the moneys adjudged or decreed to be payable.
If there shall be pending proceedings for the bankruptcy or for the
reorganization of the Issuer or any other obligor on the Securities of any
series then Outstanding under any bankruptcy, insolvency or other similar law
now or hereafter in effect, or if a receiver or trustee or similar official
<PAGE>
shall have been appointed for the property of the Issuer or such other obligor,
or in the case of any other similar judicial proceedings relative to the Issuer
or other obligor upon the Securities of such series, or to the creditors or
property of the Issuer or such other obligor, the Trustee, irrespective of
whether the principal of the Securities of such series shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand pursuant to the provisions of
this Section 5.2, shall be entitled and empowered by intervention in such
proceedings or otherwise to file and prove a claim or claims for the whole
amount of principal and interest, if any, owing and unpaid in respect of the
Securities of such series, and, in case of any judicial proceedings, to file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and of the Securityholders
allowed in such judicial proceedings relative to the Issuer or any other obligor
on the Securities of such series, its or their creditors, or its or their
property, and to collect and receive any moneys or other property payable or
deliverable on any such claims, and to distribute the same after the deduction
of its charges and expenses, and any receiver, assignee or trustee or similar
official in bankruptcy or reorganization is hereby authorized by each of the
Securityholders to make such payments to the Trustee, and, if the Trustee shall
consent to the making of such payments directly to the Securityholders, to pay
to the Trustee any amount due it for compensation and expenses, including
counsel fees and expenses incurred by it up to the date of such distribution. To
the extent that such payment of reasonable compensation, expenses and counsel
fees and expenses out of the estate in any such proceedings shall be denied for
any reason, payment of the same shall be secured by a lien on, and shall be paid
out of, any and all distributions, dividends, moneys, securities and other
property which the Holders of the Securities of such series may be entitled to
receive in such proceedings, whether in liquidation or under any plan of
reorganization or arrangement or otherwise.
All rights of action and of asserting claims under this Indenture, or under
any of the Securities, may be enforced by the Trustee without the possession of
any of the Securities, or the production thereof at any trial or other
proceeding relative thereto, and any such suit or proceeding instituted by the
Trustee shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall be for the ratable benefit of the Holders of the
Securities of the series in respect of which such judgment has been recovered.
SECTION 5.3 Application of Moneys Collected by Trustee. Any moneys
collected by the Trustee pursuant to Section 5.2 with respect to Securities of
any series then Outstanding shall be applied in the order following, at the date
or dates fixed by the Trustee for the distribution of such moneys, upon
presentation of the several Securities of such series, and stamping thereon the
payment, if only partially paid, and upon surrender thereof, if fully paid:
FIRST: To the payment of costs and expenses of collection and reasonable
compensation to the Trustee, its agents, attorneys and counsel, and of all other
expenses and liabilities incurred, and all advances made, by the Trustee
pursuant to Section 6.6 except as a result of its negligence or bad faith;
SECOND: If the principal of the Outstanding Securities of such series shall
not have become due and be unpaid, to the payment of interest, if any, on the
Securities of such series, in the order of the maturity of the installments of
such interest, if any, with interest (to the extent that such interest has been
collected by the Trustee) upon the overdue installments of interest, if any, at
the rate borne by the Securities of such series, such payment to be made ratably
to the Persons entitled thereto;
THIRD: If the principal of the Outstanding Securities of such series shall
have become due, by declaration or otherwise, to the payment of the whole amount
then owing and unpaid upon the Securities of such series for principal and
interest, if any, with interest on the overdue principal and (to the extent that
such interest has been collected by the Trustee) upon overdue installments of
interest, if any, at the rate borne by the Securities of such series; and in
case such moneys shall be insufficient to pay in full the whole amounts so due
and unpaid upon the Securities of such series, then to the payment of such
principal and interest, if any, without preference or priority of principal over
interest or of interest over principal, or of any installment of interest over
any other installment of interest, or of any Security over any other Security,
ratably to the aggregate of such principal and accrued and unpaid interest; and
FOURTH: To the payment of any surplus then remaining to the Issuer, its
successors or assigns, or to whomsoever may be lawfully entitled to receive the
same.
No claim for interest which in any manner at or after maturity shall have
been transferred or pledged separate or apart from the Securities to which it
relates, or which in any manner shall have been kept alive after maturity by an
extension (otherwise than pursuant to an extension made pursuant to a plan
proposed by the Issuer to the Holders of all Securities of any series then
Outstanding), purchase, funding or otherwise by or on behalf or with the consent
or approval of the Issuer shall be entitled, in case of a default hereunder, to
any benefit of this Indenture, except after prior payment in full of the
principal of all Securities of any series then Outstanding and of all claims for
interest not so transferred, pledged, kept alive, extended, purchased or funded.
SECTION 5.4 Proceedings by Securityholders. No Holder of any Securities of
any series then Outstanding shall have any right by virtue of or by availing of
any provision of this Indenture to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Indenture or for the
appointment of a receiver or trustee or similar official, or for any other
<PAGE>
remedy hereunder, unless such Holder previously shall have given to the Trustee
written notice of default and of the continuance thereof, as hereinbefore
provided, and unless the Holders of not less than 25% in aggregate principal
amount of the Securities of such series then Outstanding shall have made written
request to the Trustee to institute such action, suit or proceeding in its own
name as Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee for 60 days after its receipt of
such notice, request and offer of indemnity, shall have neglected or refused to
institute any such action, suit or proceeding, it being understood and intended,
and being expressly covenanted by the Holder of every Security of such series
with every other taker and Holder and the Trustee, that no one or more Holders
of Securities of such series shall have any right in any manner whatever by
virtue of or by availing of any provision of this Indenture or of the Securities
to affect, disturb or prejudice the rights of any other Holder of such
Securities of such series, or to obtain or seek to obtain priority over or
preference as to any other such Holder, or to enforce any right under this
Indenture or the Securities, except in the manner herein provided and for the
equal, ratable and common benefit of all Holders of Securities of such series.
Notwithstanding any other provisions in this Indenture, however, the right
of any Holder of any Security to receive payment of the principal of and
interest, if any, on such Security, on or after the respective due dates
expressed in such Security, or to institute suit for the enforcement of any such
payment on or after such respective dates shall not be impaired or affected
without the consent of such Holder.
SECTION 5.5 Proceedings by Trustee. In case of an Event of Default
hereunder, the Trustee may in its discretion proceed to protect and enforce the
rights vested in it by this Indenture by such appropriate judicial proceedings
as the Trustee shall deem most effectual to protect and enforce any of such
rights, either by suit in equity or by action at law or by proceedings in
bankruptcy or otherwise, whether for the specific enforcement of any covenant or
agreement contained in this Indenture or in aid of the exercise of any power
granted in this Indenture, or to enforce any other legal or equitable right
vested in the Trustee by this Indenture or by law.
SECTION 5.6 Remedies Cumulative and Continuing. All powers and remedies
given by this Article Five to the Trustee or to the Securityholders shall, to
the extent permitted by law, be deemed cumulative and not exclusive of any
thereof or of any other powers and remedies available to the Trustee or the
Securityholders, by judicial proceedings or otherwise, to enforce the
performance or observance of the covenants and agreements contained in this
Indenture, and no delay or omission of the Trustee or of any Securityholder to
exercise any right or power accruing upon any default occurring and continuing
as aforesaid shall impair any such right or power, or shall be construed to be a
waiver of any such default or an acquiescence therein; and, subject to the
provisions of Section 5.4, every power and remedy given by this Article Five or
by law to the Trustee or to the Securityholders may be exercised from time to
time, and as often as shall be deemed expedient, by the Trustee or by the
Securityholders.
SECTION 5.7 Direction of Proceedings; Waiver of Defaults by Majority of
Securityholders. The Holders of a majority in aggregate principal amount of the
Securities of any series then Outstanding 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 or power conferred on the Trustee with
respect to Securities of such series; provided, however, that (subject to the
provisions of Section 6.1) the Trustee shall have the right to decline to follow
any such direction if the Trustee shall determine upon advice of counsel that
the action or proceeding so directed may not lawfully be taken or if the Trustee
in good faith by its board of directors, its executive committee, or a trust
committee of directors or Responsible Officers or both shall determine that the
action or proceeding so directed would involve the Trustee in personal
liability. The Holders of a majority in aggregate principal amount of the
Securities of any series then Outstanding may on behalf of the Holders of all of
the Securities of such series waive any past default or Event of Default
hereunder and its consequences except a default in the payment of interest, if
any, on, or the principal of, the Securities of such series. Upon any such
waiver the Issuer, the Trustee and the Holders of the Securities of such series
shall be restored to their former positions and rights hereunder, respectively;
but no such waiver shall extend to any subsequent or other default or Event of
Default or impair any right consequent thereon. Whenever any default or Event of
Default hereunder shall have been waived as permitted by this Section 5.7, said
default or Event of Default shall for all purposes of the Securities and this
Indenture be deemed to have been cured and to be not continuing.
SECTION 5.8 Notice of Defaults. The Trustee shall, within 90 days after the
occurrence of a default, with respect to Securities of any series then
Outstanding, mail to all Holders of Securities of such series, as the names and
the addresses of such Holders appear upon the Securities register, notice of all
defaults known to the Trustee with respect to such series, unless such defaults
shall have been cured before the giving of such notice (the term "defaults" for
the purpose of this Section 5.8 being hereby defined to be the events specified
in clauses (a), (b), (c), (d), (e), (f), (g) and (h) of Section 5.1, not
including periods of grace, if any, provided for therein and irrespective of the
giving of the written notice specified in said clause (d) or (g) but in the case
of any default of the character specified in said clause (d) or (g) no such
notice to Securityholders shall be given until at least 60 days after the giving
of written notice thereof to the Issuer pursuant to said clause (d) or (g), as
the case may be); provided, however, that, except in the case of default in the
payment of the principal of or interest, if any, on any of the Securities, or in
the payment or satisfaction of any sinking fund or other purchase obligation,
the Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee, or a trust committee of directors
or Responsible Officers or both of the Trustee in good faith determines that the
withholding of such notice is in the best interests of the Securityholders.
SECTION 5.9 Undertaking to Pay Costs. All parties to this Indenture agree,
and each Holder of any Security by his acceptance thereof shall be deemed to
<PAGE>
have agreed, that any court may in its discretion require, 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, the filing by any
party litigant in such suit of an undertaking to pay the cost of such suit, and
that such court may in its discretion assess reasonable costs, including
reasonable attorney's fees and expenses, against any party litigant in such
suit, having due regard to the merits and good faith of the claims or defenses
made by such party litigant; but the provisions of this Section 5.9 shall not
apply to any suit instituted by the Trustee, to any suit instituted by any
Securityholder, or group of Securityholders, holding in the aggregate more than
10% in principal amount of the Securities of any series then Outstanding, or to
any suit instituted by any Securityholders for the enforcement of the payment of
the principal of or interest, if any, on any Security against the Issuer on or
after the due date expressed in such Security.
ARTICLE SIX
CONCERNING THE TRUSTEE
SECTION 6.1 Duties and Responsibilities of the Trustee; During Default;
Prior to Default. With respect to the Holders of any series of Securities issued
hereunder, the Trustee, prior to the occurrence of an Event of Default with
respect to the Securities of a particular series and after the curing or waiving
of all Events of Default which may have occurred with respect to such series,
undertakes to perform such duties and only such duties as are specifically set
forth in this Indenture. In case an Event of Default with respect to the
Securities of a series has occurred (which has not been cured or waived) the
Trustee shall exercise with respect to such series of Securities such of the
rights and powers vested in it by this Indenture, and use the same degree of
care and skill in their exercise as a prudent man would exercise or use under
the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own wilful misconduct, except that
(a) prior to the occurrence of an Event of Default with respect to the
Securities of any series and after the curing or waiving of all such Events of
Default with respect to such series which may have occurred:
(i) the duties and obligations of the Trustee with respect to the
Securities of any series shall be determined solely by the express
provisions of this Indenture, and the Trustee shall not be liable except
for the performance of such duties and obligations as are specifically set
forth in this Indenture, and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any statements,
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture; but in the case of any such statements,
certificates or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall be under a duty
to examine the same to determine whether or not they conform to the
requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer or Responsible Officers of the Trustee, unless it
shall be proved that the Trustee was negligent in ascertaining the pertinent
facts; and
(c) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of the
Holders pursuant to Section 5.7 relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred upon the Trustee, under this Indenture.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there shall be reasonable ground for believing that the
repayment of such funds or adequate indemnity against such liability is not
reasonably assured to it.
SECTION 6.2 Certain Rights of the Trustee. Subject to Section 6.1:
(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, Officers' Certificate or any other certificate,
statement, instrument, opinion, report, notice, request, consent, order, bond,
debenture, note, coupon, security or other paper or document believed by it to
be genuine and to have been signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the Issuer mentioned herein
shall be sufficiently evidenced by an Officers' Certificate or Issuer Order
(unless other evidence in respect thereof be herein specifically prescribed);
and any resolution of the Board of Directors may be evidenced to the Trustee by
a copy thereof certified by the secretary or an assistant secretary of the
Issuer;
<PAGE>
(c) the Trustee may consult with counsel of its selection and any advice of
such counsel promptly confirmed in writing shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
to be taken by it hereunder in good faith and in reliance thereon in accordance
with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the trusts
or powers vested in it by this Indenture at the request, order or direction of
any of the Securityholders pursuant to the provisions of this Indenture
(including, without limitation, pursuant to Section 5.1), unless such
Securityholders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be incurred
therein or thereby;
(e) the Trustee shall not be liable for any action taken or omitted by it
in good faith and believed by it to be authorized or within the discretion,
rights or powers conferred upon it by this Indenture;
(f) prior to the occurrence of an Event of Default hereunder and after the
curing or waiving of all Events of Default, the Trustee shall not be bound to
make any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, approval, appraisal, bond, debenture, note, coupon, security, or other
paper or document unless requested in writing so to do by the Holders of not
less than a majority in aggregate principal amount of the Securities of all
series affected then Outstanding; provided that, if the payment within a
reasonable time to the Trustee of the costs, expenses or liabilities likely to
be incurred by it in the making of such investigation is, in the opinion of the
Trustee, not reasonably assured to the Trustee by the security afforded to it by
the terms of this Indenture, the Trustee may require reasonable indemnity
against such expenses or liabilities as a condition to proceeding; the
reasonable expenses of every such investigation shall be paid by the Issuer or,
if paid by the Trustee or any predecessor Trustee, shall be repaid by the Issuer
upon demand; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys not regularly in its employ and the Trustee shall not be responsible
for any misconduct or negligence on the part of any such agent or attorney
appointed with due care by it hereunder.
SECTION 6.3 Trustee Not Responsible for Recitals, Disposition of Securities
or Application of Proceeds Trustee Not Responsible for Recitals, Disposition of
Securities or Application of Proceeds Thereof. The recitals contained herein and
in the Securities, except the Trustee's certificates of authentication, shall be
taken as the statements of the Issuer, and the Trustee assumes no responsibility
for the correctness of the same. The Trustee makes no representation as to the
validity or sufficiency of this Indenture, of the Securities or of any
prospectus used to sell the Securities. The Trustee shall not be accountable for
the use or application by the Issuer of any of the Securities or of the proceeds
thereof.
SECTION 6.4 Trustee and Agents May Hold Securities; Collections, etc. The
Trustee or any agent of the Issuer or the Trustee, in its individual or any
other capacity, may become the owner or pledgee of Securities with the same
rights it would have if it were not the Trustee or such agent and, subject to
Sections 6.8 and 6.13, may otherwise deal with the Issuer and receive, collect,
hold and retain collections from the Issuer with the same rights it would have
if it were not the Trustee or such agent.
SECTION 6.5 Moneys Held by Trustee. Subject to the provisions of Section
10.4 hereof, all moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received,
but need not be segregated from other funds except to the extent required by
mandatory provisions of law. Neither the Trustee nor any agent of the Issuer or
the Trustee shall be under any liability for interest on any moneys received by
it hereunder.
SECTION 6.6. Compensation and Indemnification of Trustee and Its Prior
Claim. The Issuer covenants and agrees to pay to the Trustee from time to time,
and the Trustee shall be entitled to, such compensation as shall be agreed to in
writing between the Issuer and the Trustee (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express trust)
and the Issuer covenants and agrees to pay or reimburse the Trustee and each
predecessor Trustee upon its request for all reasonable expenses, disbursements
and advances incurred or made by or on behalf of it in accordance with any of
the provisions of this Indenture (including the reasonable compensation and the
expenses and disbursements of its counsel and of all agents and other persons
not regularly in its employ) except any such expense, disbursement or advance as
may arise from its negligence or bad faith. The Issuer also covenants to
indemnify the Trustee and each predecessor Trustee for, and to hold it harmless
against, any and all loss, liability, damage, claim or expense, including taxes
(other than taxes based on the income of the Trustee), incurred without
negligence or bad faith on its part, arising out of or in connection with the
acceptance or administration of this Indenture or the trusts hereunder and its
duties hereunder, including the costs and expenses of defending itself against
or investigating any claim or liability in the premises. The obligations of the
Issuer under this Section 6.6 to compensate and indemnify the Trustee and each
predecessor Trustee and to pay or reimburse the Trustee and each predecessor
Trustee for expenses, disbursements and advances shall constitute additional
indebtedness hereunder and shall survive the satisfaction and discharge of this
Indenture or the resignation or removal of the Trustee. Such additional
indebtedness shall be a senior claim to that of the Securities upon all property
and funds held or collected by the Trustee as such, except funds held in trust
for the benefit of the Holders of particular Securities, and the Securities are
hereby subordinated to such senior claim. When the Trustee incurs expenses or
<PAGE>
renders services in connection with an Event of Default specified in Section 5.1
or in connection with Article Five hereof, the expenses (including the
reasonable fees and expenses of its counsel) and the compensation for the
service in connection therewith are intended to constitute expenses of
administration under any bankruptcy law.
SECTION 6.7 Right of Trustee to Rely on Officers' Certificate, etc. Subject
to Sections 6.1 and 6.2, whenever in the administration of the trusts of this
Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or bad faith on the
part of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Trustee, and such certificate, in the
absence of negligence or bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action taken, suffered or omitted by it under the
provisions of this Indenture upon the faith thereof.
SECTION 6.8 Qualification of Trustee; Conflicting Interests. (a) If the
Trustee has or shall acquire any conflicting interest (as defined in subsection
(c)), then within 90 days after ascertaining that it has such conflicting
interest, and if the default (as defined in subsection (c)) to which such
conflicting interest relates has not been cured or duly waived or otherwise
eliminated before the end of such 90-day period, the Trustee shall either
eliminate such conflicting interest or, except as otherwise provided below,
resign, and the Issuer shall take prompt steps to have a successor appointed in
the manner provided in Section 6.10.
(b) If the Trustee shall fail to comply with the provisions of subsection
(a), the Trustee shall, within 10 days after the expiration of such 90-day
period, transmit notice of such failure to the Securityholders in the manner and
to the extent provided in Section 4.4 and, subject to the provisions of Section
5.9, unless the Trustee's duty to resign is stayed as provided below, any
Securityholder who has been a bona fide Holder of Securities for at least six
months may, on behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the removal of the Trustee, and the
appointment of a successor, if the Trustee fails, after written request thereof
by such Securityholder, to comply with the provisions of subsection (a).
Except in the case of a default in the payment of the principal of or
interest on any Security, or in the payment of any sinking or purchase fund
installment, the Trustee shall not be required to resign as provided by this
Section 6.8 if the Trustee shall have sustained the burden of proving, on
application to the Commission and after opportunity for hearing thereon, that
(i) the default under the Indenture may be cured or waived during a
reasonable period and under the procedures described in such application,
and
(ii) a stay of the Trustee's duty to resign will not be inconsistent
with the interests of Holders of the Securities.
The filing of such an application shall automatically stay the performance
of the duty to resign until the Commission orders otherwise. Any resignation of
the Trustee shall become effective only upon the appointment of a successor
trustee in accordance with the provisions of Section 6.10 and such successor's
acceptance of such an appointment.
(c) For the purposes of this Section 6.8, the Trustee shall be deemed to
have a conflicting interest with respect to Securities of any series if the
Securities of such series are in default (as determined in accordance with the
provisions of Section 5.1, but exclusive of any period of grace or requirement
of notice) and
(i) the Trustee is trustee under this Indenture with respect to the
Outstanding securities of any other series or is a trustee under another
indenture under which any other securities, or certificates of interest or
participation in any other securities, of the Issuer are outstanding,
unless such other indenture is a collateral trust indenture under which the
only collateral consists of Securities issued under this Indenture;
provided that there shall be excluded from the operation of this paragraph
(i), this Indenture with respect to the Securities of any other series and
there shall also be so excluded any other indenture or indentures under
which other securities, or certificates of interest or participation in
other securities, of the Issuer are outstanding if (x) this Indenture is
and, if applicable, this Indenture and any series issued pursuant to this
Indenture and such other indenture or indentures are wholly unsecured and
rank equally and such other indenture or indentures are hereafter qualified
under the Trust Indenture Act of 1939, unless the Commission shall have
found and declared by order pursuant to Section 305(b) or Section 307(c) of
the Trust Indenture Act of 1939 that differences exist between the
provisions of this Indenture with respect to Securities of such series and
one or more other series, or the provisions of this Indenture and the
provisions of such other indenture or indentures which are so likely to
involve a material conflict of interest as to make it necessary in the
public interest or for the protection of investors to disqualify the
Trustee from acting as such under this Indenture with respect to Securities
of such series and such other series, or under this Indenture or such other
indenture or indentures, or (y) the Issuer shall have sustained the burden
of proving, on application to the Commission and after opportunity for
hearing thereon, that trusteeship under this Indenture with respect to
Securities of such series and such other series, or under this Indenture
and such other indenture or indentures is not so likely to involve a
material conflict of interest as to make it necessary in the public
interest or for the protection of investors to disqualify the Trustee from
acting as such under this Indenture with respect to Securities of such
series and such other series, or under this Indenture and such other
indentures;
<PAGE>
(ii) the Trustee or any of its directors or executive officers is
an underwriter for the Issuer;
(iii) the Trustee directly or indirectly controls or is directly
or indirectly controlled by or is under direct or indirect common
control with an underwriter for the Issuer;
(iv) the Trustee or any of its directors or executive officers is
a director, officer, partner, employee, appointee, or representative
of the Issuer, or of an underwriter (other than the Trustee itself)
for the Issuer who is currently engaged in the business of
underwriting, except that (x) one individual may be a director or an
executive officer, or both, of the Trustee and a director or an
executive officer, or both, of the Issuer, but may not be at the same
time an executive officer of both the Trustee and the Issuer; (y) if
and so long as the number of directors of the Trustee in office is
more than nine, one additional individual may be a director or an
executive officer, or both, of the Trustee and a director of the
Issuer; and (z) the Trustee may be designated by the Issuer or by any
underwriter for the Issuer to act in the capacity of transfer agent,
registrar, custodian, paying agent, fiscal agent, escrow agent, or
depositary, or in any other similar capacity, or, subject to the
provisions of subsection (c) (i) of this Section, to act as trustee,
whether under an indenture or otherwise;
(v) 10% or more of the voting securities of the Trustee is
beneficially owned either by the Issuer or by any director, partner or
executive officer thereof, or 20% or more of such voting securities is
beneficially owned, collectively, by any two or more of such persons;
or 10% or more of the voting securities of the Trustee is beneficially
owned either by an underwriter for the Issuer or by any director,
partner, or executive officer thereof, or is beneficially owned,
collectively, by any two or more such persons;
(vi) the Trustee is the beneficial owner of, or holds as
collateral security for an obligation which is in default, (x) 5% or
more of the voting securities or 10% or more of any other class of
security of the Issuer, not including the Securities issued under this
Indenture and securities issued under any other indenture under which
the Trustee is also trustee, or (y) 10% or more of any class of
security of an underwriter for the Issuer;
(vii) the Trustee is the beneficial owner of, or holds as
collateral security for an obligation which is in default, 5% or more
of the voting securities of any person who, to the knowledge of the
Trustee, owns 10% or more of the voting securities of, or controls
directly or indirectly or is under direct or indirect common control
with, the Issuer;
(viii) the Trustee is the beneficial owner of, or holds as
collateral security for an obligation which is in default, 10% or more
of any class security of any person who, to the knowledge of the
Trustee, owns 50% or more of the voting securities of the Issuer;
(ix) the Trustee owns on the date of default (as determined in
accordance with the provisions of Section 5.1, but exclusive of any
period of grace or requirement of notice) or on any anniversary of
such default while such default remains outstanding, in the capacity
of executor, administrator, testamentary or inter vivos trustee,
guardian, committee or conservator, or in any other similar capacity,
an aggregate of 25% or more of the voting securities, or of any class
of security, of any Person, the beneficial ownership of a specified
percentage of which would have constituted a conflicting interest
under paragraphs (vi), (vii) or (viii) of this subsection. As to any
such securities of which the Trustee acquired ownership through
becoming executor, administrator, or testamentary trustee of an estate
which included them, the provisions of the preceding sentence shall
not apply, for a period of two years from the date of such
acquisition, to the extent that such securities included in such
estate do not exceed 25% of such voting securities or 25% of any such
class of security. Promptly after the dates of any such default and
annually in each succeeding year that the Securities remain in
default, the Trustee shall make a check of its holdings of such
securities in any of the above-mentioned capacities as of such dates.
If the Issuer fails to make payment in full of principal of or
interest on any of the Securities when and as the same becomes due and
payable, and such failure continues for 30 days thereafter, the
Trustee shall make a prompt check of its holdings of such Securities
in any of the above-mentioned capacities as of the date of the
expiration of such 30-day period, and after such date, notwithstanding
the foregoing provisions of this paragraph, all such Securities so
held by the Trustee, with sole or joint control over such Securities
vested in it, shall, but only so long as such failure shall continue,
be considered as though beneficially owned by the Trustee for the
purposes of paragraphs (vi), (vii) and (viii) of this subsection; or
(x) except under the circumstances described in paragraphs (1),
(3), (4), (5) or (6) of Section 6.13(b), the Trustee shall be or shall
become a creditor of the Issuer.
For purposes of subsection (c) (i), the term "series of securities" or
"series" means a series, class or group of securities issuable under an
indenture pursuant to the terms of which holders of one such series may vote to
direct the Trustee, or otherwise take action pursuant to a vote of such holders,
separately from holders of another such series; provided that "series of
securities" or "series" shall not include any series of securities issuable
under an indenture if all such series rank equally and are wholly unsecured.
<PAGE>
The specification of percentages in subsections (c) (v) to (ix) inclusive
of this Section 6.8 shall not be construed as indicating that the ownership of
such percentages of the securities of a person is or is not necessary or
sufficient to constitute direct or indirect control for the purposes of
subsections (c) (iii) or (vii) of this Section.
For the purposes of subsections (c) (vi), (vii), (viii) and (ix), of this
Section 6.8, only,
(A) the terms "security" and "securities" shall include only such
securities as are generally known as corporate securities, but shall not
include any note or other evidence of indebtedness issued to evidence an
obligation to repay moneys lent to a person by one or more banks, trust
companies, or banking firms, or any certificate of interest or
participation in any such note or evidence of indebtedness;
(B) an obligation shall be deemed to be in default when a default in
payment of principal shall have continued for 30 days or more and shall not
have been cured; and
(C) the Trustee shall not be deemed to be the owner or holder of (x)
any security which it holds as collateral security, as trustee or
otherwise, for an obligation which is not in default as defined in clause
(B) above, or (y) any security which it holds as collateral security under
this Indenture, irrespective of any default hereunder, or (z) any security
which it holds as agent for collection, or as custodian, escrow agent, or
depositary, or in any similar representative capacity.
Except as provided above, the word "security" or "securities" as used in
this Section 6.8 shall mean any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in any
profit-sharing agreement, collateral trust certificate, preorganization
certificate or subscription, transferable share, investment contract, voting
trust certificate, certificate of deposit for a security, fractional undivided
interest in oil, gas or other mineral rights, or, in general, any interest or
instrument commonly known as a "security", or any certificate of interest or
participation in, temporary or interim certificate for, receipt for, guarantee
of, or warrant or right to subscribe to or purchase, any of the foregoing.
(d) For purposes of this Section 6.8:
(i) the term "underwriter" when used with reference to the Issuer
shall mean every person who, within a one year period prior to the
time as of which the determination is made, was an underwriter of any
security of the Issuer outstanding at the time of the determination;
(ii) the term "director" shall mean any director of a corporation
or any individual performing similar functions with respect to any
organization whether incorporated or unincorporated;
(iii) the term "person" shall mean an individual, a corporation,
a partnership, an association, a joint-stock company, a trust, an
unincorporated organization, or a government or political subdivision
thereof; as used in this paragraph, the term "trust" shall include
only a trust where the interest or interests of the beneficiary or
beneficiaries are evidenced by a security;
(iv) the term "voting security" shall mean any security presently
entitling the owner or holder thereof to vote in the direction or
management of the affairs of a person, or any security issued under or
pursuant to any trust, agreement or arrangement whereby a trustee or
trustees or agent or agents for the owner or holder of such security
are presently entitled to vote in the direction or management of the
affairs of a person;
(v) the term "Issuer" shall mean any obligor upon the Securities;
and
(vi) the term "executive officer" shall mean the president, every
vice president, every trust officer, the cashier, the secretary, and
the treasurer of a corporation, and any individual customarily
performing similar functions with respect to any organization whether
incorporated or unincorporated, but shall not include the chairman of
the board of directors.
(e) The percentages of voting securities and other securities specified
in this Section 6.8 shall be calculated in accordance with the following
provisions:
(i) a specified percentage of the voting securities of the
Trustee, the Issuer or any other person referred to in this Section
(each of whom is referred to as a "person" in this paragraph) means
such amount of the outstanding voting securities of such person as
entitles the holder or holders thereof to cast such specified
percentage of the aggregate votes which the holders of all the
outstanding voting securities of such person are entitled to cast in
the direction or management of the affairs of such person;
(ii) a specified percentage of a class of securities of a person
means such percentage of the aggregate amount of securities of the
class outstanding;
<PAGE>
(iii) the term "amount", when used in regard to securities, means
the principal amount if relating to evidences of indebtedness, the
number of shares if relating to capital shares, and the number of
units if relating to any other kind of security;
(iv) the term "outstanding" means issued and not held by or for
the account of the issuer; the following securities shall not be
deemed outstanding within the meaning of this definition:
(A) securities of an issuer held in a sinking fund relating to
securities of the issuer of the same class;
(B) securities of an issuer held in a sinking fund relating to
another class of securities of the issuer, if the obligation evidenced
by such other class of securities is not in default as to principal or
interest or otherwise;
(C) securities pledged by the issuer thereof as security for an
obligation of the issuer not in default as to principal or interest or
otherwise; and
(D) securities held in escrow if placed in escrow by the issuer
thereof; provided,that any voting securities of an issuer shall be
deemed outstanding if any person other than the issuer is entitled to
exercise the voting rights thereof; and
(v) a security shall be deemed to be of the same class as
another security if both securities confer upon the holder or holders
thereof substantially the same rights and privileges; provided, that,
in the case of secured evidences of indebtedness, all of which are
issued under a single indenture, differences in the interest rates or
maturity dates of various series thereof shall not be deemed sufficient
to constitute such series different classes and provided, further,
that, in the case of unsecured evidences of indebtedness, differences
in the interest rates or maturity dates thereof shall not be deemed
sufficient to constitute them securities of different classes, whether
or not they are issued under a single indenture.
SECTION 6.9 Persons Eligible for Appointment as Trustee. The Trustee for
each series of Securities hereunder shall at all times be a corporation
organized and doing business under the laws of the United States of America or
of any state or the District of Columbia having a combined capital and surplus
of at least $50,000,000, and which is authorized under such laws to exercise
corporate trust powers and is subject to supervision or examination by federal,
state or District of Columbia authority, or a corporation or other Person
permitted to act as trustee by the Commission. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purposes of
this Section, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. No obligor upon the Securities or any
Affiliate of such obligor shall serve as trustee upon the Securities. In case at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 6.9, the Trustee shall resign immediately in the
manner and with the effect specified in Section 6.10.
SECTION 6.10 Resignation and Removal; Appointment of Successor Trustee. (a)
The Trustee, or any trustee or trustees hereafter appointed, may at any time
resign with respect to one or more or all series of Securities by giving written
notice of resignation to the Issuer. Upon receiving such notice of resignation,
the Issuer shall promptly appoint a successor trustee or trustees with respect
to the applicable series by written instrument in duplicate, executed by
authority of the Board of Directors, one copy of which instrument shall be
delivered to the resigning Trustee and one copy to the successor trustee or
trustees. If no successor trustee shall have been so appointed with respect to
any series and have accepted appointment within 30 days after the mailing of
such notice of resignation, the resigning trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee, or any
Securityholder who has been a bona fide Holder of a Security or Securities of
the applicable series for at least six months may, subject to the provisions of
Section 5.9, on behalf of himself and all others similarly situated, petition
any such court for the appointment of a successor trustee. Such court may
thereupon, after such notice, if any, as it may deem proper and prescribe,
appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(i) the Trustee shall fail to comply with the provisions of
Section 6.8 with respect to any series of Securities after written
request therefor by the Issuer or by any Securityholder who has been a
bona fide Holder of a Security or Securities of such series for at
least six months; or
(ii) the Trustee shall cease to be eligible in accordance with
the provisions of Section 6.9 and shall fail to resign after written
request therefor by the Issuer or by any such Securityholder; or
(iii) the Trustee shall become incapable of acting with respect
to any series of Securities, or shall be adjudged a bankrupt or
insolvent, or a receiver or liquidator of the Trustee or of its
property shall be appointed, or any public officer shall take charge
or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation;
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then, in any such case, the Issuer may remove the Trustee with respect to
the applicable series of Securities and appoint a successor trustee for such
series by written instrument, in duplicate, executed by order of the Board of
Directors one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor trustee, or, subject to the provisions of
Section 5.9, any Securityholder who has been a bona fide Holder of a Security or
Securities of such series for at least six months may on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor trustee with
respect to such series. Such court may thereupon, after such notice, if any, as
it may deem proper and prescribe, remove the Trustee and appoint a successor
trustee.
(c) The Holders of a majority in aggregate principal amount of the
Securities of each series then Outstanding may at any time remove the Trustee
with respect to Securities of such series and appoint a successor trustee with
respect to the Securities of such series by delivering to the Trustee so
removed, to the successor trustee so appointed and to the Issuer the evidence
provided for in Section 7.1 of the action in that regard taken by the
Securityholders. If no successor trustee shall have been so appointed with
respect to any series and have accepted appointment within 30 days after the
delivery of such evidence of removal, the Trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee, or any
Securityholder who has been a bona fide Holder of a Security or Securities of
the applicable series for at least six months may, subject to the provisions of
Section 5.9, on behalf of himself and all others similarly situated, petition
any such court for the appointment of a successor trustee. Such court may
thereupon, after such notice, if any, as it may deem proper and prescribe,
appoint a successor trustee.
(d) Any resignation or removal of the Trustee with respect to any series
and any appointment of a successor trustee with respect to such series pursuant
to any of the provisions of this Section 6.10 shall become effective upon
acceptance of appointment by the successor trustee as provided in Section 6.11.
SECTION 6.11 Acceptance of Appointment by Successor Trustee. Any successor
trustee appointed as provided in Section 6.10 shall execute and deliver to the
Issuer and to its predecessor trustee an instrument accepting such appointment
hereunder, and thereupon the resignation or removal of the predecessor trustee
with respect to all or any applicable series shall become effective and such
successor trustee, without any further act, deed or conveyance, shall become
vested with all rights, powers, duties and obligations with respect to such
series of its predecessor hereunder, with like effect as if originally named as
trustee for such series hereunder; but, nevertheless, on the written request of
the Issuer or of the successor trustee, upon payment of its charges then unpaid,
the trustee ceasing to act shall, subject to Section 10.4, pay over to the
successor trustee all moneys at the time held by it hereunder and shall execute
and deliver an instrument transferring to such successor trustee all such
rights, powers, duties and obligations. Upon request of any such successor
trustee, the Issuer shall execute any and all instruments in writing for more
fully and certainly vesting in and confirming to such successor trustee all such
rights and powers. Any trustee ceasing to act shall, nevertheless, retain a
prior claim upon all property or funds held or collected by such trustee to
secure any amounts then due it pursuant to the provisions of Section 6.6.
If a successor trustee is appointed with respect to the Securities of one
or more (but not all) series, the Issuer, the predecessor Trustee and each
successor trustee with respect to the Securities of any applicable series shall
execute and deliver an indenture supplemental hereto which shall contain such
provisions as shall be deemed necessary or desirable to confirm that all the
rights, powers, trusts and duties of the predecessor Trustee with respect to the
Securities of any series as to which the predecessor Trustee is not retiring
shall continue to be vested in the predecessor Trustee, and shall add to or
change any of the provisions of this Indenture as shall be necessary to provide
for or facilitate the administration of the trusts hereunder by more than one
trustee, it being understood that nothing herein or in such supplemental
indenture shall constitute such trustees co-trustees of the same trust and that
each such trustee shall be trustee of a trust or trusts under separate
indentures.
No successor trustee with respect to any series of Securities shall accept
appointment as provided in this Section 6.11 unless at the time of such
acceptance such successor trustee shall be qualified under the provisions of
Section 6.8 and eligible under the provisions of Section 6.9.
Upon acceptance of appointment by any successor trustee as provided in this
Section 6.11, the Issuer shall give notice thereof to the Holders of Securities
of each series affected, by mailing such notice to such Holders at their
addresses as they shall appear on the registry books. If the Issuer fails to
give such notice within ten days after acceptance of appointment by the
successor trustee, the successor trustee shall cause such notice to be given at
the expense of the Issuer.
SECTION 6.12 Merger, Conversion, Consolidation or Succession to Business of
Trustee. Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to the corporate trust business of the Trustee, shall be
the successor of the Trustee hereunder, provided that such corporation shall be
qualified under the provisions of Section 6.8 and eligible under the provisions
of Section 6.9, without the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Securities of any series shall have
been authenticated but not delivered, any such successor to the Trustee may
<PAGE>
adopt the certificate of authentication of any predecessor Trustee and deliver
such Securities so authenticated; and, in case at that time any of the
Securities of any series shall not have been authenticated, any successor to the
Trustee may authenticate such Securities either in the name of any predecessor
hereunder or in the name of the successor Trustee; and in all such cases such
certificate shall have the full force which it is anywhere in the Securities of
such series or in this Indenture provided that the certificate of the Trustee
shall have; provided, that the right to adopt the certificate of authentication
of any predecessor Trustee or to authenticate Securities of any series in the
name of any predecessor Trustee shall apply only to its successor or successors
by merger, conversion or consolidation.
SECTION 6.13 Preferential Collection of Claims Against the Issuer. (a)
Subject to the provisions of this Section, if the Trustee shall be or shall
become a creditor, directly or indirectly, secured or unsecured, of the Issuer
within three months prior to a default, as defined in subsection (c) of this
Section 6.13, or subsequent to such a default, then, unless and until such
default shall be cured, the Trustee shall set apart and hold in a special
account for the benefit of the Trustee individually, the Holders of the
Securities and the holders of other indenture securities (as defined in this
Section 6.13):
(1) an amount equal to any and all reductions in the amount due
and owing upon any claim as such creditor in respect of principal or
interest, effected after the beginning of such three month period and
valid as against the Issuer and its other creditors, except any such
reduction resulting from the receipt or disposition of any property
described in subsection (a) (2) of this section, or from the exercise
of any right of set-off which the Trustee could have exercised if a
petition in bankruptcy had been filed by or against the Issuer upon
the date of such default; and
(2) all property received by the Trustee in respect of any claim
as such creditor, either as security therefor, or in satisfaction or
composition thereof, or otherwise, after the beginning of such three
month period, or an amount equal to the proceeds of any such property,
if disposed of, subject, however, to the rights, if any, of the Issuer
and its other creditors in such property or such proceeds.
Nothing herein contained, however, shall affect the right of the
Trustee:
(A) to retain for its own account (i) payments made on account of
any such claim by any Person (other than the Issuer) who is liable
thereon, (ii) the proceeds of the bona fide sale of any such claim by
the Trustee to a third Person, and (iii) distributions made in cash,
securities or other property in respect of claims filed against the
Issuer in bankruptcy or receivership or in proceedings for
reorganization pursuant to the Bankruptcy Code or applicable state
law;
(B) to realize, for its own account, upon any property held by it
as security for any such claim, if such property was so held prior to
the beginning of such three month period;
(C) to realize, for its own account, but only to the extent of
the claim hereinafter mentioned, upon any property held by it as
security for any such claim, if such claim was created after the
beginning of such three month period and such property was received as
security therefor simultaneously with the creation thereof, and if the
Trustee shall sustain the burden of proving that at the time such
property was so received the Trustee had no reasonable cause to
believe that a default as defined in subsection (c) of this Section
would occur within three months; or
(D) to receive payment on any claim referred to in paragraph (B)
or (C), against the release of any property held as security for such
claim as provided in such paragraph (B) or (C), as the case may be, to
the extent of the fair value of such property.
For the purposes of paragraphs (B), (C) and (D), property substituted after
the beginning of such three month period for property held as security at the
time of such substitution shall, to the extent of the fair value of the property
released, have the same status as the property released, and, to the extent that
any claim referred to in any of such paragraphs is created in renewal of or in
substitution for or for the purpose of repaying or refunding any preexisting
claim of the Trustee as such creditor, such claim shall have the same status as
such pre-existing claim.
If the Trustee shall be required to account, the funds and property held in
such special account and the proceeds thereof shall be apportioned between the
Trustee, the Securityholders and the holders of other indenture securities in
such manner that the Trustee, such Securityholders and the holders of other
indenture securities realize, as a result of payments from such special account
and payments of dividends on claims filed against the Issuer in bankruptcy or
receivership or in proceedings for reorganization pursuant to the Bankruptcy
Code or applicable state law, the same percentage of their respective claims,
figured before crediting to the claim of the Trustee anything on account of the
receipt by it from the Issuer of the funds and property in such special account,
and before crediting to the respective claims of the Trustee, such
Securityholders and the holders of other indenture securities, dividends on
claims filed against the Issuer in bankruptcy or receivership or in proceedings
for reorganization pursuant to the Bankruptcy Code or applicable state law, but
after crediting thereon receipts on account of the indebtedness represented by
their respective claims from all sources other than from such dividends and from
the funds and property so held in such special account. As used in this
paragraph, with respect to any claim, the term "dividends" shall include any
distribution with respect to such claim, in bankruptcy or receivership or in
proceedings for reorganization pursuant to the Bankruptcy Code or applicable
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state law, whether such distribution is made in cash, securities or other
property, but shall not include any such distribution with respect to the
secured portion, if any, of such claim. The court in which such bankruptcy,
receivership or proceeding for reorganization is pending shall have jurisdiction
(i) to apportion between the Trustee, such Securityholders and the holders of
other indenture securities, in accordance with the provisions of this paragraph,
the funds and property held in such special account and the proceeds thereof, or
(ii) in lieu of such apportionment, in whole or in part, to give to the
provisions of this paragraph due consideration in determining the fairness of
the distributions to be made to the Trustee, such Securityholders and the
holders of other indenture securities with respect to their respective claims,
in which event it shall not be necessary to liquidate or to appraise the value
of any securities or other property held in such special account or as security
for any such claim, or to make a specific allocation of such distributions as
between the secured and unsecured portions of such claims, or otherwise to apply
the provisions of this paragraph as a mathematical formula.
Any Trustee who has resigned or been removed after the beginning of
such three month period shall be subject to the provisions of this subsection
(a) as though such resignation or removal had not occurred. If any Trustee has
resigned or been removed prior to the beginning of such three month period, it
shall be subject to the provisions of this subsection (a) if and only if the
following conditions exist:
(i) the receipt of property or reduction of claim which would
have given rise to the obligation to account, if such Trustee had
continued as trustee, occurred after the beginning of such three month
period; and
(ii) such receipt of property or reduction of claim occurred
within three months after such resignation or removal.
(b) There shall be excluded from the operation of this Section 6.13 a
creditor relationship arising from:
(1) the ownership or acquisition of securities issued under any
indenture or any security or securities having a maturity of one year or
more at the time of acquisition by the Trustee;
(2) advances authorized by a receivership or bankruptcy court of
competent jurisdiction or by this Indenture for the purpose of preserving
any property which shall at any time be subject to the lien of this
Indenture or of discharging tax liens or other prior liens or encumbrances
thereon, if notice of such advance and of the circumstances surrounding the
making thereof is given to the Securityholders at the time and in the
manner provided in this Indenture;
(3) disbursements made in the ordinary course of business in the
capacity of trustee under an indenture, transfer agent, registrar,
custodian, paying agent, fiscal agent or depositary, or other similar
capacity;
(4) an indebtedness created as a result of services rendered or
premises rented or an indebtedness created as a result of goods or
securities sold in a cash transaction as defined in subsection (c)(2) of
this Section;
(5) the ownership of stock or of other securities of a corporation
organized under the provisions of Section 25 (a) of the Federal Reserve
Act, as amended, which is directly or indirectly a creditor of the Issuer;
or
(6) the acquisition, ownership, acceptance or negotiation of any
drafts, bills of exchange, acceptances or obligations which fall within the
classification of self-liquidating paper as defined in subsection (c) (3)
of this Section.
(c) As used in this Section 6.13:
(1) the term "default" shall mean any failure to make payment in full
of the principal of or interest on any of the Securities when and as such
principal or interest becomes due and payable;
(2) the term "cash transaction" shall mean any transaction in which
full payment for goods or securities sold is made within seven days after
delivery of the goods or securities in currency or in checks or other
orders drawn upon banks or bankers and payable upon demand;
(3) the term "self-liquidating paper" shall mean any draft, bill of
exchange, acceptance or obligation which is made, drawn, negotiated or
incurred by the Issuer for the purpose of financing the purchase,
processing, manufacture, shipment, storage or sale of goods, wares or
merchandise and which is secured by documents evidencing title to,
possession of, or a lien upon the goods, wares or merchandise or the
receivables or proceeds arising from the sale of the goods, wares or
merchandise previously constituting the security, provided the security is
received by the Trustee simultaneously with the creation of the creditor
relationship with the Issuer arising from the making, drawing, negotiating
or incurring of the draft, bill of exchange, acceptance or obligation; and
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(4) the term "Issuer" shall mean any obligor upon the Securities.
SECTION 6.14 Appointment of Authenticating Agent. As long as any Securities
of a series remain Outstanding, the Trustee may, by an instrument in writing,
appoint with the approval of the Issuer an authenticating agent (the
"Authenticating Agent") which shall be authorized to act on behalf of the
Trustee to authenticate Securities, including Securities issued upon exchange,
registration of transfer, partial redemption or pursuant to Section 2.9.
Securities of each such series authenticated by such Authenticating Agent shall
be entitled to the benefits of this Indenture and shall be valid and obligatory
for all purposes as if authenticated by the Trustee. Whenever reference is made
in this Indenture to the authentication and delivery of Securities of any series
by the Trustee or to the Trustee's Certificate of Authentication, such reference
shall be deemed to include authentication and delivery on behalf of the Trustee
by an Authenticating Agent for such series and a Certificate of Authentication
executed on behalf of the Trustee by such Authenticating Agent. Such
Authenticating Agent shall at all times be a corporation organized and doing
business under the laws of the United States of America or of any state or the
District of Columbia, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $50,000,000
(determined as provided in Section 6.9 with respect to the Trustee) and subject
to supervision or examination by federal or state authority.
Any corporation into which any Authenticating Agent may be merged or
converted, or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which any Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency business
of any Authenticating Agent, shall continue to be the Authenticating Agent with
respect to all series of Securities for which it served as Authenticating Agent
without the execution or filing of any paper or any further act on the part of
the Trustee or such Authenticating Agent. Any Authenticating Agent may at any
time, and if it shall cease to be eligible shall, resign by giving written
notice of resignation to the Trustee and to the Issuer. The Trustee may at any
time terminate the agency of an Authenticating Agent by giving written notice
thereof to such Authenticating Agent and to the Issuer.
Upon receiving such a notice of resignation or upon such a termination, or
in case at any time any Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section 6.14 with respect to one or more
series of Securities, the Trustee may appoint a successor Authenticating Agent
which shall be acceptable to the Issuer and the Issuer shall provide notice of
such appointment to all Holders of Securities of such series in the manner and
to the extent provided in Section 11.4. Any successor Authenticating Agent upon
acceptance of its appointment hereunder shall become vested with all rights,
powers, duties and responsibilities of its predecessor hereunder, with like
effect as if originally named as Authenticating Agent. The Issuer agrees to pay
to the Authenticating Agent for such series from time to time reasonable
compensation. The Authenticating Agent for the Securities of any series shall
have no responsibility or liability for any action taken by it as such at the
direction of the Trustee.
Sections 6.2, 6.3, 6.4 and 7.3 shall be applicable to any Authenticating
Agent.
ARTICLE SEVEN
CONCERNING THE SECURITYHOLDERS
SECTOIN 7.1 Evidence of Action Taken by Securityholders. Any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be given or taken by a specified percentage in
principal amount of the Securityholders of any or all series may be embodied in
and evidenced by one or more instruments of substantially similar tenor signed
by such specified percentage of Securityholders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee. Proof of execution of any instrument or of a writing appointing
any such agent shall be sufficient for any purpose of this Indenture and
(subject to Sections 6.1 and 6.2) conclusive in favor of the Trustee and the
Issuer, if made in the manner provided in this Article Seven.
SECTION 7.2 Proof of Execution of Instruments and of Holding of Securities.
Subject to Sections 6.1 and 6.2, the execution of any instrument by a
Securityholder or his agent or proxy may be proved in the following manner:
(a) The fact and date of the execution by any Holder of any instrument may
be proved by the certificate of any notary public or other officer of any
jurisdiction authorized to take acknowledgments of deeds or administer oaths
that the person executing such instruments acknowledged to him the execution
thereof, or by an affidavit of a witness to such execution sworn to before any
such notary or other such officer. Where such execution is by or on behalf of
any legal entity other than an individual, such certificate or affidavit shall
also constitute sufficient proof of the authority of the person executing the
same.
(b) The ownership of Securities shall be proved by the Security register or
by a certificate of the Security registrar.
SECTION 7.3 Holders to be Treated as Owners. The Issuer, the Trustee and
any agent of the Issuer or the Trustee may deem and treat the Person in whose
name any Security shall be registered upon the Security register for such series
as the absolute owner of such Security (whether or not such Security shall be
overdue and notwithstanding any notation of ownership or other writing thereon)
for the purpose of receiving payment of or on account of the principal of and,
<PAGE>
subject to the provisions of this Indenture, interest, if any, on such Security
and for all other purposes; and neither the Issuer nor the Trustee nor any agent
of the Issuer or the Trustee shall be affected by any notice to the contrary.
SECTION 7.4 Securities Owned by Issuer Deemed Not Outstanding. In
determining whether the Holders of the requisite aggregate principal amount of
Outstanding Securities of any or all series have concurred in any direction,
consent or waiver under this Indenture, Securities which are owned by the Issuer
or any other obligor on the Securities with respect to which such determination
is being made or by any Affiliate of the Issuer or any other obligor on the
Securities with respect to which such determination is being made shall be
disregarded and deemed not to be Outstanding for the purpose of any such
determination, except that for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, consent or waiver only
securities which the Trustee knows are so owned shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Issuer or any other obligor upon the Securities or any Affiliate of
the Issuer or any other obligor on the Securities. In case of a dispute as to
such right, the advice of counsel shall be full protection in respect of any
decision made by the Trustee in accordance with such advice. Upon request of the
Trustee, the Issuer shall furnish to the Trustee promptly an Officers'
Certificate listing and identifying all Securities, if any, known by the Issuer
to be owned or held by or for the account of any of the above-described Persons;
and, subject to Sections 6.1 and 6.2, the Trustee shall be entitled to accept
such Officers' Certificate as conclusive evidence of the facts therein set forth
and of the fact that all Securities not listed therein are Outstanding for the
purpose of any such determination.
SECTION 7.5 Right of Revocation of Action Taken. At any time prior to (but
not after) the evidencing to the Trustee, as provided in Section 7.1, of the
taking of any action by the Holders of the percentage in aggregate principal
amount of the Securities of any or all series, as the case may be, specified in
this Indenture in connection with such action, any Holder of a Security the
serial number of which is shown by the evidence to be included among the serial
numbers of the Securities the Holders of which have consented to such action
may, by filing written notice at the Corporate Trust Office and upon proof of
holding as provided in this Article Seven, revoke such action so far as concerns
such Security provided that such revocation shall not become effective until
three business days after such filing. Except as aforesaid any such action taken
by the Holder of any Security shall be conclusive and binding upon such Holder
and upon all future Holders and owners of such Security and of any Securities
issued in exchange or substitution therefor or on registration of transfer
thereof, irrespective of whether or not any notation in regard thereto is made
upon any such Security. Any action taken by the Holders of the percentage in
aggregate principal amount of the Securities of any or all series, as the case
may be, specified in this Indenture in connection with such action shall be
conclusively binding upon the Issuer, the Trustee and the Holders of all the
Securities affected by such action.
SECTION 7.6 Record Date for Consents and Waivers. The Issuer may, but shall
not be obligated to, direct the Trustee to establish a record date for the
purpose of determining the Persons entitled to (i) waive any past default with
respect to the Securities of such series in accordance with Section 5.7 of the
Indenture, (ii) consent to any supplemental indenture in accordance with Section
8.2 of the Indenture or (iii) waive compliance with any term, condition or
provision of any covenant hereunder. If a record date is fixed, the Holders on
such record date, or their duly designated proxies, and any such Persons, shall
be entitled to waive any such past default, consent to any such supplemental
indenture or waive compliance with any such term, condition or provision,
whether or not such Holder remains a Holder after such record date; provided,
however, that unless such waiver or consent is obtained from the Holders, or
duly designated proxies, of the requisite principal amount of Outstanding
Securities of such series prior to the date which is the 180th day after such
record date, any such waiver or consent previously given shall automatically and
without further action by any Holder be cancelled and of no further effect.
ARTICLE EIGHT
SUPPLEMENTAL INDENTURES
SECTION 8.1 Supplemental Indentures Without Consent of Securityholders. The
Issuer, when authorized by a resolution of its Board of Directors (which
resolution may provide general terms or parameters for such action and may
provide that the specific terms of such action may be determined in accordance
with or pursuant to an Issuer Order), and the Trustee may from time to time and
at any time enter into an indenture or indentures supplemental hereto (which
shall conform to the provisions of the Trust Indenture Act of 1939 as in force
at the date of the execution thereof) for one or more of the following purposes:
(a) to convey, transfer, assign, mortgage or pledge to the Trustee as
security for the Securities of one or more series any property or assets;
(b) to evidence the succession of another corporation to the Issuer, or
successive successions, and the assumption by the successor corporation of the
covenants, agreements and obligations of the Issuer pursuant to Article Nine;
(c) to add to the covenants of the Issuer such further covenants,
restrictions, conditions or provisions as the Issuer and the Trustee shall
consider to be for the protection of the Holders of all or any series of
Securities (and if such covenants, restrictions, conditions or provisions are to
<PAGE>
be for the protection of less than all series of Securities, stating that the
same are expressly being included solely for the protection of such series), and
to make the occurrence, or the occurrence and continuance, of a default in any
such additional covenants, restrictions, conditions or provisions an Event of
Default permitting the enforcement of all or any of the several remedies
provided in this Indenture as herein set forth; provided, however, that in
respect of any such additional covenant, restriction, condition or provision
such supplemental indenture may provide for a particular period of grace after
default (which period may be shorter or longer than that allowed in the case of
other defaults) or may provide for an immediate enforcement upon such an Event
of Default or may limit the remedies available to the Trustee upon such an Event
of Default or may limit the right of the Holders of a majority in aggregate
principal amount of the Securities of such series to waive such an Event of
Default;
(d) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any supplemental
indenture, or to make any other provisions as the Issuer may deem necessary or
desirable, provided, however, that no such action shall adversely affect the
interests of the Holders of the Securities;
(e) to establish the form or terms of Securities of any series as permitted
by Sections 2.1 and 2.3; and
(f) to evidence and provide for the acceptance of appointment hereunder by
a successor trustee with respect to the Securities of one or more series and to
add to or change any of the provisions of this Indenture as shall be necessary
to provide for or facilitate the administration of the trusts hereunder by more
than one trustee, pursuant to the requirements of Section 6.11.
The Trustee is hereby authorized to join with the Issuer in the execution
of any such supplemental indenture, to make any further appropriate agreements
and stipulations which may be therein contained and to accept the conveyance,
transfer, assignment, mortgage or pledge of any property thereunder, but the
Trustee shall not be obligated to enter into any such supplemental indenture
which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section may
be executed without the consent of the Holders of any of the Securities then
Outstanding, notwithstanding any of the provisions of Section 8.2.
SECTION 8.2 Supplemental Indentures with Consent of Securityholders. With
the consent (evidenced as provided in Article Seven) of the Holders of not less
than a majority in aggregate principal amount of the Securities then Outstanding
of any series affected by such supplemental indenture, the Issuer, when
authorized by a resolution of its Board of Directors (which resolution may
provide general terms or parameters for such action and may provide that the
specific terms of such action may be determined in accordance with or pursuant
to an Issuer Order), and the Trustee may, from time to time and at any time,
enter into an indenture or indentures supplemental hereto (which shall conform
to the provisions of the Trust Indenture Act of 1939 as in force at the date of
execution thereof) for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of any
supplemental indenture or of modifying in any manner the rights of the Holders
of the Securities of such series; provided, that no such supplemental indenture
shall (a) extend the stated final maturity of the principal of any Security, or
reduce the principal amount thereof, or reduce the rate or extend the time of
payment of interest, if any, thereon (or, in the case of an Original Issue
Discount Security, reduce the rate of accrual of original issue discount
thereon), or reduce or alter the method of computation of any amount payable on
redemption, repayment or purchase by the Issuer thereof (or the time at which
any such redemption, repayment or purchase may be made), or make the principal
thereof (including any amount in respect of original issue discount), or
interest, if any, thereon payable in any coin or currency other than that
provided in the Securities or in accordance with the terms of the Securities, or
reduce the amount of the principal of an Original Issue Discount Security that
would be due and payable upon an acceleration of the maturity thereof pursuant
to Section 5.1 or the amount thereof provable in bankruptcy pursuant to Section
5.2, or impair or affect the right of any Securityholder to institute suit for
the payment thereof or, if the Securities provide therefor, any right of
repayment or purchase at the option of the Securityholder, in each case without
the consent of the Holder of each Security so affected, or (b) reduce the
aforesaid percentage of Securities of any series, the consent of the Holders of
which is required for any such supplemental indenture, without the consent of
the Holders of each Security so affected. No consent of any Holder of any
Security shall be necessary under this Section 8.2 to permit the Trustee and the
Issuer to execute supplemental indentures pursuant to Sections 8.1 and 9.2.
A supplemental indenture which changes or eliminates any covenant,
Event of Default or other provision of this Indenture which has expressly been
included solely for the benefit of one or more particular series of Securities,
or which modifies the rights of Holders of Securities of such series, with
respect to such covenant or provision, shall be deemed not to affect the rights
under this Indenture of the Holders of Securities of any other series.
Upon the request of the Issuer, accompanied by a copy of a resolution
of the Board of Directors (which resolution may provide general terms or
parameters for such action and may provide that the specific terms of such
action may be determined in accordance with or pursuant to an Issuer Order)
certified by the secretary or an assistant secretary of the Issuer authorizing
the execution of any such supplemental indenture, and upon the filing with the
Trustee of evidence of the consent of the Holders of the Securities as aforesaid
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and other documents, if any, required by Section 7.1, the Trustee shall join
with the Issuer in the execution of such supplemental indenture unless such
supplemental indenture affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such supplemental
indenture.
It shall not be necessary for the consent of the Securityholders under this
Section 8.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to the provisions of this Section 8.2, the
Trustee shall give notice thereof to the Holders of then Outstanding Securities
of each series affected thereby, as provided in Section 11.4. Any failure of the
Issuer to give such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.
SECTION 8.3 Effect of Supplemental Indenture. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and shall be deemed to be modified and amended in accordance therewith and
the respective rights, limitations of rights, obligations, duties and immunities
under this Indenture of the Trustee, the Issuer and the Holders of Securities of
each series affected thereby shall thereafter be determined, exercised and
enforced hereunder subject in all respects to such modifications and amendments,
and all the terms and conditions of any such supplemental indenture shall be and
shall be deemed to be part of the terms and conditions of this Indenture for any
and all purposes.
SECTION 8.4 Documents to Be Given to Trustee. The Trustee, subject to the
provisions of Sections 6.1 and 6.2, shall be entitled to receive an Officers'
Certificate and an Opinion of Counsel as conclusive evidence that any
supplemental indenture executed pursuant to this Article Eight complies with the
applicable provisions of this Indenture.
SECTION 8.5 Notation on Securities in Respect of Supplemental Indentures.
Securities of any series authenticated and delivered after the execution of any
supplemental indenture pursuant to the provisions of this Article Eight may bear
a notation in form approved by the Trustee for such series as to any matter
provided for by such supplemental indenture or as to any action taken by
Securityholders. If the Issuer or the Trustee shall so determine, new Securities
of any series so modified as to conform, in the opinion of the Trustee and the
Issuer, to any modification of this Indenture contained in any such supplemental
indenture may be prepared by the Issuer, authenticated by the Trustee and
delivered in exchange for the Securities of such series then Outstanding.
ARTICLE NINE
CONSOLIDATION, MERGER, SALE, LEASE, EXCHANGE OR DISPOSITION
SECTION 9.1 Issuer May Consolidate, etc., on Certain Terms. Subject to the
provisions of Section 9.3, nothing contained in this Indenture or in any of the
Securities shall prevent any consolidation or merger of the Issuer with or into
any other corporation or corporations (whether or not affiliated with the
Issuer), or successive consolidations or mergers in which the Issuer or its
successor or successors shall be a party or parties, or shall prevent any sale,
lease, exchange or other disposition of all or substantially all the property
and assets of the Issuer to any other corporation (whether or not affiliated
with the Issuer) authorized to acquire and operate the same; provided, however,
and the Issuer hereby covenants and agrees, that any such consolidation, merger,
sale, lease, exchange or other disposition shall be upon the conditions that (a)
immediately after such consolidation, merger, sale, lease, exchange or other
disposition of the corporation (whether the Issuer or such other corporation)
formed by or surviving any such consolidation or merger, or to which such sale,
lease, exchange or other disposition shall have been made, shall not be in
default in the performance or observance of any of the terms, covenants and
conditions of this Indenture to be kept or performed by the Issuer; (b) the
corporation (if other than the Issuer) formed by or surviving any such
consolidation or merger, or to which such sale, lease, exchange or other
disposition shall have been made, shall be a corporation organized under the
laws of the United States of America, any state thereof or the District of
Columbia; and (c) the due and punctual payment of the principal of and interest,
if any, on all the Securities, according to their tenor, and the due and
punctual performance and observance of all of the covenants and conditions of
this Indenture to be performed by the Issuer, shall be expressly assumed, by
supplemental indenture satisfactory in form to the Trustee executed and
delivered to the Trustee, by the corporation (if other than the Issuer) formed
by such consolidation, or into which the Issuer shall have been merged, or by
the corporation which shall have acquired or leased such property.
SECTION 9.2 Securities to be Secured in Certain Events. If, upon any such
consolidation, merger, or upon any such sale, lease, exchange or other
disposition, or upon any acquisition by the Issuer by purchase or otherwise of
all or any part of the properties of any other corporation, any Principal
Property owned by the Issuer or a Restricted Subsidiary immediately prior
thereto would thereupon become subject to any mortgage, security interest,
pledge, lien or encumbrance, not permitted by Section 3.6 hereof, the Issuer,
prior to such consolidation, merger, sale, conveyance, lease or acquisition,
will by indenture supplemental hereto secure the due and punctual payment of the
principal of and interest, if any, on the Securities then outstanding (equally
and ratably, or with such other relative priority specified in Section 3.6, with
any other indebtedness of or guaranteed by the Issuer then entitled thereto) by
a direct lien on such Principal Property, together with any other properties and
assets of the Issuer or of any such Restricted Subsidiary, whichever shall be
the owner of any such Principal Property, which would thereupon become subject
to any such mortgage, security interest, pledge, lien or encumbrance, prior to
all liens other than any theretofore existing thereon.
SECTION 9.3 Successor Corporation to be Substituted. In case of any such
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consolidation or merger or any sale, conveyance or lease of all or substantially
all of the property of the Issuer and upon the assumption by the successor
corporation, by supplemental indenture, executed and delivered to the Trustee
and satisfactory in form to the Trustee, of the due and punctual payment of the
principal of and interest, if any, on all of the Securities and the due and
punctual performance of all of the covenants and conditions of this Indenture to
be performed by the Issuer, such successor corporation shall succeed to and be
substituted for the Issuer, with the same effect as if it had been named herein
as the party of the first part, and the Issuer (including any intervening
successor to the Issuer which shall have become the obligor hereunder) shall be
relieved of any further obligation under this Indenture and the Securities;
provided, however, that in the case of a sale, lease, exchange or other
disposition of the property and assets of the Issuer (including any such
intervening successor), the Issuer (including any such intervening successor)
shall continue to be liable on its obligations under this Indenture and the
Securities to the extent, but only to the extent, of liability to pay the
principal of and interest, if any, on the Securities at the time, places and
rate prescribed in this Indenture and the Securities. Such successor corporation
thereupon may cause to be signed, and may issue either in its own name or in the
name of the Issuer, any or all of the Securities issuable hereunder which
theretofore shall not have been signed by the Issuer and delivered to the
Trustee; and, upon the order of such successor corporation instead of the Issuer
and subject to all the terms, conditions and limitations in this Indenture
prescribed, the Trustee shall authenticate and shall deliver any Securities
which previously shall have been signed and delivered by the officers of the
Issuer to the Trustee for authentication, and any Securities which such
successor corporation thereafter shall cause to be signed and delivered to the
Trustee for that purpose. All the Securities so issued shall in all respects
have the same legal rank and benefit under this Indenture as the Securities
theretofore or thereafter issued in accordance with the terms of this Indenture
as though all of such Securities had been issued at the date of the execution
hereof.
In case of any such consolidation or merger or any sale, lease, exchange or
other disposition of all or substantially all of the property and assets of the
Issuer, such changes in phraseology and form (but not in substance) may be made
in the Securities, thereafter to be issued, as may be appropriate.
SECTION 9.4 Opinion of Counsel to be Given Trustee. The Trustee, subject to
Sections 6.1 and 6.2, may receive an Officers' Certificate and Opinion of
Counsel as conclusive evidence that any such consolidation, merger, sale, lease,
exchange or other disposition and any such assumption complies with the
provisions of this Article Nine.
ARTICLE TEN
SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS
SECTIO 10.1 Satisfaction and Discharge of Indenture.
(A) If at any time (a) the Issuer shall have paid or caused to be paid
the principal of and interest, if any, on all the Securities Outstanding
(other than Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 2.9) as and when the same
shall have become due and payable, or (b) the Issuer shall have delivered
to the Trustee for cancellation all Securities theretofore authenticated
(other than Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 2.9); and if, in any such
case, the Issuer shall also pay or cause to be paid all other sums payable
hereunder by the Issuer, then this Indenture shall cease to be of further
effect, and the Trustee, on demand of the Issuer accompanied by an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent relating to the satisfaction and discharge
contemplated by this provision have been complied with, and at the cost and
expense of the Issuer, shall execute proper instruments acknowledging such
satisfaction and discharging this Indenture. The Issuer agrees to reimburse
the Trustee for any costs or expenses thereafter reasonably and properly
incurred, and to compensate the Trustee for any services thereafter
reasonably and properly rendered, by the Trustee in connection with this
Indenture or the Securities.
(B) If at any time (a) the Issuer shall have paid or caused to be paid
the principal of, premium, if any, and interest, if any, on all the
Securities of any series Outstanding (other than Securities of such series
which have been destroyed, lost or stolen and which have been replaced or
paid as provided in Section 2.9) as and when the same shall have become due
and payable, or (b) the Issuer shall have delivered to the Trustee for
cancellation all Securities of any series theretofore authenticated (other
than any Securities of such series which have been destroyed, lost or
stolen and which have been replaced or paid as provided in Section 2.9), or
(c) in the case of any series of Securities with respect to which the exact
amount described in clause (ii) below can be determined at the time of
making the deposit referred to in such clause (ii), (i) all the Securities
of such series not theretofore delivered to the Trustee for cancellation
shall have become due and payable, or are by their terms to become due and
payable within one year or are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving of notice of
redemption, and (ii) the Issuer shall have irrevocably deposited or caused
to be deposited with the Trustee as funds in trust, specifically pledged as
security for, and dedicated solely to, the benefit of the Holders of
Securities of such series, cash in an amount (other than moneys repaid by
the Trustee or any paying agent to the Issuer in accordance with Section
10.4) or direct obligations of the United States of America, backed by its
full faith and credit ("U.S. Government Obligations"), maturing as to
principal and interest, if any, at such times and in such amounts as will
insure the availability of cash, or a combination thereof, sufficient in
the opinion of a nationally recognized firm of independent public
<PAGE>
accountants expressed in a written certification thereof delivered to the
Trustee, to pay (A) the principal of, premium, if any, and interest, if
any, on all Securities of such series on each date that such principal of,
premium, if any, or interest, if any, is due and payable, and (B) any
mandatory sinking fund payments on the dates on which such payments are due
and payable in accordance with the terms of the Indenture and the
Securities of such series; then the Issuer shall be deemed to have paid and
discharged the entire indebtedness on all the Securities of such series on
the date of the deposit referred to in clause (ii) above and the provisions
of this Indenture with respect to the Securities of such series shall no
longer be in effect (except, in the case of clause (c) of this Section
10.1(B), as to (i) rights of registration of transfer and exchange of
Securities of such series, (ii) rights of substitution of mutilated,
defaced, destroyed, lost or stolen Securities of such series, (iii) rights
of Holders of Securities of such series to receive payments of principal
thereof and premium, if any, and interest, if any, thereon upon the
original stated due dates therefor (but not upon acceleration), and
remaining rights of the Holders of Securities of such series to receive
mandatory sinking fund payments thereon, if any, when due, (iv) the rights,
obligations, duties and immunities of the Trustee hereunder, (v) the rights
of the Holders of Securities of such series as beneficiaries hereof with
respect to the property so deposited with the Trustee payable to all or any
of them and (vi) the obligations of the Issuer under Section 3.2 with
respect to Securities of such series) and the Trustee, on demand of the
Issuer accompanied by an Officers' Certificate and an Opinion of Counsel,
each stating that all conditions precedent contemplated by this provision
have been complied with, and at the cost and expense of the Issuer, shall
execute proper instruments acknowledging the same.
(C) The following provisions shall apply to the Securities of each
series unless specifically otherwise provided in a Board Resolution,
Officers' Certificate or indenture supplemental hereto provided pursuant to
Section 2.3. In addition to discharge of the Indenture pursuant to the next
preceding paragraph, in the case of any series of Securities with respect
to which the exact amount described in subparagraph (a) below can be
determined at the time of making the deposit referred to in such
subparagraph (a), the Issuer shall be deemed to have paid and discharged
the entire indebtedness on all the Securities of such a series on the 91st
day after the date of the deposit referred to in subparagraph (a) below,
and the provisions of this Indenture with respect to the Securities of such
series shall no longer be in effect (except as to (i) rights of
registration of transfer and exchange of Securities of such series, (ii)
substitution of mutilated, defaced, destroyed, lost or stolen Securities of
such series, (iii) rights of Holders of Securities of such series to
receive payments of principal thereof, premium, if any, and interest, if
any, thereon upon the original stated due dates therefor (but not upon
acceleration), and remaining rights of the Holders of Securities of such
series to receive mandatory sinking fund payments, if any, (iv) the rights,
obligations, duties and immunities of the Trustee hereunder, (v) the rights
of the Holders of Securities of such series as beneficiaries hereof with
respect to the property so deposited with the Trustee payable to all or any
of them and (vi) the obligations of the Issuer under Section 3.2 with
respect to Securities of such series) and the Trustee, on demand of the
Issuer accompanied by an Officers' Certificate and an Opinion of Counsel,
each stating that all conditions precedent contemplated by this provision
have been complied with, and at the cost and expense of the Issuer, shall
execute proper instruments acknowledging the same, if
(a) with reference to this provision the Issuer has irrevocably
deposited or caused to be irrevocably deposited with the Trustee as
funds in trust, specifically pledged as security for, and dedicated
solely to, the benefit of the Holders of Securities of such series (i)
cash in an amount, or (ii) U.S. Government Obligations, maturing as to
principal and interest, if any, at such times and in such amounts as
will insure the availability of cash, or (iii) a combination thereof,
sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay (A) the principal of,
premium, if any, and interest, if any, on all Securities of such
series on each date that such principal or interest, if any, is due
and payable, and (B) any mandatory sinking fund payments on the dates
on which such payments are due and payable in accordance with the
terms of the Indenture and the Securities of such series;
(b) such deposit will not result in a breach or violation of, or
constitute a default under, any agreement or instrument to which the
Issuer is a party or by which it is bound; and
(c) the Issuer has delivered to the Trustee an Opinion of Counsel
based on the fact that (x) the Issuer has received from, or there has
been published by, the Internal Revenue Service a ruling or (y), since
the date hereof, there has been a change in the applicable United
States federal income tax law, in either case to the effect that, and
such opinion shall confirm that, the Holders of the Securities of such
series will not recognize income, gain or loss for Federal income tax
purposes as a result of such deposit, defeasance and discharge and
will be subject to Federal income tax on the same amount and in the
same manner and at the same times, as would have been the case if such
deposit, defeasance and discharge had not occurred.
SECTION 10.2 Application by Trustee of Funds Deposited for Payment of
Securities. Subject to Section 10.4, all moneys and U.S. Government Obligations
deposited with the Trustee pursuant to Section 10.1 shall be held in trust, and
such moneys and all moneys from such U.S. Government Obligations shall be
applied by it to the payment, either directly or through any paying agent
(including the Issuer acting as its own paying agent), to the Holders of the
particular Securities of such series for the payment or redemption of which such
moneys and U.S. Government Obligations have been deposited with the Trustee, of
all sums due and to become due thereon for principal and interest, if any, but
such moneys and U.S. Government Obligations need not be segregated from other
funds except to the extent required by law.
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SECTION 10.3 Repayment of Moneys Held by Paying Agent. In connection with
the satisfaction and discharge of this Indenture with respect to Securities of
any series, all moneys then held by any paying agent under the provisions of
this Indenture with respect to such series of Securities shall, upon demand of
the Issuer, be repaid to it or paid to the Trustee and thereupon such paying
agent shall be released from all further liability with respect to such moneys.
SECTION 10.4 Return of Moneys Held by Trustee and Paying Agent Unclaimed
for Two Years. Any moneys deposited with or paid to the Trustee or any paying
agent for the payment of the principal of or interest, if any, on any Security
of any series and not applied but remaining unclaimed for two years after the
date upon which such principal or interest, if any, shall have become due and
payable, shall, upon the written request of the Issuer and unless otherwise
required by mandatory provisions of applicable escheat or abandoned or unclaimed
property law, be repaid to the Issuer by the Trustee for such series or such
paying agent, and the Holder of the Securities of such series shall, unless
otherwise required by mandatory provisions of applicable escheat or abandoned or
unclaimed property laws, thereafter look only to the Issuer for any payment
which such Holder may be entitled to collect, and all liability of the Trustee
or any paying agent with respect to such moneys shall thereupon cease.
SECTION 10.5 Indemnity for U.S. Government Obligations. The Issuer shall
pay and indemnify the Trustee against any tax, fee or other charge imposed on or
assessed against the U.S. Government Obligations deposited pursuant to Section
10.1 or the principal or interest received in respect of such obligations.
ARTICLE ELEVEN
MISCELLANEOUS PROVISIONS
SECTION 11.1 Partners, Incorporators, Stockholders, Officers and Directors
of Issuer Exempt from IndividuaPartners, Incorporators, Stockholders, Officers
and Directors of Issuer Exempt from Individual Liability. No recourse under or
upon any obligation, covenant or agreement contained in this Indenture, or in
any Security, or because of any indebtedness evidenced thereby, shall be had
against any incorporator, as such or against any past, present or future
stockholder, officer or director, as such, of the Issuer, or any partner of the
Issuer or of any successor, either directly or through the Issuer or any
successor, under any rule of law, statute or constitutional provision or by the
enforcement of any assessment or by any legal or equitable proceeding or
otherwise, all such liability being expressly waived and released by the
acceptance of the Securities by the Holders thereof and as part of the
consideration for the issue of the Securities.
SECTION 11.2 Provisions of Indenture for the Sole Benefit of Parties and
Holders of Securities. Nothing in this Indenture or in the Securities, expressed
or implied, shall give or be construed to give to any Person, other than the
parties hereto and their successors and the Holders of the Securities, any legal
or equitable right, remedy or claim under this Indenture or under any covenant
or provision herein contained, all such covenants and provisions being for the
sole benefit of the parties hereto and their successors and of the Holders of
the Securities.
SECTION 11.3 Successors and Assigns of Issuer Bound by Indenture. All the
covenants, stipulations, promises and agreements in this Indenture contained by
or on behalf of the Issuer shall bind its successors and assigns, whether so
expressed or not.
SECTION 11.4 Notices and Demands on Issuer, Trustee and Holders of
Securities. Any notice or demand which by any provision of this Indenture is
required or permitted to be given or served by the Trustee or by the Holders of
Securities to or on the Issuer, or as required pursuant to the Trust Indenture
Act of 1939, may be given or served by being deposited postage prepaid,
first-class mail (except as otherwise specifically provided herein) addressed
(until another address of the Issuer is filed by the Issuer with the Trustee) to
Seagull Energy Corporation, 1001 Fannin, Suite 1700, Houston, Texas 77002,
Attention: Chairman of the Board. Any notice, direction, request or demand by
the Issuer or any Holder of Securities to or upon the Trustee shall be deemed to
have been sufficiently given or served by being deposited postage prepaid,
first-class mail (except as otherwise specifically provided herein) addressed
(until another address of the Trustee is filed by the Trustee with the Issuer)
to The Bank of New York, 101 Barclay Street, Floor 21 West, New York, New York
10286, Attention: Corporate Trust Trustee Administration.
Where this Indenture provides for notice to Holders of Securities, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder entitled
thereto, at his last address as it appears in the Security register. Where this
Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
In case, by reason of the suspension of or irregularities in regular mail
service, it shall be impracticable to mail notice to the Issuer when such notice
is required to be given pursuant to any provision of this Indenture, then any
manner of giving such notice as shall be reasonably satisfactory to the Trustee
shall be deemed to be sufficient notice.
<PAGE>
SECTION 11.5 Officers' Certificates and Opinions of Counsel; Statements to
Be Contained Therein. Upon any herein application or demand by the Issuer to the
Trustee to take any action under any of the provisions of this Indenture, or as
required pursuant to the Trust Indenture Act of 1939, the Issuer shall furnish
to the Trustee an Officers' Certificate stating that all conditions precedent
provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent have been complied with, except that in
the case of any such application or demand as to which the furnishing of such
documents is specifically required by any provision of this Indenture relating
to such particular application or demand, no additional certificate or opinion
need be furnished.
Each certificate or opinion provided for in this Indenture (other than a
certificate provided pursuant to Section 4.3(d)) and delivered to the Trustee
with respect to compliance with a condition or covenant provided for in this
Indenture shall include (a) a statement that the person making such certificate
or opinion has read such covenant or condition, (b) a brief statement as to the
nature and scope of the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are based, (c) a statement
that, in the opinion of such person, he has made such examination or
investigation as is necessary to enable him to express an opinion as to whether
or not such covenant or condition has been complied with, and (d) a statement as
to whether or not, in the opinion of such person, such condition or covenant has
been complied with.
Any certificate, statement or opinion of an officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of
or representations by counsel, unless such officer knows that the certificate or
opinion or representations with respect to the matters upon which his
certificate, statement or opinion may be based as aforesaid are erroneous, or in
the exercise of reasonable care should know that the same are erroneous. Any
certificate, statement or opinion of counsel may be based, insofar as it relates
to factual matters, information with respect to which is in the possession of
the Issuer, upon the certificate, statement or opinion of or representations by
an officer or officers of the Issuer, unless such counsel knows that the
certificate, statement or opinion or representations with respect to the matters
upon which his certificate, statement or opinion may be based as aforesaid are
erroneous, or in the exercise of reasonable care should know that the same are
erroneous.
Any certificate, statement or opinion of an officer of the Issuer or of
counsel may be based, insofar as it relates to accounting matters, upon a
certificate or opinion of or representations by an accountant or firm of
accountants in the employ of the Issuer, unless such officer or counsel, as the
case may be, knows that the certificate or opinion or representations with
respect to the accounting matters upon which his certificate, statement or
opinion may be based as aforesaid are erroneous, or in the exercise of
reasonable care should know that the same are erroneous.
Any certificate or opinion of any independent firm of public accountants
filed with and directed to the Trustee shall contain a statement that such firm
is independent.
SECTION 11.6 Payments Due on Saturdays, Sundays and Holidays. If the date
of maturity of principal of or interest, if any, on the Securities of any series
or the date fixed for redemption, purchase or repayment of any such Security
shall not be a Business Day, then payment of interest, if any, or principal need
not be made on such date, but may be made on the next succeeding Business Day
with the same force and effect as if made on the date of maturity or the date
fixed for redemption, purchase or repayment, and, in the case of payment, no
interest shall accrue for the period after such date.
SECTION 11.7 Conflict of Any Provision of Indenture with Trust Indenture
Act of 1939. If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with another provision included in this Indenture which
is required to be included herein by any of Sections 310 to 317, inclusive, or
is deemed applicable to this Indenture by virtue of the provisions, of the Trust
Indenture Act of 1939, such required provision shall control.
SECTION 11.8 GOVERNING LAW. THIS INDENTURE AND EACH SECURITY SHALL BE
DEEMED TO BE A CONTRACT UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL
PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH
STATE.
SECTION 11.9 Counterparts. This Indenture may be executed in any number of
counterparts, each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
SECTION 11.10 Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
ARTICLE TWELVE
REDEMPTION OF SECURITIES AND SINKING FUNDS
SECTION 12.1 Applicability of Article. The provisions of this Article shall
be applicable to the Securities of any series which are redeemable before their
maturity or to any sinking fund for the retirement of Securities of a series
except as otherwise specified, as contemplated by Section 2.3 for Securities of
such series.
<PAGE>
SECTION 12.2 Notice of Redemption; Partial Redemptions. Notice of
redemption to the Holders of Securities of any series to be redeemed as a whole
or in part at the option of the Issuer shall be given by mailing notice of such
redemption by first class mail, postage prepaid, at least 30 days and not more
than 60 days prior to the date fixed for redemption to such Holders of
Securities of such series at their last addresses as they shall appear in the
Security register. Any notice which is mailed in the manner herein provided
shall be conclusively presumed to have been duly given, whether or not the
Holder receives the notice. Failure to give notice by mail, or any defect in the
notice to the Holder of any Security of a series designated for redemption as a
whole or in part shall not affect the validity of the proceedings for the
redemption of any other Security of such series.
The notice of redemption to each such Holder shall specify the principal
amount of each Security of such series held by such Holder to be redeemed, the
date fixed for redemption, the redemption price, the place or places of payment,
the CUSIP number relating to such Securities, that payment will be made upon
presentation and surrender of such Securities, that such redemption is pursuant
to the mandatory or optional sinking fund, or both, if such be the case, that
interest, if any, (or, in the case of Original Issue Discount Securities,
original issue discount) accrued to the date fixed for redemption will be paid
as specified in such notice and that on and after said date interest, if any,
(or, in the case of Original Issue Discount Securities, original issue discount)
thereon or on the portions thereof to be redeemed will cease to accrue. In case
any Security of a series is to be redeemed in part only, the notice of
redemption shall state the portion of the principal amount thereof to be
redeemed and shall state that on and after the date fixed for redemption, upon
surrender of such Security, a new Security or Securities of such series in
principal amount equal to the unredeemed portion thereof will be issued.
The notice of redemption of Securities of any series to be redeemed at the
option of the Issuer shall be given by the Issuer or, at the Issuer's request,
by the Trustee in the name and at the expense of the Issuer.
On or before the redemption date specified in the notice of redemption
given as provided in this Section 12.2, the Issuer will deposit with the Trustee
or with one or more paying agents (or, if the Issuer is acting as its own paying
agent, set aside, segregate and hold in trust as provided in Section 3.5) an
amount of money sufficient to redeem on the redemption date all the Securities
of such series so called for redemption at the appropriate redemption price,
together with accrued interest, if any, to the date fixed for redemption. The
Issuer will deliver to the Trustee at least 45 days prior to the date fixed for
redemption (unless a shorter notice period shall be satisfactory to the Trustee)
an Officers' Certificate stating the aggregate principal amount of Securities to
be redeemed. In case of a redemption at the election of the Issuer prior to the
expiration of any restriction on such redemption, the Issuer shall deliver to
the Trustee, prior to the giving of any notice of redemption to Holders pursuant
to this Section, an Officers' Certificate stating that such restriction has been
complied with.
If less than all the Securities of a series are to be redeemed, the Trustee
shall select, in such manner as it shall deem appropriate and fair, Securities
of such series to be redeemed. Securities may be redeemed in part in multiples
equal to the minimum authorized denomination for Securities of such series or
any multiple thereof. The Trustee shall promptly notify the Issuer in writing of
the Securities of such series selected for redemption and, in the case of any
Securities of such series selected for partial redemption, the principal amount
thereof to be redeemed. For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of Securities of
any series shall relate, in the case of any Security redeemed or to be redeemed
only in part, to the portion of the principal amount of such Security which has
been or is to be redeemed.
SECTION 12.3 Payment of Securities Called for Redemption. If notice of
redemption has been given as above provided, the Securities or portions of
Securities specified in such notice shall become due and payable on the date and
at the place or places stated in such notice at the applicable redemption price,
together with interest, if any, accrued to the date fixed for redemption, and on
and after said date (unless the Issuer shall default in the payment of such
Securities at the redemption price, together with interest, if any, accrued to
said date) interest (or, in the case of Original Issue Discount Securities,
original issue discount) on the Securities or portions of Securities so called
for redemption shall cease to accrue, and such Securities shall cease from and
after the date fixed for redemption (unless an earlier date shall be specified
in a Board Resolution, Officers' Certificate or executed supplemental indenture
referred to in Sections 2.1 and 2.3 by or pursuant to which the form and terms
of the Securities of such series were established) except as provided in
Sections 6.5 and 10.4, to be entitled to any benefit or security under this
Indenture, and the Holders thereof shall have no right in respect of such
Securities except the right to receive the redemption price thereof and unpaid
interest to the date fixed for redemption. On presentation and surrender of such
Securities at a place of payment specified in said notice, said Securities or
the specified portions thereof shall be paid and redeemed by the Issuer at the
applicable redemption price, together with interest, if any, accrued thereon to
the date fixed for redemption; provided that payment of interest, if any,
becoming due on or prior to the date fixed for redemption shall be payable to
the Holders of Securities registered as such on the relevant record date subject
to the terms and provisions of Sections 2.3 and 2.7 hereof.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the redemption price shall, until paid or duly provided
for, bear interest from the date fixed for redemption at the rate of interest or
Yield to Maturity (in the case of an Original Issue Discount Security) borne by
such Security.
Upon presentation of any Security redeemed in part only, the Issuer shall
14
<PAGE>
execute and the Trustee shall authenticate and deliver to or on the order of the
Holder thereof, at the expense of the Issuer, a new Security or Securities of
such series, and of like tenor, of authorized denominations, in principal amount
equal to the unredeemed portion of the Security so presented.
SECTION 12.4 Exclusion of Certain Securities from Eligibility for Selection
for Redemption. Securities shall be excluded from eligibility for selection for
redemption if they are identified by registration and certificate number in an
Officers' Certificate delivered to the Trustee at least 45 days prior to the
last date on which notice of redemption may be given as being owned of record
and beneficially by, and not pledged or hypothecated by either (a) the Issuer,
or (b) a Person specifically identified in such written statement as an
Affiliate of the Issuer.
SECTION 12.5 Mandatory and Optional Sinking Funds. The minimum amount of
any sinking fund payment provided for by the terms of the Securities of any
series is herein referred to as a "mandatory sinking fund payment", and any
payment in excess of such minimum amount provided for by the terms of the
Securities of any series is herein referred to as an "optional sinking fund
payment". The date on which a sinking fund payment is to be made is herein
referred to as the "sinking fund payment date".
In lieu of making all or any part of any mandatory sinking fund payment
with respect to any series of Securities in cash, the Issuer may at its option
(a) deliver to the Trustee Securities of such series theretofore purchased or
otherwise acquired (except upon redemption pursuant to the mandatory sinking
fund) by the Issuer or receive credit for Securities of such series (not
previously so credited) theretofore purchased or otherwise acquired (except as
aforesaid) by the Issuer and delivered to the Trustee for cancellation pursuant
to Section 2.10, (b) receive credit for optional sinking fund payments (not
previously so credited) made pursuant to this Section 12.5, or (c) receive
credit for Securities of such series (not previously so credited) redeemed by
the Issuer through any optional redemption provision contained in the terms of
such series. Securities so delivered or credited shall be received or credited
by the Trustee at the sinking fund redemption price specified in such
Securities.
On or before the 60th day next preceding each sinking fund payment date for
any series, the Issuer will deliver to the Trustee an Officers' Certificate (a)
specifying the portion of the mandatory sinking fund payment to be satisfied by
payment of cash and the portion to be satisfied by credit of Securities of such
series and the basis for such credit, (b) stating that none of the Securities of
such series to be so credited has theretofore been so credited, (c) stating that
no defaults in the payment of interest or Events of Default with respect to such
series have occurred (which have not been waived or cured or otherwise ceased to
exist) and are continuing, and (d) stating whether or not the Issuer intends to
exercise its right to make an optional sinking fund payment with respect to such
series and, if so, specifying the amount of such optional sinking fund payment
which the Issuer intends to pay on or before the next succeeding sinking fund
payment date. Any Securities of such series to be credited and required to be
delivered to the Trustee in order for the Issuer to be entitled to credit
therefor as aforesaid which have not theretofore been delivered to the Trustee
shall be delivered for cancellation pursuant to Section 2.10 to the Trustee with
such Officers' Certificate (or reasonably promptly thereafter if acceptable to
the Trustee). Such Officers' Certificate shall be irrevocable and upon its
receipt by the Trustee the Issuer shall become unconditionally obligated to make
all the cash payments or payments therein referred to, if any, on or before the
next succeeding sinking fund payment date. Failure of the Issuer, on or before
any such 60th day, to deliver such Officers' Certificate and Securities (subject
to the parenthetical clause in the second preceding sentence) specified in this
paragraph, if any, shall not constitute a default but shall constitute, on and
as of such date, the irrevocable election of the Issuer (i) that the mandatory
sinking fund payment for such series due on the next succeeding sinking fund
payment date shall be paid entirely in cash without the option to deliver or
credit Securities of such series in respect thereof, and (ii) that the Issuer
will make no optional sinking fund payment with respect to such series as
provided in this Section 12.5.
If the sinking fund payment or payments (mandatory or optional or both) to
be made in cash on the next succeeding sinking fund payment date plus any unused
balance of any preceding sinking fund payments made in cash shall exceed
$50,000, or a lesser sum if the Issuer shall so request with respect to the
Securities of any particular series, such cash shall be applied on the next
succeeding sinking fund payment date to the redemption of Securities of such
series at the sinking fund redemption price together with accrued interest, if
any, to the date fixed for redemption. If such amount shall be $50,000 or less
and the Issuer makes no such request, then it shall be carried over until a sum
in excess of $50,000 is available. The Trustee shall select, in the manner
provided in Section 12.2, for redemption on such sinking fund payment date a
sufficient principal amount of Securities of such series to absorb said cash, as
nearly as may be, and shall (if requested in writing by the Issuer) inform the
Issuer of the serial numbers of the Securities of such series (or portions
thereof) so selected. The Trustee, in the name and at the expense of the Issuer
(or the Issuer, if it shall so request the Trustee in writing) shall cause
notice of redemption of the Securities of such series to be given in
substantially the manner provided in Section 12.2 (and with the effect provided
in Section 12.3) for the redemption of Securities of such series in part at the
option of the Issuer. The amount of any sinking fund payments not so applied or
allocated to the redemption of Securities of such series shall be added to the
next cash sinking fund payment for such series and, together with such payment,
shall be applied in accordance with the provisions of this Section 12.5. Any and
all sinking fund moneys held on the stated maturity date of the Securities of
any particular series (or earlier, if such maturity is accelerated), which are
not held for the payment or redemption of particular Securities of such series
shall be applied, together with other moneys, if necessary, sufficient for the
purpose, to the payment of the principal of, and interest, if any, on, the
Securities of such series at maturity.
On or before each sinking fund payment date, the Issuer shall pay to the
Trustee in cash or shall otherwise provide for the payment of all interest, if
any, accrued to the date fixed for redemption on Securities to be redeemed on
such sinking fund payment date.
The Trustee shall not redeem or cause to be redeemed any Securities of a
series with sinking fund moneys or give any notice of redemption of Securities
for such series by operation of the sinking fund during the continuance of a
default in payment of interest on such Securities or of any Event of Default
with respect to such series except that, where the giving of notice of
redemption of any Securities shall theretofore have been made, the Trustee shall
redeem or cause to be redeemed such Securities, provided that it shall have
received from the Issuer a sum sufficient for such redemption. Except as
aforesaid, any moneys in the sinking fund for such series at the time when any
such default or Event of Default shall occur, and any moneys thereafter paid
into the sinking fund, shall, during the continuance of such default or Event of
Default, be deemed to have been collected under Article Five and held for the
payment of all such Securities. In case such Event of Default shall have been
waived as provided in Section 5.7 or the default cured on or before the 60th day
preceding the sinking fund payment date in any year, such moneys shall
thereafter be applied on the next succeeding sinking fund payment date in
accordance with this Section to the redemption of such Securities.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of July 15, 1993.
SEAGULL ENERGY CORPORATION
By:
Title:
Attest:
By
Title:
THE BANK OF NEW YORK,
as Trustee
By:
Title:
Attest:
By
Title:
<PAGE>
SEAGULL ENERGY CORPORATION
7-7/8% Senior Note due 2003
SEAGULL ENERGY CORPORATION, a corporation duly organized and existing under the
laws of Texas (herein called the "Company", which term indicates any successor
corporation under the indenture hereinafter referred to), FOR VALUE RECEIVED,
HEREBY PROMISES TO PAY TO
, or registered assigns the principal sum of Dollars on August 1, 2003, in such
coin or currency of the United States of America as at the time of payment shall
be legal tender for the payment of public and private debts, and to pay
interest, semi-annually on February 1 and August 1 of each year, on said
principal sum, in like coin or currency, at the rate per annum specified in the
title of this Security, to the registered holder hereof as of the close of
business on the January 15 or July 15 next preceding such interest payment date,
except as otherwise provided in the indenture referred to on the reverse hereof,
all at the office or agency of the Company in the City of Houston, State of
Texas, from the February 1 or August 1, as the case may be, next preceding the
date of this Security to which interest has been paid (unless the date hereof is
a February 1 or August 1 to which interest has been paid, in which case from the
date hereof, or unless the date hereof is prior to the payment of any interest
on the Securities, in which case from July 29, 1993, or unless the date hereof
is between the January 15 or July 15, as the case may be, and the next following
February 1 or August 1 to which interest has been paid or, if no interest has
been paid on the Securities, from July 29, 1993) until payment of said principal
sum has been made or duly provided for; provided, however, that payment of
interest may be made at the option of the Company by check mailed on or before
the payment date to the address of the person entitled thereto as such address
shall appear in the Security register. Interest shall be computed on the basis
of a 360-day year consisting of twelve 30-day months.
This Security shall not be valid or become obligatory for any purpose until the
certificate of authentication hereon shall have been signed by the Trustee or an
Authenticating Agent under the Indenture referred to on the reverse hereof.
REFERENCE IS MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON THE
REVERSE HEREOF. SHUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME
EFFECT AS THOUGH FULLY SET FORTH AT THIS PLACE.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed
under its corporate seal.
Dated:
TRUSTEES'S AUTHENTICATION CERTIFICATE
This is one of the Securities of the series designated herein referred to in the
within-mentioned Indenture.
THE BANK OF NEW YOURK,
as Trustee
By:
Authorized Signatory
SEAGULL ENERGY CORPORATION
/s/ Sylvia Sanchez /s/ Barry J. Galt
Secretary Chairman of the Board
<PAGE>
SEAGULL ENERGY CORPORATION
7-7/8% SENIOR NOTE DUE 2003
1. Designation
This Security is one of a duly authorized series of Securities of the
Company, designated as its 7-7/8% Senior Notes Due 2003 (herein called the
"Securities"), limited to the aggregate principal amount of $100,000,000, all
issued or to be issued under and pursuant to a senior subordinated indenture
dated as of July 15, 1993 (herein called the "Indenture"), duly executed and
delivered by the Company and The Bank of New York, as trustee, to which
Indenture and all indentures supplemental thereto reference is hereby made for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the Holders of the
Securities. Capitalized terms used but not defined herein are defined in the
Indenture and are used herein with the same meanings as ascribed to them
therein.
2. Paying Agent and Registrar
Initially, the Trustee will act as paying agent, registrar and as the
agent where notices and demands to or upon the Company in respect of the
Securities may be served. The Company may appoint and change any paying agent,
registrar or agent for notices without notice, other than notice to the Trustee.
The Company or any of its Subsidiaries or any of their Affiliates may act as
paying agent, registrar or agent of notices.
3. Denominations; Transfers; Exchange
The Securities are in registered form, without coupons, in
denominations of $1,000 in principal amount and integral multiples of $1,000.
Upon due presentation for registration of transfer of this Security at the
corporate trust office of the Trustee in the City of New York, State of New York
or any other such designated office or agency of the Company, a new Security or
Securities of authorized denominations for an equal aggregate principal amount
will be issued to the transferee in exchange herefor, subject to the limitations
imposed by the Indenture, without charges except for any tax or other
governmental charge imposed in connection therewith, and the Security may in a
like manner be exchanged for one or more new Securities for other authorized
denominations but of the same aggregate principal amount.
4. Persons Deemed Owners
The Company, the Trustee, any paying agent and any registrar may deem
and treat the registered Holder hereof as the absolute owner of this Security
(whether or not this Security shall be overdue and notwithstanding any notation
of ownership or other writing hereon) for purposes of receiving payment hereof,
or on account hereof, and for all other purposes, and neither the Company, the
Trustee, any paying agent not any registrar shall be affected by any notice to
the contrary. All payments made to or upon the order of such registered Holder
shall, to the extent of the sum or sums so paid, satisfy and discharge the
liability for moneys payable on this Security.
5. Defaults; Amendment; Waiver
In case an Event of Default shall have occurred and be continuing, the
principal hereof and the interest accrued thereon may be declared, and upon such
declaration shall become, due and payable, in the manner, with the effect and
subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee with the consent of the Holders of not less than a majority in aggregate
principal amount of each series of Securities then Outstanding under the
Indenture and affected thereby, evidenced as provided in the Indenture, to
<PAGE>
execute supplemental indentures adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or of any
supplemental indenture or modifying in manner the rights of the Holders of the
Securities of such series; provided, however, that no such supplemental
indenture shall (i) extend the stated final maturity of any Security, or reduce
the principal amount hereof, or reduce the rate or extend the time of payment of
interest hereon, or reduce or alter the method of computation of any amount
payable on redemption, repayment or purchase by the Company, or change the coin
or currency in which payments are to be made, or impair or affect her right of
any Holder to institute suit for enforcement of any payment hereof or (ii)
reduce the aforesaid percentage of any series of such Securities, without the
consent of the Holders of each Security of any series so affected. It is also
provided in the Indenture that the Holders of a majority in aggregate principal
amount of the Securities of any series then Outstanding may on behalf of the
Holders of all of the Securities of such series waive any past default or Event
of Default under the Indenture and its consequences except a default in the
payment of the principal of or interest on any of the Securities of such Series.
Any such consent or waiver by the Holder of this Security (unless revoked as
provided in the Indenture) shall be conclusive and binding upon such Holder and
upon all future Holders and owners of this Security and any Securities which may
be issued in exchange or substitution hereof, irrespective of whether or not any
notation thereof is made upon this Security or such other Securities.
6. Change of Control
If a Change of Control shall occur at any time, than each Holder shall
have the right to require that the Company repurchase such Holder's Securities
in whole or in part in integral multiples of $1,000, at a purchase price in cash
in an amount equal to 101% of the principal amount thereof, plus accrued and
unpaid interest, if any to the date of purchase. The Company shall be obligated
to give the holders of securities and the Trustee within 30 days following a
Change of Control notice specifying (i) the purchase date, (ii) the place at
which the Securities shall be presented and surrendered for purchase, (iii) that
interest accrued to the purchase date will be paid upon such presentation and
surrender and (iv) that interest shall cease to accrue on Securities surrendered
for purchase as of such purchase date.
7. No Recourse Against Others
No recourse under or upon any obligation, covenant or agreement
contained in the Indenture, or in any Security, or because of any indebtedness
evidenced thereby or hereby, shall be had against any incorporator, as such or
against any past, present or future stockholder, officer or director, as such of
the Company, or any partner of the Company or of any successor, wither directly
or though the Company or any successor, under any rule of law, statute or
constitutional provision or by the enforcement of any assessment or by any legal
or equitable proceeding or otherwise, all such liability being expressly waived
and released by the acceptance of this Security by the Holder hereof and as part
of the consideration of the issue of the Securities.
8. GOVERNING LAW
THE INDENYURE AND THIS SECURITY SHALL BE DEEMED TO BE A CONTRACT UNDER
THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE.
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN
- as joint tenants with rights
of survivorship and not as
tenants in common
UNIF GIFT MIN ACT ______________ Custodian ________________
(Cust) (Minor)
Under Uniform Gifts to Minors
Act _____________________
(State)
Additional abbreviations may also be used though not in the
above list.
- -------------------------------------------------------------------------------
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Please print or typewrite name and address including postal zip code of assignee
- -------------------------------------------------------------------------------
the within Security and all rights thereunder, hereby irrevocably constituting
and appointing
- -------------------------------------------------------------------------------
attorney to transfer said Security on the books of the Company, with full power
of substitution in the premises.
Dated:_______________________ ____________________________________
Notice: The signature to this assignment must correspond with the
name as written upon the face of the within instrument in every
particular, without alteration or enlargement or any change
whatever.
<PAGE>
SEAGULL ENERGY CORPORATION
RESOLUTIONS ADOPTED BY THE
CHAIRMAN OF THE BOARD OF DIRECTORS
EFFECTIVE JULY 22, 1993
WHEREAS, on June 23, 1993, the Board of Directors of the Company
approved the issuance by the Company, publicly or privately from time to time,
of up to $350,000,000 aggregate initial offering prices of bonds, debentures,
notes and/or other debt obligations (collectively, "Securities");
WHEREAS, the Board of Directors has authorized the Executive Committee
of the Company or the Chairman of the Board of the Company to determine the
terms and conditions of the Securities;
NOW, THEREFORE, in furtherance of the foregoing, the Chairman of the
Board of the Company hereby adopts the following resolutions:
RESOLVED, that Seagull Energy Corporation (the "Company") issue and
sell $100,000,000 aggregate principal amount of 7-7/8% Senior Notes Due 2003
(the "Senior Notes") on substantially the terms and conditions set forth in
Exhibit A hereto;
RESOLVED, that the Company issue and sell $150,000,000 aggregate
principal amount of 8-5/8% Senior Subordinated Notes Due 2005 ("Senior
Subordinated Notes") on substantially the terms and conditions set forth in
Exhibit B hereto;
RESOLVED, that the Senior Notes and Senior Subordinated Notes shall
have the terms set forth in the Company's Prospectus Supplement dated July 22,
1993 to its Prospectus dated July 22, 1993;
RESOLVED, that the form, terms and provisions of the Underwriting
Agreement dated July 22, 1993 (the "Underwriting Agreement") by and among the
Company and Dillon, Read & Co. Inc., Donaldson, Lufkin & Jenrette Securities
Corporation, J.P. Morgan Securities Inc. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated (the "Underwriters"), as well as the execution and delivery
of the Underwriting Agreement by the President, and Vice President or the
Treasurer of the Company on behalf of the Company and the performance of the
transactions contemplated by the Underwriting Agreement on behalf of the Company
by the appropriate officers of the Company, be and they hereby are, adopted,
ratified and approved;
RESOLVED, that the public offering price for the Senior Notes and for
the Senior Subordinated Notes set forth in the Prospectus Supplement dated July
22, 1993 be, and it hereby is, adopted, ratified and approved;
RESOLVED, that the discounts and commissions for the sale of the Senior
Notes and the Senior Subordinated Notes, payable tot he Underwriters pursuant to
the Underwriting Agreement be, and they hereby are, ratified, adopted and
approved;
RESOLVED, that the Senior Notes and the Senior Subordinated Notes shall
be in the form approved by the Chairman of the Board, the President or any Vice
President of the Company, such officer's approval to be conclusively evidenced
by his delivery of the Senior Notes and the Senior Subordinated Notes for and on
behalf of the Company at the closing under Underwriting Agreement to be executed
among the Company, Dillon, Read & Co. Inc., Donaldson, Lufkin & Jenrette
Securities Corporation, J.P. Morgan Securities Inc.
and Merrill Lynch, Pierce, Fenner & Smith Incorporated; and
RESOLVED, that the Chairman of the Board, the President or any Vice
President of the Company be, and each of them hereby is, authorized and
empowered, for and on behalf of the Company and in its name, to execute and
deliver all agreements, powers of attorney, certificates and other instruments
and documents as he may deem necessary or appropriate to carry out the
transactions approved by the preceding resolutions.
EXECUTED to be effective as of July 22, 1993.
/s/ Barry J. Galt
Barry J. Galt
Chairman of the Board
<PAGE>
EXHIBIT A
TERMS OF THE SENIOR NOTES
Title: 7-7/8% Senior Notes due 2003.
Principal Amount: $100,000,000.
Interest: 7-7/8% per annum, from July 29, 1993, payable semiannually on
each February 1 and August 1, commencing on February 1, 1994, to holders of
record on the preceding January 15 or July 15, as the case may be.
Interest on the Senior Notes shall be calculated on the basis of a
360-day year of twelve 30-day months.
Maturity: August 1, 2003.
Mandatory Redemption: If a "Change of Control" shall occur at any time,
than each holder shall have the right to require that the Company repurchase
such holder's Senior Notes in whole or in part in integral multiples of $1,000,
at a purchase price in cash in an amount equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any to the date of purchase.
The Company shall be obligated to give holders of Senior Notes and the
Trustee within 30 days following a Change of Control notice specifying (i) the
purchase date (which date shall be no earlier than 30 days nor more than 60 days
from the date the Company notifies the holders of the occurrence of a Change of
Control), (ii) the place at which Notes shall be presented and surrendered for
purchase, (iii) that interest accrued to the purchase date shall be paid upon
such presentation and surrender and (iv) that interest shall cease to accrue on
Senior Notes surrendered for purchase as of such purchase date. Any tender by a
holder of Senior Notes shall be irrevocable.
A-1
<PAGE>
For purposes of the Senior Notes, a "Change of Control: shall mean a
change resulting when any Unrelated Person or any Unrelated Persons acting
together which would constitute a Group together with any Affiliates or Related
Persons thereof (in each case also constituting Unrelated Persons) shall at any
time either (i) Beneficially Own more than 50% of the aggregate voting power of
all classes of Voting Stock of the Company or (ii) succeed in having sufficient
of its or their nominees elected to the Board of Directors of the Company such
that such nominees, when added to any existing director remaining on the Board
of Directors of the Company after such election who is an Affiliate or Related
Person of such person or Group, shall constitute a majority of the Board of
Directors of the Company.
As used herein (a) "Beneficially Own" means "beneficially own" as
defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the
"exchange Act"), or any successor provision thereto; provided, however, that,
for purposes of this definition, a person shall not be deemed to Beneficially
Own securities tendered pursuant to a tender or exchange offer made by or on
behalf of such person or any of such person's Affiliates until such tendered
securities are accepted for purchase or exchange; (b) "Group" means "group" for
purposes of Section 13(d) of the Exchange Act; (c) "Unrelated Person" means at
any time any person other than the Company or any subsidiary of the Company and
other than any trust for any employee benefit plan of the Company or any
subsidiary of the Company; (d) "related Person" of any person shall mean any
other person owning (1) 5% or more of the outstanding common stock of such
person or (2) 5% or more of the Voting Stock of such person; (e) "Voting Stock"
of any such person shall mean capital stock of such person that ordinarily has
voting power for the election of directors (or persons performing similar
functions) of such person, whether at all times or only so long as no senior
class of securities has such voting power by reason of any contingency; and (f)
"Affiliate" of any persons shall mean any other person that directly or
indirectly control, or in under common control with, or is controlled by, such
person.
Sinking Fund: None.
Offices for Notices and Payments, Etc.: Principal of and interest on
the Senior Notes shall be payable, and the Senior Notes shall be exchangeable
and transfers thereof shall be registrable, at the corporate trust office of the
Trustee in New York, New York; provided however, that at the option of the
Company, payment of interest may be made by check mailed to the address of the
person entitled thereto at such person's registered address.
A-2
<PAGE>
Global Securities: The Senior Notes shall not be issuable as Global
Securities.
Trustee: The Bank of New York shall serve as the trustee, depositary,
authenticating or paying agent, transfer agent and registrar with respect to the
Senior Notes.
Names and Addresses of Underwriters:
Dillon, Read & Co. Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
J.P. Morgan Securities Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
c/o Dillon, Read & Co. Inc.
535 Madison Avenue
New York, New York 10022
A-3
<PAGE>
EXHIBIT B
TERMS OF THE SENIOR SUBORDINATED NOTES
Title: 8-5/8% Senior Subordinated Notes due 2005.
Principal Amount: $150,000,000.
Interest: 8-5/8% per annum, from July 29, 1993, payable semiannually on
each February 1 and August 1, commencing on February 1, 1994, to holders of
record on the preceding January 15 or July 15, as the case may be.
Interest on the Senior Subordinated Notes shall be calculated on the
basis of a 360-day year of twelve 30-day months.
Maturity: August 1, 2005.
Optional Redemption: On or after August 1, 2000, the Senior
Subordinated Notes shall be redeemable at any time at the option of the Company,
in whole or from time to time in part, at the redemption prices set forth below
(expressed as a percentage of principal amount), plus accrued interest to the
redemption date:
<TABLE>
<CAPTION>
If redeemed during the 12-month Redemption
period beginning August 1, Price
---------------------------------------- ---------------
<S> <C> <C>
2000.................................. 102.59%
2001.................................. 101.73%
2002.................................. 100.86%
2003 and thereafter................... 100.00%
</TABLE>
Notice of redemption shall be mailed to each holder at least 30 days
but not more than 60 days prior to the redemption date. On and after the
redemption date, interest shall cease to accrue on Senior Subordinated Notes or
portions thereof called for redemption.
B-1
<PAGE>
Mandatory Redemption: If a "Change of Control" shall occur at any time,
than each holder shall have the right to require that the Company repurchase
such holder's Senior Subordinated Notes in whole or in part in integral
multiples of $1,000, at a purchase price in cash in an amount equal to 101% of
the principal amount thereof, plus accrued and unpaid interest, if any to the
date of purchase.
The Company shall be obligated to give holders of Senior Subordinated
Notes and the Trustee within 30 days following a Change of Control notice
specifying (i) the purchase date (which date shall be no earlier than 30 days
nor more than 60 days from the date the Company notifies the holders of the
occurrence of a Change of Control), (ii) the place at which Notes shall be
presented and surrendered for purchase, (iii) that interest accrued to the
purchase date shall be paid upon such presentation and surrender and (iv) that
interest shall cease to accrue on Senior Subordinated Notes surrendered for
purchase as of such purchase date. Any tender by a holder of Senior Subordinated
Notes shall be irrevocable.
For purposes of the Senior Subordinated Notes, a "Change of Control:
shall mean a change resulting when any Unrelated Person or any Unrelated Persons
acting together which would constitute a Group together with any Affiliates or
Related Persons thereof (in each case also constituting Unrelated Persons) shall
at any time either (i) Beneficially Own more than 50% of the aggregate voting
power of all classes of Voting Stock of the Company or (ii) succeed in having
sufficient of its or their nominees elected to the Board of Directors of the
Company such that such nominees, when added to any existing director remaining
on the Board of Directors of the Company after such election who is an Affiliate
or Related Person of such person or Group, shall constitute a majority of the
Board of Directors of the Company.
As used herein (a) "Beneficially Own" means "beneficially own" as
defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the
"exchange Act"), or any successor provision thereto; provided, however, that,
for purposes of this definition, a person shall not be deemed to Beneficially
Own securities tendered pursuant to a tender or exchange offer made by or on
behalf of such person or any of such person's Affiliates until such tendered
securities are accepted for purchase or exchange; (b) "Group" means "group" for
purposes of Section 13(d) of the Exchange Act; (c) "Unrelated Person" means at
any time any person other than the Company or any subsidiary of the Company and
other than any trust for any employee benefit plan of the Company or any
subsidiary of the Company; (d) "related Person" of any person shall mean any
other person owning (1) 5% or more of the outstanding common stock of such
person or (2) 5% or more of the Voting Stock of such person; (e) "Voting Stock"
of any such person shall mean capital stock of such person that ordinarily has
voting power for the election of directors (or persons
B-2
<PAGE>
performing similar functions) of such person, whether at all times or only so
long as no senior class of securities has such voting power by reason of any
contingency; and (f) "Affiliate" of any persons shall mean any other person that
directly or indirectly control, or in under common control with, or is
controlled by, such person.
Sinking Fund: None.
Offices for Notices and Payments, Etc.: Principal of and interest on
the Senior Subordinated Notes shall be payable, and the Senior Subordinated
Notes shall be exchangeable and transfers thereof shall be registrable, at the
corporate trust office of the Trustee in New York, New York; provided however,
that at the option of the Company, payment of interest may be made by check
mailed to the address of the person entitled thereto at such person's registered
address.
Global Securities: The Senior Subordinated Notes shall not be issuable
as Global Securities.
Trustee: The Bank of New York shall serve as the trustee, depositary,
authenticating or paying agent, transfer agent and registrar with respect to the
Senior Notes.
Names and Addresses of Underwriters:
Dillon, Read & Co. Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
J.P. Morgan Securities Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
c/o Dillon, Read & Co. Inc.
535 Madison Avenue
New York, New York 10022
B-3
SEAGULL ENERGY CORPORATION
AND
THE BANK OF NEW YORK
Senior Subordinated Indenture
Dated as of July 15, 1993
<PAGE>
CROSS REFERENCE SHEET*
Provisions of Trust Indenture Act of 1939 and Indenture to be dated as of
July 15, 1993 between SEAGULL ENERGY CORPORATION and The Bank of New York,
Trustee:
<TABLE>
<CAPTION>
Section of the Act Section of Indenture
<S> <C>
310(a)(1), (2) and (5)............................................................... 6.9
310(a)(3) and (4).................................................................... Inapplicable
310(b)............................................................................... 6.8 and 6.10(a), (b)
and (d)
310(c)............................................................................... Inapplicable
311(a)............................................................................... 6.13(a) and (c)
311(b)............................................................................... 6.13(b) and (c)
311(c)............................................................................... Inapplicable
312(a)............................................................................... 4.1 and 4.2(a)
312(b)............................................................................... 4.2(a) and (b)(i)
and (ii)
312(c)............................................................................... 4.2(c)
313(a)............................................................................... 4.4(a)(i), (ii),
(iii), (iv), (v),
(vi) and (vii)
313(a)(5)............................................................................ Inapplicable
313(b)(1)............................................................................ Inapplicable
313(b)(2)............................................................................ 4.4(b)
313(c)............................................................................... 4.4(c)
313(d)............................................................................... 4.4(d)
314(a)............................................................................... 4.3
314(b)............................................................................... Inapplicable
314(c)(1) and (2).................................................................... 11.5
314(c)(3)............................................................................ Inapplicable
314(d)............................................................................... Inapplicable
314(e)............................................................................... 11.5
314(f)............................................................................... Inapplicable
315(a), (c) and (d).................................................................. 6.1
315(b)............................................................................... 5.8
315(e)............................................................................... 5.9
316(a)(1)............................................................................ 5.7
316(a)(2)............................................................................ Not required
316(a) (last sentence)............................................................... 7.4
316(b)............................................................................... 5.4
317(a)............................................................................... 5.2
317(b)............................................................................... 3.5(a)
318(a)............................................................................... 11.7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE ONE
DEFINITIONS
<S> <C>
Affiliate....................................................................................................... 1
Asset Sale...................................................................................................... 2
Authenticating Agent............................................................................................ 2
Bankruptcy Code................................................................................................. 2
Board of Directors.............................................................................................. 2
Board Resolution................................................................................................ 2
Business Day.................................................................................................... 2
Commission...................................................................................................... 2
Consolidated Net Tangible Assets................................................................................ 2
Corporate Trust Office.......................................................................................... 2
Depositary...................................................................................................... 2
EBITDA.......................................................................................................... 3
EBITDA/Interest Ratio........................................................................................... 3
ENSTAR Alaska................................................................................................... 3
Event of Default................................................................................................ 3
Global Security................................................................................................. 3
Holder.......................................................................................................... 3
Holder of Securities............................................................................................ 3
Securityholder.................................................................................................. 3
Indebtedness.................................................................................................... 3
Indenture....................................................................................................... 4
interest........................................................................................................ 4
Issuer.......................................................................................................... 4
Issuer Order.................................................................................................... 4
Officers' Certificate........................................................................................... 4
Opinion of Counsel.............................................................................................. 4
original issue date............................................................................................. 4
original issue discount......................................................................................... 4
Original Issue Discount Security................................................................................ 5
Outstanding..................................................................................................... 5
Periodic Offering............................................................................................... 5
Person.......................................................................................................... 5
Place of Payment................................................................................................ 5
principal....................................................................................................... 5
principal amount................................................................................................ 6
Principal Property.............................................................................................. 6
record date..................................................................................................... 6
Responsible Officer............................................................................................. 6
Restricted Subsidiary........................................................................................... 6
Sale and Leaseback Transaction.................................................................................. 6
Secured Debt.................................................................................................... 6
Security........................................................................................................ 6
Securities...................................................................................................... 6
Senior Indebtedness............................................................................................. 6
Senior Subordinated Indebtedness................................................................................ 6
Subordinated Indebtedness....................................................................................... 7
Subsidiary...................................................................................................... 7
Trust Indenture Act of 1939..................................................................................... 7
Trustee......................................................................................................... 7
Unrestricted Subsidiary......................................................................................... 7
U.S. Government Obligations..................................................................................... 7
vice president.................................................................................................. 7
Yield to Maturity............................................................................................... 7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE TWO
SECURITIES
<S> <C> <C>
SECTION 2.1 Forms Generally............................................................................... 8
SECTION 2.2 Form of Trustee's Certificate of Authentication............................................... 8
SECTION 2.3 Amount Unlimited, Issuable in Series.......................................................... 8
SECTION 2.4 Authentication and Delivery of Securities..................................................... 10
SECTION 2.5 Execution of Securities....................................................................... 12
SECTION 2.6 Certificate of Authentication................................................................. 13
SECTION 2.7 Denomination and Date of Securities; Payments of Interest..................................... 13
SECTION 2.8 Registration Transfer and Exchange............................................................ 13
SECTION 2.9 Mutilated, Defaced, Destroyed, Lost and Stolen Securities..................................... 15
SECTION 2.10 Cancellation of Securities; Disposition Thereof............................................... 16
SECTION 2.11 Temporary Securities.......................................................................... 16
SECTION 2.12 CUSIP Numbers................................................................................. 16
ARTICLE THREE
COVENANTS OF THE ISSUER
SECTION 3.1 Payment of Principal and Interest............................................................. 17
SECTION 3.2 Offices for Notices and Payments, etc......................................................... 17
SECTION 3.3 No Interest Extension......................................................................... 17
SECTION 3.4 Appointments to Fill Vacancies in Trustee's Office............................................ 17
SECTION 3.5 Provision as to Paying Agent.................................................................. 17
SECTION 3.6 Restriction on Creation of Secured Debt....................................................... 18
SECTION 3.7 Restriction on Sale and Leaseback Transactions................................................ 19
SECTION 3.8 Restriction on Transfer of Principal Property to Unrestricted Subsidiary...................... 20
SECTION 3.9 Restriction on Incurrence of Indebtedness by Restricted Subsidiaries.......................... 20
SECTION 3.10 Limitation on Incurrence of Additional Indebtedness........................................... 21
SECTION 3.11 Limitation on Issuance of Certain Other Subordinated Indebtedness............................. 21
ARTICLE FOUR
SECURITYHOLDERS LISTS AND REPORTS BY THE
ISSUER AND THE TRUSTEE
SECTION 4.1 Issuer to Furnish Trustee Information as to Names and Addresses of Securityholders........... 22
SECTION 4.2 Preservation and Disclosure of Securityholders Lists.......................................... 22
SECTION 4.3 Reports by the Issuer......................................................................... 23
SECTION 4.4 Reports by the Trustee........................................................................ 23
ARTICLE FIVE
REMEDIES OF THE TRUSTEE AND SECURITY HOLDERS
ON EVENT OF DEFAULT
SECTION 5.1 Events of Default............................................................................. 25
SECTION 5.2 Payment of Securities on Default; Suit Therefor............................................... 27
SECTION 5.3 Application of Moneys Collected by Trustee.................................................... 28
SECTION 5.4 Proceedings by Securityholders................................................................ 28
SECTION 5.5 Proceedings by Trustee........................................................................ 29
SECTION 5.6 Remedies Cumulative and Continuing............................................................ 29
SECTION 5.7 Direction of Proceedings; Waiver of Defaults by Majority of Securityholders................... 29
SECTION 5.8 Notice of Defaults............................................................................ 30
SECTION 5.9 Undertaking to Pay Costs...................................................................... 30
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE SIX
CONCERNING THE TRUSTEE
<S> <C> <C>
SECTION 6.1 Duties and Responsibilities of the Trustee; During Default; Prior to Default.................. 30
SECTION 6.2 Certain Rights of the Trustee................................................................. 31
SECTION 6.3 Trustee Not Responsible for Recitals, Disposition of Securities or Application
of Proceeds Thereof......................................................................... 32
SECTION 6.4 Trustee and Agents May Hold Securities; Collections, etc...................................... 32
SECTION 6.5 Moneys Held by Trustee........................................................................ 32
SECTION 6.6 Compensation and Indemnification of Trustee and Its Prior Claim............................... 32
SECTION 6.7 Right of Trustee to Rely on Officers' Certificate, etc........................................ 33
SECTION 6.8 Qualification of Trustee; Conflicting Interests............................................... 33
SECTION 6.9 Persons Eligible for Appointment as Trustee................................................... 37
SECTION 6.10 Resignation and Removal; Appointment of Successor Trustee..................................... 38
SECTION 6.11 Acceptance of Appointment by Successor Trustee................................................ 39
SECTION 6.12 Merger, Conversion, Consolidation or Succession to Business of Trustee........................ 39
SECTION 6.13 Preferential Collection of Claims Against the Issuer.......................................... 40
SECTION 6.14 Appointment of Authenticating Agent........................................................... 42
ARTICLE SEVEN
CONCERNING THE SECURITYHOLDERS
SECTION 7.1 Evidence of Action Taken by Securityholders................................................... 43
SECTION 7.2 Proof of Execution of Instruments and of Holding of Securities................................ 43
SECTION 7.3 Holders to be Treated as Owners............................................................... 44
SECTION 7.4 Securities Owned by Issuer Deemed Not Outstanding............................................. 44
SECTION 7.5 Right of Revocation of Action Taken........................................................... 44
SECTION 7.6 Record Date for Consents and Waivers.......................................................... 45
ARTICLE EIGHT
SUPPLEMENTAL INDENTURES
SECTION 8.1 Supplemental Indentures Without Consent of Securityholders.................................... 45
SECTION 8.2 Supplemental Indentures with Consent of Securityholders....................................... 46
SECTION 8.3 Effect of Supplemental Indenture.............................................................. 47
SECTION 8.4 Documents to Be Given to Trustee.............................................................. 47
SECTION 8.5 Notation on Securities in Respect of Supplemental Indentures.................................. 47
SECTION 8.6 Subordination Unimpaired...................................................................... 47
ARTICLE NINE
CONSOLIDATION, MERGER, SALE, LEASE, EXCHANGE OR OTHER DISPOSITION
SECTION 9.1 Issuer May Consolidate, etc., on Certain Terms................................................ 48
SECTION 9.2 Securities to be Secured in Certain Events.................................................... 48
SECTION 9.3 Successor Corporation to be Substituted....................................................... 48
SECTION 9.4 Opinion of Counsel to be Given Trustee........................................................ 49
ARTICLE TEN
SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS
SECTION 10.1 Satisfaction and Discharge of Indenture....................................................... 49
SECTION 10.2 Application by Trustee of Funds Deposited for Payment of Securities........................... 51
SECTION 10.3 Repayment of Moneys Held by Paying Agent...................................................... 51
SECTION 10.4 Return of Moneys Held by Trustee and Paying Agent Unclaimed for Two Years..................... 51
SECTION 10.5 Indemnity for U.S. Government Obligations..................................................... 51
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE ELEVEN
MISCELLANEOUS PROVISIONS
<S> <C> <C>
SECTION 11.1 Partners, Incorporators, Stockholders, Officers and Directors of Issuer Exempt
from Individual Liability.................................................................... 52
SECTION 11.2 Provisions of Indenture for the Sole Benefit of Parties and Holders of Securities............. 52
SECTION 11.3 Successors and Assigns of Issuer Bound by Indenture........................................... 52
SECTION 11.4 Notices and Demands on Issuer, Trustee and Holders of Securities.............................. 52
SECTION 11.5 Officers' Certificates and Opinions of Counsel; Statements to Be Contained Therein............ 52
SECTION 11.6 Payments Due on Saturdays, Sundays and Holidays............................................... 53
SECTION 11.7 Conflict of Any Provision of Indenture with Trust Indenture Act of 1939....................... 53
SECTION 11.8 GOVERNING LAW................................................................................. 53
SECTION 11.9 Counterparts.................................................................................. 54
SECTION 11.10 Effect of Headings............................................................................ 54
ARTICLE TWELVE
REDEMPTION OF SECURITIES AND SINKING FUNDS
SECTION 12.1 Applicability of Article...................................................................... 54
SECTION 12.2 Notice of Redemption; Partial Redemptions..................................................... 54
SECTION 12.3 Payment of Securities Called for Redemption................................................... 55
SECTION 12.4 Exclusion of Certain Securities from Eligibility for Selection for Redemption................. 55
SECTION 12.5 Mandatory and Optional Sinking Funds.......................................................... 55
ARTICLE THIRTEEN
SUBORDINATION
SECTION 13.1 Securities Subordinated to Senior Indebtedness................................................ 57
SECTION 13.2 Reliance on Certificate of Liquidating Agent; Further Evidence as to Ownership of
Senior Indebtedness ........................................................................ 59
SECTION 13.3 Payment Permitted If No Default............................................................... 60
SECTION 13.4 Disputes with Holders of Certain Senior Indebtedness.......................................... 60
SECTION 13.5 Trustee Not Charged with Knowledge of Prohibition............................................. 60
SECTION 13.6 Trustee to Effectuate Subordination........................................................... 61
SECTION 13.7 Rights of Trustee as Holder of Senior Indebtedness............................................ 61
SECTION 13.8 Article Applicable to Paying Agents........................................................... 61
SECTION 13.9 Subordination Rights Not Impaired by Acts or Omissions of the Issuer or Holders
of Senior Indebtedness...................................................................... 61
SECTION 13.10 Trustee Not Fiduciary for Holders of Senior Indebtedness...................................... 61
</TABLE>
<PAGE>
THIS SENIOR SUBORDINATED INDENTURE, dated as of July 15, 1993 between
SEAGULL ENERGY CORPORATION, a Texas corporation (the "Issuer"), and The Bank of
New York, a New York banking corporation as trustee (the "Trustee"),
W I T N E S S E T H:
WHEREAS, the Issuer has duly authorized the issuance from time to time of
its unsecured senior subordinated debentures, notes or other evidences of
indebtedness to be issued in one or more series (the "Securities") up to such
principal amount or amounts as may from time to time be authorized in accordance
with the terms of this Indenture;
WHEREAS, the Issuer has duly authorized the execution and delivery of this
Indenture to provide, among other things, for the authentication, delivery and
administration of the Securities; and
WHEREAS, all things necessary to make this Indenture a valid indenture and
agreement according to its terms have been undertaken and completed;
NOW, THEREFORE:
In consideration of the premises and the purchases of the Securities by the
Holders (as hereinafter defined) thereof, the Issuer and the Trustee mutually
covenant and agree for the equal and proportionate benefit of the respective
Holders from time to time of the Securities as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.1 For all purposes of this Indenture and of any indenture
supplemental hereto the following terms shall have the respective meanings
specified in this Section 1.1 (except as otherwise expressly provided or unless
the context otherwise clearly requires). All other terms used in this Indenture
that are defined in the Trust Indenture Act of 1939, including terms defined
therein by reference to the Securities Act of 1933, as amended, shall have the
meanings assigned to such terms in said Trust Indenture Act and in said
Securities Act as in force at the date of this Indenture (except as herein
otherwise expressly provided or unless the context otherwise clearly requires).
All accounting terms used herein and not expressly defined shall have the
meanings assigned to such terms in accordance with generally accepted accounting
principles, and the term "generally accepted accounting principles" means such
accounting principles as are generally accepted at the time of any computation.
The words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision. The expressions "date of this Indenture", "date
hereof", "date as of which this Indenture is dated" and "date of execution and
delivery of this Indenture" and other expressions of similar import refer to the
effective date of the original execution and delivery of this Indenture, viz.
July 15, 1993.
The terms defined in this Article have the meanings assigned to them in
this Article and include the plural as well as the singular.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Asset Sale" for any Person shall mean the sale, lease, conveyance or other
disposition (including without limitation by merger or consolidation, and
whether by operation of law or otherwise) of any of that Person's assets
(including without limitation the sale or other disposition of capital stock of
any Subsidiary of such Person, whether by such Person or by such Subsidiary),
<PAGE>
whether owned on the date of this Indenture or subsequently acquired, in one
transaction or a series of related transactions, in which such Person and/or its
Subsidiaries receive cash and/or other consideration (including without
limitation the unconditional assumption of Indebtedness of such Person and/or
its Subsidiaries) having an aggregate fair market value of $5 million or more as
to such transaction or series of transactions; provided, however, that the
following shall not constitute Asset Sales: (i) sales of inventories in the
ordinary course of business or pledges of inventories and of accounts receivable
by the Issuer or its Subsidiaries; (ii) transactions between the Issuer and any
of its wholly owned Subsidiaries or among such wholly owned Subsidiaries; and
(iii) the incurrence of any mortgage, security interest, pledge, lien or
encumbrance that secures Secured Debt as permitted by Section 3.6.
"Authenticating Agent" shall have the meaning set forth in Section 6.14.
"Bankruptcy Code" means the United States Bankruptcy Code, 11 United States
Code ss.ss. 101 et seq., or any successor statute thereto.
"Board of Directors" means either the Board of Directors of the Issuer or
any committee of such Board duly authorized to act on its behalf.
"Board Resolutions" means one or more resolutions, certified by the
secretary or an assistant secretary of the Issuer to have been duly adopted or
consented to by the Board of Directors and to be in full force and effect.
"Business Day" means, with respect to any Security, a day that (a) in the
Place of Payment (or in any of the Places of Payment, if more than one) in which
amounts are payable, as specified in the form of such Security, and (b) in the
city in which the Corporate Trust Office is located, is not a day on which
banking institutions are authorized or required by law or regulation to close.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, as amended,
or, if at any time after the execution and delivery of this Indenture such
Commission is not existing and performing the duties now assigned to it under
the Trust Indenture Act of 1939, then the body performing such duties on such
date.
"Consolidated Net Tangible Assets" means the aggregate amount of assets
included on the most recent consolidated balance sheet of the Issuer and its
Restricted Subsidiaries, less applicable reserves and other properly deductible
items and after deducting therefrom (a) all current liabilities and (b) all
goodwill, trade names, trademarks, patents, unamortized debt discount and
expense and other like intangibles, all in accordance with generally accepted
accounting principles consistently applied.
"Corporate Trust Office" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date as of which this
Indenture is dated, located in New York, New York.
"Depositary" means, with respect to the Securities of any series issuable
or issued in the form of one or more Global Securities, the Person designated as
Depositary by the Issuer pursuant to Section 2.3 until a successor Depositary
shall have become such pursuant to the applicable provisions of this Indenture,
and thereafter "Depositary" shall mean or include each Person who is then a
Depositary hereunder, and, if at any time there is more than one such Person,
"Depositary" as used with respect to the Securities of any such series shall
mean the Depositary with respect to the Global Securities of such series.
"EBITDA" shall mean net earnings (excluding gains and losses on sales and
retirement of assets, non-cash write downs and charges resulting from accounting
convention changes) before deduction for federal and state taxes, interest
expense or depreciation, depletion and amortization expense, all determined in
accordance with generally accepted accounting principles.
"EBITDA/Interest Ratio", on any date, shall mean the ratio of (a) EBITDA of
the Issuer and its Restricted Subsidiaries on a consolidated basis to (b)
interest expense on all Indebtedness of the Issuer and its Restricted
Subsidiaries on a consolidated basis for any twelve-month period ending on the
last day of the most recent calendar quarter; provided, however, that if any
calculation of the Issuer's EBITDA/Interest Ratio requires the use of any
quarter prior to the date of the Indenture, such calculation shall be made on a
<PAGE>
pro forma basis, giving effect to the issuance of the Securities and the use of
the net proceeds therefrom, as if the same had occurred at the beginning of the
twelve-month period used to make such calculation; and provided further that if
any such calculation requires the use of any quarter prior to the date that any
Asset Sale was consummated, any Indebtedness described in clause (a) of the
definition of Indebtedness was incurred, any capital stock of the Issuer was
issued in a financing transaction or any acquisition other than in the ordinary
course of business was consummated by the Issuer or any Restricted Subsidiary,
such calculation shall be made on a pro forma basis, giving effect to each such
Asset Sale, incurrence of Indebtedness, issuance of capital stock or
acquisition, as the case may be, and the use of any proceeds therefrom, as if
the same had occurred at the beginning of the twelve-month period used to make
such calculation.
"ENSTAR Alaksa" means (i) the division of the Issuer known on the date of
this Indenture as ENSTAR Natural Gas Company, which owns on the date of this
Indenture the gas distribution system in south-central Alaska, and (ii) Alaska
Pipeline Company, an Alaska corporation and a Subsidiary of the Issuer, in each
case together with successors and assigns.
"Event of Default" means any event or condition specified as such in
Section 5.1.
"Global Security" means a Security evidencing all or a part of a series of
Securities issued to the Depositary for such series in accordance with Section
2.3 and bearing the legend prescribed in Section 2.4.
"Holder", "Holder of Securities" or other similar terms mean, in the case
of any Security, the person in whose name such Security is registered in the
security register kept by the Issuer for that purpose in accordance with the
terms hereof.
"Indebtedness" means, with respect to any Person,
(a) (i) the principal of and premium, if any, and interest, if any, on
indebtedness for money borrowed of such Person, indebtedness of such Person
evidenced by bonds, notes, debentures or similar obligations, and any guaranty
by such Person of any indebtedness for money borrowed or indebtedness evidenced
by bonds, notes, debentures or similar obligations of any other Person, whether
any such indebtedness or guaranty is outstanding on the date of this Indenture
or is thereafter created, assumed or incurred, (ii) the principal of and
premium, if any, and interest, if any, on indebtedness for money borrowed,
incurred, assumed or guaranteed by such Person in connection with the
acquisition by it or any of its subsidiaries of any other businesses, properties
or other assets and (iii) lease obligations which such Person capitalizes in
accordance with Statement of Financial Accounting Standards No. 13 promulgated
by the Financial Accounting Standards Board or such other generally accepted
accounting principles as may be from time to time in effect;
(b) any other indebtedness of such Person, including any indebtedness
representing the balance deferred and unpaid of the purchase price of any
property or interest therein, and any guaranty, endorsement or other contingent
obligation of such Person in respect of any indebtedness of another that is
outstanding on the date of this Indenture or is thereafter created, assumed or
incurred by such Person;
(c) obligations of such Person under interest rate, commodity or currency
swaps, caps, collars, options and similar arrangements;
(d) obligations of such Person for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction; and
(e) any amendments, modifications, refundings, renewals or extensions of
any indebtedness or obligation described as Indebtedness in clauses (a) through
(d) above.
"Indenture" means this instrument as originally executed and delivered or,
if amended or supplemented as herein provided, as so amended or supplemented or
both, including, for all purposes of this instrument and any such supplement,
the provisions of the Trust Indenture Act of 1939 that are deemed to be a part
of and govern this instrument and any such supplement, respectively, and shall
include the forms and terms of particular series of Securities established as
contemplated hereunder.
The term "interest" means, when used with respect to non-interest bearing
Securities (including, without limitation, any Original Issue Discount Security
that by its terms bears interest only after maturity or upon default in any
<PAGE>
other payment due on such Security), interest payable after maturity (whether at
stated maturity, upon acceleration or redemption or otherwise) or after the
date, if any, on which the Issuer becomes obligated to acquire a Security,
whether upon conversion, by purchase or otherwise.
"Issuer" means (except as otherwise provided in Section 6.8) Seagull Energy
Corporation, a Texas corporation, and, subject to Article Nine, its successors
and assigns.
"Issuer Order" means a written statement, request or order of the Issuer
which is signed in its name by the chairman of the Board of Directors, the
president or any vice president of the Issuer.
"Officers' Certificate", when used with respect to the Issuer, means a
certificate signed by the chairman of the Board of Directors, the president, or
any vice president and by the treasurer, any assistant treasurer, the
controller, any assistant controller, the secretary or any assistant secretary
of the Issuer. Each such certificate shall include the statements provided for
in Section 11.5 if and to the extent required by the provisions of such Section
11.5. One of the officers signing an Officers' Certificate given pursuant to
Section 4.3 shall be the principal executive, financial or accounting officer of
the Issuer.
"Opinion of Counsel" means an opinion in writing signed by the chief
counsel of the Issuer or by such other legal counsel who may be an employee of
or counsel to the Issuer and who shall be satisfactory to the Trustee. Each such
opinion shall include the statements provided for in Section 11.5, if and to the
extent required by the provisions of such Section 11.5.
The term "original issue date" of any Security (or portion thereof) means
the earlier of (a) the date of such Security or (b) the date of any Security (or
portion thereof) for which such Security was issued (directly or indirectly) on
registration of transfer, exchange or substitution.
The term "original issue discount" of any debt security, including any
Original Issue Discount Security, means the difference between the principal
amount of such debt security and the initial issue price of such debt security
(as set forth in the case of an Original Issue Discount Security on the face of
such Security).
"Original Issue Discount Security" means any Security that provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the maturity thereof pursuant to Section 5.1.
"Outstanding" (except as otherwise provided in Section 6.8), when used with
reference to Securities, shall, subject to the provisions of Section 7.4, mean,
as of any particular time, all Securities authenticated and delivered by the
Trustee under this Indenture, except:
(a) Securities theretofore cancelled by the Trustee or delivered to the
Trustee for cancellation;
(b) Securities (other than Securities of any series as to which the
provisions of Article Ten hereof shall not be applicable), or portions thereof,
for the payment or redemption of which moneys or U.S. Government Obligations (as
provided for in Section 10.1) in the necessary amount shall have been deposited
in trust with the Trustee or with any paying agent (other than the Issuer) or
shall have been set aside, segregated and held in trust by the Issuer for the
Holders of such Securities (if the Issuer shall act as its own paying agent),
provided that, if such Securities, or portions thereof, are to be redeemed prior
to the maturity thereof, notice of such redemption shall have been given as
herein provided, or provision satisfactory to the Trustee shall have been made
for giving such notice; and
(c) Securities which shall have been paid or in substitution for which
other Securities shall have been authenticated and delivered pursuant to the
terms of Section 2.9 (except with respect to any such Security as to which proof
satisfactory to the Trustee is presented that such Security is held by a person
in whose hands such Security is a legal, valid and binding obligation of the
Issuer).
In determining whether the Holders of the requisite aggregate principal
amount of Outstanding Securities of any or all series have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, the
principal amount of an Original Issue Discount Security that shall be deemed to
be Outstanding for such purposes shall be the portion of the principal amount
thereof that would be due and payable as of the date of such determination (as
certified by the Issuer to the Trustee) upon a declaration of acceleration of
the maturity thereof pursuant to Section 5.1. <PAGE>
"Periodic Offering" means an offering of Securities of a series from time
to time, the specific terms of which Securities, including, without limitation,
the rate or rates of interest, if any, thereon, the stated maturity or
maturities thereof and the redemption provisions, if any, with respect thereto,
are to be determined by the Issuer or its agents upon the issuance of such
Securities.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust, estate,
unincorporated organization or government or any agency or political subdivision
thereof.
"Place of Payment", when used with respect to the Securities of any series,
means the place or places where the principal of and interest, if any, on the
Securities of such series are payable as determined in accordance with Section
2.3.
The term "principal" of a debt security, including any Security, means the
amount (including, without limitation, if and to the extent applicable, any
premium and, in the case of an Original Issue Discount Security, any accrued
original issue discount, but excluding interest) that is payable with respect to
such debt security as of any date and for any purpose (including, without
limitation, in connection with any sinking fund, upon any redemption at the
option of the Issuer, upon any purchase or exchange at the option of the Issuer
or the holder of such debt security and upon any acceleration of the maturity of
such debt security).
The term "principal amount" of a debt security, including any Security,
means the principal amount as set forth on the face of such debt security.
"Principal Property" means any real property, manufacturing plant,
processing plant, pipeline, office building, warehouse or other physical
facility, or any other like depreciable or depletable asset of the Issuer or any
Restricted Subsidiary whether owned at July 1, 1993 or thereafter acquired
(other than any facility thereafter acquired for the control or abatement of
atmospheric pollutants or contaminants or water, noise, odor or other pollution)
which in the opinion of the Board of Directors is of material importance to the
total business conducted by the Issuer and its Restricted Subsidiaries, as a
whole; provided, however, that any such property shall not be deemed a Principal
Property if such property does not have a fair value in excess of 3% of the
total assets included on a consolidated balance sheet of the Issuer and its
Restricted Subsidiaries prepared in accordance with generally accepted
accounting principles consistently applied.
The term "record date" shall have the meaning set forth in Section 2.7.
"Responsible Officer", when used with respect to the Trustee, means any
officer assigned by the Trustee to administer its corporate trust matters.
"Restricted Subsidiary" means (a) any Subsidiary other than an Unrestricted
Subsidiary, and (b) any Subsidiary which was an Unrestricted Subsidiary but
which, subsequent to the date hereof, is designated by the Issuer (by certified
resolution of the Board of Directors delivered to the Trustee) to be a
Restricted Subsidiary; provided, however, that the Issuer may not designate any
such Subsidiary to be a Restricted Subsidiary if the Issuer would thereby breach
any covenant or agreement herein contained (on the assumptions that any
outstanding Indebtedness of such Subsidiary was incurred at the time of such
designation and that any Sale and Leaseback Transaction to which such Subsidiary
is then a party was entered into at the time of such designation).
" Sale and Leaseback" shall have the meaning set forth in Section 3.7.
"Secured Debt" means indebtedness for money borrowed by the Issuer or a
Restricted Subsidiary and any other indebtedness of the Issuer or a Restricted
Subsidiary on which interest is paid or payable (other than indebtedness owed by
a Restricted Subsidiary to the Issuer, by a Restricted Subsidiary to another
Restricted Subsidiary or by the Issuer to a Restricted Subsidiary), that in any
such case is secured by (a) a mortgage or other lien on any Principal Property
of the Issuer or a Restricted Subsidiary, or (b) a pledge, lien or other
security interest on any shares of stock or indebtedness of a Restricted
Subsidiary, or (c) in the case of any such indebtedness of the Issuer, a
guaranty by any Restricted Subsidiary. The amount of Secured Debt at any time
outstanding shall be the amount then owing thereon by the Issuer or a Restricted
Subsidiary.
"Secrity" or "Securities" (except as otherwise provided in Section 6.8) has
the meaning stated in the first recital of this Indenture or, as the case may
be, Securities that have been authenticated and delivered pursuant to this
Indenture.
"Senior Indebtedness" means Indebtedness of the Issuer outstanding at any
<PAGE>
time except (a) any Indebtedness as to which, by the terms of the instrument
creating or evidencing the same, it is provided that such Indebtedness is not
senior in right of payment to the Securities, (b) the Securities, (c) any
Indebtedness of the Issuer to a wholly-owned subsidiary of the Issuer, (d)
interest accruing after the filing of a petition initiating any proceeding
referred to in Sections 5.1(e) and 5.1(f) unless such interest is an allowed
claim enforceable against the Issuer in a proceeding under federal or state
bankruptcy laws and (e) trade payables.
"Senior Subordinated Indebtedness" means the Securities and any other
Indebtedness of the Issuer that ranks pari passu with the Securities. Any
Indebtedness of the Issuer that is subordinate or junior by its terms in right
of payment to any other Indebtedness of the Issuer shall be subordinate to
Senior Subordinated Indebtedness unless the instrument creating or evidencing
the same or pursuant to which the same is outstanding specifically provides that
such Indebtedness (i) is to rank pari passu with other Senior Subordinated
Indebtedness and (ii) is not subordinated by its terms to any Indebtedness of
the Issuer which is not Senior Indebtedness.
"Subordinated Indebtedness" means the Securities, any other Senior
Subordinated Indebtedness and any other Indebtedness that is subordinate or
junior in right of payment to Senior Indebtedness.
"Subsidiary" means any corporation of which the Issuer, or the Issuer and
one or more Subsidiaries, or any one or more Subsidiaries, directly or
indirectly own voting securities entitling any one or more of the Issuer and its
Subsidiaries to elect a majority of the directors, either at all times or, so
long as there is no default or contingency which permits the holders of any
other class or classes of securities to vote for the election of one or more
directors.
"Trust Indenture Act of 1939" (except as otherwise provided in Sections 8.1
and 8.2) means the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990, as in force at the date as of which this Indenture
is originally executed.
"Trustee" means the Person identified as "Trustee" in the first paragraph
hereof and, subject to the provisions of Article Six, shall also include any
successor trustee. "Trustee" shall also mean or include each Person who is then
a trustee hereunder and, if at any time there is more than one such Person,
"Trustee" as used with respect to the Securities of any series shall mean the
trustee with respect to the Securities of such series.
"Inrestricted Subsidiary" means (a) any Subsidiary acquired or organized
after the date hereof, provided, however, that such Subsidiary shall not be a
successor, directly or indirectly, to any Restricted Subsidiary, and (b) any
Subsidiary whose principal business and assets are located outside the United
States of America, its territories and possessions and Canada or are located in
Puerto Rico, and (c) any Subsidiary the principal business of which consists of
financing or assisting in financing the acquisition or disposition of products
of the Issuer or a Subsidiary by dealers, distributors or other customers, and
(d) any Subsidiary the principal business of which is owning, leasing, dealing
in or developing real property, and (e) any Subsidiary substantially all the
assets of which consist of stock or other securities of a Subsidiary or
Subsidiaries of the character described in clauses (a) through (d) of this
paragraph, unless and until such Subsidiary shall have been designated to be a
Restricted Subsidiary pursuant to clause (b) of the definition of "Restricted
Subsidiary".
"U.S. Government Obligations" shall have the meaning set forth in Section
10.1(B).
The term "vice president," when used with respect to the Issuer or the
Trustee, means any vice president, regardless of whether designated by a number
or a word or words added before or after the title "vice president."
"Yield to Maturity" means the yield to maturity on a series of Securities,
calculated at the time of issuance of such series, or, if applicable, at the
most recent redetermination of interest on such series, and calculated in
accordance with generally accepted financial practice or as otherwise provided
in the terms of such series of Securities. <PAGE>
ARTICLE TWO
SECURITIES
SECTION 2.1 Forms Generally. The Securities of each series shall be
substantially in such form (not inconsistent with this Indenture) as shall be
established by or pursuant to one or more Board Resolutions (as set forth in a
Board Resolution or, to the extent established pursuant to rather than set forth
in a Board Resolution, an Officers' Certificate detailing such establishment) or
in one or more indentures supplemental hereto, in each case with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture, and may have imprinted or otherwise
reproduced thereon such legend or legends or endorsements, not inconsistent with
the provisions of this Indenture, as may be required to comply with any law or
with any rules or regulations pursuant thereto, or with any rules of any
securities exchange or to conform to general usage, all as may be determined by
the officers executing such Securities, as evidenced by their execution of such
Securities.
The definitive Securities shall be printed, lithographed or engraved on
steel engraved borders or may be produced in any other manner, all as determined
by the officers executing such Securities as evidenced by their execution of
such Securities.
SECTION 2.2 Form of Trustee's Certificate of Authentication. The Trustee's
certificate of authentication on all Securities shall be substantially as
follows:
This is one of the Securities of the series designated herein referred to
in the within mentioned Indenture.
The Bank of New York, as Trustee
By_______________________________
Authorized Signatory
If at any time there shall be an Authenticating Agent appointed with
respect to any series of Securities, then the Securities of such series shall
bear, in addition to the Trustee's certificate of authentication, an alternate
Certificate of Authentication which shall be substantially as follows:
This is one of the Securities of the series designated herein referred to
in the within mentioned Indenture.
The Bank of New York, as Trustee
By _________________________________
as Authenticating Agent
By__________________________________
Authorized Signatory
SECTION 2.3 Amount Unlimited, Issuable in Series. The aggregate principal
amount of Securities which may be authenticated and delivered under this
Indenture is unlimited.
The Securities may be issued in one or more series and the Securities of
each such series shall rank equally and pari passu with the Securities of each
other series, but all Securities issued hereunder shall be subordinate and
junior in right of payment, to the extent and in the manner set forth in Article
Thirteen, to all Senior Indebtedness. There shall be established in or pursuant
to one or more Board Resolutions (and, to the extent established pursuant to
rather than set forth in a Board Resolution, in an Officers' Certificate
detailing such establishment) or established in one or more indentures
supplemental hereto, prior to the initial issuance of Securities of any series:
(1) the designation of the Securities of the series, which shall
<PAGE>
distinguish the Securities of such series from the Securities of all other
series;
(2) any limit upon the aggregate principal amount of the Securities of the
series that may be authenticated and delivered under this Indenture (except for
Securities authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Securities of the series pursuant to Section
2.8, 2.9, 2.11, 8.5 or 12.3);
(3) the date or dates on which the principal of the Securities of the
series is payable;
(4) the rate or rates at which the Securities of the series shall bear
interest, if any, the date or dates from which any such interest shall accrue,
on which any such interest shall be payable and on which a record shall be taken
for the determination of Holders to whom any such interest is payable or the
method by which such rate or rates or date or dates shall be determined or both;
(5) the place or places where and the manner in which the principal of and
interest, if any, on Securities of the series shall be payable (if other than as
provided in Section 3.2) and the office or agency for the Securities of the
series maintained by the Issuer pursuant to Section 3.2;
(6) the right, if any, of the Issuer to redeem, purchase or repay
Securities of the series, in whole or in part, at its option and the period or
periods within which, the price or prices (or the method by which such price or
prices shall be determined or both) at which, the form or method of payment
therefor if other than in cash and any terms and conditions upon which and the
manner in which (if different from the provisions of Article Twelve) Securities
of the series may be so redeemed, purchased or repaid, in whole or in part,
pursuant to any sinking fund or otherwise;
(7) the obligation, if any, of the Issuer to redeem, purchase or repay
Securities of the series in whole or in part pursuant to any mandatory
redemption, sinking fund or analogous provisions or at the option of a Holder
thereof and the period or periods within which the price or prices (or the
method by which such price or prices shall be determined or both) at which, the
form or method of payment therefor if other than in cash and any terms and
conditions upon which and the manner in which (if different from the provisions
of Article Twelve) Securities of the series shall be redeemed, purchased or
repaid, in whole or in part, pursuant to such obligation;
(8) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which Securities of the series shall be issuable;
(9) if other than the principal amount thereof, the portion of the
principal amount of Securities of the series which shall be payable upon
acceleration of the maturity thereof;
(10) whether Securities of the series will be issuable as Global
Securities;
(11) if the Securities of such series are to be issuable in definitive form
(whether upon original issue or upon exchange of a temporary Security of such
series) only upon receipt of certain certificates or other documents or
satisfaction of other conditions, the form and terms of such certificates,
documents or conditions;
(12) any trustees, depositaries, authenticating or paying agents, transfer
agents or registrars or any other agents with respect to the Securities of such
series;
(13) any deleted, modified or additional events of default or remedies or
any additional covenants with respect to the Securities of such series;
(14) whether the provisions of Section 10.1(C) will be applicable to
Securities of such series;
(15) any provision relating to the issuance of Securities of such series at
an original issue discount (including, without limitation, the issue price
thereof, the rate or rates at which such original issue discount shall accrue,
if any, and the date or dates from or to which or period or periods during which
such original issue discount shall accrue at such rate or rates); <PAGE>
(16) if the amounts of payments of principal of and interest on the
Securities of such series are to be determined with reference to an index, the
manner in which such amounts shall be determined; and
(17) any other terms of the series (which terms shall not be inconsistent
with the provisions of this Indenture).
All Securities of any one series shall be substantially identical, except
as to denomination and except as may otherwise be provided by or pursuant to the
Board Resolution or Officers' Certificate referred to above or as set forth in
any such indenture supplemental hereto. All Securities of any one series need
not be issued at the same time and may be issued from time to time, consistent
with the terms of this Indenture, if so provided by or pursuant to such Board
Resolution, such Officers' Certificate or in any such indenture supplemental
hereto.
Any such Board Resolution or Officers' Certificate referred to above with
respect to Securities of any series filed with the Trustee on or before the
initial issuance of the Securities of such series shall bc incorporated herein
by reference with respect to Securities of such series and shall thereafter be
deemed to be a part of the Indenture for all purposes relating to Securities of
such series as fully as if such Board Resolution or Officers' Certificate were
set forth herein in full.
SECTION 2.4 Authentication and Delivery of Securities. The Issuer may
deliver Securities of any series executed by the Issuer to the Trustee for
authentication together with the applicable documents referred to below in this
Section 2.4, and the Trustee shall thereupon authenticate and deliver such
Securities to, or upon the order of, the Issuer (contained in the Issuer Order
referred to below in this Section 2.4) or pursuant to such procedures acceptable
to the Trustee and to such recipients as may be specified from time to time by
an Issuer Order. The maturity date, original issue date, interest rate, if any,
and any other terms of the Securities of such series shall be determined by or
pursuant to such Issuer Order and procedures. If provided for in such procedures
and agreed to by the Trustee, such Issuer Order may authorize authentication and
delivery pursuant to oral instructions from the Issuer or its duly authorized
agent, which instructions shall be promptly confirmed in writing. In
authenticating the Securities of such series and accepting the additional
responsibilities under this Indenture in relation to such Securities, the
Trustee shall be entitled to receive (in the case of subparagraphs (2), (3) and
(4) below only at or before the time of the first request of the Issuer to the
Trustee to authenticate Securities of such series) and (subject to Section 6.1)
shall be fully protected in relying upon, unless and until such documents have
been superseded or revoked:
(1) an Issuer Order requesting such authentication and setting forth
delivery instructions if the Securities of such series are not to be
delivered to the Issuer, provided that, with respect to Securities of a
series subject to a Periodic Offering, (a) such Issuer Order may be
delivered by the Issuer to the Trustee prior to the delivery to the Trustee
of such Securities for authentication and delivery, (b) the Trustee shall
authenticate and deliver Securities of such series for original issue from
time to time, in an aggregate principal amount not exceeding the aggregate
principal amount established for such series, pursuant to an Issuer Order
or pursuant to procedures acceptable to the Trustee as may be specified
from time to time by an Issuer Order, (c) the maturity date or dates,
original issue date or dates, interest rate or rates, if any, and any other
terms of Securities of such series shall be determined by an Issuer Order
or pursuant to such procedures, (d) if provided for in such procedures,
such Issuer Order may authorize authentication and delivery pursuant to
oral or electronic instructions from the Issuer or its duly authorized
agent or agents, which oral instructions shall be promptly confirmed in
writing and (e) after the original issuance of the first Security of such
series to be issued, any separate request by the Issuer that the Trustee
authenticate Securities of such series for original issuance will be deemed
to be a certification by the Issuer that it is in compliance with all
conditions precedent provided for in this Indenture relating to the
authentication and delivery of such Securities;
(2) the Board Resolution, Officers' Certificate or executed
supplemental indenture referred to in Sections 2.1 and 2.3 by or pursuant
to which the forms and terms of the Securities of such series were
established;
(3) an Officers' Certificate setting forth the form or forms and terms
of the Securities stating that the form or forms and terms of the
Securities have been established pursuant to Sections 2.1 and 2.3 and
comply with this Indenture and covering such other matters as the Trustee
may reasonably request; and
<PAGE>
(4) at the option of the Issuer, either an Opinion of Counsel, or a
letter from legal counsel addressed to the Trustee permitting it to rely on
an Opinion of Counsel, substantially to the effect that:
(a) the form or forms of the Securities of such series have been
duly authorized and established in conformity with the provisions of
this Indenture;
(b) in the case of an underwritten offering, the terms of the
Securities of such series have been duly authorized and established in
conformity with the provisions of this Indenture, and, in the case of
an offering that is not underwritten, certain terms of the Securities
of such series have been established pursuant to a Board Resolution,
an Officers' Certificate or a supplemental indenture in accordance
with this Indenture, and when such other terms as are to be
established pursuant to procedures set forth in an Issuer Order shall
have been established, all such terms will have been duly authorized
by the Issuer and will have been established in conformity with the
provisions of this Indenture;
(c) when the Securities of such series have been executed by the
Issuer and authenticated by the Trustee in accordance with the
provisions of this Indenture and delivered to and duly paid for by the
purchasers thereof, they will have been duly issued under this
Indenture and will be valid and legally binding obligations of the
Issuer, enforceable in accordance with their respective terms, and
will be entitled to the benefits of this Indenture; and
(d) the execution and delivery by the Issuer of, and the
performance by the Issuer of its obligations under, the Securities of
such series will not contravene any provision of applicable law or the
articles of incorporation or bylaws of the Issuer or any agreement or
other instrument binding upon the Issuer or any of its Subsidiaries
that is material to the Issuer and its Subsidiaries, considered as one
enterprise, or, to such counsel's knowledge after the inquiry
indicated therein, any judgment, order or decree of any governmental
agency or any court having jurisdiction over the Issuer or any
Subsidiary, and no consent, approval or authorization of any
governmental body or agency is required for the performance by the
Issuer of its obligations under the Securities, except such as are
specified and have been obtained and such as may be required by the
securities or blue sky laws of the various states in connection with
the offer and sale of the Securities.
In rendering such opinions, such counsel may qualify any opinions as to
enforceability by stating that such enforceability may be limited by bankruptcy,
insolvency, reorganization, liquidation, moratorium and other similar laws
affecting the rights and remedies of creditors and is subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). Such counsel may rely, as to all matters
governed by the laws of jurisdictions other than the State of Texas and the
federal law of the United States, upon opinions of other counsel (copies of
which shall be delivered to the Trustee), who shall be counsel reasonably
satisfactory to the Trustee, in which case the opinion shall state that such
counsel believes that both such counsel and the Trustee are entitled so to rely.
Such counsel may also state that, insofar as such opinion involves factual
matters, such counsel has relied, to the extent such counsel deems proper, upon
certificates of officers of the Issuer and its Subsidiaries and certificates of
public officials.
The Trustee shall have the right to decline to authenticate and deliver any
Securities of any series under this Section 2.4 if the Trustee, being advised by
counsel, determines that such action may not lawfully be taken by the Issuer or
if the Trustee in good faith by its board of directors or board of trustees,
executive committee or a trust committee of directors or trustees or Responsible
Officers shall determine that such action would expose the Trustee to personal
liability to existing Holders or would adversely affect the Trustee's own
rights, duties or immunities under the Securities, this Indenture or otherwise.
If the Issuer shall establish pursuant to Section 2.3 that the Securities
of a series are to be issued in the form of one or more Global Securities, then
the Issuer shall execute and the Trustee shall, in accordance with this Section
2.4 and the Issuer Order with respect to such series, authenticate and deliver
one or more Global Securities that (i) shall represent and shall be denominated
in an amount equal to the aggregate principal amount of all of the Securities of
such series to be issued in the form of Global Securities and not yet cancelled,
(ii) shall be registered in the name of the Depositary for such Global Security
or Securities or the nominee of such Depositary, (iii) shall be delivered by the
Trustee to such Depositary or pursuant to such Depositary's instructions, and
(iv) shall bear a legend substantially to the following effect: "Unless and
until it is exchanged in whole or in part for Securities in definitive
registered form, this Security may not be transferred except as a whole by the
Depositary to the nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary."
<PAGE>
Each Depositary designated pursuant to Section 2.3 must, at the time of its
designation and at all times while it serves as Depositary, be a clearing agency
registered under the Securities Exchange Act of 1934, as amended, and any other
applicable statute or regulation.
SECTION 2.5 Execution of Securities. The Securities shall be signed on
behalf of the Issuer by the chairman of the Board of Directors, the president,
any vice president or the treasurer of the Issuer, under its corporate seal
which may, but need not, be attested by its secretary or one of its assistant
secretaries. Such signatures may be the manual or facsimile signatures of the
present or any future such officers. The seal of the Issuer may be in the form
of a facsimile thereof and may be impressed, affixed, imprinted or otherwise
reproduced on the Securities. Typographical and other minor errors or defects in
any such reproduction of the seal or any such signature shall not affect the
validity or enforceability of any Security that has been duly authenticated and
delivered by the Trustee.
In case any officer of the Issuer who shall have signed any of the
Securities shall cease to be such officer before the Security so signed shall be
authenticated and delivered by the Trustee or disposed of by the Issuer, such
Security nevertheless may be authenticated and delivered or disposed of as
though the person who signed such Security had not ceased to be such officer of
the Issuer; and any Security may be signed on behalf of the Issuer by such
persons as, at the actual date of the execution of such Security, shall be the
proper officers of the Issuer, although at the date of the execution and
delivery of this Indenture any such person was not such an officer.
SECTION 2.6 Certificate of Authentication. Only such Securities as shall
bear thereon a certificate of authentication substantially in the form
hereinbefore recited, executed by the Trustee by the manual signature of one of
its authorized signatories, or its Authenticating Agent, shall be entitled to
the benefits of this Indenture or be valid or obligatory for any purpose. The
execution of such certificate by the Trustee or its Authenticating Agent upon
any Security executed by the Issuer shall be conclusive evidence that the
Security so authenticated has been duly authenticated and delivered hereunder
and that the Holder is entitled to the benefits of this Indenture. Each
reference in this Indenture to authentication by the Trustee includes
authentication by an agent appointed pursuant to Section 6.14.
SECTION 2.7 Denomination and Date of Securities; Payments of Interest. The
Securities of each series shall be issuable in registered form in denominations
established as contemplated by Section 2.3 or, with respect to the Securities of
any series, if not so established, in denominations of $1,000 and any integral
multiple thereof. The Securities of each series shall be numbered, lettered or
otherwise distinguished in such manner or in accordance with such plan as the
officers of the Issuer executing the same may determine with the approval of the
Trustee, as evidenced by the execution and authentication thereof.
Each Security shall be dated the date of its authentication. The Securities
of each series shall bear interest, if any, from the date, and such interest, if
any, shall be payable on the dates, established as contemplated by Section 2.3.
The Person in whose name any Security of any series is registered at the
close of business on any record date applicable to a particular series with
respect to any interest payment date for such series shall be entitled to
receive the interest, if any, payable on such interest payment date
notwithstanding any transfer or exchange of such Security subsequent to the
record date and prior to such interest payment date, except if and to the extent
the Issuer shall default in the payment of the interest due on such interest
payment date for such series, in which case such defaulted interest shall be
paid to the Persons in whose names Outstanding Securities for such series are
registered (a) at the close of business on a subsequent record date (which shall
be not less than five Business Days prior to the date of payment of such
defaulted interest) established by notice given by mail by or on behalf of the
Issuer to the Holders of Securities not less than 15 days preceding such
subsequent record date or (b) as determined by such other procedure as is
mutually acceptable to the Issuer and the Trustee. The term "record date" as
used with respect to any interest payment date (except a date for payment of
defaulted interest) for the Securities of any series shall mean the date
specified as such in the terms of the Securities of such series established as
contemplated by Section 2.3, or, if no such date is so established, if such
interest payment date is the first day of a calendar month, the fifteenth day of
the next preceding calendar month or, if such interest payment date is the
fifteenth day of a calendar month, the first day of such calendar month, whether
or not such record date is a Business Day.
SECTION 2.8 Registration Transfer and Exchange. The Issuer will keep at
each office or agency to be maintained for the purpose as provided in Section
<PAGE>
3.2 for each series of Securities a register or registers in which, subject to
such reasonable regulations as it may prescribe, it will provide for the
registration of Securities of each series and the registration of transfer of
Securities of such series. Each such register shall be in written form in the
English language or in any other form capable of being converted into such form
within a reasonable time. At all reasonable times such register or registers
shall be open for inspection and available for copying by the Trustee.
Upon due presentation for registration of transfer of any Security of any
series at any such office or agency to be maintained for the purpose as provided
in Section 3.2, the Issuer shall execute and the Trustee shall authenticate and
deliver in the name of the transferee or transferees a new Security or
Securities of the same series, maturity date, interest rate, if any, and
original issue date in authorized denominations for a like aggregate principal
amount.
All Securities presented for registration of transfer shall (if so required
by the Issuer or the Trustee) be duly endorsed by, or be accompanied by a
written instrument or instruments of transfer in form satisfactory to the Issuer
and the Trustee duly executed by, the Holder or his attorney duly authorized in
writing.
At the option of the Holder thereof, Securities of any series (other than a
Global Security, except as set forth below) may be exchanged for a Security or
Securities of such series having authorized denominations and an equal aggregate
principal amount, upon surrender of such Securities to be exchanged at the
agency of the Issuer that shall be maintained for such purpose in accordance
with Section 3.2. All Securities surrendered upon any exchange or transfer
provided for in this Indenture shall be promptly cancelled and returned to the
Issuer.
The Issuer may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any
registration of transfer of Securities. No service charge shall be made for any
such transaction or for any exchange of Securities of any series as contemplated
by the immediately preceding paragraph.
The Issuer shall not be required to exchange or register a transfer of (a)
any Securities of any series for a period of 15 days next preceding the first
mailing or publication of notice of redemption of Securities of such series to
be redeemed, (b) any Securities selected, called or being called for redemption,
in whole or in part, except, in the case of any Security to be redeemed in part,
the portion thereof not so to be redeemed or (c) any Security if the Holder
thereof has exercised his right, if any, to require the Issuer to repurchase
such Security in whole or in part, except the portion of such Security not
required to be repurchased.
Notwithstanding any other provision of this Section 2.8, unless and until
it is exchanged in whole or in part for Securities in definitive registered
form, a Global Security representing all or a part of the Securities of a series
may not be transferred except as a whole by the Depositary for such series to a
nominee of such Depositary or by a nominee of such Depositary to such Depositary
or another nominee of such Depositary or by such Depositary or any such nominee
to a successor Depositary for such series or a nominee of such successor
Depositary.
If at any time the Depositary for any Securities of a series represented by
one or more Global Securities notifies the Issuer that it is unwilling or unable
to continue as Depositary for such Securities or if at any time the Depositary
for such Securities shall no longer be eligible under Section 2.4, the Issuer
shall appoint a successor Depositary with respect to such Securities. If a
successor Depositary for such Securities is not appointed by the Issuer within
90 days after the Issuer receives such notice or becomes aware of such
ineligibility, the Issuer's election pursuant to Section 2.3 that such
Securities be represented by one or more Global Securities shall no longer be
effective and the Issuer shall execute, and the Trustee, upon receipt of an
Issuer Order for the authentication and delivery of definitive Securities of
such series, will authenticate and deliver Securities of such series in
definitive registered form, in any authorized denominations, in an aggregate
principal amount equal to the principal amount of the Global Security or
Securities representing such Securities in exchange for such Global Security or
Securities.
The Issuer may at any time and in its sole discretion determine that the
Securities of any series issued in the form of one or more Global Securities
shall no longer be represented by a Global Security or Securities. In such event
the Issuer shall execute, and the Trustee, upon receipt of an Issuer Order for
the authentication and delivery of definitive Securities of such series, shall
authenticate and deliver, Securities of such series in definitive registered
form, in any authorized denominations, in an aggregate principal amount equal to
the principal amount of the Global Security or Securities representing such
Securities, in exchange for such Global Security or Securities.
<PAGE>
If specified by the Issuer pursuant to Section 2.3 with respect to
Securities represented by a Global Security, the Depositary for such Global
Security may surrender such Global Security in exchange in whole or in part for
Securities of the same series in definitive registered form on such terms as are
acceptable to the Issuer and such Depositary. Thereupon, the Issuer shall
execute, and the Trustee shall authenticate and deliver, without service charge,
(i) to the Person specified by such Depositary, a new Security or
Securities of the same series, of any authorized denominations as requested
by such Person, in an aggregate principal amount equal to and in exchange
for such Person's beneficial interest in the Global Security; and
(ii) to such Depositary a new Global Security in a denomination equal
to the difference, if any, between the principal amount of the surrendered
Global Security and the aggregate principal amount of Securities
authenticated and delivered pursuant to clause (i) above.
Upon the exchange of a Global Security for Securities in definitive
registered form in authorized denominations, such Global Security shall be
cancelled by the Trustee or an agent of the Issuer or the Trustee. Securities in
definitive registered form issued in exchange for a Global Security pursuant to
this Section 2.8 shall be registered in such names and in such authorized
denominations as the Depositary for such Global Security, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee or an agent of the Trustee or the Issuer or an agent of the
Issuer. The Trustee or such agent shall deliver at its office such Securities to
or as directed by the Persons in whose names such Securities are so registered.
All Securities issued upon any transfer or exchange of Securities shall be
valid and legally binding obligations of the Issuer, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such transfer or exchange.
SECTION 2.9 Mutilated, Defaced, Destroyed, Lost and Stolen Securities. In
case any temporary or definitive Security shall become mutilated, defaced or be
destroyed, lost or stolen, the Issuer in its discretion may execute, and upon
the written request of any officer of the Issuer, the Trustee shall authenticate
and deliver a new Security of the same series, maturity date, interest rate, if
any, and original issue date, bearing a number or other distinguishing symbol
not contemporaneously outstanding, in exchange and substitution for the
mutilated or defaced Security, or in lieu of and in substitution for the
Security so destroyed, lost or stolen. In every case the applicant for a
substitute Security shall furnish to the Issuer and to the Trustee and any agent
of the Issuer or the Trustee such security or indemnity as may be required by
the Trustee or the Issuer to indemnify and defend and to save each of the
Trustee and the Issuer harmless and, in every case of destruction, loss or
theft, evidence to their satisfaction of the destruction, loss or theft of such
Security and of the ownership thereof and in the case of mutilation or
defacement, shall surrender the Security to the Trustee or such agent.
Upon the issuance of any substitute Security, the Issuer may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses (including the fees
and expenses of the Trustee or its agent) connected therewith. In case any
Security which has matured or is about to mature or has been called for
redemption in full shall become mutilated or defaced or be destroyed, lost or
stolen, the Issuer may instead of issuing a substitute Security, pay or
authorize the payment of the same (without surrender thereof except in the case
of a mutilated or defaced Security), if the applicant for such payment shall
furnish to the Issuer and to the Trustee and any agent of the Issuer or the
Trustee such security or indemnity as any of them may require to hold each of
them harmless, and, in every case of destruction, loss or theft, the applicant
shall also furnish to the Issuer and the Trustee and any agent of the Issuer or
the Trustee evidence to the Trustee's satisfaction of the destruction, loss or
theft of such Security and of the ownership thereof.
Every substitute Security of any series issued pursuant to the provisions
of this Section by virtue of the fact that any such Security is destroyed, lost
or stolen shall constitute an additional contractual obligation of the Issuer,
whether or not the destroyed, lost or stolen Security shall be at any time
enforceable by anyone and shall be entitled to all the benefits of (but shall be
subject to all the limitations of rights set forth in) this Indenture equally
and proportionately with any and all other Securities of such series duly
authenticated and delivered hereunder. All Securities shall be held and owned
upon the express condition that, to the extent permitted by law, the foregoing
provisions are exclusive with respect to the replacement or payment of
mutilated, defaced, destroyed, lost or stolen Securities and shall preclude any
and all other rights or remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement or payment of
negotiable instruments or other securities without their surrender.
<PAGE>
SECTION 2.10 Cancellation of Securities; Disposition Thereof. All
Securities surrendered for payment, redemption, registration of transfer or
exchange, or for credit against any payment in respect of a sinking or analogous
fund, if surrendered to the Issuer or any agent of the Issuer or the Trustee or
any agent of the Trustee, shall be delivered to the Trustee or its agent for
cancellation or, if surrendered to the Trustee, shall be cancelled by it; and no
Securities shall be issued in lieu thereof except as expressly permitted by any
of the provisions of this Indenture. The Trustee or its agent shall return
cancelled Securities to the Issuer. If the Issuer or its agent shall acquire any
of the Securities, such acquisition shall not operate as a redemption or
satisfaction of the indebtedness represented by such Securities unless and until
the same are delivered to the Trustee or its agent for cancellation.
SECTION 2.11 Temporary Securities. Pending the preparation of definitive
Securities for any series, the Issuer may execute and the Trustee shall
authenticate and deliver temporary Securities for such series (printed,
lithographed, typewritten or otherwise reproduced, in each case in form
satisfactory to the Trustee). Temporary Securities of any series shall be
issuable in any authorized denomination, and substantially in the form of the
definitive Securities of such series but with such omissions, insertions and
variations as may be appropriate for temporary Securities, all as may be
determined by the Issuer with the concurrence of the Trustee as evidenced by the
execution and authentication thereof. Temporary Securities may contain such
references to any provisions of this Indenture as may be appropriate. Every
temporary Security shall be executed by the Issuer and be authenticated by the
Trustee upon the same conditions and in substantially the same manner, and with
like effect, as the definitive Securities. Without unreasonable delay the Issuer
shall execute and shall furnish definitive Securities of such series and
thereupon temporary Securities of such series may be surrendered in exchange
therefor without charge at each office or agency to be maintained by the Issuer
for that purpose pursuant to Section 3.2 and the Trustee shall authenticate and
deliver in exchange for such temporary Securities of such series an equal
aggregate principal amount of definitive Securities of the same series having
authorized denominations. Until so exchanged, the temporary Securities of any
series shall be entitled to the same benefits under this Indenture as definitive
Securities of such series, unless otherwise established pursuant to Section 2.3.
SECTION 2.12 CUSIP Numbers. The Issuer in issuing the Securities may use
"CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Holders; provided
that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers.
ARTICLE THREE
COVENANTS OF THE ISSUER
SECTION 3.1 Payment of Principal and Interest. The Issuer covenants and
agrees that it will duly and punctually pay or cause to be paid the principal of
and interest, if any, on each of the Securities at the place, at the respective
times and in the manner provided in the Securities.
SECTION 3.2 Offices for Notices and Payments, etc. So long as any of the
Securities are Outstanding, the Issuer will maintain in each Place of Payment,
an office or agency where the Securities may be presented for payment, an office
or agency where the Securities may be presented for registration of transfer and
for exchange as in this Indenture provided, and an office or agency where
notices and demands to or upon the Issuer in respect of the Securities or of
this Indenture may be served. In case the Issuer shall at any time fail to
maintain any such office or agency, or shall fail to give notice to the Trustee
of any change in the location thereof, presentation may be made and notice and
demand may be served in respect of the Securities or of this Indenture at the
Corporate Trust Office. The Issuer hereby initially designates the Corporate
Trust Office for each such purpose and appoints the Trustee as registrar and
paying agent and as the agent upon whom notices and demands may be served with
respect to the Securities.
SECTION 3.3. No Interest Extension. In order to prevent any accumulation of
claims for interest after maturity thereof, the Issuer will not directly or
indirectly extend or consent to the extension of the time for the payment of any
claim for interest on any of the Securities and will not directly or indirectly
be a party to or approve any such arrangement by the purchase or funding of said
claims or in any other manner; provided, however, that this Section 3.3 shall
not apply in any case where an extension shall be made pursuant to a plan
proposed by the Issuer to the Holders of all Securities of any series then
Outstanding.
<PAGE>
SECTION 3.4 Appointments to Fill Vacancies in Trustee's Office. The Issuer,
whenever necessary to avoid or fill a vacancy in the office of the Trustee, will
appoint, in the manner provided in Section 6.10, a Trustee, so that there shall
at all times be a Trustee hereunder.
SECTION 3.5 Provision as to Paying Agent. (a) If the Issuer shall appoint a
paying agent other than the Trustee, it will cause such paying agent to execute
and deliver to the Trustee an instrument in which such agent shall agree with
the Trustee, subject to the provisions of this Section 3.5,
(1) that it will hold all sums held by it as such agent for the
payment of the principal of or interest, if any, on the Securities (whether
such sums have been paid to it by the Issuer or by any other obligor on the
Securities) in trust for the benefit of the Holders of the Securities and
the Trustee; and
(2) that it will give the Trustee notice of any failure by the Issuer
(or by any other obligor on the Securities) to make any payment of the
principal of or interest, if any, on the Securities when the same shall be
due and payable; and
(3) that it will, at any time during the continuance of any such
failure, upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust by such paying agent.
(b) If the Issuer shall act as its own paying agent, it will, on or before
each due date of the principal of or interest, if any, on the Securities, set
aside, segregate and hold in trust for the benefit of the Holders of the
Securities a sum sufficient to pay such principal or interest, if any, so
becoming due and will notify the Trustee of any failure to take such action and
of any failure by the Issuer (or by any other obligor under the Securities) to
make any payment of the principal of or interest, if any, on the Securities when
the same shall become due and payable.
(c) Anything in this Section 3.5 to the contrary notwithstanding, the
Issuer may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be paid to
the Trustee all sums held in trust by it, or any paying agent hereunder, as
required by this Section 3.5, such sums to be held by the Trustee upon the
trusts herein contained.
(d) Anything in this Section 3.5 to the contrary notwithstanding, any
agreement of the Trustee or any paying agent to hold sums in trust as provided
in this Section 3.5 is subject to Sections 10.3 and 10.4.
(e) Whenever the Issuer shall have one or more paying agents, it will, on
or before each due date of the principal of or interest, if any, on any
Securities, deposit with a paying agent a sum sufficient to pay the principal or
interest, if any, so becoming due, such sum to be held in trust for the benefit
of the Persons entitled to such principal or interest, if any, and (unless such
paying agent is the Trustee) the Issuer will promptly notify the Trustee of its
action or failure so to act.
SECTION 3.6 Restriction on Creation of Secured Debt. So long as any of the
Securities are outstanding, the Issuer shall not at any time create, incur,
assume or guarantee, and shall not cause, suffer or permit a Restricted
Subsidiary to create, incur, assume or guarantee, any Secured Debt that is
expressly by its terms Subordinated Indebtedness without making effective
provision (and the Issuer covenants that in such case it will make or cause to
be made such effective provision) whereby the Securities then Outstanding and
any other indebtedness of or guaranteed by the Issuer or such Restricted
Subsidiary then entitled thereto, subject to applicable priorities of payment,
shall be secured by such mortgage, security interest, pledge, lien or
encumbrance equally and ratably with any and all other obligations and
indebtedness thereby secured, so long as any such other obligations and
indebtedness shall be so secured; provided, that if any such mortgage, security
interest, pledge, lien or encumbrance securing such Subordinated Indebtedness
ceases to exist, such equal and ratable security for the benefit of the Holders
of Securities shall automatically cease to exist without any further action;
provided further that if such Subordinated Indebtedness is expressly
subordinated to the Securities, the mortgage, security interest, pledge, lien or
encumbrance securing such Subordinated Indebtedness shall be subordinate and
junior to the mortgage, security interest, pledge, lien or encumbrance securing
the Securities with the same relative priority as such Subordinated Indebtedness
shall have with respect to the Securities; provided, further that the foregoing
covenants shall not be applicable to the following:
(a)(i) Any mortgage, security interest, pledge, lien or encumbrance on any
property hereafter acquired (including acquisition through merger or
consolidation) or constructed by the Issuer or a Restricted Subsidiary and
<PAGE>
created contemporaneously with, or within twelve months after, such acquisition
or the completion of construction to secure or provide for the payment of all or
any part of the purchase price of such property or the cost of construction
thereof, as the case may be; or (ii) any mortgage on property (including any
unimproved portion of partially improved property) of the Issuer or a Restricted
Subsidiary created within twelve months of completion of construction of a new
plant or plants on such property to secure all or part of the cost of such
construction if, in the opinion of the Board of Directors, such property or such
portion thereof was prior to such construction substantially unimproved for the
use intended by the Issuer; or (iii) the acquisition of property subject to any
mortgage, security interest, pledge, lien or encumbrance upon such property
existing at the time of acquisition thereof, whether or not assumed by the
Issuer or such Restricted Subsidiary; or (iv) any mortgage, security interest,
pledge, lien or encumbrance existing on the property or on the outstanding
shares or indebtedness of a corporation or other entity at the time such
corporation or other entity shall become a Restricted Subsidiary; or (v) any
mortgage, security interest, pledge, lien or encumbrance on property of a
corporation or other entity existing at the time such corporation or other
entity is merged into or consolidated with the Issuer or a Restricted Subsidiary
or at the time of a sale, lease or other disposition of the properties of a
corporation or other entity as an entirety or substantially as an entirety to
the Issuer or a Restricted Subsidiary; or
(b) Mortgages on property of the Issuer or a Restricted Subsidiary in favor
of the United States of America or any State thereof or any foreign government,
or any department, agency or instrumentality or political subdivision of any
thereof, to secure partial, progress, advance or other payments pursuant to any
contract or statute or to secure any indebtedness incurred for the purpose of
financing all or any part of the purchase price or the cost of construction of
the property subject to such mortgages; or
(c) Any mortgage, security interest, pledge, lien or encumbrance existing
on property owned by the Issuer or any of its Subsidiaries on the date of this
Indenture; or
(d) Any mortgage, security interest, pledge, lien or encumbrance created
pursuant to the creation of trusts or other arrangements funded solely with
cash, cash equivalents or other marketable investments or securities of the type
customarily subject to such arrangements in customary financial practice with
respect to long-term or medium-term Indebtedness for money borrowed, the sole
purpose of which is to make provision for the retirement or defeasance, without
prepayment, of Indebtedness; or
(e) Any mortgage, security interest, pledge, lien or encumbrance on the
assets or properties of ENSTAR Alaska; or
(f) Any extension, renewal or replacement (or successive extensions,
renewals or replacements) in whole or in part of any mortgage, security
interest, pledge, lien or encumbrance referred to in the foregoing subparagraphs
(a) through (e); provided, however, that the principal amount of Secured Debt
secured thereby shall not exceed the principal amount outstanding at the time of
such extension, renewal or replacement, and that such extension, renewal or
replacement shall be limited to the property which secured the mortgage,
security interest, pledge, lien or encumbrance so extended, renewed or replaced
and additions to such property.
Notwithstanding the foregoing provisions of this Section 3.6, the Issuer
and any one or more Restricted Subsidiaries may create, incur, assume or
guarantee Secured Debt which would otherwise be subject to the foregoing
restrictions in an aggregate amount that, without duplication, together with all
other Secured Debt of the Issuer and its Restricted Subsidiaries which would
otherwise be subject to the foregoing restrictions (not including Secured Debt
permitted to be secured under subparagraphs (a) through (f) above) and the
aggregate value of the Sale and Leaseback Transactions (as defined in Section
3.7) in existence at such time (not including Sale and Leaseback Transactions
the proceeds of which have been or will be applied in accordance with clause (b)
of Section 3.7) and all Indebtedness for money borrowed of Restricted
Subsidiaries in existence at such time (not including Indebtedness permitted to
be incurred under subparagraphs (a) through (e) of Section 3.9), does not at the
time exceed 10% of Consolidated Net Tangible Assets (excluding ENSTAR Alaska).
Solely for purposes of subparagraphs (a) through (f) above, the term "mortgage"
shall include any arrangements in connection with a production payment or
similar financing arrangement.
SECTION 3.7 Restriction on Sale and Leaseback Transactions. The Issuer will
not, and will not permit any Restricted Subsidiary to, sell or transfer (except
to the Issuer or to one or more Restricted Subsidiaries, or both) any Principal
Property owned by it and which has been in full operation for more than 120 days
prior to such sale or transfer with the intention (i) of taking back a lease on
such property (other than a lease for a period not exceeding 36 months) and (ii)
<PAGE>
that the use by the Issuer or such Restricted Subsidiary of such property will
be discontinued on or before the expiration of the term of such lease (any such
transaction being herein referred to as a "Sale and Leaseback Transaction"),
unless (a) the Issuer or such Restricted Subsidiary would be entitled, pursuant
to the provisions of Section 3.6, to incur Secured Debt equal in amount to the
amount realized or to be realized upon such sale or transfer secured by a
mortgage on the property to be leased without equally and ratably securing the
Securities, or (b) the Issuer or a Restricted Subsidiary shall apply an amount
equal to the value of the property so leased to the retirement (other than any
mandatory retirement), within 120 days of the effective date of any such
arrangement, of indebtedness for money borrowed by the Issuer or any Restricted
Subsidiary (other than such indebtedness owned by the Issuer or any Restricted
Subsidiary) which was recorded as funded debt as of the date of its creation and
which, in the case of such indebtedness of the Issuer, is not subordinate and
junior in right of payment to the prior payment of the Securities; provided,
however, that the amount to be so applied to the retirement of such indebtedness
shall be reduced by (i) the aggregate principal amount of any Securities
delivered within 120 days of the effective date of any such arrangement to the
Trustee for retirement and cancellation, and (ii) the aggregate principal amount
of such indebtedness (other than the Securities) retired by the Issuer or a
Restricted Subsidiary within 120 days of the effective date of any such
arrangement.
The term "value" shall mean, with respect to a Sale and Leaseback
Transaction, as of any particular time, the amount equal to the greater of (i)
the net proceeds of the sale of the property leased pursuant to such Sale and
Leaseback Transaction, or (ii) the fair value of such property at the time of
entering into such Sale and Leaseback Transaction, as determined by the Board of
Directors, in either case divided first by the number of full years of the term
of the lease and then multiplied by the number of full years of such term
remaining at the time of determination, without regard to any renewal or
extension options contained in the lease.
SECTION 3.8 Restriction on Transfer of Principal Property to Unrestricted
Subsidiary. The Issuer will not itself, and will not permit any Restricted
Subsidiary to, transfer (whether by merger, consolidation or otherwise) any
Principal Property to any Unrestricted Subsidiary, except for fair value as
determined by the Board of Directors, unless it shall apply an amount equal to
the fair value of such property at the time of such transfer, as so determined,
to the retirement (other than any mandatory retirement), within 10 days of the
effective date of such transfer, of indebtedness for money borrowed by the
Issuer or any Restricted Subsidiary (other than such indebtedness owned by the
Issuer or any Restricted Subsidiary) which was recorded as funded debt as of the
date of its creation and which, in case of such indebtedness of the Issuer, is
not subordinate and junior in right of payment to the prior payment of the
Securities; provided, however, that the amount to be so applied to the
retirement of such indebtedness shall be reduced by (i) the aggregate principal
amount of any Securities delivered within 10 days of the effective date of any
such arrangement to the Trustee for retirement and cancellation, and (ii) the
aggregate principal amount of such indebtedness (other than Securities) retired
by the Issuer or a Restricted Subsidiary within 10 days of the effective date of
any such arrangement.
SECTION 3.9 Restriction on Incurrence of Indebtedness by Restricted
Subsidiaries. So long as any of the Securities are outstanding, the Issuer shall
not at any time permit any Restricted Subsidiary to create, incur, assume or
guarantee any Indebtedness for money borrowed; provided that the foregoing
covenant shall not be applicable to the following:
(a) any Indebtedness of ENSTAR Alaska;
(b) any Secured Debt that is permitted to be created, incurred,
assumed or guaranteed pursuant to subparagraphs (a) through (f) of Section
3.6;
(c) any Indebtedness of a Restricted Subsidiary existing at the time
such Restricted Subsidiary was acquired by the Issuer (including without
limitation Indebtedness incurred by such Restricted Subsidiary in
connection with its acquisition by the Issuer);
(d) intercompany Indebtedness owed to the Issuer by any Restricted
Subsidiary and intercompany Indebtedness owed to any wholly owned
Subsidiary of the Issuer by any Restricted Subsidiary; or
(e) any extension, renewal or replacement (or successive extensions,
renewals or replacements) in whole or in part of any Indebtedness referred
to in the foregoing subparagraphs (a) through (d); provided, however, that
the principal amount of Indebtedness so extended, renewed or replaced shall
not exceed the principal amount outstanding at the time of such extension,
renewal or replacement.
<PAGE>
Notwithstanding the foregoing provisions of this Section 3.9, any one or
more Restricted Subsidiaries may create, incur, assume or guarantee Indebtedness
that would otherwise be subject to the foregoing restrictions in an aggregate
amount that, without duplication, together with all Indebtedness of Restricted
Subsidiaries in existence at such time (not including Indebtedness permitted
under subparagraphs (a) through (e) above), all Secured Debt of the Issuer and
its Restricted Subsidiaries in existence at such time (not including Secured
Debt permitted to be secured under subparagraphs (a) through (f) of Section 3.6)
and the aggregate value of Sale and Leaseback Transactions (as defined in
Section 3.7) in existence at such time (not including Sale and Leaseback
Transactions the proceeds of which have been or will be applied in accordance
with clause (b) of Section 3.7) does not at the time exceed 10% of Consolidated
Net Tangible Assets of the Issuer and its Restricted Subsidiaries (excluding
ENSTAR Alaska).
SECTION 3.10 Limitation on Incurrence of Additional Indebtedness. So long
as any of the Securities are outstanding, the Issuer shall not, and shall not
permit any Restricted Subsidiary to, create, incur, assume, guarantee or
otherwise become obligated with respect to any Indebtedness described in clause
(a) of the definition of Indebtedness, unless, after giving effect thereto, the
Issuer's EBITDA/Interest Ratio on the date thereof would be at least 2.5 to 1.0,
determined on a pro forma basis as if the incurrence of such additional
Indebtedness and the application of the net proceeds therefrom had occurred at
the beginning of the twelve-month period used to calculate the Issuer's
EBITDA/Interest Ratio; provided that the foregoing covenant shall not be
applicable to the following:
(a) (i) Indebtedness of the Issuer or any Restricted Subsidiary
outstanding on the date of this Indenture or (ii) Indebtedness of the
Issuer or any Restricted Subsidiary under a revolving credit facility to
the extent that the aggregate commitment thereunder does not exceed $475
million, the maximum aggregate commitment for the Issuer's revolving credit
facility on the date of this Indenture;
(b) intercompany Indebtedness owed to the Issuer by any Restricted
Subsidiary and intercompany Indebtedness owed to any wholly owned
Subsidiary of the Issuer by any Restricted Subsidiary; or
(c) any extension, renewal or replacement (or successive extensions,
renewals or replacements) in whole or in part of any Indebtedness referred
to in the foregoing subparagraphs (a) through (b); provided, however, that
the principal amount of Indebtedness so extended, renewed or replaced shall
not exceed the principal amount outstanding at the time of such extension,
renewal or replacement.
SECTION 3.11 Limitation on Issuance of Certain Other Subordinated
Indebtedness. The Issuer shall not issue, guarantee, assume or incur, directly
or indirectly, any Indebtedness which by its terms is both (a) subordinate or
junior in right of payment to Senior Indebtedness and (b) senior in right of
payment to the Securities.
ARTICLE FOUR
SECURITYHOLDERS LISTS AND REPORTS BY THE
ISSUER AND THE TRUSTEE
SECTION 4.1 Issuer to Furnish Trustee Information as to Names and Addresses
of Securityholders. The Issuer and any other obligor on the Securities covenant
and agree that they will furnish or cause to be furnished to the Trustee a list
in such form as the Trustee may reasonably require of the names and addresses of
the Holders of the Securities of each series:
(a) semiannually and not more than 15 days after each March 1 and
September 1, and
(b) at such other times as the Trustee may request in writing, within
30 days after receipt by the Issuer of any such request,provided that if
and so long as the Trustee shall be the registrar for such series, such
list shall not be required to be furnished.
<PAGE>
SECTION 4.2 Preservation and Disclosure of Securityholders Lists. (a) The
Trustee shall preserve, in as current a form as is reasonably practicable, all
information as to the names and addresses of the Holders of each series of
Securities (i) contained in the most recent list furnished to it as provided in
Section 4.1, and (ii) received by it in the capacity of registrar or paying
agent for such series, if so acting. The Trustee may destroy any list furnished
to it as provided in Section 4.1 upon receipt of a new list so furnished.
(b) In case three or more Holders of Securities (hereinafter referred to as
"applicants") apply in writing to the Trustee and furnish to the Trustee
reasonable proof that each such applicant has owned a Security for a period of
at least six months preceding the date of such application, and such application
states that the applicants desire to communicate with other Holders of
Securities of a particular series (in which case the applicants must all hold
Securities of such series) or with Holders of all Securities with respect to
their rights under this Indenture or under such Securities and such application
is accompanied by a copy of the form of proxy or other communication which such
applicants propose to transmit, then the Trustee shall, within five Business
Days after the receipt of such application, at its election, either
(i) afford to such applicants access to the information preserved at
the time by the Trustee in accordance with the provisions of subsection (a)
of this Section 4.2, or
(ii) inform such applicants as to the approximate number of Holders of
Securities of such series or of all Securities, as the case may be, whose
names and addresses appear in the information preserved at the time by the
Trustee, in accordance with the provisions of subsection (a) of this
Section 4.2, and as to the approximate cost of mailing to such
Securityholders the form of proxy or other communication, if any, specified
in such application.
If the Trustee shall elect not to afford to such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to each Securityholder of such series or all Holders of Securities, as the
case may be, whose name and address appears in the information preserved at the
time by the Trustee in accordance with the provisions of subsection (a) of this
Section 4.2 a copy of the form of proxy or other communication which is
specified in such request, with reasonable promptness after a tender to the
Trustee of the material to be mailed and of payment, or provision for the
payment, of the reasonable expenses of mailing, unless within five days after
such tender, the Trustee shall mail to such applicants and file with the
Commission, together with a copy of the material to be mailed, a written
statement to the effect that, in the opinion of the Trustee, such mailing would
be contrary to the best interests of the Holders of Securities of such series or
of all Securities, as the case may be, or would be in violation of applicable
law. Such written statement shall specify the basis of such opinion. If the
Commission, after opportunity for a hearing upon the objections specified in the
written statement so filed, shall enter an order refusing to sustain any of such
objections or if, after the entry of an order sustaining one or more of such
objections, the Commission shall find, after notice and opportunity for hearing,
that all the objections so sustained have been met, and shall enter an order so
declaring, the Trustee shall mail copies of such material to all such
Securityholders with reasonable promptness after the entry of such order and the
renewal of such tender; otherwise the Trustee shall be relieved of any
obligation or duty to such applicants respecting their application.
(c) Each and every Holder of Securities, by receiving and holding the same,
agrees with the Issuer and the Trustee that neither the Issuer nor the Trustee
nor any agent of the Issuer or the Trustee shall be held accountable by reason
of the disclosure of any such information as to the names and addresses of the
Holders of Securities in accordance with the provisions of subsection (b) of
this Section 4.2, regardless of the source from which such information was
derived, and that the Trustee shall not be held accountable by reason of mailing
any material pursuant to a request made under such subsection (b).
SECTION 4.3 Reports by the Issuer. The Issuer covenants:
(a) to file with the Trustee, within 15 days after the Issuer is required
to file the same with the Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as the Commission may from time to time by rules and regulations
prescribe) which the Issuer may be required to file with the Commission pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as
amended; or, if the Issuer is not required to file information, documents or
reports pursuant to either of such Sections, then to file with the Trustee and
the Commission, in accordance with rules and regulations prescribed from time to
time by the Commission, such of the supplementary and periodic information,
docVE LaserJet Series IIVEHP11.PRSational securities exchange as may be
prescribed from time to time in such rules and regulations; <PAGE>
(b) to file with the Trustee and the Commission, in accordance with rules
and regulations prescribed from time to time by the Commission, such additional
information, documents and reports with respect to compliance by the Issuer with
the conditions and covenants provided for in this Indenture as may be required
from time to time by such rules and regulations;
(c) to transmit by mail to the Holders of Securities within 30 days after
the filing thereof with the Trustee, in the manner and to the extent provided in
Section 4.4(c), such summaries of any information, documents and reports
required to be filed by the Issuer pursuant to subsections (a) and (b) of this
Section 4.3 as may be required to be transmitted to such Holders by rules and
regulations prescribed from time to time by the Commission; and
(d) furnish to the Trustee, not less than annually, a brief certificate
from the principal executive officer, principal financial officer or principal
accounting officer as to his knowledge of the Issuer's compliance with all
conditions and covenants under this Indenture. For purposes of this subsection
(d), such compliance shall be determined without regard to any period of grace
or requirement of notice provided under this Indenture.
SECTION 4.4 Reports by the Trustee. (a) Within 60 days after January 1 of
each year commencing with the year 1994, the Trustee shall transmit by mail to
the Holders of Securities, as provided in subsection (c) of this Section, a
brief report dated as of such January 1 with respect to any of the following
events which may have occurred within the last 12 months (but if no such event
has occurred within such period, no report need be transmitted):
(i) any change to its eligibility under Section 6.9 and its
qualification under Section 6.8;
(ii) the creation of, or any material change to, a relationship
specified in paragraph (i) through (x) of Section 6.8 (c);
(iii) the character and amount of any advances (and if the Trustee
elects so to state, the circumstances surrounding the making thereof) made
by the Trustee (as such) which remain unpaid on the date of such report and
for the reimbursement of which it claims or may claim a lien or charge,
prior to that of the Securities of any series, on any property or funds
held or collected by it as Trustee, except that the Trustee shall not be
required (but may elect) to report such advances if such advances so
remaining unpaid aggregate not more than 1/2 of 1% of the principal amount
of all Securities Outstanding on the date of such report;
(iv) the amount, interest rate, if any, and maturity date of all other
indebtedness owing by the Issuer (or by any other obligor on the
Securities) to the Trustee in its individual capacity on the date of such
report, with a brief description of any property held as collateral
security therefor, except any indebtedness based upon a creditor
relationship arising in any manner described in Section 6.13(b) (2), (3),
(4) or (6);
(v) any change to the property and funds, if any, physically in the
possession of the Trustee (as such) on the date of such report;
(vi) any additional issue of Securities which the Trustee has not
previously reported; and
(vii) any action taken by the Trustee in the performance of its duties
under this Indenture which it has not previously reported and which in its
opinion materially affects the Securities, except action in respect of a
default, notice of which has been or is to be withheld by it in accordance
with the provisions of Section 5.8.
(b) The Trustee shall transmit to the Securityholders of each series, as
provided in subsection (c) of this Section 4.4, a brief report with respect to
the character and amount of any advances (and if the Trustee elects so to state,
the circumstances surrounding the making thereof) made by the Trustee, as such,
since the date of the last report transmitted pursuant to the provisions of
subsection (a) of this Section 4.4 (or if no such report has yet been so
transmitted, since the date of this Indenture) for the reimbursement of which it
claims or may claim a lien or charge prior to that of the Securities of such
series on property or funds held or collected by it as Trustee and which it has
not previously reported pursuant to this subsection (b), except that the Trustee
shall not be required (but may elect) to report such advances if such advances
remaining unpaid at any time aggregate 10% or less of the principal amount of
all Securities Outstanding at such time, such report to be transmitted within 90
days after such time.
<PAGE>
(c) Reports pursuant to this Section shall be transmitted by mail:
(i) to all Holders of Securities, as the names and addresses of such
Holders appear upon the registry books of the Issuer; and
(ii) to all other Persons to whom such reports are required to be
transmitted pursuant to Section 313(c) of the Trust Indenture Act of 1939.
(d) A copy of each such report shall, at the time of such transmission to
Securityholders, be furnished to the Issuer and be filed by the Trustee with
each stock exchange upon which the Securities of any applicable series are
listed and also with the Commission. The Issuer agrees to promptly notify the
Trustee with respect to any series when and as the Securities of such series
become admitted to trading on any national securities exchange.
ARTICLE FIVE
REMEDIES OF THE TRUSTEE AND SECURITY HOLDERS
ON EVENT OF DEFAULT
SECTION 5.1 Events of Default. "Event of Default", wherever used herein
with respect to Securities of any series, means any one or more of the following
events (whatever the reason for such Event of Default and whether it shall be
occasioned by the provisions of Article Thirteen or otherwise), unless it is
either inapplicable to a particular series or it is specifically deleted or
modified in or pursuant to the Board Resolution or supplemental indenture
establishing such series of Securities or in the form of Security, for such
series:
(a) default in the payment of any installment of interest upon any of the
Securities of such series as and when the same shall become due and payable, and
continuance of such default for a period of 30 days; or
(b) default in the payment of the principal of or premium, if any, of the
Securities of such series as and when the same shall become due and payable
either at maturity, upon redemption, by declaration or otherwise; or
(c) default in the payment or satisfaction of any sinking fund or other
purchase obligation with respect to Securities of such series, as and when such
obligation shall become due and payable as in this Indenture expressed; or
(d) failure on the part of the Issuer duly to observe or perform any other
of the covenants or agreements on the part of the Issuer in the Securities of
such series or in this Indenture continued for a period of 60 days after the
date on which written notice of such failure, requiring the same to be remedied,
shall have been given to the Issuer by the Trustee by certified or registered
mail, or to the Issuer and the Trustee by the Holders of at least 25% in
aggregate principal amount of the Securities of such series then Outstanding; or
(e) without the consent of the Issuer a court having jurisdiction shall
enter an order for relief with respect to the Issuer under the Bankruptcy Code
or without the consent of the Issuer a court having jurisdiction shall enter a
judgment, order or decree adjudging the Issuer a bankrupt or insolvent, or enter
an order for relief for reorganization, arrangement, adjustment or composition
of or in respect of the Issuer under the Bankruptcy Code or applicable state
insolvency law and the continuance of any such judgment, order or decree is
unstayed and in effect for a period of 90 consecutive days; or
(f) the Issuer shall institute proceedings for entry of an order for relief
with respect to the Issuer under the Bankruptcy Code or for an adjudication of
insolvency, or shall consent to the institution of bankruptcy or insolvency
proceedings against it, or shall file a petition seeking, or seek or consent to
reorganization, arrangement, composition or relief under the Bankruptcy Code or
any applicable state law, or shall consent to the filing of such petition or to
the appointment of a receiver, custodian, liquidator, assignee, trustee,
sequestrator or similar official of the Issuer or of substantially all of its
property, or the Issuer shall make a general assignment for the benefit of
creditors as recognized under the Bankruptcy Code; or
(g) default under any bond, debenture, note or other evidence of
Indebtedness for money borrowed by the Issuer or under any mortgage, indenture
or instrument under which there may be issued or by which there may be secured
or evidenced any Indebtedness for money borrowed by the Issuer, whether such
<PAGE>
Indebtedness exists on the date hereof or shall hereafter be created, which
default shall have resulted in such Indebtedness becoming or being declared due
and payable prior to the date on which it would otherwise have become due and
payable, or any default in payment of such Indebtedness (after the expiration of
any applicable grace periods and the presentation of any debt instruments, if
required), if the aggregate amount of all such Indebtedness that has been so
accelerated and with respect to which there has been such a default in payment
shall exceed $25,000,000, without each such default and acceleration having been
rescinded or annulled within a period of ten days after there shall have been
given to the Issuer by the Trustee by certified or registered mail, or to the
Issuer and the Trustee by the Holders of at least 25% in aggregate principal
amount of the Securities of such series then Outstanding, a written notice
specifying each such default and requiring the Issuer to cause each such default
and acceleration to be rescinded or annulled and stating that such notice is a
"Notice of Default" hereunder; or
(h) any other Event of Default provided with respect to the Securities of
such series.
If an Event of Default with respect to Securities of any series then
Outstanding occurs and is continuing, then and in each and every such case,
unless the principal of all of the Securities of such series shall have already
become due and payable, either the Trustee or the Holders of not less than 25%
in aggregate principal amount of the Securities of such series then Outstanding,
by notice in writing to the Issuer (and to the Trustee if given by
Securityholders), may declare the principal (or, if the Securities of such
series are Original Issue Discount Securities, such portion of the principal
amount as may be specified in the terms of such series) of all the Securities of
such series and the interest, if any, accrued thereon to be due and payable
immediately, and upon any such declaration the same shall become and shall be
immediately due and payable, notwithstanding anything to the contrary contained
in this Indenture or in the Securities of such series. This provision, however,
is subject to the condition that, if at any time after the unpaid principal
amount (or such specified amount) of the Securities of such series shall have
been so declared due and payable and before any judgment or decree for the
payment of the moneys due shall have been obtained or entered as hereinafter
provided, the Issuer shall pay or shall deposit with the Trustee a sum
sufficient to pay all matured installments of interest, if any, upon all of the
Securities of such series and the principal of any and all Securities of such
series which shall have become due otherwise than by acceleration (with interest
on overdue installments of interest, if any, to the extent that payment of such
interest is enforceable under applicable law and on such principal at the rate
borne by the Securities of such series to the date of such payment or deposit)
and the reasonable compensation, disbursements, expenses and advances of the
Trustee, and any and all defaults under this Indenture, other than the
nonpayment of such portion of the principal amount of and accrued interest, if
any, on Securities of such series which shall have become due by acceleration,
shall have been cured or shall have been waived in accordance with Section 5.7
or provision deemed by the Trustee to be adequate shall have been made therefor,
then and in every such case the Holders of a majority in aggregate principal
amount of the Securities of such series then Outstanding, by written notice to
the Issuer and to the Trustee, may rescind and annul such declaration and its
consequences; but no such rescission and annulment shall extend to or shall
affect any subsequent default, or shall impair any right consequent thereon. If
any Event of Default with respect to the Issuer specified in Section 5.1(e) or
5.1(f) occurs, all unpaid principal amount (or, if the Securities of any series
then Outstanding are Original Issue Discount Securities, such portion of the
principal amount as may be specified in the terms of each such series) and
accrued interest on all Securities of each series then Outstanding shall ipso
facto become and be immediately due and payable without any declaration or other
act by the Trustee or any Securityholder.
If the Trustee shall have proceeded to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned because
of such rescission or annulment or for any other reason or shall have been
determined adversely to the Trustee, then and in every such case the Issuer, the
Trustee and the Securityholders shall be restored respectively to their several
positions and rights hereunder, and all rights, remedies and powers of the
Issuer, the Trustee and the Securityholders shall continue as though no such
proceeding had been taken.
Except with respect to an Event of Default pursuant to Section 5.1 (a), (b)
or (c), the Trustee shall not be charged with knowledge of any Event of Default
unless written notice thereof shall have been given to a Responsible Officer by
the Issuer, a paying agent or any Securityholder.
SECTION 5.2 Payment of Securities on Default; Suit Therefor. The Issuer
covenants that (a) if default shall be made in the payment of any installment of
interest upon any of the Securities of any series then Outstanding as and when
the same shall become due and payable, and such default shall have continued for
a period of 30 days, or (b) if default shall be made in the payment of the
principal of any of the Securities of such series as and when the same shall
have become due and payable, whether at maturity of the Securities of such
series or upon redemption or by declaration or otherwise, then, upon demand of
<PAGE>
the Trustee, the Issuer will pay to the Trustee, for the benefit of the Holders
of the Securities, the whole amount that then shall have become due and payable
on all such Securities of such series for principal or interest, if any, or
both, as the case may be, with interest upon the overdue principal and (to the
extent that payment of such interest is enforceable under applicable law) upon
the overdue installments of interest, if any, at the rate borne by the
Securities of such series; and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including a
reasonable compensation to the Trustee, its agents, attorneys and counsel, and
any expenses or liabilities incurred by the Trustee hereunder other than through
its negligence or bad faith.
If the Issuer shall fail forthwith to pay such amounts upon such demand,
the Trustee, in its own name and as trustee of an express trust, shall be
entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Issuer or any other obligor on the
Securities of such series and collect in the manner provided by law out of the
property of the Issuer or any other obligor on the Securities of such series,
wherever situated, the moneys adjudged or decreed to be payable.
If there shall be pending proceedings for the bankruptcy or for the
reorganization of the Issuer or any other obligor on the Securities of any
series then Outstanding under any bankruptcy, insolvency or other similar law
now or hereafter in effect, or if a receiver or trustee or similar official
shall have been appointed for the property of the Issuer or such other obligor,
or in the case of any other similar judicial proceedings relative to the Issuer
or other obligor upon the Securities of such series, or to the creditors or
property of the Issuer or such other obligor, the Trustee, irrespective of
whether the principal of the Securities of such series shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand pursuant to the provisions of
this Section 5.2, shall be entitled and empowered by intervention in such
proceedings or otherwise to file and prove a claim or claims for the whole
amount of principal and interest, if any, owing and unpaid in respect of the
Securities of such series, and, in case of any judicial proceedings, to file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and of the Securityholders
allowed in such judicial proceedings relative to the Issuer or any other obligor
on the Securities of such series, its or their creditors, or its or their
property, and to collect and receive any moneys or other property payable or
deliverable on any such claims, and to distribute the same after the deduction
of its charges and expenses, and any receiver, assignee or trustee or similar
official in bankruptcy or reorganization is hereby authorized by each of the
Securityholders to make such payments to the Trustee, and, if the Trustee shall
consent to the making of such payments directly to the Securityholders, to pay
to the Trustee any amount due it for compensation and expenses, including
counsel fees and expenses incurred by it up to the date of such distribution. To
the extent that such payment of reasonable compensation, expenses and counsel
fees and expenses out of the estate in any such proceedings shall be denied for
any reason, payment of the same shall be secured by a lien on, and shall be paid
out of, any and all distributions, dividends, moneys, securities and other
property which the Holders of the Securities of such series may be entitled to
receive in such proceedings, whether in liquidation or under any plan of
reorganization or arrangement or otherwise.
All rights of action and of asserting claims under this Indenture, or under
any of the Securities, may be enforced by the Trustee without the possession of
any of the Securities, or the production thereof at any trial or other
proceeding relative thereto, and any such suit or proceeding instituted by the
Trustee shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall be for the ratable benefit of the Holders of the
Securities of the series in respect of which such judgment has been recovered.
SECTION 5.3 Application of Moneys Collected by Trustee. Any moneys
collected by the Trustee pursuant to Section 5.2 with respect to Securities of
any series then Outstanding shall be applied in the order following, at the date
or dates fixed by the Trustee for the distribution of such moneys, upon
presentation of the several Securities of such series, and stamping thereon the
payment, if only partially paid, and upon surrender thereof, if fully paid:
FIRST: To the payment of costs and expenses of collection and
reasonable compensation to the Trustee, its agents, attorneys and counsel,
and of all other expenses and liabilities incurred, and all advances made,
by the Trustee pursuant to Section 6.6 except as a result of its negligence
or bad faith;
SECOND: If the principal of the Outstanding Securities of such series
shall not have become due and be unpaid, to the payment of interest, if
any, on the Securities of such series, in the order of the maturity of the
installments of such interest, if any, with interest (to the extent that
such interest has been collected by the Trustee) upon the overdue
installments of interest, if any, at the rate borne by the Securities of
such series, such payment to be made ratably to the Persons entitled
thereto;
<PAGE>
THIRD: If the principal of the Outstanding Securities of such series
shall have become due, by declaration or otherwise, to the payment of the
whole amount then owing and unpaid upon the Securities of such series for
principal and interest, if any, with interest on the overdue principal and
(to the extent that such interest has been collected by the Trustee) upon
overdue installments of interest, if any, at the rate borne by the
Securities of such series; and in case such moneys shall be insufficient to
pay in full the whole amounts so due and unpaid upon the Securities of such
series, then to the payment of such principal and interest, if any, without
preference or priority of principal over interest or of interest over
principal, or of any installment of interest over any other installment of
interest, or of any Security over any other Security, ratably to the
aggregate of such principal and accrued and unpaid interest; and
FOURTH: To the payment of any surplus then remaining to the Issuer,
its successors or assigns, or to whomsoever may be lawfully entitled to
receive the same.
No claim for interest which in any manner at or after maturity shall have
been transferred or pledged separate or apart from the Securities to which it
relates, or which in any manner shall have been kept alive after maturity by an
extension (otherwise than pursuant to an extension made pursuant to a plan
proposed by the Issuer to the Holders of all Securities of any series then
Outstanding), purchase, funding or otherwise by or on behalf or with the consent
or approval of the Issuer shall be entitled, in case of a default hereunder, to
any benefit of this Indenture, except after prior payment in full of the
principal of all Securities of any series then Outstanding and of all claims for
interest not so transferred, pledged, kept alive, extended, purchased or funded.
SECTION 5.4 Proceedings by Securityholders. No Holder of any Securities of
any series then Outstanding shall have any right by virtue of or by availing of
any provision of this Indenture to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Indenture or for the
appointment of a receiver or trustee or similar official, or for any other
remedy hereunder, unless such Holder previously shall have given to the Trustee
written notice of default and of the continuance thereof, as hereinbefore
provided, and unless the Holders of not less than 25% in aggregate principal
amount of the Securities of such series then Outstanding shall have made written
request to the Trustee to institute such action, suit or proceeding in its own
name as Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee for 60 days after its receipt of
such notice, request and offer of indemnity, shall have neglected or refused to
institute any such action, suit or proceeding, it being understood and intended,
and being expressly covenanted by the Holder of every Security of such series
with every other taker and Holder and the Trustee, that no one or more Holders
of Securities of such series shall have any right in any manner whatever by
virtue of or by availing of any provision of this Indenture or of the Securities
to affect, disturb or prejudice the rights of any other Holder of such
Securities of such series, or to obtain or seek to obtain priority over or
preference as to any other such Holder, or to enforce any right under this
Indenture or the Securities, except in the manner herein provided and for the
equal, ratable and common benefit of all Holders of Securities of such series.
Notwithstanding any other provisions in this Indenture, but subject to
Article Thirteen, the right of any Holder of any Security to receive payment of
the principal of and interest, if any, on such Security, on or after the
respective due dates expressed in such Security, or to institute suit for the
enforcement of any such payment on or after such respective dates shall not be
impaired or affected without the consent of such Holder.
SECTION 5.5 Proceedings by Trustee. In case of an Event of Default
hereunder, the Trustee may in its discretion proceed to protect and enforce the
rights vested in it by this Indenture by such appropriate judicial proceedings
as the Trustee shall deem most effectual to protect and enforce any of such
rights, either by suit in equity or by action at law or by proceedings in
bankruptcy or otherwise, whether for the specific enforcement of any covenant or
agreement contained in this Indenture or in aid of the exercise of any power
granted in this Indenture, or to enforce any other legal or equitable right
vested in the Trustee by this Indenture or by law.
SECTION 5.6 Remedies Cumulative and Continuing. All powers and remedies
given by this Article Five to the Trustee or to the Securityholders shall, to
the extent permitted by law, be deemed cumulative and not exclusive of any
thereof or of any other powers and remedies available to the Trustee or the
Securityholders, by judicial proceedings or otherwise, to enforce the
performance or observance of the covenants and agreements contained in this
Indenture, and no delay or omission of the Trustee or of any Securityholder to
exercise any right or power accruing upon any default occurring and continuing
as aforesaid shall impair any such right or power, or shall be construed to be a
waiver of any such default or an acquiescence therein; and, subject to the
provisions of Section 5.4, every power and remedy given by this Article Five or
by law to the Trustee or to the Securityholders may be exercised from time to
time, and as often as shall be deemed expedient, by the Trustee or by the
Securityholders. <PAGE>
SECTION 5.7 Direction of Proceedings; Waiver of Defaults by Majority of
Securityholders. The Holders of a majority in aggregate principal amount of the
Securities of any series then Outstanding 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 or power conferred on the Trustee with
respect to Securities of such series; provided, however, that (subject to the
provisions of Section 6.1) the Trustee shall have the right to decline to follow
any such direction if the Trustee shall determine upon advice of counsel that
the action or proceeding so directed may not lawfully be taken or if the Trustee
in good faith by its board of directors, its executive committee, or a trust
committee of directors or Responsible Officers or both shall determine that the
action or proceeding so directed would involve the Trustee in personal
liability. The Holders of a majority in aggregate principal amount of the
Securities of any series then Outstanding may on behalf of the Holders of all of
the Securities of such series waive any past default or Event of Default
hereunder and its consequences except a default in the payment of interest, if
any, on, or the principal of, the Securities of such series. Upon any such
waiver the Issuer, the Trustee and the Holders of the Securities of such series
shall be restored to their former positions and rights hereunder, respectively;
but no such waiver shall extend to any subsequent or other default or Event of
Default or impair any right consequent thereon. Whenever any default or Event of
Default hereunder shall have been waived as permitted by this Section 5.7, said
default or Event of Default shall for all purposes of the Securities and this
Indenture be deemed to have been cured and to be not continuing.
SECTION 5.8 Notice of Defaults. The Trustee shall, within 90 days after the
occurrence of a default, with respect to Securities of any series then
Outstanding, mail to all Holders of Securities of such series, as the names and
the addresses of such Holders appear upon the Securities register, notice of all
defaults known to the Trustee with respect to such series, unless such defaults
shall have been cured before the giving of such notice (the term "defaults" for
the purpose of this Section 5.8 being hereby defined to be the events specified
in clauses (a), (b), (c), (d), (e), (f), (g) and (h) of Section 5.1, not
including periods of grace, if any, provided for therein and irrespective of the
giving of the written notice specified in said clause (d) or (g) but in the case
of any default of the character specified in said clause (d) or (g) no such
notice to Securityholders shall be given until at least 60 days after the giving
of written notice thereof to the Issuer pursuant to said clause (d) or (g), as
the case may be); provided, however, that, except in the case of default in the
payment of the principal of or interest, if any, on any of the Securities, or in
the payment or satisfaction of any sinking fund or other purchase obligation,
the Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee, or a trust committee of directors
or Responsible Officers or both of the Trustee in good faith determines that the
withholding of such notice is in the best interests of the Securityholders.
SECTION 5.9 Undertaking to Pay Costs. All parties to this Indenture agree,
and each Holder of any Security by his acceptance thereof shall be deemed to
have agreed, that any court may in its discretion require, 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, the filing by any
party litigant in such suit of an undertaking to pay the cost of such suit, and
that such court may in its discretion assess reasonable costs, including
reasonable attorney's fees and expenses, against any party litigant in such
suit, having due regard to the merits and good faith of the claims or defenses
made by such party litigant; but the provisions of this Section 5.9 shall not
apply to any suit instituted by the Trustee, to any suit instituted by any
Securityholder, or group of Securityholders, holding in the aggregate more than
10% in principal amount of the Securities of any series then Outstanding, or to
any suit instituted by any Securityholders for the enforcement of the payment of
the principal of or interest, if any, on any Security against the Issuer on or
after the due date expressed in such Security.
ARTICLE SIX
CONCERNING THE TRUSTEE
SECTION 6.1 Duties and Responsibilities of the Trustee; During Default;
Prior to Default. With respect to the Holders of any series of Securities issued
hereunder, the Trustee, prior to the occurrence of an Event of Default with
respect to the Securities of a particular series and after the curing or waiving
of all Events of Default which may have occurred with respect to such series,
undertakes to perform such duties and only such duties as are specifically set
forth in this Indenture. In case an Event of Default with respect to the
Securities of a series has occurred (which has not been cured or waived) the
Trustee shall exercise with respect to such series of Securities such of the
rights and powers vested in it by this Indenture, and use the same degree of
care and skill in their exercise as a prudent man would exercise or use under
the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own wilful misconduct, except that
(a) prior to the occurrence of an Event of Default with respect to the
Securities of any series and after the curing or waiving of all such Events of
Default with respect to such series which may have occurred:
(i) the duties and obligations of the Trustee with respect to the
Securities of any series shall be determined solely by the express
provisions of this Indenture, and the Trustee shall not be liable except
for the performance of such duties and obligations as are specifically set
forth in this Indenture, and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any statements,
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture; but in the case of any such statements,
certificates or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall be under a duty
to examine the same to determine whether or not they conform to the
requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer or Responsible Officers of the Trustee, unless it
shall be proved that the Trustee was negligent in ascertaining the pertinent
facts; and
(c) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of the
Holders pursuant to Section 5.7 relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred upon the Trustee, under this Indenture.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there shall be reasonable ground for believing that the
repayment of such funds or adequate indemnity against such liability is not
reasonably assured to it.
SECTION 6.2 Certain Rights of the Trustee. Subject to Section 6.1:
(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, Officers' Certificate or any other certificate,
statement, instrument, opinion, report, notice, request, consent, order, bond,
debenture, note, coupon, security or other paper or document believed by it to
be genuine and to have been signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the Issuer mentioned herein
shall be sufficiently evidenced by an Officers' Certificate or Issuer Order
(unless other evidence in respect thereof be herein specifically prescribed);
and any resolution of the Board of Directors may be evidenced to the Trustee by
a copy thereof certified by the secretary or an assistant secretary of the
Issuer;
(c) the Trustee may consult with counsel of its selection and any advice of
such counsel promptly confirmed in writing shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
to be taken by it hereunder in good faith and in reliance thereon in accordance
with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the trusts
or powers vested in it by this Indenture at the request, order or direction of
any of the Securityholders pursuant to the provisions of this Indenture
(including, without limitation, pursuant to Section 5.1), unless such
Securityholders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be incurred
therein or thereby;
(e) the Trustee shall not be liable for any action taken or omitted by it
in good faith and believed by it to be authorized or within the discretion,
rights or powers conferred upon it by this Indenture; <PAGE>
(f) prior to the occurrence of an Event of Default hereunder and after the
curing or waiving of all Events of Default, the Trustee shall not be bound to
make any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, approval, appraisal, bond, debenture, note, coupon, security, or other
paper or document unless requested in writing so to do by the Holders of not
less than a majority in aggregate principal amount of the Securities of all
series affected then Outstanding; provided that, if the payment within a
reasonable time to the Trustee of the costs, expenses or liabilities likely to
be incurred by it in the making of such investigation is, in the opinion of the
Trustee, not reasonably assured to the Trustee by the security afforded to it by
the terms of this Indenture, the Trustee may require reasonable indemnity
against such expenses or liabilities as a condition to proceeding; the
reasonable expenses of every such investigation shall be paid by the Issuer or,
if paid by the Trustee or any predecessor Trustee, shall be repaid by the Issuer
upon demand; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys not regularly in its employ and the Trustee shall not be responsible
for any misconduct or negligence on the part of any such agent or attorney
appointed with due care by it hereunder.
SECTION 6.3 Trustee Not Responsible for Recitals, Disposition of Securities
or Application of Proceeds Trustee Not Responsible for Recitals, Disposition of
Securities or Application of Proceeds Thereof. The recitals contained herein and
in the Securities, except the Trustee's certificates of authentication, shall be
taken as the statements of the Issuer, and the Trustee assumes no responsibility
for the correctness of the same. The Trustee makes no representation as to the
validity or sufficiency of this Indenture, of the Securities or of any
prospectus used to sell the Securities. The Trustee shall not be accountable for
the use or application by the Issuer of any of the Securities or of the proceeds
thereof.
SECTION 6.4 Trustee and Agents May Hold Securities; Collections, etc. The
Trustee or any agent of the Issuer or the Trustee, in its individual or any
other capacity, may become the owner or pledgee of Securities with the same
rights it would have if it were not the Trustee or such agent and, subject to
Sections 6.8 and 6.13, may otherwise deal with the Issuer and receive, collect,
hold and retain collections from the Issuer with the same rights it would have
if it were not the Trustee or such agent.
SECTION 6.5 Moneys Held by Trustee. Subject to the provisions of Section
10.4 hereof, all moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received,
but need not be segregated from other funds except to the extent required by
mandatory provisions of law. Neither the Trustee nor any agent of the Issuer or
the Trustee shall be under any liability for interest on any moneys received by
it hereunder.
SECTION 6.6 Compensation and Indemnification of Trustee and Its Prior
Claim. The Issuer covenants and agrees to pay to the Trustee from time to time,
and the Trustee shall be entitled to, such compensation as shall be agreed to in
writing between the Issuer and the Trustee (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express trust)
and the Issuer covenants and agrees to pay or reimburse the Trustee and each
predecessor Trustee upon its request for all reasonable expenses, disbursements
and advances incurred or made by or on behalf of it in accordance with any of
the provisions of this Indenture (including the reasonable compensation and the
expenses and disbursements of its counsel and of all agents and other persons
not regularly in its employ) except any such expense, disbursement or advance as
may arise from its negligence or bad faith. The Issuer also covenants to
indemnify the Trustee and each predecessor Trustee for, and to hold it harmless
against, any and all loss, liability, damage, claim or expense, including taxes
(other than taxes based on the income of the Trustee), incurred without
negligence or bad faith on its part, arising out of or in connection with the
acceptance or administration of this Indenture or the trusts hereunder and its
duties hereunder, including the costs and expenses of defending itself against
or investigating any claim or liability in the premises. The obligations of the
Issuer under this Section 6.6 to compensate and indemnify the Trustee and each
predecessor Trustee and to pay or reimburse the Trustee and each predecessor
Trustee for expenses, disbursements and advances shall constitute additional
indebtedness hereunder and shall survive the satisfaction and discharge of this
Indenture or the resignation or removal of the Trustee and shall not be
subordinate to the payment of Senior Indebtedness pursuant to Article Thirteen.
Such additional indebtedness shall be a senior claim to that of the Securities
upon all property and funds held or collected by the Trustee as such, except
funds held in trust for the benefit of the Holders of particular Securities, and
the Securities are hereby subordinated to such senior claim. When the Trustee
incurs expenses or renders services in connection with an Event of Default
specified in Section 5.1 or in connection with Article Five hereof, the expenses
(including the reasonable fees and expenses of its counsel) and the compensation
for the service in connection therewith are intended to constitute expenses of
administration under any bankruptcy law.
SECTION 6.7 Right of Trustee to Rely on Officers' Certificate, etc. Subject
to Sections 6.1 and 6.2, whenever in the administration of the trusts of this
Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or bad faith on the
part of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Trustee, and such certificate, in the
absence of negligence or bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action taken, suffered or omitted by it under the
provisions of this Indenture upon the faith thereof.
SECTION 6.8 Qualification of Trustee; Conflicting Interests. (a) If the
Trustee has or shall acquire any conflicting interest (as defined in subsection
(c)), then within 90 days after ascertaining that it has such conflicting
interest, and if the default (as defined in subsection (c)) to which such
conflicting interest relates has not been cured or duly waived or otherwise
eliminated before the end of such 90-day period, the Trustee shall either
eliminate such conflicting interest or, except as otherwise provided below,
resign, and the Issuer shall take prompt steps to have a successor appointed in
the manner provided in Section 6.10.
(b) If the Trustee shall fail to comply with the provisions of subsection
(a), the Trustee shall, within 10 days after the expiration of such 90-day
period, transmit notice of such failure to the Securityholders in the manner and
to the extent provided in Section 4.4 and, subject to the provisions of Section
5.9, unless the Trustee's duty to resign is stayed as provided below, any
Securityholder who has been a bona fide Holder of Securities for at least six
months may, on behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the removal of the Trustee, and the
appointment of a successor, if the Trustee fails, after written request thereof
by such Securityholder, to comply with the provisions of subsection (a).
Except in the case of a default in the payment of the principal of or
interest on any Security, or in the payment of any sinking or purchase fund
installment, the Trustee shall not be required to resign as provided by this
Section 6.8 if the Trustee shall have sustained the burden of proving, on
application to the Commission and after opportunity for hearing thereon, that
(i) the default under the Indenture may be cured or waived during a
reasonable period and under the procedures described in such application,
and
(ii) a stay of the Trustee's duty to resign will not be inconsistent
with the interests of Holders of the Securities.
The filing of such an application shall automatically stay the performance
of the duty to resign until the Commission orders otherwise. Any resignation of
the Trustee shall become effective only upon the appointment of a successor
trustee in accordance with the provisions of Section 6.10 and such successor's
acceptance of such an appointment.
(c) For the purposes of this Section 6.8, the Trustee shall be deemed to
have a conflicting interest with respect to Securities of any series if the
Securities of such series are in default (as determined in accordance with the
provisions of Section 5.1, but exclusive of any period of grace or requirement
of notice) and
(i) the Trustee is trustee under this Indenture with respect to the
Outstanding securities of any other series or is a trustee under another
indenture under which any other securities, or certificates of interest or
participation in any other securities, of the Issuer are outstanding,
unless such other indenture is a collateral trust indenture under which the
only collateral consists of Securities issued under this Indenture;
provided that there shall be excluded from the operation of this paragraph
(i), this Indenture with respect to the Securities of any other series and
there shall also be so excluded any other indenture or indentures under
which other securities, or certificates of interest or participation in
other securities, of the Issuer are outstanding if (x) this Indenture is
and, if applicable, this Indenture and any series issued pursuant to this
Indenture and such other indenture or indentures are wholly unsecured and
rank equally and such other indenture or indentures are hereafter qualified
under the Trust Indenture Act of 1939, unless the Commission shall have
found and declared by order pursuant to Section 305(b) or Section 307(c) of
the Trust Indenture Act of 1939 that differences exist between the
provisions of this Indenture with respect to Securities of such series and
one or more other series, or the provisions of this Indenture and the
provisions of such other indenture or indentures which are so likely to
involve a material conflict of interest as to make it necessary in the
public interest or for the protection of investors to disqualify the
Trustee from acting as such under this Indenture with respect to Securities
<PAGE>
of such series and such other series, or under this Indenture or such other
indenture or indentures, or (y) the Issuer shall have sustained the burden
of proving, on application to the Commission and after opportunity for
hearing thereon, that trusteeship under this Indenture with respect to
Securities of such series and such other series, or under this Indenture
and such other indenture or indentures is not so likely to involve a
material conflict of interest as to make it necessary in the public
interest or for the protection of investors to disqualify the Trustee from
acting as such under this Indenture with respect to Securities of such
series and such other series, or under this Indenture and such other
indentures;
(ii) the Trustee or any of its directors or executive officers is an
underwriter for the Issuer;
(iii) the Trustee directly or indirectly controls or is directly or
indirectly controlled by or is under direct or indirect common control with
an underwriter for the Issuer;
(iv) the Trustee or any of its directors or executive officers is a
director, officer, partner, employee, appointee, or representative of the
Issuer, or of an underwriter (other than the Trustee itself) for the Issuer
who is currently engaged in the business of underwriting, except that (x)
one individual may be a director or an executive officer, or both, of the
Trustee and a director or an executive officer, or both, of the Issuer, but
may not be at the same time an executive officer of both the Trustee and
the Issuer; (y) if and so long as the number of directors of the Trustee in
office is more than nine, one additional individual may be a director or an
executive officer, or both, of the Trustee and a director of the Issuer;
and (z) the Trustee may be designated by the Issuer or by any underwriter
for the Issuer to act in the capacity of transfer agent, registrar,
custodian, paying agent, fiscal agent, escrow agent, or depositary, or in
any other similar capacity, or, subject to the provisions of subsection (c)
(i) of this Section, to act as trustee, whether under an indenture or
otherwise;
(v) 10% or more of the voting securities of the Trustee is
beneficially owned either by the Issuer or by any director, partner or
executive officer thereof, or 20% or more of such voting securities is
beneficially owned, collectively, by any two or more of such persons; or
10% or more of the voting securities of the Trustee is beneficially owned
either by an underwriter for the Issuer or by any director, partner, or
executive officer thereof, or is beneficially owned, collectively, by any
two or more such persons;
(vi) the Trustee is the beneficial owner of, or holds as collateral
security for an obligation which is in default, (x) 5% or more of the
voting securities or 10% or more of any other class of security of the
Issuer, not including the Securities issued under this Indenture and
securities issued under any other indenture under which the Trustee is also
trustee, or (y) 10% or more of any class of security of an underwriter for
the Issuer;
(vii) the Trustee is the beneficial owner of, or holds as collateral
security for an obligation which is in default, 5% or more of the voting
securities of any person who, to the knowledge of the Trustee, owns 10% or
more of the voting securities of, or controls directly or indirectly or is
under direct or indirect common control with, the Issuer;
(viii) the Trustee is the beneficial owner of, or holds as collateral
security for an obligation which is in default, 10% or more of any class
security of any person who, to the knowledge of the Trustee, owns 50% or
more of the voting securities of the Issuer;
(ix) the Trustee owns on the date of default (as determined in
accordance with the provisions of Section 5.1, but exclusive of any period
of grace or requirement of notice) or on any anniversary of such default
while such default remains outstanding, in the capacity of executor,
administrator, testamentary or inter vivos trustee, guardian, committee or
conservator, or in any other similar capacity, an aggregate of 25% or more
of the voting securities, or of any class of security, of any Person, the
beneficial ownership of a specified percentage of which would have
constituted a conflicting interest under paragraphs (vi), (vii) or (viii)
of this subsection. As to any such securities of which the Trustee acquired
ownership through becoming executor, administrator, or testamentary trustee
of an estate which included them, the provisions of the preceding sentence
shall not apply, for a period of two years from the date of such
acquisition, to the extent that such securities included in such estate do
not exceed 25% of such voting securities or 25% of any such class of
security. Promptly after the dates of any such default and annually in each
succeeding year that the Securities remain in default, the Trustee shall
make a check of its holdings of such securities in any of the
<PAGE>
above-mentioned capacities as of such dates. If the Issuer fails to make
payment in full of principal of or interest on any of the Securities when
and as the same becomes due and payable, and such failure continues for 30
days thereafter, the Trustee shall make a prompt check of its holdings of
such Securities in any of the above-mentioned capacities as of the date of
the expiration of such 30-day period, and after such date, notwithstanding
the foregoing provisions of this paragraph, all such Securities so held by
the Trustee, with sole or joint control over such Securities vested in it,
shall, but only so long as such failure shall continue, be considered as
though beneficially owned by the Trustee for the purposes of paragraphs
(vi), (vii) and (viii) of this subsection; or
(x) except under the circumstances described in paragraphs (1), (3),
(4), (5) or (6) of Section 6.13(b), the Trustee shall be or shall become a
creditor of the Issuer.
For purposes of subsection (c) (i), the term "series of securities" or
"series" means a series, class or group of securities issuable under an
indenture pursuant to the terms of which holders of one such series may vote to
direct the Trustee, or otherwise take action pursuant to a vote of such holders,
separately from holders of another such series; provided that "series of
securities" or "series" shall not include any series of securities issuable
under an indenture if all such series rank equally and are wholly unsecured.
The specification of percentages in subsections (c) (v) to (ix) inclusive
of this Section 6.8 shall not be construed as indicating that the ownership of
such percentages of the securities of a person is or is not necessary or
sufficient to constitute direct or indirect control for the purposes of
subsections (c) (iii) or (vii) of this Section.
For the purposes of subsections (c) (vi), (vii), (viii) and (ix), of this
Section 6.8, only,
(A) the terms "security" and "securities" shall include only such
securities as are generally known as corporate securities, but shall not
include any note or other evidence of indebtedness issued to evidence an
obligation to repay moneys lent to a person by one or more banks, trust
companies, or banking firms, or any certificate of interest or
participation in any such note or evidence of indebtedness;
(B) an obligation shall be deemed to be in default when a default in
payment of principal shall have continued for 30 days or more and shall not
have been cured; and
(C) the Trustee shall not be deemed to be the owner or holder of (x)
any security which it holds as collateral security, as trustee or
otherwise, for an obligation which is not in default as defined in clause
(B) above, or (y) any security which it holds as collateral security under
this Indenture, irrespective of any default hereunder, or (z) any security
which it holds as agent for collection, or as custodian, escrow agent, or
depositary, or in any similar representative capacity.
Except as provided above, the word "security" or "securities" as used in
this Section 6.8 shall mean any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in any
profit-sharing agreement, collateral trust certificate, preorganization
certificate or subscription, transferable share, investment contract, voting
trust certificate, certificate of deposit for a security, fractional undivided
interest in oil, gas or other mineral rights, or, in general, any interest or
instrument commonly known as a "security", or any certificate of interest or
participation in, temporary or interim certificate for, receipt for, guarantee
of, or warrant or right to subscribe to or purchase, any of the foregoing.
(d) For purposes of this Section 6.8:
(i) the term "underwriter" when used with reference to the Issuer
shall mean every person who, within a one year period prior to the time as
of which the determination is made, was an underwriter of any security of
the Issuer outstanding at the time of the determination;
(ii) the term "director" shall mean any director of a corporation or
any individual performing similar functions with respect to any
organization whether incorporated or unincorporated;
(iii) the term "person" shall mean an individual, a corporation, a
partnership, an association, a joint-stock company, a trust, an
unincorporated organization, or a government or political subdivision
thereof; as used in this paragraph, the term "trust" shall include only a
trust where the interest or interests of the beneficiary or beneficiaries
are evidenced by a security;
<PAGE>
(iv) the term "voting security" shall mean any security presently
entitling the owner or holder thereof to vote in the direction or
management of the affairs of a person, or any security issued under or
pursuant to any trust, agreement or arrangement whereby a trustee or
trustees or agent or agents for the owner or holder of such security are
presently entitled to vote in the direction or management of the affairs of
a person;
(v) the term "Issuer" shall mean any obligor upon the Securities; and
(vi) the term "executive officer" shall mean the president, every vice
president, every trust officer, the cashier, the secretary, and the
treasurer of a corporation, and any individual customarily performing
similar functions with respect to any organization whether incorporated or
unincorporated, but shall not include the chairman of the board of
directors.
(e) The percentages of voting securities and other securities specified in
this Section 6.8 shall be calculated in accordance with the following
provisions:
(i) a specified percentage of the voting securities of the Trustee,
the Issuer or any other person referred to in this Section (each of whom is
referred to as a "person" in this paragraph) means such amount of the
outstanding voting securities of such person as entitles the holder or
holders thereof to cast such specified percentage of the aggregate votes
which the holders of all the outstanding voting securities of such person
are entitled to cast in the direction or management of the affairs of such
person;
(ii) a specified percentage of a class of securities of a person means
such percentage of the aggregate amount of securities of the class
outstanding;
(iii) the term "amount", when used in regard to securities, means the
principal amount if relating to evidences of indebtedness, the number of
shares if relating to capital shares, and the number of units if relating
to any other kind of security;
(iv) the term "outstanding" means issued and not held by or for the
account of the issuer; the following securities shall not be deemed
outstanding within the meaning of this definition:
(A) securities of an issuer held in a sinking fund relating to
securities of the issuer of the same class;
(B) securities of an issuer held in a sinking fund relating to another
class of securities of the issuer, if the obligation evidenced by such
other class of securities is not in default as to principal or interest or
otherwise;
(C) securities pledged by the issuer thereof as security for an
obligation of the issuer not in default as to principal or interest or
otherwise; and
(D) securities held in escrow if placed in escrow by the issuer
thereof; provided,that any voting securities of an issuer shall be deemed
outstanding if any person other than the issuer is entitled to exercise the
voting rights thereof; and
(v) a security shall be deemed to be of the same class as another
security if both securities confer upon the holder or holders thereof
substantially the same rights and privileges; provided, that, in the case
of secured evidences of indebtedness, all of which are issued under a
single indenture, differences in the interest rates or maturity dates of
various series thereof shall not be deemed sufficient to constitute such
series different classes and provided, further, that, in the case of
unsecured evidences of indebtedness, differences in the interest rates or
maturity dates thereof shall not be deemed sufficient to constitute them
securities of different classes, whether or not they are issued under a
single indenture.
SECTION 6.9 Persons Eligible for Appointment as Trustee. The Trustee for
each series of Securities hereunder shall at all times be a corporation
<PAGE>
organized and doing business under the laws of the United States of America or
of any state or the District of Columbia having a combined capital and surplus
of at least $50,000,000, and which is authorized under such laws to exercise
corporate trust powers and is subject to supervision or examination by federal,
state or District of Columbia authority, or a corporation or other Person
permitted to act as trustee by the Commission. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purposes of
this Section, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. No obligor upon the Securities or any
Affiliate of such obligor shall serve as trustee upon the Securities. In case at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 6.9, the Trustee shall resign immediately in the
manner and with the effect specified in Section 6.10.
SECTION 6.10 Resignation and Removal; Appointment of Successor Trustee. (a)
The Trustee, or any trustee or trustees hereafter appointed, may at any time
resign with respect to one or more or all series of Securities by giving written
notice of resignation to the Issuer. Upon receiving such notice of resignation,
the Issuer shall promptly appoint a successor trustee or trustees with respect
to the applicable series by written instrument in duplicate, executed by
authority of the Board of Directors, one copy of which instrument shall be
delivered to the resigning Trustee and one copy to the successor trustee or
trustees. If no successor trustee shall have been so appointed with respect to
any series and have accepted appointment within 30 days after the mailing of
such notice of resignation, the resigning trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee, or any
Securityholder who has been a bona fide Holder of a Security or Securities of
the applicable series for at least six months may, subject to the provisions of
Section 5.9, on behalf of himself and all others similarly situated, petition
any such court for the appointment of a successor trustee. Such court may
thereupon, after such notice, if any, as it may deem proper and prescribe,
appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(i) the Trustee shall fail to comply with the provisions of Section
6.8 with respect to any series of Securities after written request therefor
by the Issuer or by any Securityholder who has been a bona fide Holder of a
Security or Securities of such series for at least six months; or
(ii) the Trustee shall cease to be eligible in accordance with the
provisions of Section 6.9 and shall fail to resign after written request
therefor by the Issuer or by any such Securityholder; or
(iii) the Trustee shall become incapable of acting with respect to any
series of Securities, or shall be adjudged a bankrupt or insolvent, or a
receiver or liquidator of the Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation;
then, in any such case, the Issuer may remove the Trustee with respect to the
applicable series of Securities and appoint a successor trustee for such series
by written instrument, in duplicate, executed by order of the Board of Directors
one copy of which instrument shall be delivered to the Trustee so removed and
one copy to the successor trustee, or, subject to the provisions of Section 5.9,
any Securityholder who has been a bona fide Holder of a Security or Securities
of such series for at least six months may on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor trustee with respect to such
series. Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, remove the Trustee and appoint a successor trustee.
(c) The Holders of a majority in aggregate principal amount of the
Securities of each series then Outstanding may at any time remove the Trustee
with respect to Securities of such series and appoint a successor trustee with
respect to the Securities of such series by delivering to the Trustee so
removed, to the successor trustee so appointed and to the Issuer the evidence
provided for in Section 7.1 of the action in that regard taken by the
Securityholders. If no successor trustee shall have been so appointed with
respect to any series and have accepted appointment within 30 days after the
delivery of such evidence of removal, the Trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee, or any
Securityholder who has been a bona fide Holder of a Security or Securities of
the applicable series for at least six months may, subject to the provisions of
Section 5.9, on behalf of himself and all others similarly situated, petition
any such court for the appointment of a successor trustee. Such court may
thereupon, after such notice, if any, as it may deem proper and prescribe,
appoint a successor trustee.
(d) Any resignation or removal of the Trustee with respect to any series
<PAGE>
and any appointment of a successor trustee with respect to such series pursuant
to any of the provisions of this Section 6.10 shall become effective upon
acceptance of appointment by the successor trustee as provided in Section 6.11.
SECTION 6.11 Acceptance of Appointment by Successor Trustee. Any successor
trustee appointed as provided in Section 6.10 shall execute and deliver to the
Issuer and to its predecessor trustee an instrument accepting such appointment
hereunder, and thereupon the resignation or removal of the predecessor trustee
with respect to all or any applicable series shall become effective and such
successor trustee, without any further act, deed or conveyance, shall become
vested with all rights, powers, duties and obligations with respect to such
series of its predecessor hereunder, with like effect as if originally named as
trustee for such series hereunder; but, nevertheless, on the written request of
the Issuer or of the successor trustee, upon payment of its charges then unpaid,
the trustee ceasing to act shall, subject to Section 10.4, pay over to the
successor trustee all moneys at the time held by it hereunder and shall execute
and deliver an instrument transferring to such successor trustee all such
rights, powers, duties and obligations. Upon request of any such successor
trustee, the Issuer shall execute any and all instruments in writing for more
fully and certainly vesting in and confirming to such successor trustee all such
rights and powers. Any trustee ceasing to act shall, nevertheless, retain a
prior claim upon all property or funds held or collected by such trustee to
secure any amounts then due it pursuant to the provisions of Section 6.6.
If a successor trustee is appointed with respect to the Securities of one
or more (but not all) series, the Issuer, the predecessor Trustee and each
successor trustee with respect to the Securities of any applicable series shall
execute and deliver an indenture supplemental hereto which shall contain such
provisions as shall be deemed necessary or desirable to confirm that all the
rights, powers, trusts and duties of the predecessor Trustee with respect to the
Securities of any series as to which the predecessor Trustee is not retiring
shall continue to be vested in the predecessor Trustee, and shall add to or
change any of the provisions of this Indenture as shall be necessary to provide
for or facilitate the administration of the trusts hereunder by more than one
trustee, it being understood that nothing herein or in such supplemental
indenture shall constitute such trustees co-trustees of the same trust and that
each such trustee shall be trustee of a trust or trusts under separate
indentures.
No successor trustee with respect to any series of Securities shall accept
appointment as provided in this Section 6.11 unless at the time of such
acceptance such successor trustee shall be qualified under the provisions of
Section 6.8 and eligible under the provisions of Section 6.9.
Upon acceptance of appointment by any successor trustee as provided in this
Section 6.11, the Issuer shall give notice thereof to the Holders of Securities
of each series affected, by mailing such notice to such Holders at their
addresses as they shall appear on the registry books. If the Issuer fails to
give such notice within ten days after acceptance of appointment by the
successor trustee, the successor trustee shall cause such notice to be given at
the expense of the Issuer.
SECTION 6.12 Merger, Conversion, Consolidation or Succession to Business of
Trustee. Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to the corporate trust business of the Trustee, shall be
the successor of the Trustee hereunder, provided that such corporation shall be
qualified under the provisions of Section 6.8 and eligible under the provisions
of Section 6.9, without the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Securities of any series shall have
been authenticated but not delivered, any such successor to the Trustee may
adopt the certificate of authentication of any predecessor Trustee and deliver
such Securities so authenticated; and, in case at that time any of the
Securities of any series shall not have been authenticated, any successor to the
Trustee may authenticate such Securities either in the name of any predecessor
hereunder or in the name of the successor Trustee; and in all such cases such
certificate shall have the full force which it is anywhere in the Securities of
such series or in this Indenture provided that the certificate of the Trustee
shall have; provided, that the right to adopt the certificate of authentication
of any predecessor Trustee or to authenticate Securities of any series in the
name of any predecessor Trustee shall apply only to its successor or successors
by merger, conversion or consolidation.
SECTION 6.13 Preferential Collection of Claims Against the Issuer. (a)
Subject to the provisions of this Section, if the Trustee shall be or shall
become a creditor, directly or indirectly, secured or unsecured, of the Issuer
within three months prior to a default, as defined in subsection (c) of this
Section 6.13, or subsequent to such a default, then, unless and until such
default shall be cured, the Trustee shall set apart and hold in a special
account for the benefit of the Trustee individually, the Holders of the
Securities and the holders of other indenture securities (as defined in this
Section 6.13):
(1) an amount equal to any and all reductions in the amount due and
owing upon any claim as such creditor in respect of principal or interest,
effected after the beginning of such three month period and valid as
against the Issuer and its other creditors, except any such reduction
resulting from the receipt or disposition of any property described in
subsection (a) (2) of this section, or from the exercise of any right of
set-off which the Trustee could have exercised if a petition in bankruptcy
had been filed by or against the Issuer upon the date of such default; and
(2) all property received by the Trustee in respect of any claim as
such creditor, either as security therefor, or in satisfaction or
composition thereof, or otherwise, after the beginning of such three month
period, or an amount equal to the proceeds of any such property, if
disposed of, subject, however, to the rights, if any, of the Issuer and its
other creditors in such property or such proceeds.
Nothing herein contained, however, shall affect the right of the Trustee:
(A) to retain for its own account (i) payments made on account of any
such claim by any Person (other than the Issuer) who is liable thereon,
(ii) the proceeds of the bona fide sale of any such claim by the Trustee to
a third Person, and (iii) distributions made in cash, securities or other
property in respect of claims filed against the Issuer in bankruptcy or
receivership or in proceedings for reorganization pursuant to the
Bankruptcy Code or applicable state law;
(B) to realize, for its own account, upon any property held by it as
security for any such claim, if such property was so held prior to the
beginning of such three month period;
(C) to realize, for its own account, but only to the extent of the
claim hereinafter mentioned, upon any property held by it as security for
any such claim, if such claim was created after the beginning of such three
month period and such property was received as security therefor
simultaneously with the creation thereof, and if the Trustee shall sustain
the burden of proving that at the time such property was so received the
Trustee had no reasonable cause to believe that a default as defined in
subsection (c) of this Section would occur within three months; or
(D) to receive payment on any claim referred to in paragraph (B) or
(C), against the release of any property held as security for such claim as
provided in such paragraph (B) or (C), as the case may be, to the extent of
the fair value of such property.
For the purposes of paragraphs (B), (C) and (D), property substituted after
the beginning of such three month period for property held as security at the
time of such substitution shall, to the extent of the fair value of the property
released, have the same status as the property released, and, to the extent that
any claim referred to in any of such paragraphs is created in renewal of or in
substitution for or for the purpose of repaying or refunding any preexisting
claim of the Trustee as such creditor, such claim shall have the same status as
such pre-existing claim.
If the Trustee shall be required to account, the funds and property held in
such special account and the proceeds thereof shall be apportioned between the
Trustee, the Securityholders and the holders of other indenture securities in
such manner that the Trustee, such Securityholders and the holders of other
indenture securities realize, as a result of payments from such special account
and payments of dividends on claims filed against the Issuer in bankruptcy or
receivership or in proceedings for reorganization pursuant to the Bankruptcy
Code or applicable state law, the same percentage of their respective claims,
figured before crediting to the claim of the Trustee anything on account of the
receipt by it from the Issuer of the funds and property in such special account,
and before crediting to the respective claims of the Trustee, such
Securityholders and the holders of other indenture securities, dividends on
claims filed against the Issuer in bankruptcy or receivership or in proceedings
for reorganization pursuant to the Bankruptcy Code or applicable state law, but
after crediting thereon receipts on account of the indebtedness represented by
their respective claims from all sources other than from such dividends and from
the funds and property so held in such special account. As used in this
paragraph, with respect to any claim, the term "dividends" shall include any
distribution with respect to such claim, in bankruptcy or receivership or in
proceedings for reorganization pursuant to the Bankruptcy Code or applicable
state law, whether such distribution is made in cash, securities or other
property, but shall not include any such distribution with respect to the
secured portion, if any, of such claim. The court in which such bankruptcy,
receivership or proceeding for reorganization is pending shall have jurisdiction
(i) to apportion between the Trustee, such Securityholders and the holders of
<PAGE>
other indenture securities, in accordance with the provisions of this paragraph,
the funds and property held in such special account and the proceeds thereof, or
(ii) in lieu of such apportionment, in whole or in part, to give to the
provisions of this paragraph due consideration in determining the fairness of
the distributions to be made to the Trustee, such Securityholders and the
holders of other indenture securities with respect to their respective claims,
in which event it shall not be necessary to liquidate or to appraise the value
of any securities or other property held in such special account or as security
for any such claim, or to make a specific allocation of such distributions as
between the secured and unsecured portions of such claims, or otherwise to apply
the provisions of this paragraph as a mathematical formula.
Any Trustee who has resigned or been removed after the beginning of such
three month period shall be subject to the provisions of this subsection (a) as
though such resignation or removal had not occurred. If any Trustee has resigned
or been removed prior to the beginning of such three month period, it shall be
subject to the provisions of this subsection (a) if and only if the following
conditions exist:
(i) the receipt of property or reduction of claim which would have
given rise to the obligation to account, if such Trustee had continued as
trustee, occurred after the beginning of such three month period; and
(ii) such receipt of property or reduction of claim occurred within
three months after such resignation or removal.
(b) There shall be excluded from the operation of this Section 6.13 a
creditor relationship arising from:
(1) the ownership or acquisition of securities issued under any
indenture or any security or securities having a maturity of one year or
more at the time of acquisition by the Trustee;
(2) advances authorized by a receivership or bankruptcy court of
competent jurisdiction or by this Indenture for the purpose of preserving
any property which shall at any time be subject to the lien of this
Indenture or of discharging tax liens or other prior liens or encumbrances
thereon, if notice of such advance and of the circumstances surrounding the
making thereof is given to the Securityholders at the time and in the
manner provided in this Indenture;
(3) disbursements made in the ordinary course of business in the
capacity of trustee under an indenture, transfer agent, registrar,
custodian, paying agent, fiscal agent or depositary, or other similar
capacity;
(4) an indebtedness created as a result of services rendered or
premises rented or an indebtedness created as a result of goods or
securities sold in a cash transaction as defined in subsection (c)(2) of
this Section;
(5) the ownership of stock or of other securities of a corporation
organized under the provisions of Section 25(a) of the Federal Reserve Act,
as amended, which is directly or indirectly a creditor of the Issuer; or
(6) the acquisition, ownership, acceptance or negotiation of any
drafts, bills of exchange, acceptances or obligations which fall within the
classification of self-liquidating paper as defined in subsection (c) (3)
of this Section.
(c) As used in this Section 6.13:
(1) the term "default" shall mean any failure to make payment in full
of the principal of or interest on any of the Securities when and as such
principal or interest becomes due and payable;
(2) the term "cash transaction" shall mean any transaction in which
full payment for goods or securities sold is made within seven days after
delivery of the goods or securities in currency or in checks or other
orders drawn upon banks or bankers and payable upon demand;
(3) the term "self-liquidating paper" shall mean any draft, bill of
exchange, acceptance or obligation which is made, drawn, negotiated or
incurred by the Issuer for the purpose of financing the purchase,
processing, manufacture, shipment, storage or sale of goods, wares or
<PAGE>
merchandise and which is secured by documents evidencing title to,
possession of, or a lien upon the goods, wares or merchandise or the
receivables or proceeds arising from the sale of the goods, wares or
merchandise previously constituting the security, provided the security is
received by the Trustee simultaneously with the creation of the creditor
relationship with the Issuer arising from the making, drawing, negotiating
or incurring of the draft, bill of exchange, acceptance or obligation; and
(4) the term "Issuer" shall mean any obligor upon the Securities.
SECTION 6.14 Appointment of Authenticating Agent. As long as any Securities
of a series remain Outstanding, the Trustee may, by an instrument in writing,
appoint with the approval of the Issuer an authenticating agent (the
"Authenticating Agent") which shall be authorized to act on behalf of the
Trustee to authenticate Securities, including Securities issued upon exchange,
registration of transfer, partial redemption or pursuant to Section 2.9.
Securities of each such series authenticated by such Authenticating Agent shall
be entitled to the benefits of this Indenture and shall be valid and obligatory
for all purposes as if authenticated by the Trustee. Whenever reference is made
in this Indenture to the authentication and delivery of Securities of any series
by the Trustee or to the Trustee's Certificate of Authentication, such reference
shall be deemed to include authentication and delivery on behalf of the Trustee
by an Authenticating Agent for such series and a Certificate of Authentication
executed on behalf of the Trustee by such Authenticating Agent. Such
Authenticating Agent shall at all times be a corporation organized and doing
business under the laws of the United States of America or of any state or the
District of Columbia, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $50,000,000
(determined as provided in Section 6.9 with respect to the Trustee) and subject
to supervision or examination by federal or state authority.
Any corporation into which any Authenticating Agent may be merged or
converted, or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which any Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency business
of any Authenticating Agent, shall continue to be the Authenticating Agent with
respect to all series of Securities for which it served as Authenticating Agent
without the execution or filing of any paper or any further act on the part of
the Trustee or such Authenticating Agent. Any Authenticating Agent may at any
time, and if it shall cease to be eligible shall, resign by giving written
notice of resignation to the Trustee and to the Issuer. The Trustee may at any
time terminate the agency of an Authenticating Agent by giving written notice
thereof to such Authenticating Agent and to the Issuer.
Upon receiving such a notice of resignation or upon such a termination, or
in case at any time any Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section 6.14 with respect to one or more
series of Securities, the Trustee may appoint a successor Authenticating Agent
which shall be acceptable to the Issuer and the Issuer shall provide notice of
such appointment to all Holders of Securities of such series in the manner and
to the extent provided in Section 11.4. Any successor Authenticating Agent upon
acceptance of its appointment hereunder shall become vested with all rights,
powers, duties and responsibilities of its predecessor hereunder, with like
effect as if originally named as Authenticating Agent. The Issuer agrees to pay
to the Authenticating Agent for such series from time to time reasonable
compensation. The Authenticating Agent for the Securities of any series shall
have no responsibility or liability for any action taken by it as such at the
direction of the Trustee.
Sections 6.2, 6.3, 6.4 and 7.3 shall be applicable to any Authenticating
Agent.
ARTICLE SEVEN
CONCERNING THE SECURITYHOLDERS
SECTION 7.1 Evidence of Action Taken by Securityholders. Any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be given or taken by a specified percentage in
principal amount of the Securityholders of any or all series may be embodied in
and evidenced by one or more instruments of substantially similar tenor signed
by such specified percentage of Securityholders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee. Proof of execution of any instrument or of a writing appointing
any such agent shall be sufficient for any purpose of this Indenture and
(subject to Sections 6.1 and 6.2) conclusive in favor of the Trustee and the
Issuer, if made in the manner provided in this Article Seven.
<PAGE>
SECTION 7.2 Proof of Execution of Instruments and of Holding of Securities.
Subject to Sections 6.1 and 6.2, the execution of any instrument by a
Securityholder or his agent or proxy may be proved in the following manner:
(a) The fact and date of the execution by any Holder of any instrument may
be proved by the certificate of any notary public or other officer of any
jurisdiction authorized to take acknowledgments of deeds or administer oaths
that the person executing such instruments acknowledged to him the execution
thereof, or by an affidavit of a witness to such execution sworn to before any
such notary or other such officer. Where such execution is by or on behalf of
any legal entity other than an individual, such certificate or affidavit shall
also constitute sufficient proof of the authority of the person executing the
same.
(b) The ownership of Securities shall be proved by the Security register or
by a certificate of the Security registrar.
SECTION 7.3 Holders to be Treated as Owners. The Issuer, the Trustee and
any agent of the Issuer or the Trustee may deem and treat the Person in whose
name any Security shall be registered upon the Security register for such series
as the absolute owner of such Security (whether or not such Security shall be
overdue and notwithstanding any notation of ownership or other writing thereon)
for the purpose of receiving payment of or on account of the principal of and,
subject to the provisions of this Indenture, interest, if any, on such Security
and for all other purposes; and neither the Issuer nor the Trustee nor any agent
of the Issuer or the Trustee shall be affected by any notice to the contrary.
SECTION 7.4 Securities Owned by Issuer Deemed Not Outstanding. In
determining whether the Holders of the requisite aggregate principal amount of
Outstanding Securities of any or all series have concurred in any direction,
consent or waiver under this Indenture, Securities which are owned by the Issuer
or any other obligor on the Securities with respect to which such determination
is being made or by any Affiliate of the Issuer or any other obligor on the
Securities with respect to which such determination is being made shall be
disregarded and deemed not to be Outstanding for the purpose of any such
determination, except that for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, consent or waiver only
securities which the Trustee knows are so owned shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Issuer or any other obligor upon the Securities or any Affiliate of
the Issuer or any other obligor on the Securities. In case of a dispute as to
such right, the advice of counsel shall be full protection in respect of any
decision made by the Trustee in accordance with such advice. Upon request of the
Trustee, the Issuer shall furnish to the Trustee promptly an Officers'
Certificate listing and identifying all Securities, if any, known by the Issuer
to be owned or held by or for the account of any of the above-described Persons;
and, subject to Sections 6.1 and 6.2, the Trustee shall be entitled to accept
such Officers' Certificate as conclusive evidence of the facts therein set forth
and of the fact that all Securities not listed therein are Outstanding for the
purpose of any such determination.
SECTION 7.5 Right of Revocation of Action Taken. At any time prior to (but
not after) the evidencing to the Trustee, as provided in Section 7.1, of the
taking of any action by the Holders of the percentage in aggregate principal
amount of the Securities of any or all series, as the case may be, specified in
this Indenture in connection with such action, any Holder of a Security the
serial number of which is shown by the evidence to be included among the serial
numbers of the Securities the Holders of which have consented to such action
may, by filing written notice at the Corporate Trust Office and upon proof of
holding as provided in this Article Seven, revoke such action so far as concerns
such Security provided that such revocation shall not become effective until
three business days after such filing. Except as aforesaid any such action taken
by the Holder of any Security shall be conclusive and binding upon such Holder
and upon all future Holders and owners of such Security and of any Securities
issued in exchange or substitution therefor or on registration of transfer
thereof, irrespective of whether or not any notation in regard thereto is made
upon any such Security. Any action taken by the Holders of the percentage in
aggregate principal amount of the Securities of any or all series, as the case
may be, specified in this Indenture in connection with such action shall be
conclusively binding upon the Issuer, the Trustee and the Holders of all the
Securities affected by such action.
SECTION 7.6 Record Date for Consents and Waivers. The Issuer may, but shall
not be obligated to, direct the Trustee to establish a record date for the
purpose of determining the Persons entitled to (i) waive any past default with
respect to the Securities of such series in accordance with Section 5.7 of the
Indenture, (ii) consent to any supplemental indenture in accordance with Section
8.2 of the Indenture or (iii) waive compliance with any term, condition or
provision of any covenant hereunder. If a record date is fixed, the Holders on
<PAGE>
such record date, or their duly designated proxies, and any such Persons, shall
be entitled to waive any such past default, consent to any such supplemental
indenture or waive compliance with any such term, condition or provision,
whether or not such Holder remains a Holder after such record date; provided,
however, that unless such waiver or consent is obtained from the Holders, or
duly designated proxies, of the requisite principal amount of Outstanding
Securities of such series prior to the date which is the 180th day after such
record date, any such waiver or consent previously given shall automatically and
without further action by any Holder be cancelled and of no further effect.
ARTICLE EIGHT
SUPPLEMENTAL INDENTURES
SECTION 8.1 Supplemental Indentures Without Consent of Securityholders. The
Issuer, when authorized by a resolution of its Board of Directors (which
resolution may provide general terms or parameters for such action and may
provide that the specific terms of such action may be determined in accordance
with or pursuant to an Issuer Order), and the Trustee may from time to time and
at any time enter into an indenture or indentures supplemental hereto (which
shall conform to the provisions of the Trust Indenture Act of 1939 as in force
at the date of the execution thereof) for one or more of the following purposes:
(a) to convey, transfer, assign, mortgage or pledge to the Trustee as
security for the Securities of one or more series any property or assets;
(b) to evidence the succession of another corporation to the Issuer, or
successive successions, and the assumption by the successor corporation of the
covenants, agreements and obligations of the Issuer pursuant to Article Nine;
(c) to add to the covenants of the Issuer such further covenants,
restrictions, conditions or provisions as the Issuer and the Trustee shall
consider to be for the protection of the Holders of all or any series of
Securities, (and if such covenants, restrictions, conditions or provisions are
to be for the protection of less than all series of Securities, stating that the
same are expressly being included solely for the protection of such series) and
to make the occurrence, or the occurrence and continuance, of a default in any
such additional covenants, restrictions, conditions or provisions an Event of
Default permitting the enforcement of all or any of the several remedies
provided in this Indenture as herein set forth; provided, however, that in
respect of any such additional covenant, restriction, condition or provision
such supplemental indenture may provide for a particular period of grace after
default (which period may be shorter or longer than that allowed in the case of
other defaults) or may provide for an immediate enforcement upon such an Event
of Default or may limit the remedies available to the Trustee upon such an Event
of Default or may limit the right of the Holders of a majority in aggregate
principal amount of the Securities of such series to waive such an Event of
Default;
(d) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any supplemental
indenture, or to make any other provisions as the Issuer may deem necessary or
desirable, provided, however, that no such action shall adversely affect the
interests of the Holders of the Securities;
(e) to establish the form or terms of Securities of any series as permitted
by Sections 2.1 and 2.3; and
(f) to evidence and provide for the acceptance of appointment hereunder by
a successor trustee with respect to the Securities of one or more series and to
add to or change any of the provisions of this Indenture as shall be necessary
to provide for or facilitate the administration of the trusts hereunder by more
than one trustee, pursuant to the requirements of Section 6.11.
The Trustee is hereby authorized to join with the Issuer in the execution
of any such supplemental indenture, to make any further appropriate agreements
and stipulations which may be therein contained and to accept the conveyance,
transfer, assignment, mortgage or pledge of any property thereunder, but the
Trustee shall not be obligated to enter into any such supplemental indenture
which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section may
be executed without the consent of the Holders of any of the Securities then
Outstanding, notwithstanding any of the provisions of Section 8.2.
SECTION 8.2 Supplemental Indentures with Consent of Securityholders. With
the consent (evidenced as provided in Article Seven) of the Holders of not less
<PAGE>
than a majority in aggregate principal amount of the Securities then Outstanding
of any series affected by such supplemental indenture, the Issuer, when
authorized by a resolution of its Board of Directors (which resolution may
provide general terms or parameters for such action and may provide that the
specific terms of such action may be determined in accordance with or pursuant
to an Issuer Order), and the Trustee may, from time to time and at any time,
enter into an indenture or indentures supplemental hereto (which shall conform
to the provisions of the Trust Indenture Act of 1939 as in force at the date of
execution thereof) for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of any
supplemental indenture or of modifying in any manner the rights of the Holders
of the Securities of such series; provided, that no such supplemental indenture
shall (a) extend the stated final maturity of the principal of any Security, or
reduce the principal amount thereof, or reduce the rate or extend the time of
payment of interest, if any, thereon (or, in the case of an Original Issue
Discount Security, reduce the rate of accrual of original issue discount
thereon), or reduce or alter the method of computation of any amount payable on
redemption, repayment or purchase by the Issuer thereof (or the time at which
any such redemption, repayment or purchase may be made), or make the principal
thereof (including any amount in respect of original issue discount), or
interest, if any, thereon payable in any coin or currency other than that
provided in the Securities or in accordance with the terms of the Securities, or
reduce the amount of the principal of an Original Issue Discount Security that
would be due and payable upon an acceleration of the maturity thereof pursuant
to Section 5.1 or the amount thereof provable in bankruptcy pursuant to Section
5.2, or impair or affect the right of any Securityholder to institute suit for
the payment thereof or, if the Securities provide therefor, any right of
repayment or purchase at the option of the Securityholder, in each case without
the consent of the Holder of each Security so affected, or (b) reduce the
aforesaid percentage of Securities of any series, the consent of the Holders of
which is required for any such supplemental indenture, without the consent of
the Holders of each Security so affected. No consent of any Holder of any
Security shall be necessary under this Section 8.2 to permit the Trustee and the
Issuer to execute supplemental indentures pursuant to Sections 8.1 and 9.2.
A supplemental indenture which changes or eliminates any covenant, Event of
Default or other provision of this Indenture which has expressly been included
solely for the benefit of one or more particular series of Securities, or which
modifies the rights of Holders of Securities of such series, with respect to
such covenant or provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
Upon the request of the Issuer, accompanied by a copy of a resolution of
the Board of Directors (which resolution may provide general terms or parameters
for such action and may provide that the specific terms of such action may be
determined in accordance with or pursuant to an Issuer Order) certified by the
secretary or an assistant secretary of the Issuer authorizing the execution of
any such supplemental indenture, and upon the filing with the Trustee of
evidence of the consent of the Holders of the Securities as aforesaid and other
documents, if any, required by Section 7.1, the Trustee shall join with the
Issuer in the execution of such supplemental indenture unless such supplemental
indenture affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which case the Trustee may in its discretion, but
shall not be obligated to, enter into such supplemental indenture.
It shall not be necessary for the consent of the Securityholders under this
Section 8.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to the provisions of this Section 8.2, the
Trustee shall give notice thereof to the Holders of then Outstanding Securities
of each series affected thereby, as provided in Section 11.4. Any failure of the
Issuer to give such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.
SECTION 8.3 Effect of Supplemental Indenture. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and shall be deemed to be modified and amended in accordance therewith and
the respective rights, limitations of rights, obligations, duties and immunities
under this Indenture of the Trustee, the Issuer and the Holders of Securities of
each series affected thereby shall thereafter be determined, exercised and
enforced hereunder subject in all respects to such modifications and amendments,
and all the terms and conditions of any such supplemental indenture shall be and
shall be deemed to be part of the terms and conditions of this Indenture for any
and all purposes.
SECTION 8.4 Documents to Be Given to Trustee. The Trustee, subject to the
provisions of Sections 6.1 and 6.2, shall be entitled to receive an Officers'
Certificate and an Opinion of Counsel as conclusive evidence that any
supplemental indenture executed pursuant to this Article Eight complies with the
applicable provisions of this Indenture.
SECTION 8.5 Notation on Securities in Respect of Supplemental Indentures.
<PAGE>
Securities of any series authenticated and delivered after the execution of any
supplemental indenture pursuant to the provisions of this Article Eight may bear
a notation in form approved by the Trustee for such series as to any matter
provided for by such supplemental indenture or as to any action taken by
Securityholders. If the Issuer or the Trustee shall so determine, new Securities
of any series so modified as to conform, in the opinion of the Trustee and the
Issuer, to any modification of this Indenture contained in any such supplemental
indenture may be prepared by the Issuer, authenticated by the Trustee and
delivered in exchange for the Securities of such series then Outstanding.
SECTION 8.6 Subordination Unimpaired. This Indenture may not be amended to
alter the subordination of any Outstanding Securities without the written
consent of each holder of Senior Indebtedness then outstanding that would be
adversely affected thereby.
ARTICLE NINE
CONSOLIDATION, MERGER, SALE, LEASE, EXCHANGE OR OTHER DISPOSITION
SECTION 9.1 Issuer May Consolidate, etc., on Certain Terms. Subject to the
provisions of Section 9.3, nothing contained in this Indenture or in any of the
Securities shall prevent any consolidation or merger of the Issuer with or into
any other corporation or corporations (whether or not affiliated with the
Issuer), or successive consolidations or mergers in which the Issuer or its
successor or successors shall be a party or parties, or shall prevent any sale,
lease, exchange or other disposition of all or substantially all the property
and assets of the Issuer to any other corporation (whether or not affiliated
with the Issuer) authorized to acquire and operate the same; provided, however,
and the Issuer hereby covenants and agrees, that any such consolidation, merger,
sale, lease, exchange or other disposition shall be upon the conditions that (a)
immediately after such consolidation, merger, sale, lease, exchange or other
disposition of the corporation (whether the Issuer or such other corporation)
formed by or surviving any such consolidation or merger, or to which such sale,
lease, exchange or other disposition shall have been made, shall not be in
default in the performance or observance of any of the terms, covenants and
conditions of this Indenture to be kept or performed by the Issuer; (b) the
corporation (if other than the Issuer) formed by or surviving any such
consolidation or merger, or to which such sale, lease, exchange or other
disposition shall have been made, shall be a corporation organized under the
laws of the United States of America, any state thereof or the District of
Columbia; and (c) the due and punctual payment of the principal of and interest,
if any, on all the Securities, according to their tenor, and the due and
punctual performance and observance of all of the covenants and conditions of
this Indenture to be performed by the Issuer, shall be expressly assumed, by
supplemental indenture satisfactory in form to the Trustee executed and
delivered to the Trustee, by the corporation (if other than the Issuer) formed
by such consolidation, or into which the Issuer shall have been merged, or by
the corporation which shall have acquired or leased such property.
SECTION 9.2 Securities to be Secured in Certain Events. If, upon any such
consolidation, merger, or upon any such sale, lease, exchange or other
disposition or upon any acquisition by the Issuer by purchase or otherwise of
all or any part of the properties of any other corporation, any Principal
Property owned by the Issuer or a Restricted Subsidiary immediately prior
thereto would thereupon become subject to any mortgage, security interest,
pledge, lien or encumbrance, not permitted by Section 3.6 hereof, the Issuer,
prior to such consolidation, merger, sale, lease, exchange or other disposition
or acquisition, will by indenture supplemental hereto secure the due and
punctual payment of the principal of and interest, if any, on the Securities
then outstanding (equally and ratably, or with such other relative priority
specified in Section 3.6, with any other indebtedness of or guaranteed by the
Issuer then entitled thereto, but only to the extent that such indebtedness is
Subordinated Indebtedness) by a direct lien on such Principal Property, together
with any other properties and assets of the Issuer or of any such Restricted
Subsidiary, whichever shall be the owner of any such Principal Property, which
would thereupon become subject to any such mortgage, security interest, pledge,
lien or encumbrance, prior to all liens other than any theretofore existing
thereon and other than liens on Senior Indebtedness.
SECTION 9.3 Successor Corporation to be Substituted. In case of any such
consolidation or merger or any sale, conveyance or lease of all or substantially
all of the property of the Issuer and upon the assumption by the successor
corporation, by supplemental indenture, executed and delivered to the Trustee
and satisfactory in form to the Trustee, of the due and punctual payment of the
principal of and interest, if any, on all of the Securities and the due and
punctual performance of all of the covenants and conditions of this Indenture to
be performed by the Issuer, such successor corporation shall succeed to and be
substituted for the Issuer, with the same effect as if it had been named herein
as the party of the first part, and the Issuer (including any intervening
successor to the Issuer which shall have become the obligor hereunder) shall be
relieved of any further obligation under this Indenture and the Securities;
provided, however, that in the case of a sale, lease, exchange or other
disposition of the property and assets of the Issuer (including any such
intervening successor), the Issuer (including any such intervening successor)
shall continue to be liable on its obligations under this Indenture and the
Securities to the extent, but only to the extent, of liability to pay the
<PAGE>
principal of and interest, if any, on the Securities at the time, places and
rate prescribed in this Indenture and the Securities. Such successor corporation
thereupon may cause to be signed, and may issue either in its own name or in the
name of the Issuer, any or all of the Securities issuable hereunder which
theretofore shall not have been signed by the Issuer and delivered to the
Trustee; and, upon the order of such successor corporation instead of the Issuer
and subject to all the terms, conditions and limitations in this Indenture
prescribed, the Trustee shall authenticate and shall deliver any Securities
which previously shall have been signed and delivered by the officers of the
Issuer to the Trustee for authentication, and any Securities which such
successor corporation thereafter shall cause to be signed and delivered to the
Trustee for that purpose. All the Securities so issued shall in all respects
have the same legal rank and benefit under this Indenture as the Securities
theretofore or thereafter issued in accordance with the terms of this Indenture
as though all of such Securities had been issued at the date of the execution
hereof.
In case of any such consolidation or merger or any sale, lease, exchange or
other disposition of all or substantially all of the property and assets of the
Issuer, such changes in phraseology and form (but not in substance) may be made
in the Securities, thereafter to be issued, as may be appropriate.
SECTION 9.4 Opinion of Counsel to be Given Trustee. The Trustee, subject to
Sections 6.1 and 6.2, may receive an Officers' Certificate and Opinion of
Counsel as conclusive evidence that any such consolidation, merger, sale, lease,
exchange or other disposition and any such assumption complies with the
provisions of this Article Nine.
ARTICLE TEN
SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS
SECTION 10.1 Satisfaction and Discharge of Indenture. (A) If at any time
(a) the Issuer shall have paid or caused to be paid the principal of and
interest, if any, on all the Securities Outstanding (other than Securities which
have been destroyed, lost or stolen and which have been replaced or paid as
provided in Section 2.9) as and when the same shall have become due and payable,
or (b) the Issuer shall have delivered to the Trustee for cancellation all
Securities theretofore authenticated (other than Securities which have been
destroyed, lost or stolen and which have been replaced or paid as provided in
Section 2.9); and if, in any such case, the Issuer shall also pay or cause to be
paid all other sums payable hereunder by the Issuer, then this Indenture shall
cease to be of further effect, and the Trustee, on demand of the Issuer
accompanied by an Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent relating to the satisfaction and discharge
contemplated by this provision have been complied with, and at the cost and
expense of the Issuer, shall execute proper instruments acknowledging such
satisfaction and discharging this Indenture. The Issuer agrees to reimburse the
Trustee for any costs or expenses thereafter reasonably and properly incurred,
and to compensate the Trustee for any services thereafter reasonably and
properly rendered, by the Trustee in connection with this Indenture or the
Securities.
(B) If at any time (a) the Issuer shall have paid or caused to be paid the
principal of, premium, if any, and interest, if any, on all the Securities of
any series Outstanding (other than Securities of such series which have been
destroyed, lost or stolen and which have been replaced or paid as provided in
Section 2.9) as and when the same shall have become due and payable, or (b) the
Issuer shall have delivered to the Trustee for cancellation all Securities of
any series theretofore authenticated (other than any Securities of such series
which have been destroyed, lost or stolen and which have been replaced or paid
as provided in Section 2.9), or (c) in the case of any series of Securities with
respect to which the exact amount described in clause (ii) below can be
determined at the time of making the deposit referred to in such clause (ii),
(i) all the Securities of such series not theretofore delivered to the Trustee
for cancellation shall have become due and payable, or are by their terms to
become due and payable within one year or are to be called for redemption within
one year under arrangements satisfactory to the Trustee for the giving of notice
of redemption, and (ii) the Issuer shall have irrevocably deposited or caused to
be deposited with the Trustee as funds in trust, specifically pledged as
security for, and dedicated solely to, the benefit of the Holders of Securities
of such series, cash in an amount (other than moneys repaid by the Trustee or
any paying agent to the Issuer in accordance with Section 10.4) or direct
obligations of the United States of America, backed by its full faith and credit
("U.S. Government Obligations"), maturing as to principal and interest, if any,
at such times and in such amounts as will insure the availability of cash, or a
combination thereof, sufficient in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay (A) the principal of, premium, if any, and
interest, if any, on all Securities of such series on each date that such
principal of, premium, if any, or interest, if any, is due and payable, and (B)
any mandatory sinking fund payments on the dates on which such payments are due
and payable in accordance with the terms of the Indenture and the Securities of
such series; then the Issuer shall be deemed to have paid and discharged the
entire indebtedness on all the Securities of such series on the date of the
deposit referred to in clause (ii) above and the provisions of this Indenture
with respect to the Securities of such series shall no longer be in effect
<PAGE>
(except, in the case of clause (c) of this Section 10.1(B), as to (i) rights of
registration of transfer and exchange of Securities of such series, (ii) rights
of substitution of mutilated, defaced, destroyed, lost or stolen Securities of
such series, (iii) rights of Holders of Securities of such series to receive
payments of principal thereof and premium, if any, and interest, if any, thereon
upon the original stated due dates therefor (but not upon acceleration), and
remaining rights of the Holders of Securities of such series to receive
mandatory sinking fund payments thereon, if any, when due, (iv) the rights,
obligations, duties and immunities of the Trustee hereunder, (v) the rights of
the Holders of Securities of such series as beneficiaries hereof with respect to
the property so deposited with the Trustee payable to all or any of them and
(vi) the obligations of the Issuer under Section 3.2 with respect to Securities
of such series) and the Trustee, on demand of the Issuer accompanied by an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent contemplated by this provision have been complied with, and
at the cost and expense of the Issuer, shall execute proper instruments
acknowledging the same.
(C) The following provisions shall apply to the Securities of each series
unless specifically otherwise provided in a Board Resolution, Officers'
Certificate or indenture supplemental hereto provided pursuant to Section 2.3.
In addition to discharge of the Indenture pursuant to the next preceding
paragraph, in the case of any series of Securities with respect to which the
exact amount described in subparagraph (a) below can be determined at the time
of making the deposit referred to in such subparagraph (a), the Issuer shall be
deemed to have paid and discharged the entire indebtedness on all the Securities
of such a series on the 91st day after the date of the deposit referred to in
subparagraph (a) below, and the provisions of this Indenture with respect to the
Securities of such series shall no longer be in effect (except as to (i) rights
of registration of transfer and exchange of Securities of such series, (ii)
substitution of mutilated, defaced, destroyed, lost or stolen Securities of such
series, (iii) rights of Holders of Securities of such series to receive payments
of principal thereof, premium, if any, and interest, if any, thereon upon the
original stated due dates therefor (but not upon acceleration), and remaining
rights of the Holders of Securities of such series to receive mandatory sinking
fund payments, if any, (iv) the rights, obligations, duties and immunities of
the Trustee hereunder, (v) the rights of the Holders of Securities of such
series as beneficiaries hereof with respect to the property so deposited with
the Trustee payable to all or any of them and (vi) the obligations of the Issuer
under Section 3.2 with respect to Securities of such series) and the Trustee, on
demand of the Issuer accompanied by an Officers' Certificate and an Opinion of
Counsel, each stating that all conditions precedent contemplated by this
provision have been complied with, and at the cost and expense of the Issuer,
shall execute proper instruments acknowledging the same, if
(a) with reference to this provision the Issuer has irrevocably
deposited or caused to be irrevocably deposited with the Trustee as funds
in trust, specifically pledged as security for, and dedicated solely to,
the benefit of the Holders of Securities of such series (i) cash in an
amount, or (ii) U.S. Government Obligations, maturing as to principal and
interest, if any, at such times and in such amounts as will insure the
availability of cash, or (iii) a combination thereof, sufficient, in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to
pay (A) the principal of, premium, if any, and interest, if any, on all
Securities of such series on each date that such principal or interest, if
any, is due and payable, and (B) any mandatory sinking fund payments on the
dates on which such payments are due and payable in accordance with the
terms of the Indenture and the Securities of such series;
(b) such deposit will not result in a breach or violation of, or
constitute a default under, any agreement or instrument to which the Issuer
is a party or by which it is bound; and
(c) the Issuer has delivered to the Trustee an Opinion of Counsel
based on the fact that (x) the Issuer has received from, or there has been
published by, the Internal Revenue Service a ruling or (y), since the date
hereof, there has been a change in the applicable United States federal
income tax law, in either case to the effect that, and such opinion shall
confirm that, the Holders of the Securities of such series will not
recognize income, gain or loss for Federal income tax purposes as a result
of such deposit, defeasance and discharge and will be subject to Federal
income tax on the same amount and in the same manner and at the same times,
as would have been the case if such deposit, defeasance and discharge had
not occurred.
SECTION 10.2 Application by Trustee of Funds Deposited for Payment of
Securities. Subject to Section 10.4, all moneys and U.S. Government Obligations
deposited with the Trustee pursuant to Section 10.1 shall be held in trust, and
such moneys and all moneys from such U.S. Government Obligations shall be
applied by it to the payment, either directly or through any paying agent
(including the Issuer acting as its own paying agent), to the Holders of the
<PAGE>
particular Securities of such series for the payment or redemption of which such
moneys and U.S. Government Obligations have been deposited with the Trustee, of
all sums due and to become due thereon for principal and interest, if any, but
such moneys and U.S. Government Obligations need not be segregated from other
funds except to the extent required by law.
SECTION 10.3 Repayment of Moneys Held by Paying Agent. In connection with
the satisfaction and discharge of this Indenture with respect to Securities of
any series, all moneys then held by any paying agent under the provisions of
this Indenture with respect to such series of Securities shall, upon demand of
the Issuer, be repaid to it or paid to the Trustee and thereupon such paying
agent shall be released from all further liability with respect to such moneys.
SECTION 10.4 Return of Moneys Held by Trustee and Paying Agent Unclaimed
for Two Years. Any moneys deposited with or paid to the Trustee or any paying
agent for the payment of the principal of or interest, if any, on any Security
of any series and not applied but remaining unclaimed for two years after the
date upon which such principal or interest, if any, shall have become due and
payable, shall, upon the written request of the Issuer and unless otherwise
required by mandatory provisions of applicable escheat or abandoned or unclaimed
property law, be repaid to the Issuer by the Trustee for such series or such
paying agent, and the Holder of the Securities of such series shall, unless
otherwise required by mandatory provisions of applicable escheat or abandoned or
unclaimed property laws, thereafter look only to the Issuer for any payment
which such Holder may be entitled to collect, and all liability of the Trustee
or any paying agent with respect to such moneys shall thereupon cease.
SECTION 10.5 Indemnity for U.S. Government Obligations. The Issuer shall
pay and indemnify the Trustee against any tax, fee or other charge imposed on or
assessed against the U.S. Government Obligations deposited pursuant to Section
10.1 or the principal or interest received in respect of such obligations.
ARTICLE ELEVEN
MISCELLANEOUS PROVISIONS
SECTION 11.1 Partners, Incorporators, Stockholders, Officers and Directors
of Issuer Exempt from IndividuaPartners, Incorporators, Stockholders, Officers
and Directors of Issuer Exempt from Individual Liability. No recourse under or
upon any obligation, covenant or agreement contained in this Indenture, or in
any Security, or because of any indebtedness evidenced thereby, shall be had
against any incorporator, as such or against any past, present or future
stockholder, officer or director, as such, of the Issuer, or any partner of the
Issuer or of any successor, either directly or through the Issuer or any
successor, under any rule of law, statute or constitutional provision or by the
enforcement of any assessment or by any legal or equitable proceeding or
otherwise, all such liability being expressly waived and released by the
acceptance of the Securities by the Holders thereof and as part of the
consideration for the issue of the Securities.
SECTION 11.2 Provisions of Indenture for the Sole Benefit of Parties and
Holders of Securities. Nothing in this Indenture or in the Securities, expressed
or implied, shall give or be construed to give to any Person, other than the
parties hereto and their successors and the Holders of the Senior Indebtedness
and the Holders of the Securities, any legal or equitable right, remedy or claim
under this Indenture or under any covenant or provision herein contained, all
such covenants and provisions being for the sole benefit of the parties hereto
and their successors and of the Holders of the Securities.
SECTION 11.3 Successors and Assigns of Issuer Bound by Indenture. All the
covenants, stipulations, promises and agreements in this Indenture contained by
or on behalf of the Issuer shall bind its successors and assigns, whether so
expressed or not.
SECTION 11.4 Notices and Demands on Issuer, Trustee and Holders of
Securities. Any notice or demand which by any provision of this Indenture is
required or permitted to be given or served by the Trustee or by the Holders of
Securities to or on the Issuer, or as required pursuant to the Trust Indenture
Act of 1939, may be given or served by being deposited postage prepaid,
first-class mail (except as otherwise specifically provided herein) addressed
(until another address of the Issuer is filed by the Issuer with the Trustee) to
Seagull Energy Corporation, 1001 Fannin, Suite 1700, Houston, Texas 77002,
Attention: Chairman of the Board. Any notice, direction, request or demand by
the Issuer or any Holder of Securities to or upon the Trustee shall be deemed to
have been sufficiently given or served by being deposited postage prepaid,
first-class mail (except as otherwise specifically provided herein) addressed
(until another address of the Trustee is filed by the Trustee with the Issuer)
to The Bank of New York, 101 Barclay Street, Floor 21 West, New York, New York
10286, Attention: Corporate Trust Trustee Administration.
<PAGE>
Where this Indenture provides for notice to Holders of Securities, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder entitled
thereto, at his last address as it appears in the Security register. Where this
Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
In case, by reason of the suspension of or irregularities in regular mail
service, it shall be impracticable to mail notice to the Issuer when such notice
is required to be given pursuant to any provision of this Indenture, then any
manner of giving such notice as shall be reasonably satisfactory to the Trustee
shall be deemed to be sufficient notice.
SECTION 11.5 Officers' Certificates and Opinions of Counsel; Statements to
Be Contained Therein. Upon any herein application or demand by the Issuer to the
Trustee to take any action under any of the provisions of this Indenture, or as
required pursuant to the Trust Indenture Act of 1939, the Issuer shall furnish
to the Trustee an Officers' Certificate stating that all conditions precedent
provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent have been complied with, except that in
the case of any such application or demand as to which the furnishing of such
documents is specifically required by any provision of this Indenture relating
to such particular application or demand, no additional certificate or opinion
need be furnished.
Each certificate or opinion provided for in this Indenture (other than a
certificate provided pursuant to Section 4.3(d)) and delivered to the Trustee
with respect to compliance with a condition or covenant provided for in this
Indenture shall include (a) a statement that the person making such certificate
or opinion has read such covenant or condition, (b) a brief statement as to the
nature and scope of the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are based, (c) a statement
that, in the opinion of such person, he has made such examination or
investigation as is necessary to enable him to express an opinion as to whether
or not such covenant or condition has been complied with, and (d) a statement as
to whether or not, in the opinion of such person, such condition or covenant has
been complied with.
Any certificate, statement or opinion of an officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of
or representations by counsel, unless such officer knows that the certificate or
opinion or representations with respect to the matters upon which his
certificate, statement or opinion may be based as aforesaid are erroneous, or in
the exercise of reasonable care should know that the same are erroneous. Any
certificate, statement or opinion of counsel may be based, insofar as it relates
to factual matters, information with respect to which is in the possession of
the Issuer, upon the certificate, statement or opinion of or representations by
an officer or officers of the Issuer, unless such counsel knows that the
certificate, statement or opinion or representations with respect to the matters
upon which his certificate, statement or opinion may be based as aforesaid are
erroneous, or in the exercise of reasonable care should know that the same are
erroneous.
Any certificate, statement or opinion of an officer of the Issuer or of
counsel may be based, insofar as it relates to accounting matters, upon a
certificate or opinion of or representations by an accountant or firm of
accountants in the employ of the Issuer, unless such officer or counsel, as the
case may be, knows that the certificate or opinion or representations with
respect to the accounting matters upon which his certificate, statement or
opinion may be based as aforesaid are erroneous, or in the exercise of
reasonable care should know that the same are erroneous.
Any certificate or opinion of any independent firm of public accountants
filed with and directed to the Trustee shall contain a statement that such firm
is independent.
SECTION 11.6 Payments Due on Saturdays, Sundays and Holidays. If the date
of maturity of principal of or interest, if any, on the Securities of any series
or the date fixed for redemption, purchase or repayment of any such Security
shall not be a Business Day, then payment of interest, if any, or principal need
not be made on such date, but may be made on the next succeeding Business Day
with the same force and effect as if made on the date of maturity or the date
fixed for redemption, purchase or repayment, and, in the case of payment, no
interest shall accrue for the period after such date.
SECTION 11.7 Conflict of Any Provision of Indenture with Trust Indenture
Act of 1939. If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with another provision included in this Indenture which
is required to be included herein by any of Sections 310 to 317, inclusive, or
is deemed applicable to this Indenture by virtue of the provisions, of the Trust
Indenture Act of 1939, such required provision shall control.
<PAGE>
SECTION 11.8 GOVERNING LAW. THIS INDENTURE AND EACH SECURITY SHALL BE
DEEMED TO BE A CONTRACT UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL
PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH
STATE.
SECTION 11.9 Counterparts. This Indenture may be executed in any number of
counterparts, each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
SECTION 11.10 Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
ARTICLE TWELVE
REDEMPTION OF SECURITIES AND SINKING FUNDS
SECTION 12.1 Applicability of Article. The provisions of this Article shall
be applicable to the Securities of any series which are redeemable before their
maturity or to any sinking fund for the retirement of Securities of a series
except as otherwise specified, as contemplated by Section 2.3 for Securities of
such series.
SECTION 12.2 Notice of Redemption; Partial Redemptions. Notice of
redemption to the Holders of Securities of any series to be redeemed as a whole
or in part at the option of the Issuer shall be given by mailing notice of such
redemption by first class mail, postage prepaid, at least 30 days and not more
than 60 days prior to the date fixed for redemption to such Holders of
Securities of such series at their last addresses as they shall appear in the
Security register. Any notice which is mailed in the manner herein provided
shall be conclusively presumed to have been duly given, whether or not the
Holder receives the notice. Failure to give notice by mail, or any defect in the
notice to the Holder of any Security of a series designated for redemption as a
whole or in part shall not affect the validity of the proceedings for the
redemption of any other Security of such series.
The notice of redemption to each such Holder shall specify the principal
amount of each Security of such series held by such Holder to be redeemed, the
date fixed for redemption, the redemption price, the place or places of payment,
the CUSIP number relating to such Securities, that payment will be made upon
presentation and surrender of such Securities, that such redemption is pursuant
to the mandatory or optional sinking fund, or both, if such be the case, that
interest, if any, (or, in the case of Original Issue Discount Securities,
original issue discount) accrued to the date fixed for redemption will be paid
as specified in such notice and that on and after said date interest, if any,
(or, in the case of Original Issue Discount Securities, original issue discount)
thereon or on the portions thereof to be redeemed will cease to accrue. In case
any Security of a series is to be redeemed in part only, the notice of
redemption shall state the portion of the principal amount thereof to be
redeemed and shall state that on and after the date fixed for redemption, upon
surrender of such Security, a new Security or Securities of such series in
principal amount equal to the unredeemed portion thereof will be issued.
The notice of redemption of Securities of any series to be redeemed at the
option of the Issuer shall be given by the Issuer or, at the Issuer's request,
by the Trustee in the name and at the expense of the Issuer.
On or before the redemption date specified in the notice of redemption
given as provided in this Section 12.2, the Issuer will deposit with the Trustee
or with one or more paying agents (or, if the Issuer is acting as its own paying
agent, set aside, segregate and hold in trust as provided in Section 3.5) an
amount of money sufficient to redeem on the redemption date all the Securities
of such series so called for redemption at the appropriate redemption price,
together with accrued interest, if any, to the date fixed for redemption. The
Issuer will deliver to the Trustee at least 45 days prior to the date fixed for
redemption (unless a shorter notice period shall be satisfactory to the Trustee)
an Officers' Certificate stating the aggregate principal amount of Securities to
be redeemed. In case of a redemption at the election of the Issuer prior to the
expiration of any restriction on such redemption, the Issuer shall deliver to
the Trustee, prior to the giving of any notice of redemption to Holders pursuant
to this Section, an Officers' Certificate stating that such restriction has been
complied with.
If less than all the Securities of a series are to be redeemed, the Trustee
shall select, in such manner as it shall deem appropriate and fair, Securities
of such series to be redeemed. Securities may be redeemed in part in multiples
equal to the minimum authorized denomination for Securities of such series or
<PAGE>
any multiple thereof. The Trustee shall promptly notify the Issuer in writing of
the Securities of such series selected for redemption and, in the case of any
Securities of such series selected for partial redemption, the principal amount
thereof to be redeemed. For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of Securities of
any series shall relate, in the case of any Security redeemed or to be redeemed
only in part, to the portion of the principal amount of such Security which has
been or is to be redeemed.
SECTION 12.3 Payment of Securities Called for Redemption. If notice of
redemption has been given as above provided, the Securities or portions of
Securities specified in such notice shall become due and payable on the date and
at the place or places stated in such notice at the applicable redemption price,
together with interest, if any, accrued to the date fixed for redemption, and on
and after said date (unless the Issuer shall default in the payment of such
Securities at the redemption price, together with interest, if any, accrued to
said date) interest (or, in the case of Original Issue Discount Securities,
original issue discount) on the Securities or portions of Securities so called
for redemption shall cease to accrue, and such Securities shall cease from and
after the date fixed for redemption (unless an earlier date shall be specified
in a Board Resolution, Officers' Certificate or executed supplemental indenture
referred to in Sections 2.1 and 2.3 by or pursuant to which the form and terms
of the Securities of such series were established) except as provided in
Sections 6.5 and 10.4, to be entitled to any benefit or security under this
Indenture, and the Holders thereof shall have no right in respect of such
Securities except the right to receive the redemption price thereof and unpaid
interest to the date fixed for redemption. On presentation and surrender of such
Securities at a place of payment specified in said notice, said Securities or
the specified portions thereof shall be paid and redeemed by the Issuer at the
applicable redemption price, together with interest, if any, accrued thereon to
the date fixed for redemption; provided that payment of interest, if any,
becoming due on or prior to the date fixed for redemption shall be payable to
the Holders of Securities registered as such on the relevant record date subject
to the terms and provisions of Sections 2.3 and 2.7 hereof.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the redemption price shall, until paid or duly provided
for, bear interest from the date fixed for redemption at the rate of interest or
Yield to Maturity (in the case of an Original Issue Discount Security) borne by
such Security.
Upon presentation of any Security redeemed in part only, the Issuer shall
execute and the Trustee shall authenticate and deliver to or on the order of the
Holder thereof, at the expense of the Issuer, a new Security or Securities of
such series, and of like tenor, of authorized denominations, in principal amount
equal to the unredeemed portion of the Security so presented.
SECTION 12.4 Exclusion of Certain Securities from Eligibility for Selection
for Redemption. Securities shall be excluded from eligibility for selection for
redemption if they are identified by registration and certificate number in an
Officers' Certificate delivered to the Trustee at least 45 days prior to the
last date on which notice of redemption may be given as being owned of record
and beneficially by, and not pledged or hypothecated by either (a) the Issuer,
or (b) a Person specifically identified in such written statement as an
Affiliate of the Issuer.
SECTION 12.5 Mandatory and Optional Sinking Funds. The minimum amount of
any sinking fund payment provided for by the terms of the Securities of any
series is herein referred to as a "mandatory sinking fund payment", and any
payment in excess of such minimum amount provided for by the terms of the
Securities of any series is herein referred to as an "optional sinking fund
payment". The date on which a sinking fund payment is to be made is herein
referred to as the "sinking fund payment date".
In lieu of making all or any part of any mandatory sinking fund payment
with respect to any series of Securities in cash, the Issuer may at its option
(a) deliver to the Trustee Securities of such series theretofore purchased or
otherwise acquired (except upon redemption pursuant to the mandatory sinking
fund) by the Issuer or receive credit for Securities of such series (not
previously so credited) theretofore purchased or otherwise acquired (except as
aforesaid) by the Issuer and delivered to the Trustee for cancellation pursuant
to Section 2.10, (b) receive credit for optional sinking fund payments (not
previously so credited) made pursuant to this Section 12.5, or (c) receive
credit for Securities of such series (not previously so credited) redeemed by
the Issuer through any optional redemption provision contained in the terms of
such series. Securities so delivered or credited shall be received or credited
by the Trustee at the sinking fund redemption price specified in such
Securities.
On or before the 60th day next preceding each sinking fund payment date for
any series, the Issuer will deliver to the Trustee an Officers' Certificate (a)
<PAGE>
specifying the portion of the mandatory sinking fund payment to be satisfied by
payment of cash and the portion to be satisfied by credit of Securities of such
series and the basis for such credit, (b) stating that none of the Securities of
such series to be so credited has theretofore been so credited, (c) stating that
no defaults in the payment of interest or Events of Default with respect to such
series have occurred (which have not been waived or cured or otherwise ceased to
exist) and are continuing, and (d) stating whether or not the Issuer intends to
exercise its right to make an optional sinking fund payment with respect to such
series and, if so, specifying the amount of such optional sinking fund payment
which the Issuer intends to pay on or before the next succeeding sinking fund
payment date. Any Securities of such series to be credited and required to be
delivered to the Trustee in order for the Issuer to be entitled to credit
therefor as aforesaid which have not theretofore been delivered to the Trustee
shall be delivered for cancellation pursuant to Section 2.10 to the Trustee with
such Officers' Certificate (or reasonably promptly thereafter if acceptable to
the Trustee). Such Officers' Certificate shall be irrevocable and upon its
receipt by the Trustee the Issuer shall become unconditionally obligated to make
all the cash payments or payments therein referred to, if any, on or before the
next succeeding sinking fund payment date. Failure of the Issuer, on or before
any such 60th day, to deliver such Officers' Certificate and Securities (subject
to the parenthetical clause in the second preceding sentence) specified in this
paragraph, if any, shall not constitute a default but shall constitute, on and
as of such date, the irrevocable election of the Issuer (i) that the mandatory
sinking fund payment for such series due on the next succeeding sinking fund
payment date shall be paid entirely in cash without the option to deliver or
credit Securities of such series in respect thereof, and (ii) that the Issuer
will make no optional sinking fund payment with respect to such series as
provided in this Section 12.5.
If the sinking fund payment or payments (mandatory or optional or both) to
be made in cash on the next succeeding sinking fund payment date plus any unused
balance of any preceding sinking fund payments made in cash shall exceed
$50,000, or a lesser sum if the Issuer shall so request with respect to the
Securities of any particular series, such cash shall be applied on the next
succeeding sinking fund payment date to the redemption of Securities of such
series at the sinking fund redemption price together with accrued interest, if
any, to the date fixed for redemption. If such amount shall be $50,000 or less
and the Issuer makes no such request, then it shall be carried over until a sum
in excess of $50,000 is available. The Trustee shall select, in the manner
provided in Section 12.2, for redemption on such sinking fund payment date a
sufficient principal amount of Securities of such series to absorb said cash, as
nearly as may be, and shall (if requested in writing by the Issuer) inform the
Issuer of the serial numbers of the Securities of such series (or portions
thereof) so selected. The Trustee, in the name and at the expense of the Issuer
(or the Issuer, if it shall so request the Trustee in writing) shall cause
notice of redemption of the Securities of such series to be given in
substantially the manner provided in Section 12.2 (and with the effect provided
in Section 12.3) for the redemption of Securities of such series in part at the
option of the Issuer. The amount of any sinking fund payments not so applied or
allocated to the redemption of Securities of such series shall be added to the
next cash sinking fund payment for such series and, together with such payment,
shall be applied in accordance with the provisions of this Section 12.5. Any and
all sinking fund moneys held on the stated maturity date of the Securities of
any particular series (or earlier, if such maturity is accelerated), which are
not held for the payment or redemption of particular Securities of such series
shall be applied, together with other moneys, if necessary, sufficient for the
purpose, to the payment of the principal of, and interest, if any, on, the
Securities of such series at maturity.
On or before each sinking fund payment date, the Issuer shall pay to
the Trustee in cash or shall otherwise provide for the payment of all interest,
if any, accrued to the date fixed for redemption on Securities to be redeemed on
such sinking fund payment date.
The Trustee shall not redeem or cause to be redeemed any Securities of a
series with sinking fund moneys or give any notice of redemption of Securities
for such series by operation of the sinking fund during the continuance of a
default in payment of interest on such Securities or of any Event of Default
with respect to such series except that, where the giving of notice of
redemption of any Securities shall theretofore have been made, the Trustee shall
redeem or cause to be redeemed such Securities, provided that it shall have
received from the Issuer a sum sufficient for such redemption. Except as
aforesaid, and subject to Article Thirteen, any moneys in the sinking fund for
such series at the time when any such default or Event of Default shall occur,
and any moneys thereafter paid into the sinking fund, shall, during the
continuance of such default or Event of Default, be deemed to have been
collected under Article Five and held for the payment of all such Securities. In
case such Event of Default shall have been waived as provided in Section 5.7 or
the default cured on or before the 60th day preceding the sinking fund payment
date in any year, such moneys shall thereafter be applied on the next succeeding
sinking fund payment date in accordance with this Section to the redemption of
such Securities.
ARTICLE THIRTEEN
SUBORDINATION
SECTION 13.1 Securities Subordinated to Senior Indebtedness. (a) The Issuer
covenants and agrees, and each Holder of Securities of each series, by his
acceptance thereof, likewise covenants and agrees, that anything in this
Indenture or the Securities of any series to the contrary notwithstanding, the
indebtedness evidenced by the Securities of each series is subordinate and
junior in right of payment, to the extent provided herein, to all Senior
Indebtedness, whether outstanding on the date of execution of this Indenture or
thereafter created, incurred or assumed, and that the subordination is for the
benefit of the holders of Senior Indebtedness, but the Securities shall in all
respects rank pari passu with all other Senior Subordinated Indebtedness of the
Issuer. The Securities shall rank senior to all existing and future Indebtedness
of the Issuer that is neither Senior Indebtedness nor Senior Subordinated
Indebtedness and only Indebtedness of the Issuer that is Senior Indebtedness
shall rank senior to the Securities in accordance with the provisions set forth
herein.
(b) Subject to Section 13.4, if (i) the Issuer shall default in the payment
of any principal of, premium, if any, or interest, if any, on any Senior
Indebtedness when the same becomes due and payable, whether at maturity or at a
date fixed for prepayment or by declaration of acceleration or otherwise, or
(ii) any other default shall occur with respect to Senior Indebtedness and the
maturity of such Senior Indebtedness has been accelerated in accordance with its
terms, then, upon written notice of such default to the Issuer by the holders of
Senior Indebtedness or any trustee therefor, unless and until, in either case,
the default has been cured or waived, and any such acceleration has been
rescinded or such Senior Indebtedness has been paid in full, no direct or
indirect payment (in cash, property, securities, by set-off or otherwise) shall
be made or agreed to be made on account of the principal of, premium, if any, or
interest, if any, on any of the Securities, or in respect of any redemption,
retirement, purchase or other acquisition of any of the Securities other than
those made in capital stock of the Issuer (or cash in lieu of fractional shares
thereof).
(c) If any default (other than a default described in paragraph (b)) shall
occur under the Senior Indebtedness, pursuant to which the maturity thereof may
be accelerated immediately without further notice (except such notice as may be
required to effect such acceleration) or the expiration of any applicable grace
periods occurs (a "Senior Nonmonetary Default"), then, upon the receipt by the
Issuer and the Trustee of written notice thereof (a "Payment Notice") from or on
behalf of holders of such Senior Indebtedness specifying an election to prohibit
such payment and other action by the Issuer in accordance with the following
provisions of this paragraph, the Issuer may not make any payment or take any
other action that would be prohibited by paragraph (b) above during the period
(the "Payment Blockage Period") commencing on the date of receipt of such
Payment Notice and ending on the earlier of (i) the date, if any, on which the
holders of such Senior Indebtedness or their representative notify the Trustee
that such Senior Nonmonetary Default is cured or waived or ceases to exist or
the Senior Indebtedness to which such Senior Nonmonetary Default relates is
discharged or (ii) the 179th day after the date of receipt of such Payment
Notice. Notwithstanding the provisions described in the immediately preceding
sentence, the Issuer may resume payments on the Securities after such Payment
Blockage Period.
(d) If (i) (A) without the consent of the Issuer, a receiver, conservator,
liquidator or trustee of the Issuer or of any of its property is appointed by
the order or decree of any court or agency or supervisory authority having
jurisdiction, and such decree or order remains in effect for more than 60 days
or (B) the Issuer is adjudicated bankrupt or insolvent or (C) any of its
property is sequestered by court order and such order remains in effect for more
than 60 days or (D) a petition is filed against the Issuer under any state or
federal bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution, liquidation or receivership law of any jurisdiction whether
now or hereafter in effect (including without limitation the Bankruptcy Code),
and is not dismissed within 60 days after such filing; or (ii) the Issuer (A)
commences a voluntary case or other proceeding seeking liquidation,
reorganization, arrangement, insolvency, readjustment of debt, dissolution,
liquidation or other relief with respect to itself or its debt or other
liabilities under any bankruptcy, insolvency or other similar law now or
hereafter in effect (including without limitation the Bankruptcy Code) or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or (B) consents
to any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it, or (C)
fails generally to, or cannot, pay its debts generally as they become due or (D)
takes any corporate action to authorize or effect any of the foregoing; or (iii)
any Subsidiary of the Issuer takes, suffers or permits to exist any of the
events or conditions referred to in the foregoing clause (i) or (ii), then all
Senior Indebtedness (including any interest thereon accruing after the
commencement of any such proceedings) shall first be paid in full before any
payment or distribution, whether in cash, securities or other property, shall be
made to any Holder of any Securities on account thereof. Any payment or
distribution, whether in cash, securities or other property (other than
securities of the Issuer or any other corporation provided for by a plan of
reorganization or readjustment the payment of which is subordinate, at least to
the extent provided in these subordination provisions with respect to the
indebtedness evidenced by the Securities, to the payment of all Senior
<PAGE>
Indebtedness then outstanding and to any securities issued in respect thereof
under any such plan of reorganization or readjustment) which would otherwise
(but for these subordination provisions) be payable or deliverable in respect of
the Securities of any series shall be paid or delivered directly to the holders
of Senior Indebtedness in accordance with the priorities then existing among
such holders until all Senior Indebtedness (including any interest thereon
accruing after the commencement of any such proceedings) shall have been paid in
full. In the event of any such proceeding, after payment in full of all sums
owing with respect to Senior Indebtedness, the Holders of the Securities,
together with the holders of any obligations of the Issuer ranking on a parity
with the Securities, shall be entitled to be paid from the remaining assets of
the Issuer the amounts at the time due and owing on account of unpaid principal
of and interest, if any, on the Securities and such other obligations before any
payment or other distribution, whether in cash, property or otherwise, shall be
made on account of any capital stock or any obligations of the Issuer ranking
junior to the Securities and such other obligations.
(e) If, notwithstanding the foregoing, any payment or distribution of any
character, whether in cash, securities or other property (other than securities
of the Issuer or any other corporation provided for by a plan of reorganization
or readjustment the payment of which is subordinate, at least to the extent
provided in the subordination provisions with respect to the indebtedness
evidenced by the Securities, to the payment of all Senior Indebtedness then
outstanding and to any securities issued in respect thereof under any such plan
of reorganization or readjustment), shall be received by the Trustee or any
Holder in contravention of any of the terms hereof, such payment or distribution
of securities shall be received in trust for the benefit of and shall be paid
over or delivered and transferred to the holders of the Senior Indebtedness then
outstanding in accordance with the priorities then existing among such holders
for application to the payment of all Senior Indebtedness remaining unpaid, to
the extent necessary to pay all such Senior Indebtedness in full. In the event
of the failure of the Trustee or any Holder to endorse or assign any such
payment, distribution or security, each holder of Senior Indebtedness is hereby
irrevocably authorized to endorse or assign the same.
(f) No present or future holder of any Senior Indebtedness shall be
prejudiced in the right to enforce subordination of the indebtedness evidenced
by the Securities by any act or failure to act on the part of the Issuer or any
Holder of Securities. Nothing contained herein shall impair, as between the
Issuer and the Holders of Securities of each series, the obligation of the
Issuer to pay to such Holders the principal of and interest, if any, on such
Securities or prevent the Trustee or the Holder from exercising all rights,
powers and remedies otherwise permitted by applicable law or hereunder upon a
default or Event of Default hereunder, all subject to the rights of the holders
of the Senior Indebtedness to receive cash, securities or other property
otherwise payable or deliverable to the Holders.
(g) Senior Indebtedness shall not be deemed to have been paid in full
unless the holders thereof shall have received cash, securities or other
property equal to the amount of such Senior Indebtedness then outstanding. Upon
the payment in full of all Senior Indebtedness, the Holders of Securities of
each series shall be subrogated to all rights of any holders of Senior
Indebtedness to receive any further payment or distributions applicable to the
Senior Indebtedness until the indebtedness evidenced by the Securities of such
series shall have been paid in full and such payments or distributions received
by such Holders, by reason of such subrogation, of cash, securities or other
property which otherwise would be paid or distributed to the holders of Senior
Indebtedness, shall, as between the Issuer and its creditors other than the
holders of Senior Indebtedness, on the one hand, and such Holders, on the other
hand, be deemed to be a payment by the Issuer on account of Senior Indebtedness,
and not on account of the Securities of such series.
(h) The provisions of this Section 13.1 shall not impair any rights,
interests, remedies or powers of any secured creditor of the Issuer in respect
of any security interest the creation of which is not prohibited by the
provisions of this Indenture.
(i) The securing of any obligations of the Issuer, otherwise ranking on a
parity with the Securities or ranking junior to the Securities, shall not be
deemed to prevent such obligations from constituting, respectively, obligations
ranking on a parity with the Securities or ranking junior to the Securities.
SECTION 13.2 Reliance on Certificate of Liquidating Agent; Further Evidence
as to Ownership of Senior InReliance on Certificate of Liquidating Agent;
Further Evidence as to Ownership of Senior Indebtedness. Upon any payment or
distribution of assets of the Issuer, the Trustee and the Holders shall be
entitled to rely upon an order or decree issued by any court of competent
<PAGE>
jurisdiction in which such dissolution or winding up or liquidation or
reorganization or arrangement proceedings are pending or upon a certificate of
the trustee in bankruptcy, receiver, assignee for the benefit of creditors or
other Person making such payment or distribution, delivered to the Trustee or to
the Holders, for the purpose of ascertaining the Persons entitled to participate
in such distribution, the holders of the Senior Indebtedness and other
indebtedness of the Issuer, the amount thereof or payable thereon, the amount or
amounts paid or distributed thereon and all other facts pertinent thereto or to
this Article Thirteen. In the absence of any such bankruptcy trustee, receiver,
assignee or other Person, the Trustee shall be entitled to rely upon written
notice by a Person representing himself to be a holder of Senior Indebtedness
(or a trustee or representative on behalf of such holder) as evidence that such
Person is a holder of Senior Indebtedness (or is such a trustee or
representative). If the Trustee determines, in good faith, that further evidence
is required with respect to the right of any Person as a holder of Senior
Indebtedness to participate in any payment or distributions pursuant to this
Article Thirteen, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, as to the extent to which such Person is entitled to
participate in such payment or distribution, and as to other facts pertinent to
the rights of such Person under this Article Thirteen, and if such evidence is
not furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
SECTION 13.3 Payment Permitted If No Default. Nothing contained in this
Article Thirteen or elsewhere in this Indenture, or in any of the Securities,
shall prevent (a) the Issuer at any time, except during the pendency of any
default with respect to Senior Indebtedness described in Section 13.1(b) or
Section 13.1(c) or of any of the events described in Section 13.1(d), from
making payments of the principal of or interest, if any, on the Securities, or
(b) the application by the Trustee or any paying agent of any moneys deposited
with it hereunder to payments of the principal of or interest, if any, on the
Securities, if, at the time of such deposit, the Trustee or such paying agent,
as the case may be, did not have the written notice provided for in Section 13.5
of any event prohibiting the making of such deposit, or if, at the time of such
deposit (whether or not in trust) by the Issuer with the Trustee or paying agent
(other than the Issuer) such payment would not have been prohibited by the
provisions of this Article Thirteen, and the Trustee or any paying agent shall
not be affected by any notice to the contrary received by it on or after such
date.
SECTION 13.4 Disputes with Holders of Certain Senior Indebtedness. Any
failure by the Issuer to make any payment on or under any Senior Indebtedness,
other than any Senior Indebtedness as to which the provisions of this Section
13.4 shall have been waived by the Issuer in the instrument or instruments by
which the Issuer incurred, assumed, guaranteed or otherwise created such Senior
Indebtedness, shall not be deemed a default under Section 13.1 if (i) the Issuer
shall be disputing its obligation to make such payment or perform such
obligation, and (ii) either (A) no final judgment relating to such dispute shall
have been issued against the Issuer which is in full force and effect and is not
subject to further review, including a judgment that has become final by reason
of the expiration of the time within which a party may seek further appeal or
review, or (B) if a judgment that is subject to further review or appeal has
been issued, the Issuer shall in good faith be prosecuting an appeal or other
proceeding for review, and a stay of execution shall have been obtained pending
such appeal or review.
SECTION 13.5 Trustee Not Charged with Knowledge of Prohibition. Anything in
this Article Thirteen or elsewhere in this Indenture contained to the contrary
notwithstanding, the Trustee shall not at any time be charged with knowledge of
the existence of any facts which would prohibit the making of any payment of
moneys to or by the Trustee and shall be entitled to assume conclusively that no
such facts exists and that no event specified in clauses (a) and (b) of Section
13.1 has happened unless and until the Trustee shall have received an Officers'
Certificate to the effect or notice in writing to that effect signed by or on
behalf of the holder or holders, or the representatives, of Senior Indebtedness
who shall have been certified by the Issuer or otherwise established to the
reasonable satisfaction of the Trustee to be such holder or holders or
representatives or from any trustee under any indenture pursuant to which such
Senior Indebtedness shall be outstanding; provided, however, that, if the
Trustee shall not have received the Officers' Certificate or notice provided for
in this Section 13.5 at least three Business Days preceding the date upon which
by the terms hereof any moneys become payable for any purpose (including,
without limitation, the payment of either the principal of or interest, if any,
on any Security), then, anything herein contained to the contrary
notwithstanding, the Trustee shall have full power and authority to receive such
moneys and apply the same to the purpose for which they were received and shall
not be affected by any notice to the contrary that may be received by it within
three Business Days preceding such date. The Issuer shall give prompt written
notice to the Trustee and to each paying agent of any facts that would prohibit
any payment of moneys to or by the Trustee or any paying agent, and the Trustee
shall not be charged with knowledge of the curing of any default or the
elimination of any other fact or condition preventing such payment or
distribution unless and until the Trustee shall have received an Officers'
Certificate to such effect.
SECTION 13.6 Trustee to Effectuate Subordination. Each Holder of Securities
by his acceptance thereof authorizes and directs the Trustee on his behalf to
<PAGE>
take such action as may be necessary or appropriate to effectuate the
subordination as between such Holder and holders of Senior Indebtedness as
provided in this Article Thirteen and appoints the Trustee its attorney-in-fact
for any and all such purposes.
SECTION 13.7 Rights of Trustee as Holder of Senior Indebtedness. The
Trustee shall be entitled to all the rights set forth in this Article Thirteen
with respect to any Senior Indebtedness which may at the time be held by it, to
the same extent as any other holder of Senior Indebtedness and nothing in this
Indenture shall deprive the Trustee of any of its rights as such holder. Nothing
in this Article Thirteen shall apply to claims of, or payments to, the Trustee
under or pursuant to Section 6.6.
SECTION 13.8 Article Applicable to Paying Agents. In case at any time any
paying agent other than the Trustee shall have been appointed by the Issuer and
be then acting hereunder, the term "Trustee" as used in this Article Thirteen
shall in such case (unless the context shall otherwise require) be construed as
extending to and including such paying agent within its meaning as fully for all
intents and purposes as if the paying agent were named in this Article Thirteen
in addition to or in place of the Trustee; provided, however, that Sections 13.5
and 13.7 shall not apply to the Issuer if it acts as paying agent.
SECTION 13.9 Subordination Rights Not Impaired by Acts or Omissions of the
Issuer or Holders of Senior InSubordination Rights Not Impaired by Acts or
Omissions of the Issuer or Holders of Senior Indebtedness. No right of any
present or future holders of any Senior Indebtedness to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Issuer or by any act or failure to act,
in good faith, by any such holder, or by any noncompliance by the Issuer with
the terms, provisions and covenants of this Indenture, regardless of any
knowledge thereof which any such holder may have or be otherwise charged with.
The holders of Senior Indebtedness, may at any time or from time to time and in
their absolute direction, change the manner, place or terms of payment, change
or extend the time of payment of, or renew or alter, any such Senior
indebtedness, or amend or supplement any instrument pursuant to which any such
Senior Indebtedness is issued or by which it may be secured, or release any
security therefor, or exercise or refrain from exercising any other of their
rights under the Senior Indebtedness, including, without limitation, the waiver
of default thereunder, all without notice to or assent from the Holders of the
Securities or the Trustee and without affecting the obligations of the Issuer,
the Trustee or the Holders of Securities under this Article Thirteen.
SECTION 13.10 Trustee Not Fiduciary for Holders of Senior Indebtedness. The
Trustee shall not be deemed to owe any fiduciary duty to the holders of the
Senior Indebtedness, and shall not be liable to any such holders if it shall
mistakenly pay over or distribute money or assets to Securityholders or the
Issuer. With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants or obligations as
are specifically set forth in this Article Thirteen and no implied covenants or
obligations with respect to holders of Senior Indebtedness shall be read into
this Indenture against the Trustee.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, effective as of July 15, 1993.
SEAGULL ENERGY CORPORATION
By:
Title:
Attest:
By:
Title:
THE BANK OF NEW YORK,
as Trustee
By:
Title:
Attest:
By:
Title:
<PAGE>
SEAGULL ENERGY CORPORATION
8-5/8% Senior Subordinated Note due 2005
SEAGULL ENERGY CORPORATION, a corporation duly organized and existing under the
laws of Texas (herein called the "Company", which term indicates any successor
corporation under the indenture hereinafter referred to), FOR VALUE RECEIVED,
HEREBY PROMISES TO PAY TO
, or registered assigns the principal sum of Dollars on August 1, 2005, in such
coin or currency of the United States of America as at the time of payment shall
be legal tender for the payment of public and private debts, and to pay
interest, semi-annually on February 1 and August 1 of each year, on said
principal sum, in like coin or currency, at the rate per annum specified in the
title of this Security, to the registered holder hereof as of the close of
business on the January 15 or July 15 next preceding such interest payment date,
except as otherwise provided in the indenture referred to on the reverse hereof,
all at the office or agency of the Company in the City of Houston, State of
Texas, from the February 1 or August 1, as the case may be, next preceding the
date of this Security to which interest has been paid (unless the date hereof is
a February 1 or August 1 to which interest has been paid, in which case from the
date hereof, or unless the date hereof is prior to the payment of any interest
on the Securities, in which case from July 29, 1993, or unless the date hereof
is between the January 15 or July 15, as the case may be, and the next following
February 1 or August 1 to which interest has been paid or, if no interest has
been paid on the Securities, from July 29, 1993) until payment of said principal
sum has been made or duly provided for; provided, however, that payment of
interest may be made at the option of the Company by check mailed on or before
the payment date to the address of the person entitled thereto as such address
shall appear in the Security register. Interest shall be computed on the basis
of a 360-day year consisting of twelve 30-day months.
This Security shall not be valid or become obligatory for any purpose until the
certificate of authentication hereon shall have been signed by the Trustee or an
Authenticating Agent under the Indenture referred to on the reverse hereof.
REFERENCE IS MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON THE
REVERSE HEREOF. SHUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME
EFFECT AS THOUGH FULLY SET FORTH AT THIS PLACE.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed
under its corporate seal.
Dated:
TRUSTEES'S AUTHENTICATION CERTIFICATE
This is one of the Securities of the series designated herein referred to in the
within-mentioned Indenture.
THE BANK OF NEW YOURK,
as Trustee
By:
Authorized Signatory
SEAGULL ENERGY CORPORATION
/s/ Sylvia Sanchez /s/ Barry J. Galt
Secretary Chairman of the Board
<PAGE>
SEAGULL ENERGY CORPORATION
8-5/8% SENIOR SUBORDINATED NOTE DUE 2005
1. Designation
This Security is one of a duly authorized series of Securities of the
Company, designated as its 8-5/8% Senior Subordinated Notes Due 2005 (herein
called the "Securities"), limited to the aggregate principal amount of
$150,000,000, all issued or to be issued under and pursuant to a senior
subordinated indenture dated as of July 15, 1993 (herein called the
"Indenture"), duly executed and delivered by the Company and The Bank of New
York, as trustee, to which Indenture and all indentures supplemental thereto
reference is hereby made for a description of the rights, limitation of rights,
obligations, duties and immunities thereunder of the Trustee, the Company and
the Holders of the Securities. Capitalized terms used but not defined herein are
defined in the Indenture and are used herein with the same meanings as ascribed
to them therein.
2. Paying Agent and Registrar
Initially, the Trustee will act as paying agent, registrar and as the
agent where notices and demands to or upon the Company in respect of the
Securities may be served. The Company may appoint and change any paying agent,
registrar or agent for notices without notice, other than notice to the Trustee.
The Company or any of its Subsidiaries or any of their Affiliates may act as
paying agent, registrar or agent of notices.
3. Denominations; Transfers; Exchange
The Securities are in registered form, without coupons, in
denominations of $1,000 in principal amount and integral multiples of $1,000.
Upon due presentation for registration of transfer of this Security at the
corporate trust office of the Trustee in the City of New York, State of New York
or any other such designated office or agency of the Company, a new Security or
Securities of authorized denominations for an equal aggregate principal amount
will be issued to the transferee in exchange herefor, subject to the limitations
imposed by the Indenture, without charges except for any tax or other
governmental charge imposed in connection therewith, and the Security may in a
like manner be exchanged for one or more new Securities for other authorized
denominations but of the same aggregate principal amount.
4. Persons Deemed Owners
The Company, the Trustee, any paying agent and any registrar may deem
and treat the registered Holder hereof as the absolute owner of this Security
(whether or not this Security shall be overdue and notwithstanding any notation
of ownership or other writing hereon) for purposes of receiving payment hereof,
or on account hereof, and for all other purposes, and neither the Company, the
Trustee, any paying agent not any registrar shall be affected by any notice to
the contrary. All payments made to or upon the order of such registered Holder
shall, to the extent of the sum or sums so paid, satisfy and discharge the
liability for moneys payable on this Security.
5. Defaults; Amendment; Waiver
In case an Event of Default shall have occurred and be continuing, the
principal hereof and the interest accrued thereon may be declared, and upon such
declaration shall become, due and payable, in the manner, with the effect and
subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee with the consent of the Holders of not less than a majority in aggregate
principal amount of each series of Securities then Outstanding under the
Indenture and affected thereby, evidenced as provided in the Indenture, to
<PAGE>
execute supplemental indentures adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or of any
supplemental indenture or modifying in manner the rights of the Holders of the
Securities of such series; provided, however, that no such supplemental
indenture shall (i) extend the stated final maturity of any Security, or reduce
the principal amount hereof, or reduce the rate or extend the time of payment of
interest hereon, or reduce or alter the method of computation of any amount
payable on redemption, repayment or purchase by the Company, or change the coin
or currency in which payments are to be made, or impair or affect her right of
any Holder to institute suit for enforcement of any payment hereof or (ii)
reduce the aforesaid percentage of any series of such Securities, without the
consent of the Holders of each Security of any series so affected. It is also
provided in the Indenture that the Holders of a majority in aggregate principal
amount of the Securities of any series then Outstanding may on behalf of the
Holders of all of the Securities of such series waive any past default or Event
of Default under the Indenture and its consequences except a default in the
payment of the principal of or interest on any of the Securities of such Series.
Any such consent or waiver by the Holder of this Security (unless revoked as
provided in the Indenture) shall be conclusive and binding upon such Holder and
upon all future Holders and owners of this Security and any Securities which may
be issued in exchange or substitution hereof, irrespective of whether or not any
notation thereof is made upon this Security or such other Securities.
6. Subordination
The indebtedness evidenced by the Securities is subordinate and junior
in right payment , to the extent provided in the Indenture, to all Senior
Indebtedness, whether outstanding on the day e of execution of the Indenture or
thereafter created, incurred or assumed, and the subordination is for the
benefit of the holders of Senior Indebtedness, but the Securities shall in all
respects rank pari passu with all other Senior Subordinated Indebtedness of the
Company. The Securities rank senior to all existing and future indebtedness of
the Company that is neither Senior Indebtedness or Senior Subordinated
Indebtedness and only Indebtedness of the Company that is Senior Indebtedness
ranks senior to the Securities in accordance with the provisions set forth in
the Indenture.
7. Change of Control
If a Change of Control shall occur at any time, than each Holder shall
have the right to require that the Company repurchase such Holder's Securities
in whole or in part in integral multiples of $1,000, at a purchase price in cash
in an amount equal to 101% of the principal amount thereof, plus accrued and
unpaid interest, if any to the date of purchase. The Company shall be obligated
to give the holders of securities and the Trustee within 30 days following a
Change of Control notice specifying (i) the purchase date, (ii) the place at
which the Securities shall be presented and surrendered for purchase, (iii) that
interest accrued to the purchase date will be paid upon such presentation and
surrender and (iv) that interest shall cease to accrue on Securities surrendered
for purchase as of such purchase date.
8. Redemption
On or after August 1, 2000, the Senior Subordinated Notes shall be
redeemable at any time at the option of the Company, in whole or from time to
time in part, at the redemption prices set forth below (expressed as a
percentage of principal amount), plus accrued interest to the redemption date:
<PAGE>
<TABLE>
<S> <C>
If redeemed during the 12-month Redemption
period beginning August 1, Price
---------------------------------------- ----------
2000.................................. 102.59%
2001.................................. 101.73%
2002.................................. 100.86%
2003 and thereafter................... 100.00%
</TABLE>
Notice of redemption shall be mailed to each holder at least 30 days
but not more than 60 days prior to the redemption date. On and after the
redemption date, interest shall cease to accrue on Senior Subordinated Notes or
portions thereof called for redemption.
9. No Recourse Against Others
No recourse under or upon any obligation, covenant or agreement
contained in the Indenture, or in any Security, or because of any indebtedness
evidenced thereby or hereby, shall be had against any incorporator, as such or
against any past, present or future stockholder, officer or director, as such of
the Company, or any partner of the Company or of any successor, wither directly
or though the Company or any successor, under any rule of law, statute or
constitutional provision or by the enforcement of any assessment or by any legal
or equitable proceeding or otherwise, all such liability being expressly waived
and released by the acceptance of this Security by the Holder hereof and as part
of the consideration of the issue of the Securities.
10. GOVERNING LAW
THE INDENYURE AND THIS SECURITY SHALL BE DEEMED TO BE A CONTRACT UNDER
THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE.
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN
- as joint tenants with rights
of survivorship and not as
tenants in common
UNIF GIFT MIN ACT ______________ Custodian ________________
(Cust) (Minor)
Under Uniform Gifts to Minors
Act _____________________
(State)
Additional abbreviations may also be used though not in the
above list.
- -------------------------------------------------------------------------------
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Please print or typewrite name and address including postal zip code of assignee
- -------------------------------------------------------------------------------
the within Security and all rights thereunder, hereby irrevocably constituting
and appointing
- -------------------------------------------------------------------------------
attorney to transfer said Security on the books of the Company, with full power
of substitution in the premises.
Dated:_______________________ ____________________________________
Notice: The signature to this assignment must correspond with the
name as written upon the face of the within instrument in every
particular, without alteration or enlargement or any change
whatever.
<PAGE>
SEAGULL ENERGY CORPORATION
RESOLUTIONS ADOPTED BY THE
CHAIRMAN OF THE BOARD OF DIRECTORS
EFFECTIVE JULY 22, 1993
WHEREAS, on June 23, 1993, the Board of Directors of the Company
approved the issuance by the Company, publicly or privately from time to time,
of up to $350,000,000 aggregate initial offering prices of bonds, debentures,
notes and/or other debt obligations (collectively, "Securities");
WHEREAS, the Board of Directors has authorized the Executive Committee
of the Company or the Chairman of the Board of the Company to determine the
terms and conditions of the Securities;
NOW, THEREFORE, in furtherance of the foregoing, the Chairman of the
Board of the Company hereby adopts the following resolutions:
RESOLVED, that Seagull Energy Corporation (the "Company") issue and
sell $100,000,000 aggregate principal amount of 7-7/8% Senior Notes Due 2003
(the "Senior Notes") on substantially the terms and conditions set forth in
Exhibit A hereto;
RESOLVED, that the Company issue and sell $150,000,000 aggregate
principal amount of 8-5/8% Senior Subordinated Notes Due 2005 ("Senior
Subordinated Notes") on substantially the terms and conditions set forth in
Exhibit B hereto;
RESOLVED, that the Senior Notes and Senior Subordinated Notes shall
have the terms set forth in the Company's Prospectus Supplement dated July 22,
1993 to its Prospectus dated July 22, 1993;
RESOLVED, that the form, terms and provisions of the Underwriting
Agreement dated July 22, 1993 (the "Underwriting Agreement") by and among the
Company and Dillon, Read & Co. Inc., Donaldson, Lufkin & Jenrette Securities
Corporation, J.P. Morgan Securities Inc. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated (the "Underwriters"), as well as the execution and delivery
of the Underwriting Agreement by the President, and Vice President or the
Treasurer of the Company on behalf of the Company and the performance of the
transactions contemplated by the Underwriting Agreement on behalf of the Company
by the appropriate officers of the Company, be and they hereby are, adopted,
ratified and approved;
RESOLVED, that the public offering price for the Senior Notes and for
the Senior Subordinated Notes set forth in the Prospectus Supplement dated July
22, 1993 be, and it hereby is, adopted, ratified and approved;
RESOLVED, that the discounts and commissions for the sale of the Senior
Notes and the Senior Subordinated Notes, payable tot he Underwriters pursuant to
the Underwriting Agreement be, and they hereby are, ratified, adopted and
approved;
RESOLVED, that the Senior Notes and the Senior Subordinated Notes shall
be in the form approved by the Chairman of the Board, the President or any Vice
President of the Company, such officer's approval to be conclusively evidenced
by his delivery of the Senior Notes and the Senior Subordinated Notes for and on
behalf of the Company at the closing under Underwriting Agreement to be executed
among the Company, Dillon, Read & Co. Inc., Donaldson, Lufkin & Jenrette
Securities Corporation, J.P. Morgan Securities Inc.
and Merrill Lynch, Pierce, Fenner & Smith Incorporated; and
RESOLVED, that the Chairman of the Board, the President or any Vice
President of the Company be, and each of them hereby is, authorized and
empowered, for and on behalf of the Company and in its name, to execute and
deliver all agreements, powers of attorney, certificates and other instruments
and documents as he may deem necessary or appropriate to carry out the
transactions approved by the preceding resolutions.
EXECUTED to be effective as of July 22, 1993.
/s/ Barry J. Galt
Barry J. Galt
Chairman of the Board
<PAGE>
EXHIBIT A
TERMS OF THE SENIOR NOTES
Title: 7-7/8% Senior Notes due 2003.
Principal Amount: $100,000,000.
Interest: 7-7/8% per annum, from July 29, 1993, payable semiannually on
each February 1 and August 1, commencing on February 1, 1994, to holders of
record on the preceding January 15 or July 15, as the case may be.
Interest on the Senior Notes shall be calculated on the basis of a
360-day year of twelve 30-day months.
Maturity: August 1, 2003.
Mandatory Redemption: If a "Change of Control" shall occur at any time,
than each holder shall have the right to require that the Company repurchase
such holder's Senior Notes in whole or in part in integral multiples of $1,000,
at a purchase price in cash in an amount equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any to the date of purchase.
The Company shall be obligated to give holders of Senior Notes and the
Trustee within 30 days following a Change of Control notice specifying (i) the
purchase date (which date shall be no earlier than 30 days nor more than 60 days
from the date the Company notifies the holders of the occurrence of a Change of
Control), (ii) the place at which Notes shall be presented and surrendered for
purchase, (iii) that interest accrued to the purchase date shall be paid upon
such presentation and surrender and (iv) that interest shall cease to accrue on
Senior Notes surrendered for purchase as of such purchase date. Any tender by a
holder of Senior Notes shall be irrevocable.
A-1
<PAGE>
For purposes of the Senior Notes, a "Change of Control: shall mean a
change resulting when any Unrelated Person or any Unrelated Persons acting
together which would constitute a Group together with any Affiliates or Related
Persons thereof (in each case also constituting Unrelated Persons) shall at any
time either (i) Beneficially Own more than 50% of the aggregate voting power of
all classes of Voting Stock of the Company or (ii) succeed in having sufficient
of its or their nominees elected to the Board of Directors of the Company such
that such nominees, when added to any existing director remaining on the Board
of Directors of the Company after such election who is an Affiliate or Related
Person of such person or Group, shall constitute a majority of the Board of
Directors of the Company.
As used herein (a) "Beneficially Own" means "beneficially own" as
defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the
"exchange Act"), or any successor provision thereto; provided, however, that,
for purposes of this definition, a person shall not be deemed to Beneficially
Own securities tendered pursuant to a tender or exchange offer made by or on
behalf of such person or any of such person's Affiliates until such tendered
securities are accepted for purchase or exchange; (b) "Group" means "group" for
purposes of Section 13(d) of the Exchange Act; (c) "Unrelated Person" means at
any time any person other than the Company or any subsidiary of the Company and
other than any trust for any employee benefit plan of the Company or any
subsidiary of the Company; (d) "related Person" of any person shall mean any
other person owning (1) 5% or more of the outstanding common stock of such
person or (2) 5% or more of the Voting Stock of such person; (e) "Voting Stock"
of any such person shall mean capital stock of such person that ordinarily has
voting power for the election of directors (or persons performing similar
functions) of such person, whether at all times or only so long as no senior
class of securities has such voting power by reason of any contingency; and (f)
"Affiliate" of any persons shall mean any other person that directly or
indirectly control, or in under common control with, or is controlled by, such
person.
Sinking Fund: None.
Offices for Notices and Payments, Etc.: Principal of and interest on
the Senior Notes shall be payable, and the Senior Notes shall be exchangeable
and transfers thereof shall be registrable, at the corporate trust office of the
Trustee in New York, New York; provided however, that at the option of the
Company, payment of interest may be made by check mailed to the address of the
person entitled thereto at such person's registered address.
A-2
<PAGE>
Global Securities: The Senior Notes shall not be issuable as Global
Securities.
Trustee: The Bank of New York shall serve as the trustee, depositary,
authenticating or paying agent, transfer agent and registrar with respect to the
Senior Notes.
Names and Addresses of Underwriters:
Dillon, Read & Co. Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
J.P. Morgan Securities Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
c/o Dillon, Read & Co. Inc.
535 Madison Avenue
New York, New York 10022
A-3
<PAGE>
EXHIBIT B
TERMS OF THE SENIOR SUBORDINATED NOTES
Title: 8-5/8% Senior Subordinated Notes due 2005.
Principal Amount: $150,000,000.
Interest: 8-5/8% per annum, from July 29, 1993, payable semiannually on
each February 1 and August 1, commencing on February 1, 1994, to holders of
record on the preceding January 15 or July 15, as the case may be.
Interest on the Senior Subordinated Notes shall be calculated on the
basis of a 360-day year of twelve 30-day months.
Maturity: August 1, 2005.
Optional Redemption: On or after August 1, 2000, the Senior
Subordinated Notes shall be redeemable at any time at the option of the Company,
in whole or from time to time in part, at the redemption prices set forth below
(expressed as a percentage of principal amount), plus accrued interest to the
redemption date:
<TABLE>
<CAPTION>
If redeemed during the 12-month Redemption
period beginning August 1, Price
---------------------------------------- ---------------
<S> <C> <C>
2000.................................. 102.59%
2001.................................. 101.73%
2002.................................. 100.86%
2003 and thereafter................... 100.00%
</TABLE>
Notice of redemption shall be mailed to each holder at least 30 days
but not more than 60 days prior to the redemption date. On and after the
redemption date, interest shall cease to accrue on Senior Subordinated Notes or
portions thereof called for redemption.
B-1
<PAGE>
Mandatory Redemption: If a "Change of Control" shall occur at any time,
than each holder shall have the right to require that the Company repurchase
such holder's Senior Subordinated Notes in whole or in part in integral
multiples of $1,000, at a purchase price in cash in an amount equal to 101% of
the principal amount thereof, plus accrued and unpaid interest, if any to the
date of purchase.
The Company shall be obligated to give holders of Senior Subordinated
Notes and the Trustee within 30 days following a Change of Control notice
specifying (i) the purchase date (which date shall be no earlier than 30 days
nor more than 60 days from the date the Company notifies the holders of the
occurrence of a Change of Control), (ii) the place at which Notes shall be
presented and surrendered for purchase, (iii) that interest accrued to the
purchase date shall be paid upon such presentation and surrender and (iv) that
interest shall cease to accrue on Senior Subordinated Notes surrendered for
purchase as of such purchase date. Any tender by a holder of Senior Subordinated
Notes shall be irrevocable.
For purposes of the Senior Subordinated Notes, a "Change of Control:
shall mean a change resulting when any Unrelated Person or any Unrelated Persons
acting together which would constitute a Group together with any Affiliates or
Related Persons thereof (in each case also constituting Unrelated Persons) shall
at any time either (i) Beneficially Own more than 50% of the aggregate voting
power of all classes of Voting Stock of the Company or (ii) succeed in having
sufficient of its or their nominees elected to the Board of Directors of the
Company such that such nominees, when added to any existing director remaining
on the Board of Directors of the Company after such election who is an Affiliate
or Related Person of such person or Group, shall constitute a majority of the
Board of Directors of the Company.
As used herein (a) "Beneficially Own" means "beneficially own" as
defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the
"exchange Act"), or any successor provision thereto; provided, however, that,
for purposes of this definition, a person shall not be deemed to Beneficially
Own securities tendered pursuant to a tender or exchange offer made by or on
behalf of such person or any of such person's Affiliates until such tendered
securities are accepted for purchase or exchange; (b) "Group" means "group" for
purposes of Section 13(d) of the Exchange Act; (c) "Unrelated Person" means at
any time any person other than the Company or any subsidiary of the Company and
other than any trust for any employee benefit plan of the Company or any
subsidiary of the Company; (d) "related Person" of any person shall mean any
other person owning (1) 5% or more of the outstanding common stock of such
person or (2) 5% or more of the Voting Stock of such person; (e) "Voting Stock"
of any such person shall mean capital stock of such person that ordinarily has
voting power for the election of directors (or persons
B-2
<PAGE>
performing similar functions) of such person, whether at all times or only so
long as no senior class of securities has such voting power by reason of any
contingency; and (f) "Affiliate" of any persons shall mean any other person that
directly or indirectly control, or in under common control with, or is
controlled by, such person.
Sinking Fund: None.
Offices for Notices and Payments, Etc.: Principal of and interest on
the Senior Subordinated Notes shall be payable, and the Senior Subordinated
Notes shall be exchangeable and transfers thereof shall be registrable, at the
corporate trust office of the Trustee in New York, New York; provided however,
that at the option of the Company, payment of interest may be made by check
mailed to the address of the person entitled thereto at such person's registered
address.
Global Securities: The Senior Subordinated Notes shall not be issuable
as Global Securities.
Trustee: The Bank of New York shall serve as the trustee, depositary,
authenticating or paying agent, transfer agent and registrar with respect to the
Senior Notes.
Names and Addresses of Underwriters:
Dillon, Read & Co. Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
J.P. Morgan Securities Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
c/o Dillon, Read & Co. Inc.
535 Madison Avenue
New York, New York 10022
B-3
Approved March 16, 1998
SEAGULL ENERGY CORPORATION
1998
EXECUTIVE INCENTIVE PLAN
Background
The 1998 Executive Incentive Plan (the "Incentive Plan") for Seagull Energy
Corporation is designed to motivate key employees of the Company to achieve
tough, but realistic, performance goals and to reward those employees who
perform at or above the expected level. The Incentive Plan defines participants,
award opportunities and performance goals for the 1998 performance year. It is,
of course, based upon the 1998 Operating Plan (the "Operating Plan") and is
designed to maximize performance incentives while allowing for the recognition
of individual efforts through a significant discretionary component.
Participation
Participants in the Incentive Plan are those key employees whose positions
have been valued in the salary structure in and above Grade 12. These are the
persons responsible for the annual and longer-term success of the company.
Timing of Payments
One hundred percent of any Incentive Plan award earned for the 1998
performance year will be paid to the recipient during the first quarter of the
year following the performance year. The recipient must be an employee on the
payment date in order to receive such payment.
Award Opportunities
Annual incentive targets are expressed as a percentage of total salary
earned during a given year and can increase to double the targeted amounts or
decrease to zero, relative to the achievement of predetermined performance goals
and subject to senior management and Board of Director discretion at year-end.
The Compensation Committee of the Board reserves the right to modify the
performance measures and award levels specified in the objective components of
the Incentive Plan if presently unforeseen circumstances should occur during the
year which invalidate any of the material assumptions that underlie the
Operating Plan, or if, in the opinion of the Compensation Committee, such
modifications are required to avoid a result that is inequitable to either the
company or the Incentive Plan participants.
<PAGE>
Page 2
Performance Measures
The performance measures for the Incentive Plan are summarized on the
following pages. Four performance components are included with the following
weightings:
<TABLE>
<S> <C> Pre-tax cash flow from operations 20% weight Reserve additions and
production replacement costs 30% weight Company stock performance assessment 10%
weight Discretionary individual performance assessment 40% weight </TABLE>
Pre-tax cash flow from operations (PCFO) - the first component is defined
as earnings before income taxes, plus operating and non-operating depreciation,
depletion and amortization, plus pre-tax incentive compensation expense, and is
based on actual corporate performance for the year as compared to the Company's
Operating Plan projection of PCFO.
Reserve additions and production replacement costs - the second component
is comprised of two subparts, reserve additions and production replacement
costs, weighted at 15% each. Using the Company's Operating Plan projections for
the Incentive Plan year, actual reserves added and actual production replacement
costs are compared to the corresponding projections for each.
Company stock performance assessment - the third component compares both
the Company's average and year-end stock price for the Plan year to its average
and year-end stock price for the preceding year and then compares the resulting
percentage changes to the percentage changes (calculated in the same manner) for
each of the peer group companies.
Discretionary individual performance assessment - the fourth component will
be determined individually and subjectively, based on each participant's
individual job performance.
The performance components will be measured independently of the other at
year-end. At that time, the Chief Executive Officer will recommend specific
awards, subject to final approval of each element of the total awards by the
Compensation Committee and ultimately by the Board of Directors.
<PAGE>
Page 3
Performance Weightings:
20% on pre-tax cash flow from operations 30% on reserve
additions and production replacement cost 10% on Company stock
performance assessment 40% on discretionary individual
performance assessment
I. Objective Performance Assessments - 60%:
Pre-Tax Cash Flow from Operations (PCFO) - 20%
The performance award will be calculated as follows:
<TABLE>
<CAPTION>
Column 1 Column 2 Column 3 Column 4
Percentage of
Pre-Tax Cash Percentage of Percentage of Total
Flow From Operating Plan PCFO Target Target Award
Operations (1) Projection (2 Award Earned (3) Earned (3)
<S> <C> <C> <C> <C>
$173,437 85 0 0
$183,640 90 25 5
$193,842 95 60 12
$204,044 100 100 20
$255,055 125 150 30
$306,066 150 200 40
</TABLE>
(1) Earnings before income taxes plus operating and non-operating
depreciation, depletion and amortization and also plus pre-tax incentive
compensation expense (dollars in thousands).
(2) If subsequent events over the course of the performance year invalidate
any of the basic assumptions in the Operating Plan, then the original Operating
Plan projections will be revised to conform the Operating Plan assumptions to
reality. The initial PCFO performance criteria for the Incentive Plan shown in
Column 1 will then be adjusted by applying the percentages shown in Column 2 to
the revised Operating Plan projection of PCFO.
(3) If, after the actual PCFO for the performance year is determined, it
falls within the ranges shown in Column 1, the exact incentive award percentages
from Columns 3 and 4 will be calculated by interpolation.
<PAGE>
Page 4
Reserve Additions and Production Replacement Cost - 30%
The performance award will be comprised of two subparts as follows:
1. The first element is weighted at 15% and compares actual reserves added
during the Plan year to the Company's Operating Plan projection for the Plan
year.
<TABLE>
<CAPTION>
Column 1 Column 2 Column3 Column 4
Reserves Percentage of Percentage of Percentage of Total
Added Operating Plan Target Award Target Award
(BCFE) (1) Projection (1) Earned (2) Earned (2)
<S> <C> <C> <C> <C>
205.2 80 0 0
230.9 90 25 3.75
243.7 95 60 9
256.5 100 100 15
282.2 110 150 22.5
307.8 120 200 30
</TABLE>
(1) If subsequent events over the course of the performance year invalidate
any of the basic assumptions in the Operating Plan, then the original Operating
Plan projections will be revised to conform the Operating Plan assumptions to
reality. The initial reserve addition performance criteria for the Incentive
Plan shown in Column 1 will then be adjusted by applying the percentages shown
in Column 2 to the revised Operating Plan projection of reserve additions.
(2) If after the actual reserve additions for the performance year are
determined, the aggregate total falls between the ranges shown in Column 1, the
exact incentive award percentages from Columns 3 and 4 will be calculated by
interpolation.
<PAGE>
Page 5
2. The second element is weighted at 15% and compares actual production
replacement costs for the Plan year to the Company's Operating Plan projection
for the Plan year, calculated in both cases in the manner reflected in the
Operating Plan.
<TABLE>
<CAPTION>
Column 1 Column 2 Column3 Column 4
Production Percentage of Percentage of Percentage of Total
Replacement Operating Plan Target Award Target Award
Cost (1) Projection (2) Earned (3) Earned (3)
<S> <C> <C> <C> <C>
$1.20 120 0 0
$1.10 110 40 6
$1.00 100 100 15
$0.90 90 140 21
$0.80 80 200 30
</TABLE>
(1) Considers cost of all reserve additions, including acquisitions.
(2) If subsequent events over the course of the performance year invalidate
any of the basic assumptions in the Operating Plan, then the original Operating
Plan projections will be revised to conform the Operating Plan assumptions to
reality. The initial production replacement cost performance criteria for the
Incentive Plan shown in Column 1 will then be adjusted by applying the
percentages shown in Column 2 to the revised Operating Plan projection of
production replacement cost.
(3) If after the actual production replacement cost for the performance
year are determined, it falls within the ranges shown in Column 1, the exact
incentive award percentages from Columns 3 and 4 will be calculated by
interpolation.
<PAGE>
Page 6
Company Stock Performance Assessment - 10%
The performance award will be based upon, A) the difference between the
Company's average stock price ("Average Price") for the calendar year preceding
the performance year and the Average Price for the performance year and, B) the
difference between the stock's year-end closing price ("Closing Price") for the
calendar year preceding the performance year and the stock's year-end closing
price for the performance year. The Average Price for each respective year will
be determined by dividing the number of trading days in the year into the sum of
the respective closing prices of the Company's stock for each such trading day.
The percentage changes in the Average Price and the Closing Price from the
previous year to the performance year are calculated. Then the same comparisons
are made for each of the peer companies selected for the Plan, and the Company
is ranked accordingly. The performance award for this component will then be
calculated as follows:
<TABLE>
<CAPTION>
Column 1 Column 2 Column 3
Change In Percentage of Percentage of Total
Average Price Target Award Target Award
Relative to Peers Earned (1) Earned (1)
<S> <C> <C> <C>
25th percentile 0 0
40th percentile 40 4
50th percentile 80 8
55th percentile 100 10
60th percentile 120 12
70th percentile 160 16
80th percentile 200 20
</TABLE>
(1) If after the actual percentile is determined, it falls within the
ranges shown in Column 1, the exact incentive award percentages for Columns 2
and 3 will be calculated by interpolation.
<PAGE>
Page 7
<TABLE>
<CAPTION>
The peer companies are:
<S> <C> <C>
1. Anadarko Petroleum Corp. 13. Ocean Energy, Inc.
2. Apache Corp. 14. Oryx Energy Co.
3. Barrett Resources Corp. 15. Pioneer Natural Resources Co.
4. Burlington Resources, Inc. 16. Pogo Producing Co.
5. Devon Energy Corp. 17. Santa Fe Energy Resources, Inc.
6. EEX Corp. 18. Union Pacific Resources Group Inc.
7. Enron Oil & Gas Co. 19. Union Texas Petroleum Corp.
8. Equitable Resources, Inc. 20. United Meridian Corp.
9. Forcenergy, Inc. 21. Vastar Resources Inc.
10. Newfield Exploration Co. 22. Vintage Petroleum, Inc.
11. Noble Affiliates, Inc. 23. Trans Texas Gas Corp.
12. Nuevo Energy Co. 24. Triton Energy, Ltd.
</TABLE>
II. Discretionary Individual Performance Assessment - 40%
The discretionary individual performance assessment will be determined
informally and subjectively on the basis of each participant's individual
job performance and primarily governed by the extent to which individual
and collective goals and objectives established at the beginning of the
year are achieved.
At year-end, the Chief Executive Officer will counsel with his direct
reports in completing discretionary performance assessments for each
participant and recommend specific awards, which will be subject to final
approval by the Compensation Committee and ultimately by the Board of
Directors.
Total Plan Payout Potential:
Maximum potential is 200%
Target goal is 100%
Minimum potential is 0%
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and effective this 30th day
of December, 1983 by and between Seagull Energy Corporation, a Texas corporation
having its principal place of business in Houston, Harris County, Texas
("Company") and Barry J. Galt, an individual currently residing at 6730 South
Evanston, Tulsa, Oklahoma ("Galt").
W I T N E S S T H: WHEREAS, the Company is desirous of employing Galt in an
executive capacity on the terms and conditions, and for the consideration,
hereinafter set forth and Galt is desirous of entering the employ of the Company
on such terms and conditions and for such consideration; NOW, THEREFORE, for and
in consideration of the mutual promises, covenants, and obligations contained
herein, Company and Galt agree as follows:
ARTICLE 1: EMPLOYMENT AND DUTIES
1.1 Company agrees to employ Galt and Galt agrees to be employed by
Company, beginning as of the effective date of this Agreement and continuing for
the period of time set forth in Article 2 of this Agreement, subject to the
terms and conditions of this Agreement.
1.2 On the effective date of this Agreement, the Company shall cause Galt
to be appointed Chief Executive Officer and elected a member of the Board of
Directors, and Chairman of the Board of Directors, of the Company. Company shall
maintain Galt in such positions, or in such other positions as the parties
mutually may agree, for the full term of Galt's employment hereunder.
1.3 Galt agrees to serve as Chief Executive Officer, Director and Chairman
of the Board of Directors of Company and to perform diligently and to the best
of his abilities the duties and services appertaining to such offices as set
forth in the Bylaws of the Company, as well as such additional duties and
services appropriate to such offices which he from time to time may be
reasonably directed to perform by the Board of Directors of the Company.
<PAGE>
1.4 Galt agrees, during the period of his employment by Company, to devote
his entire time, energy and best efforts to the business and affairs of the
Company and not to engage, directly or indirectly, in any other business or
businesses, whether or not similar to that of the Company, except with the
consent of the Board of Directors. The foregoing notwithstanding, the parties
recognize and agree (i) that Galt may engage in passive personal investments and
other business activities that do not conflict with the business and affairs of
the Company or interfere with Galt's performance of his duties hereunder, and
(ii) that during the period of time from the effective date of this Agreement
until April 1, 1984, Galt will devote such time as he finds necessary to
fulfilling and completing to the extent possible his obligations as Chapter 11
Trustee for Nucorp Energy, Inc. and affiliated companies, and that periodically
after said date he will be required to devote a limited amount of time to such
activities until he is finally discharged as such Trustee by a Court of
competent jurisdiction.
ARTICLE 2: TERM AND TERMINATION OF EMPLOYMENT
2.1 Unless sooner terminated pursuant to other provisions hereof, Company
agrees to employ Galt for a period beginning with the effective date of this
Agreement and terminating December 31, 1986. Beginning December 31, 1984, said
term of employment shall be extended automatically as of each December 31 for
successive one (1) year periods until such time, prior to December 31 of any
year during the term of employment, as either party shall give written notice to
the other that no further such automatic extensions shall occur, in which event
Galt's employment shall terminate on December 31 of the second calendar year
following such notice.
2.2 Notwithstanding the provisions of paragraph 2.1, Company shall have the
right to terminate Galt's employment under this Agreement at any time for any of
the following reasons:
(i) upon Galt's death;
(ii) upon Galt's becoming incapacitated by accident, sickness or other
circumstance which renders him mentally or physically incapable of
performing the duties and services required of him hereunder for a
<PAGE>
period of at least 120 consecutive days or for a period of 180
business days during any twelve (12) month period;
(iii)for cause, which for purposes of this Agreement shall mean Galt's
gross negligence or willful misconduct in performance of the duties
and services required of him pursuant to this Agreement, or Galt's
final conviction of a felony or of a misdemeanor involving moral
turpitude;
(iv) for Galt's material breach of any material provision of this Agreement
which, if correctable, remains uncorrected for thirty (30) days
following written notice to Galt by the Company of such breach; or
(v) for any other reason whatsoever, in the sole discretion of the Board
of Directors of the Company.
2.3 Notwithstanding the provisions of paragraph 2.1, Galt shall have the
right to terminate his employment under this Agreement at any time for any of
the following reasons:
(i) the assignment to Galt by the Board of Directors of duties materially
inconsistent with the duties of the Company's Chief Executive Officer
as such duties are constituted as of the effective date of this
Agreement;
(ii) the failure of the Company to elect or appoint, or to re-elect or
reappoint, Galt to the offices described in paragraph 1.2 of this
Agreement;
(iii)the occurrence of a "change of control." For purposes of this
paragraph 2.3(iii), a "change of control" shall be deemed to have
occurred if:
(i) any person (other than Galt, the Company, Dee S. Osborne and/or
Finial Investment Corporation) including a "group" as determined
<PAGE>
in accordance with Section 13(d)(3) of the Securities Exchange Act
of 1934, becomes the beneficial owner of shares of the Company
having 40% or more of the total number of votes that may be cast
for the election of directors of the Company; or
(ii) as a result of, or in connection with, any cash tender or
exchange offer, merger or other business combination, sale of
assets or contested election, or any combination of the foregoing
transactions (a "Transaction"), the persons who were directors of
the Company before the Transaction shall cease to constitute a
majority of the Board of Directors of the Company or any
successor to the Company;
(iv) a material breach by the Company of any material provision of this
Agreement which, if correctable, remains uncorrected for thirty (30)
days following written notice of such breach by Galt to the Company;
or
(v) for any other reason whatsoever, in the sole discretion of Galt.
2.4 If the Company or Galt desires to terminate Galt's employment hereunder
at any time prior to expiration of the term of employment as provided in
paragraph 2.1, it or he shall do so by giving written notice to the other party
that it or he has elected to terminate Galt's employment hereunder and stating
the effective date and reason for such termination, provided that no such action
shall alter or amend any other provisions hereof or rights arising hereunder.
Such notice shall also, to the extent material to any right or obligation
hereunder, constitute notice under paragraph 2.1 of the discontinuance of any
further automatic extensions of the term of paragraph 2.1.
<PAGE>
ARTICLE 3: COMPENSATION AND BENEFITS
3.1 Base Salary. During the period beginning with the effective date of
this Agreement and ending on March 31, 1984, Galt shall receive a base salary of
$10,000 per month. Beginning April 1, 1984, and continuing for the remainder of
the term of Galt's employment, Galt shall receive a base salary at the rate of
$250,000 per calendar year, or such larger sum as may be fixed by the Board of
Directors of the Company in its sole discretion, payable in equal installments
not less often than monthly. The Compensation Committee of the Board of
Directors of the Company shall make an annual review and recommendation to the
Board regarding possible increases in Galt's base salary compensation.
3.2 Stock Grant. Effective January 2, 1984, the Company will grant to Galt
in lieu of a cash bonus of thirty thousand (30,000) shares of the Company's
common stock in consideration of Galt's agreement to become an employee of the
Company and to execute this Agreement. Seven thousand five hundred (7,500) of
such shares will be transferred free of any restriction. The remaining
twenty-two thousand five hundred (22,500) shares of such stock will be subject
to the restrictions and other terms and conditions set forth in Exhibit A,
"Restricted Stock Agreement," attached to, and forming a part of, this
Agreement.
3.3 Stock Options. As additional compensation, the Company has granted, or
shall grant, to Galt the following stock options:
(i) 1983 Incentive Stock Option - On the effective date of this Agreement,
Company shall execute and deliver to Galt a ten (10) year option,
under the "Seagull Energy Corporation 1981 Nonqualified and Incentive
Stock Option Plan," to purchase up to 6,100 shares of the Company's
common stock (being the maximum number of shares which may be optioned
to Galt as of the effective date hereof under an incentive stock
option plan pursuant to section 422A of the Internal Revenue Code).
The form, price and other terms and conditions of such option are set
forth in Exhibit B, "Incentive Stock Option Agreement," attached to,
and forming a part of, this Agreement.
(ii) 1984 Incentive Stock Option - Effective January 2, 1984, the Company
shall execute and deliver to Galt a ten (10) year option, under the
"Seagull Energy Corporation 1981 Nonqualified and Incentive Stock
Option Plan," to purchase an additional number of shares of the
Company's common stock, being the maximum number of shares which may
be optioned to Galt at such time under an incentive stock option plan
pursuant to section 422A of the Internal Revenue Code. The form, price
and other terms and conditions of such option shall be substantially
in accordance with Exhibit C, "Incentive Stock Option Agreement,"
attached to, and forming a part of, this Agreement.
(iii)Non-Qualified Stock Option - Effective January 2, 1984, the Company
shall execute and deliver to Galt a ten (10) year option, under the
"Seagull Energy Corporation 1983 Stock Option Plan," to purchase up to
107,800 shares of the Company's common stock (being 120,000 shares
less the total number of shares to be optioned under the 1983
Incentive Stock Option and the 1984 Incentive Stock Option pursuant to
subparagraphs 3.3(i) and (ii) above). The form, price and other terms
and conditions of such option are set forth in Exhibit D,
"Nonqualified Stock Option Agreement," attached to, and forming a part
of, this Agreement. If the Seagull Energy Corporation 1983 Stock
Option Plan is not approved by the shareholders of the Company within
one year after the date of this Agreement, the Company shall replace
such option with a comparable benefit that provides for Galt
substantially the same opportunity for realizing economic gain, when
<PAGE>
viewed prospectively from the date hereof (e.g., a "phantom" stock
grant).
3.4 Life Insurance. The Company will provide, or cause to be provided, to
Galt, at no cost to Galt, five hundred thousand dollars ($500,000), of term life
insurance coverage payable to a beneficiary to be designated in writing by Galt.
Notwithstanding the foregoing, however, if Galt fails to qualify medically for
such insurance coverage at standard rates for his age group, Company shall not
be required to provide such coverage unless Galt pays the cost of such coverage
that is in excess of the standard rate cost. Such insurance, including
replacement or substitute policies therefor, shall be maintained for the same
period as Galt's compensation hereunder is continued pursuant to Article V
hereof.
3.5 Incentive Compensation Program. Galt shall be entitled to participate
in an executive incentive compensation program to be formulated and instituted
by the Company as soon as reasonably practicable after the effective date of
this Agreement, based upon the advice of a compensation consultant to be
retained by the Company. Such incentive compensation program will be effective
for calendar year 1984 and is expected to be based upon a mixture of objective
criteria and subjective judgment by members of the Board of Directors concerning
employee performance.
3.6 Payment In Lieu of 1984 Thrift Plan Contribution. Galt will not be
eligible to participate in the Seagull Energy Corporation Thrift Plan until such
time as he has satisfied the eligibility requirements for such Plan. In lieu of
Galt's participation in such Plan prior to satisfying such eligibility
requirements, the Company agrees to pay Galt, in January of 1985, a one-time
payment equal to six percent (6%) of Galt's cash compensation taxable for
federal income tax purposes received from the Company during the calendar year
1984.
3.7 Vacation and Sick Leave. During each year of his employment, Galt shall
be entitled to vacation and sick leave benefits equal to the maximum available
to any Company employee, without regard to the period of service that might
otherwise be necessary to entitle Galt to such vacation or sick leave under
standard Company policy. <PAGE>
3.8 Other Perquisites. During his employment hereunder, Galt shall be
afforded the following benefits as incidences of his employment:
(i) Company automobile - the Company will provide to Galt for his personal
and business use a top-of-the-line automobile, and shall provide, or
reimburse Galt for, maintenance and insurance (liability and collision
coverage insuring both the Company and Galt and covering both business
and personal use) for such automobile. Such automobile shall be owned
or leased by the Company, or an affiliate of the Company, and, if
requested by Galt, shall be replaced not less frequently than each
three (3) years.
(ii) Business and entertainment expenses - the Company will reimburse Galt
for, or pay on behalf of Galt, reasonable and appropriate expenses
incurred by Galt for business related purposes, including dues and
fees to industry and professional organizations, costs of
entertainment and business development, and costs reasonably incurred
as a result of Galt's wife accompanying Galt on business travel.
(iii)Club memberships - in addition to the other business and entertainment
expenses reimbursable pursuant to subparagraph 3.8(ii) above, the
Company shall pay membership fees, dues and assessments for (a) Galt's
current memberships in the Eldorado Country Club and Castle Pines
Country Club, (b) one country club located in Harris County, Texas, to
be selected by Galt, (c) one luncheon club located in Houston, Texas,
to be selected by Galt, (d) one luncheon club located outside of
Houston, Texas, to be selected by Galt, and, (e) such other luncheon
or country club memberships as the Compensation Committee of the Board
of Directors of the Company may deem to be justified by
<PAGE>
business usage. The foregoing notwithstanding, the Company shall not
be obligated to buy from Galt, or to reimburse Galt for the price of,
his membership in any club of which Galt is a member as of the
effective date of this Agreement.
(iv) Annual physical examination - the Company shall pay for the cost of an
annual physical examination to be conducted by a doctor or clinic of
Galt's choosing in Houston, Texas.
(v) Parking - the Company shall provide at no expense to Galt a parking
place convenient to Galt's office.
(vi) Other Company benefits - Galt and, to the extent applicable, Galt's
family, dependents and beneficiaries, shall be allowed to participate
in all benefits, plans and programs, including improvements or
modifications of the same, which are now, or may hereafter be,
available to similarly-situated Company employees. Such benefits,
plans and programs may include, without limitation, profit sharing
plan, thrift plan, health insurance or health care plan, life
insurance, disability insurance, pension plan, and the like. The
Company shall not, however, by reason of this paragraph be obligated
to institute, maintain, or refrain from changing, amending or
discontinuing, any such benefit plan or program, so long as such
changes are similarly applicable to executive employees generally.
The perquisites provided in this paragraph 3.8 (except subparagraph 3.8(ii))
shall be provided for the same period as Galt's compensation hereunder is
continued pursuant to Article V hereof; provided, however, that to the extent
that any benefit cannot be continued during a period when Galt is not an
employee of the Company, the Company shall pay Galt an amount equal to the
economic value of such benefit.
<PAGE>
ARTICLE 4: HOUSING ARRANGEMENTS
4.1 Temporary Housing. From the effective date of this Agreement, and
continuing until Galt relocates his permanent residence to Houston, Texas, or
until September 30, 1984, whichever is the earlier, the Company will provide
Galt with a furnished apartment, utilities paid, in Houston, Texas, and, during
the same period, will pay for travel, including air travel, between Houston and
Tulsa, Oklahoma by Galt and his wife.
4.2 Moving Expenses. Company will pay, or reimburse Galt for, all
reasonable expenses incurred by Galt in the course of moving his principal
residence, family and goods from Tulsa, Oklahoma, to Houston, Texas, including
packing, storage and cartage.
4.3 Loan and Note. Upon purchase by Galt of a principal residence in
Houston, during the term of this Agreement, the Company will lend to Galt a sum
of money equal to one-half the cost of such principal residence, including not
only the cost of acquiring such residence but all costs and expenses incurred by
Galt in improving, remodeling, enlarging and decorating same (hereinafter
"Acquisition Cost"), or Three Hundred Thousand dollars ($300,000) whichever is
the lesser. Such loan shall be evidenced by, and subject to the terms and
conditions of, a promissory note (hereinafter "Note") from Galt payable to the
order of Company and bearing interest at the rate of six percent (6%) per annum.
Interest only shall be payable on said Note for the first three (3) years, after
which said Note shall be payable in ten (10) equal annual installments of
principal, each such principal payment to be accompanied by payment of all then
accrued interest. Such loan and Note shall be secured by a second lien deed of
trust (hereinafter "Deed of Trust") on Galt's Houston residence, or any
replacement residence, such Deed of Trust to be in customary form. In the event
of termination of Galt's employment hereunder by the Company pursuant to
paragraphs 2.2(iii) or (iv) or by Galt pursuant to paragraph 2.3(v), such Note
shall accelerate and be fully payable six (6) months following such termination.
<PAGE>
ARTICLE 5: EFFECT OF TERMINATION ON COMPENSATION
5.1 By Expiration. If Galt's employment hereunder shall terminate upon
expiration of the term provided in paragraph 2.1 hereof as the same may have
been automatically extended from time to time, then:
(i) all compensation and all benefits to Galt hereunder shall terminate
contemporaneously with termination of his employment; and
(ii) the rights and obligations of Galt pursuant to Exhibits A through D to
this Agreement, and pursuant to said Note and said Deed of Trust shall
be specifically as provided in such instruments.
This paragraph 5.1 shall not be applicable in the event of termination of
employment prior to the expiration of the term provided in paragraph 2.1 hereof
(as same may have been automatically extended from time to time) pursuant to
paragraphs 2.2 or 2.3 hereof.
5.2 By Company. If Galt's employment hereunder shall be terminated by the
Company prior to expiration of the term provided in paragraph 2.1 hereof as the
same may have been automatically extended from time to time, then, upon such
termination, regardless of the reason therefor, all compensation and all
benefits to Galt hereunder shall terminate contemporaneously with the
termination of such employment, except that:
(i) the rights and obligations of Galt pursuant to Exhibits A through D to
this Agreement, and pursuant to said Note and said Deed of Trust shall
be specifically as provided in such instruments; and
(ii) if such termination shall be for any reason other than those
encompassed by paragraphs 2.2(iii) or (iv), then Galt's compensation
and benefits pursuant to paragraphs 3.1 and 3.4 and subparagraphs
3.8(i), (iii), (iv), (v) and (vi) shall continue for the balance of
such term.
5.3 By Galt. If Galt's employment hereunder shall be terminated by Galt
prior to expiration of the term provided in paragraph 2.1 hereof as the same may
<PAGE>
have been automatically extended from time to time, then, upon such termination,
regardless of the reason therefor, all compensation and benefits to Galt
hereunder shall terminate contemporaneously with the termination of such
employment, except that:
(i) the rights and obligations of Galt pursuant to Exhibits A through D to
this Agreement, and pursuant to said Note and said Deed of Trust shall
be specifically as provided in such instruments;
(ii) if such termination shall occur within twelve months following the
occurrence prior to April 1, 1984 of a "change of control" as defined
in paragraph 2.3(iii), then Galt's compensation and benefits pursuant
to paragraphs 3.1 and 3.4 and subparagraphs 3.8(i), (iii), (iv), (v)
and (vi) shall continue until October 31, 1984 or the last day of the
sixth full month following such termination of employment, whichever
is later;
(iii)if such termination shall occur within twelve months following the
occurrence subsequent to March 31, 1984, of a "change of control" as
defined in paragraph 2.3(iii) then Galt's compensation and benefits
pursuant to paragraphs 3.1 and 3.4 and subparagraphs 3.8(i), (iii),
(iv), (v) and (vi) shall continue for the balance of such term; and
(iv) if such termination shall be pursuant to paragraphs 2.3(i), (ii), or
(iv) then Galt's compensation and benefits pursuant to paragraphs 3.1
and 3.4 and subparagraphs 3.8(i), (iii), (iv), (v) and (vi) shall
continue for the balance of such term.
ARTICLE 6: CONFIDENTIAL INFORMATION
6.1 Company Information. Galt acknowledges that the Company's business is
highly competitive and that the Company's books, records and documents, the
Company's technical information concerning its products, equipment, services and
<PAGE>
processes, procurement procedures and pricing techniques, the names of and other
information (such as credit and financial data) concerning the Company's
customers and business affiliates, all comprise confidential business
information and trade secrets of the Company which are valuable, special, and
unique assets of the Company, which the Company uses in its business to obtain a
competitive advantage over the Company's competitors which do not know or use
this information. Galt further acknowledges that protection of the Company's
confidential business information and trade secrets against unauthorized
disclosure and use is of critical importance to the Company in maintaining its
competitive position. Accordingly, Galt hereby agrees that he will not, at any
time during or after his employment by the Company, make any unauthorized
disclosure of any confidential business information or trade secrets of the
Company, or make any use thereof, except for the benefit of, and on behalf of,
the Company. For the purposes of this paragraph, the term "Company" shall also
include affiliates of the Company.
6.2 Third Party Information. Galt acknowledges that, as a result of his
employment by the Company, he may from time to time have access to, or knowledge
of, confidential business information or trade secrets of third parties, such as
customers, suppliers, partners, joint venturers, and the like, of the Company.
Galt agrees to preserve and protect the confidentiality of such third party
confidential information and trade secrets to the same extent, and on the same
basis, as Company confidential business information and trade secrets.
6.3 Information of Prior Employers. Galt agrees not to disclose to the
Company, or to use on behalf of the Company, any confidential business
information or trade secrets of any of Galt's prior employers.
6.4 Return of Documents. All written materials, records and other documents
made by, or coming into the possession of, Galt during the period of his
employment by the Company which contain or disclose Company confidential
business information or trade secrets shall be and remain the property of the
Company. Upon termination of Galt's employment by the Company, for any reason,
he promptly shall deliver the same, and all copies thereof, to the Company.
<PAGE>
ARTICLE 7: INVENTIONS AND DISCOVERIES
7.1 Galt agrees promptly and freely to disclose to the Company, in writing,
any and all ideas, conceptions, inventions, improvements, and discoveries,
whether patentable or not, which are conceived or made by Galt, solely or
jointly with another, during the period of his employment by Company and which
are related to the business or activities of Company. Galt agrees to assign and
hereby does assign to Company all his interest in said ideas, conceptions,
inventions, improvements, and discoveries. Galt agrees that, whenever requested
to do so by Company, he shall execute any and all applications, assignments or
other instruments that Company shall deem necessary, in its sole discretion, to
apply for and obtain protection, including patent protection, for said ideas,
conceptions, inventions, improvements and discoveries in all countries of the
world. The obligations in the preceding sentence shall continue beyond the
termination of Galt's employment regardless of the reason for such termination.
7.2 Galt represents that he has not heretofore made any invention or
discovery related to the Company's business which he wishes to exclude from the
provisions of paragraph 7.1 above.
7.3 As used in this Article 7, "Company" shall include affiliates of the
Company.
ARTICLE 8: NON-COMPETITION
8.1 As part of the consideration for the compensation to be paid to Galt
hereunder, and as an additional incentive for the Company to enter into this
Agreement, Galt hereby agrees that he will not at any time during his employment
by the Company, or at any time following his employment by the Company while he
is still receiving base salary compensation from the Company pursuant to
paragraph 3.1 or Article V above, directly or indirectly, for himself or for
others, in any state of the United States or in any foreign country where the
Company or any of its affiliates is then conducting any business, or has, during
the previous twelve (12) months, conducted any business:
<PAGE>
(i) engage in any business similar to or competitive with that conducted
by the Company or its affiliates;
(ii) render advice or services to, or otherwise assist, any other person or
entity who is engaged, directly or indirectly, in any business similar
to, or competitive with, the business conducted by the Company or its
affiliates;
(iii)transact any business in any manner pertaining to suppliers or
customers of the Company or any affiliate which, in any manner, would
have, or is likely to have, an adverse effect upon the Company or any
affiliate; or,
(iv) induce any employee of the Company or any affiliate to terminate his
or her employment with the Company or such affiliate.
8.2 Galt understands that the foregoing restrictions may limit his ability
to engage in a business similar to the Company's business anywhere in the world
during any time when he is receiving base salary compensation from the Company
pursuant to paragraph 3.1 or Article V above, but acknowledges that he will
receive sufficiently high remuneration and other benefits from the Company
hereunder to justify such restriction. The Company and Galt agree that the
Company's remedy for breach of the provisions of this Article 8 shall be, and
shall be limited to, termination of all compensation and all benefits to Galt
otherwise provided under this Agreement.
8.3 It is expressly understood and agreed that the Company and Galt
consider the restrictions contained in paragraphs 8.1 above to be reasonable and
necessary for the purposes of preserving and protecting the good will and
proprietary information of the Company. Nevertheless, if any of the aforesaid
restrictions are found by a court having jurisdiction to be unreasonable, or
over broad as to geographic area or time, or otherwise unenforceable, the
parties intend for the restrictions therein set forth to be modified by such
court so as to be reasonable and enforceable and, as so modified by the court,
to be fully enforced.
<PAGE>
ARTICLE 9: MISCELLANEOUS
9.1 Notices. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Company to: Seagull Energy Corporation
First International Plaza
Suite 2000
1100 Louisiana Street
Houston, Texas 77002
Attention: Corporate Secretary
If to Galt to: Mr. Barry J. Galt
6730 South Evanston
Tulsa, Oklahoma 74136
or to such other address as either party may furnish to the other in writing in
accordance herewith, except that notices of changes of address shall be
effective only upon receipt.
9.2 Applicable Law. This contract is entered into under, and shall be
governed for all purposes by, the laws of the State of Texas.
9.3 No Waiver. No failure by either party hereto at any time to give notice
of any breach by the other party of, or to require compliance with, any
condition or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
9.4 Severability. If a court of competent jurisdiction determines that any
provision of this Agreement is invalid or unenforceable, then the invalidity or
unenforceability of that provision shall not affect the validity or
enforceability of any other provision of this Agreement, and all other
provisions shall remain. in full force and effect.
9.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
<PAGE>
9.6 Withholding of Taxes. Company may withhold from any benefits payable
under this Agreement all federal, state, city or other taxes as may be required
pursuant to any law or governmental regulation or ruling.
9.7 Headings. The paragraph headings have been inserted for purposes of
convenience and shall not be used for interpretive purposes.
9.8 Affiliate. As used in this Agreement, "affiliate" shall mean. any
entity which owns or controls, is owned or controlled by, or is under common
ownership or control with, the Company.
9.9 Assignment. This Agreement, and the rights and obligations of the
parties hereunder, are personal and neither this Agreement, nor any right,
benefit or obligation of either party hereto, shall be subject to voluntary or
involuntary assignment, alienation or transfer, whether by operation of law or
otherwise, without the prior written consent of the other party.
9.10 Term. This Agreement has a term co-extensive with the term of
employment as defined in paragraph 2.1. Termination shall not affect any right
or obligation of any party which is accrued or vested prior to such termination.
9.11 Entire Agreement. This Agreement, together with the Exhibits hereto,
constitutes the entire agreement of the parties with regard to the subject
matter hereof, and contains all the covenants, promises, representations,
warranties and agreements between the parties with respect to employment of Galt
by the Company. Each party to this Agreement acknowledges that no
representation, inducement, promise or agreement, oral or written, has been made
by either party, or by anyone acting on behalf of either party, which is not
embodied herein, and that no agreement, statement, or promise relating to the
employment of Galt by the Company, which is not contained in this Agreement or
the Exhibits hereto, shall be valid or binding. Any modification of this
Agreement will be effective only if it is in writing and signed by the party to
be charged.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the day and year first above written.
<PAGE>
SEAGULL ENERGY CORPORATION
By:
Its:
BARRY J. GALT
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
WHEREAS, Seagull Energy Corporation ("Company") and Barry J. Galt ("Galt")
have heretofore entered into an Employment Agreement ("Agreement"), effective as
of December 30, 1983; and
WHEREAS, Section 3.4 of the Agreement obligates the Company to provide
certain term life insurance coverage to Galt during the term of the Agreement;
and
WHEREAS, the Company and Galt desire to enter into an agreement regarding
the provision of insurance coverage for Galt, effective as of January 1, 1987,
and in satisfaction of the Company's obligations under Section 3.4 of the
Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Commencing as of February 9, 1987 and during each year that the
Agreement is in force and effect, the Company agrees to tender annual premiums
in the amounts established pursuant to Schedule A attached hereto and made a
part hereof to the Philadelphia Life Insurance Company to be applied by such
company to increase the cash value of Flexible Premium Adjustable Life Insurance
Policy Number 7226596.
2. Galt agrees that payment of the premiums by the Company as specified in
Item 1 above will constitute full and complete performance by the Company of its
obligations under Section 3.4 of the Agreement.
IN WITNESS WHEREOF, the parties hereto have caused these presents to be
executed this ____ day of ____________, 1987.
SEAGULL ENERGY CORPORATION
By:
Joe T. Rye, Vice President,
Finance & Administration
Barry J. Galt
<PAGE>
SCHEDULE A
Philadelphia Life Insurance Company
Policy No: 7226596; Insured: Barry J. Galt; Owner: Kathryn M. Galt
Annual Payment by Seagull Energy Corporation
<TABLE>
<CAPTION>
Due Date Amount Age of Mr. Galt
<S> <C> <C> <C>
2-9-87 $ 2,000.00 53
2-9-88 2,190.00 54
2-9-89 2,395.00 55
2-9-90 2,610.00 56
2-9-91 2,825.00 57
2-9-92 3,040.00 58
2-9-93 3,255.00 59
2-9-94 3,470.00 60
2-9-95 3,760.00 61
2-9-96 4,190.00 62
2-9-97 4,770.00 63
2-9-98 5,490.00 64
2-9-99 6,355.00 65
2-9-00 7,225.00 66
2-9-01 8,100.00 67
2-9-02 8,990.00 68
2-9-03 9,885.00 69
2-9-04 11,000.00 70
2-9-05 12,520.00 71
2-9-06 14,520.00 72
2-9-07 17,055.00 73
2-9-08 20,235.00 74
2-9-09 24,060.00 75
2-9-10 28,510.00 76
2-9-11 33,570.00 77
2-9-12 36,730.00 78
2-9-13 40,080.00 79
2-9-14 43,565.00 80
</TABLE>
SEAGULL ENERGY CORPORATION
1981 STOCK OPTION PLAN
(RESTATED)
I. History and Purpose of the Plan
The Seagull Energy Corporation 1981 Stock Option Plan(the "Plan") was
originally adopted by Seagull Energy Corporation, a Texas corporation (the
"Company"), on December 31,1981 and was approved by the shareholders of the
Company on May28, 1982. The Plan isintended to provide a means whereby certain
employees of the Company and its subsidiaries maydevelop a sense of
proprietorship and personal involvement in the development and financial success
of the Company, and to encourage them to remain with and devote their best
efforts to the business of the Company, thereby advancing the interests of the
Company and its shareholders. Accordingly, the Company may grant to certain
employees the option ("Option")to purchase shares of the common stock of the
Company("Stock"), as hereinafter set forth. Options granted under the Plan may
be either incentive stock options, within the meaning of section 422A(b) of the
Internal Revenue Code of 1986, as amended (the "Code"), ("Incentive Stock
Options") oroptions which do not constitute Incentive Stock Options. On
September 20, 1988, the Company restated the Plan in the form of this Seagull
Energy Corporation 1981 Stock Option Plan (Restated) for the purpose of
incorporating certain amendments previously adopted with respect to the Plan
into the text of the Plan and for purposes of amending the Plan incertain
respects. The terms and provisions of this restatement of the Plan are effective
only with respect to Options granted from and after September20, 1988 and
Options granted prior to such date shall continue to be governed by the terms
and provisions of the Plan (and amendments thereto) as in effect on September
20, 1988.
II. Administration
The Plan shall be administered by the CompensationCommittee (the
"Committee") of the Board of Directors of the Company (the "Board"). Members of
the Committee shall not be eligible, and shall not have been eligible at any
time within one year prior to their appointment to the Committee, to participate
in the Plan or in any other stock, stock option or stock appreciation rights
plan of the Company or any of its affiliates ("Company Stock Plan"). The
Committee shall have sole authority to select the individuals who are to be
granted Options from among those eligible hereunder and to establish the number
of shares which may be issued under each Option. The Committee is authorized to
interpret the Plan and may from time to time adopt such rules and regulations,
consistent with the provisions of the Plan, as it may deem advisable to carry
out the Plan. All decisions made by th Committee in selecting the individuals to
whom Options shall be granted, in establishing the number of shares which may be
issued under each Option and in construing the provisions of the Plan shall be
final.
III. Option Agreements
(a) Each Option shall be evidenced by an Option Agreement and shall contain
such terms and conditions, and may be exercisable for such periods, as may be
approved by the Committee. The terms and conditions of the respective Option
Agreements need not be identical. Specifically, an Option Agreement may provide
for the surrender of the right to purchase shares under the Option in return for
a payment in cash or shares of Stock or a combination of cash and shares of
Stock equal in value to the excess of the fair market value of the shares with
respect to which the right to purchase is surrendered over the option price
therefor ("Stock Appreciation Rights"), on such terms and conditions as the
Committee in its sole discretion may prescribe; provided, that no Stock
Appreciation Rights may be granted in conjunction with an Option which is an
Incentive Stock Option; and provided, further, that with respect to Stock
Appreciation Rights granted to employees who are subject to Section 16 of the
Securities Exchange Act of 1934 (the "1934 Act"), exceptas provided in
Subparagraph VIII(c) hereof, the Committeeshall retain final authority (i) to
determine whether an optionee shall be permitted, or (ii) to approve an election
by an optionee, to receive cash in full or partial settlementof Stock
Appreciation Rights. Moreover, an Option Agreement may provide for the payment
of the option price, in whole or in part, by the delivery of a number of shares
of Stock (plus cash if necessary) having a fair market value equal to such
option price. Finally, an Option Agreement may provide for cash less exercise by
permitting an Optionee to withhold from shares of Stock acquirable upon exercise
of such Option shares of Stock equal in value to all or a specified portion of
the Option Price; all on such terms and subject to such conditions as shall be
established from time to time by the Committee. For all purposes under the Plan,
the fair market value of a share of Stock on a particular date shall be equal to
the closing price of the Stock on the New York Stock Exchange Composite Tape on
that date, or if no prices are reported on that date, on the last preceding date
on which such prices of the Stock are so reported. Each Option andall rights
granted there under shall not be transferable other than by will or the laws of
descent and distribution, and shall be exercisable during the optionee's
lifetime only by the optionee or the optionee's guardian or legal
representative.
(b) Paragraph (a) above to the contrary notwithstanding, an Option
Agreement evidencing an Option granted underthe Plan shall include the following
specific provisions:
(i) A provision restricting exercise of theOption until the Optionee has
performed one year ofemployment with the Company or any parent or
subsidiary corporation (as defined in section 425 ofthe Code) of the
Company following the date ofgrant of the Option;A
(ii) A provision restricting exercise of theOption following termination of
employment byreason of retirement or disability to an exerciseperiod
of three months following the date of suchtermination of employment
and further restrictingsuch exercise to the extent such Option was
exercisable at the date of such termination of employment; andA
(iii)A provision restricting exercise of theOption upon termination of
employment by reason ofdeath to an exercise period of one year
followingthe date of such death and further restricting suchexercise
to the extent that the Option was exercisable as of the date
immediately preceding suchdeath.A
IV. Eligibility of Optionee
Options may be granted only to individuals who are keyemployees (including
officers and directors who are also keyemployees) of the Company or any parent
or subsidiary corporation (as defined in section425 of the Code) of the
Companyat the time the Option is granted and who, as of such time,are employed
on a fulltime basis and who are compensated forsuch employment by a regular
salary. Options may be grantedto the same individual on more than one occasion.
No Incentive Stock Option shall be granted to an individual if, atthe time the
Option is granted, such individual owns stockpossessing more than 10% of the
total combined voting powerof all classes of stock of the Company or of its
parent orsubsidiary corporation, within the meaning of section422A(b)(6) of the
Code, unless (i)at the time such Option isgranted the option price is at least
110% of the fair marketvalue of the Stock subject to the Option and (ii)such
Optionby its terms is not exercisable after the expiration of fivebyears from
the date of grant. To the extent that the aggregate fair market value
(determined at the time the respectiveIncentive Stock Option is granted) of
stock with respect towhich Incentive Stock Options granted after 1986 are
exercisable for the first time by an individual during any calendar year under
all incentive stock option plans of the Company and its parent and subsidiary
corporations exceeds$100,000, such Incentive Stock Options shall be treated
asoptions which do not constitute Incentive Stock Options. TheCommittee shall
determine, in accordance with applicableprovisions of the Code, Treasury
Regulations and other administrative pronouncements, which of an optionee's
IncentiveStock Options will not constitute Incentive Stock Optionsbecause of
such limitation and shall notify the optionee ofsuch determination as soon as
practicable after such determination.
V. Shares Subject to the Plan
The aggregate number of shares which may be issued under Options granted
under the Plan shall not exceed 250,000 shares of Stock. Such shares may consist
of authorized butunissued shares of Stock or previously issued shares of Stock
reacquired by the Company. Any of such shares which remain unissued and which
are not subject to outstanding Options atthe termination of the Plan shall cease
to be subject to the Plan, but, until termination of the Plan, the Company shall
at all times make available a sufficient number of shares to meet the
requirements of the Plan. Should any Option hereunder expire or terminate prior
to its exercise in full, the shares theretofore subject to such Option may again
be subject to an Option granted under the Plan. The aggregate number of shares
which may be issued under the Plan shall be subject to adjustment in the same
manner as provided in Paragraph VIII hereof with respect to shares of Stock
subject to Options then outstanding. Exercise of an Option in any manner,
including an exercise involving a Stock Appreciation Right, shall result in a
decrease in the number of shares of Stock which may thereafter be available,
both for purposes ofthe Plan and for sale to any one individual, by the number
of shares as to which the Option is exercised. Separate stock certificates shall
be issued by the Company for those shares acquired pursuant to the exercise of
an Incentive Stock Option and for those shares acquired pursuant to the exercise
of any Option which does not constitute an Incentive Stock Option.
VI. Option Price
The purchase price of Stock issued under each Option shall be determined by
the Committee, but in the case of an Incentive Stock Option, such purchase price
shall not beless than the fair market value of Stock subject to the Option on
the date the Option is granted.
VII. Term of Plan
The Plan became effective upon December 31, 1981, thedate of its adoption
by the Board. Except with respect to Options then outstanding, if not sooner
terminated under the provisions of Paragraph IX, the Plan shall terminate upon
and no further Options shall be granted after the expiration often years from
the date of its adoption by the Board.
VIII. Recapitalization or Reorganization
(a) The existence of the Plan and the Options granted hereunder shall not
affect in any way the right or power of the Board or the shareholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of debt or equity securities ahead of or
affecting Stock or the rights thereof, the dissolution or liquidation of the
Company or any sale, lease, exchange or other disposition ofall or any part of
its assets or business or any other corporate act or proceeding.
(b) The shares with respect to which Options may begranted are shares of
Stock as presently constituted, but if, and whenever, prior to the expiration of
an Option theretofore granted, the Company shall effect a subdivision
orconsolidation of shares of Stock or the payment of a stock dividend on Stock
without receipt of consideration by the Company, the number of shares of Stock
with respect to which such Option may there after be exercised (i)in the event
of an increase in the number of outstanding shares shall be proportionately
increased, and the purchase price per share shall be proportionately reduced,
and (ii) in the event of a reduction in the number of outstanding shares shall
be proportionately reduced, and the purchase price per share shall be
proportionately increased.
(c) If the Company recapitalizes or otherwise changes its capital
structure, thereafter upon any exercise of an Option theretofore granted the
optionee shall be entitled to purchase under such Option, in lieu of the number
of shares of Stock as to which such Option shall then be exercisable,the number
and class of shares of stock and securities to which the optionee would have
been entitled pursuant to the terms of the recapitalization if, immediately
prior to such recapitalization, the optionee had been the holder of record of
the number of shares of Stock as to which such Option is then exercisable. If
(i) the Company shall not be the surviving entity in any merger or consolidation
(or survives only as a subsidiary of an entity other than a previously
whollyowned subsidiary of the Company), (ii) the Company sells, leases or
exchanges or agrees to sell, lease or exchange all or substantially all of its
assets to any otherperson or entity (other than a wholly-owned subsidiary of the
Company), (iii) the Company is to be dissolved and liquidated, (iv) any person
or entity, including a "group" ascontemplated by Section 13(d)(3) of the 1934
Act, acquires orgains ownership or control (including, without limitation,power
to vote) of more than 40% of the outstanding shares ofStock, or (v) as a result
of or in connection with a contested election of directors, the persons who were
directors of the Company before such election shall cease to constitute a
majority of the Board (each such event is referred to herein as a "Corporate
Change"), then, upon the occurrence of any such Corporate Change, each Option
then outstanding shall become fully exercisable and effective as of a date
(selected by the Committee) within (a) ten days after the approval by the
shareholders of the Company of such merger, consolidation, sale, lease or
exchange of assets or dissolution or such election of directors or (b) thirty
days of such change of control, the Committee, acting in its sole discretion
without the consent or approval of any optionee, shall effect one or more of the
following alternatives, which may vary among individual optionees: (1) establish
a limited period of time on or before a specified date (before or after such
Corporate Change) fixed by the Committee during which such outstanding Options
may be exercised, after which specified date all unexercised Options and all
rights of optionees thereunder shall terminate, (2) require the mandatory
surrender to the Company by selected optionees of some or all of the outstanding
Options held by such optionees as of a date, before or after such Corporate
Change, specified by the Committee, in which event the Committee shall there
upon cancel such Options and pay to each optionee an amount of cash per share
equal to the excess of the amount calculated in Subparagraph (d) below (the
"Change of Control Value") of the shares subject to such Option over the
exercise price(s)under such Options for such shares, (3) make such adjustments
to Options then outstanding as the Committee deems appropriate to reflect such
Corporate Change (provided, however, that the Committee may determine in its
sole discretion that no adjustment is necessary to Options then outstanding) or
(4) provide that thereafter upon any exercise of an Option theretofore granted
the optionee shall be entitled to purchase under such Option, in lieu of the
number of shares of Stock as to which such Option shall then be exercisable, the
number and class of shares of stock or other securities or property to which the
optionee would have been entitled pursuant to the terms of the agreement of
merger, consolidation or sale of assets and dissolution if, immediately prior to
such merger, consolidation or sale of assets and dissolution the optionee had
been the holder of record of the number of shares of Stock as to which such
Option is then exercisable.
(d) For the purposes of clause (2) in Subparagraph (c)above, the "Change of
Control Value" shall equal the amount determined in clause (i), (ii) or (iii),
whichever is applicable, as follows: (i) the per share price offered to
shareholders of the Company in any such merger, consolidation, sale of assets or
dissolution transaction, (ii) the price per share offered to shareholders of the
Company in any tender offer or exchange offer whereby a Corporate Change takes
place, or (iii) if such Corporate Change occurs other than pursuant to a tender
or exchange offer, the fair market value per share of the shares into which such
Options being surrendered are exercisable, as determined by the Committee as of
the date determined by the Committee to be the date of cancellation and
surrender of such Options. In the event that the consideration offered to
shareholders of the Company in any transaction described in this Subparagraph
(d) or Subparagraph (c) above consists of anything other than cash, the
Committee shall determine the fair cash equivalent of the portion of the
consideration offered which is other than cash.
(e) Any adjustment provided for in Subparagraphs(b) or(c) above shall be
subject to any required share holder action.
(f) Except as herein before expressly provided, the issuance by the Company
of shares of stock of any class or securities convertible into shares of stock
of any class, for cash, property, labor or services, upon direct sale, upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, and in any case whether or not for fair value, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number of
shares of Stock subject to Options theretofore granted or the purchase price per
share.
IX. Amendment or Termination of the Plan
The Board in its discretion may terminate the Plan at any time with respect
to any shares for which Options have not theretofore been granted. The Board
shall have the right to alter or amend the Plan or any part thereof from time to
time; provided, that no change in any Option theretofore granted may be made
which would impair the rights of the optionee without the consent of such
optionee; and provided, further, that the Board may not make any alteration or
amendment which would materially increase the benefits accruing to participants
under the Plan, increase the aggregate number of shares which may be issued
pursuant to the provisions of thePlan, change the class of individuals eligible
to receiveOptions under the Plan or extend the term of the Plan, without the
approval of the shareholders of the Company.
SEAGULL ENERGY CORPORATION
1983 STOCK OPTION PLAN
(RESTATED)
I. History and Purpose of the Plan
The Seagull Energy Corporation 1983 Stock Option Plan(the "Plan") was
originally adopted by Seagull Energy Corporation, a Texas corporation (the
"Company"), on December 30,1983 and was approved by the shareholders of the
Company on May15, 1984. The Plan is intended to provide a means whereby certain
employees of the Company and its subsidiaries may develop a sense of
proprietorship and personal involvement in the development and financial success
of the Company, and to encourage them to remain with and devote their best
efforts to the business of the Company, thereby advancing the interests of the
Company and its shareholders. Accordingly, the Company may grant to certain
employees the option ("Option")to purchase shares of the common stock of the
Company("Stock"), as hereinafter set forth. Options granted under the Plan may
be either incentive stock options, within the meaning of section 422A(b) of the
Internal Revenue Code of 1986, as amended (the "Code"), ("Incentive Stock
Options") or options which do not constitute Incentive Stock Options. On
September 20, 1988, the Company restated the Plan in the form of this Seagull
Energy Corporation 1983 Stock Option Plan(Restated) for the purpose of
incorporating certain amendments previously adopted with respect to the Plan
into the text of the Plan and for purposes of amending the Plan in certain
respects. The terms and provisions of this restatement of the Plan are effective
only with respect to Options granted from and after September 20, 1988 and
Options granted prior to such date shall continue to be governed by the terms
and provisions of the Plan (and amendments thereto) as ineffect on September 20,
1988.
II. Administration
The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board"). Members of
the Committee shall not be eligible, and shall not have been eligible at any
time within one year prior to their appointment to the Committee, to participate
in the Plan or in any other stock, stock option or stock appreciation rights
plan of the Company or any of its affiliates ("Company Stock Plan"). The
Committee shall have sole authority to select the individuals who are to be
granted Options from among those eligible hereunder and to establish the number
of shares which may be issued under each Option. The Committee is authorized to
interpret the Plan and may from time to time adopt such rules and regulations,
consistent with the provisions of the Plan, as it may deem advisable to carry
out the Plan. All decisions made by the Committee in selecting the individuals
to whom Options shall be granted, in establishing the number of shares which may
beissued under each Option and in construing the provisions ofthe Plan shall be
final.
III. Option Agreements
Each Option shall be evidenced by an Option Agreement and shall contain
such terms and conditions, and may be exercisable for such periods, as may be
approved by the Committee. The terms and conditions of the respective Option
Agreements need not be identical. Specifically, an Option Agreement may provide
for the surrender of the right to purchase shares under the Option in return for
a payment in cash or shares of Stock or a combination of cash and shares of
Stock equal in value to the excess of the fair market value of the shares with
respect to which the right to purchase is surrendered over the option price
therefor ("Stock Appreciation Rights"), on such terms and conditions as the
Committee in its sole discretion may prescribe; provided, that with respect to
Stock Appreciation Rights granted to employees who are subject to Section 16 of
the Securities Exchange Act of 1934 (the "1934 Act"), except as provided in
Subparagraph VIII(c) hereof, the Committee shall retain final authority (i) to
determine whether an optionee shall be permitted, or (ii) to approve an election
by an optionee, to receive cash in full or partial settlement of Stock
Appreciation Rights. Moreover, an Option Agreement may provide for the payment
of the option price, in whole or in part, by the delivery of a number of shares
of Stock (plus cash if necessary) having a fair market value equal to such
option price. Finally, an Option Agreement may provide for cashless exercise by
permitting an Optionee to withhold from shares of Stock acquirable upon exercise
of such Option shares of Stock equal in value to all or a specified portion of
the Option Price; all on such terms and subject to such conditions as shall be
established from time to time by the Committee. For all purposes under the Plan,
the fair market value of a share of Stock on a particular date shall be equal to
the closing price of the Stock on the New York Stock Exchange Composite Tape on
that date, or if no prices are reported on that date,on the last preceding date
on which such prices of the Stock are so reported. Each Option and all rights
granted thereunder shall not be transferable other than by will or the laws of
descent and distribution, and shall be exercisable during the optionee's
lifetime only by the optionee or the optionee's guardian or legal
representative.
IV. Eligibility of Optionee
Options may be granted only to individuals who are key employees (including
officers and directors who are also key employees) of the Company or any parent
or subsidiary corporation (as defined in section 425 of the Code) of the Company
at the time the Option is granted. Options may be granted to the same individual
on more than one occasion. No Incentive Stock Option shall be granted to an
individual if, at the time the Option is granted, such individual owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or of its parent or subsidiary corporation, within the
meaning of section 422A(b)(6) of the Code, unless (i)at the time such Option is
granted the option price is at least 110% of the fair market value of the Stock
subject to the Option and (ii)such Option by its terms is not exercisable after
the expiration of five years from the date of grant. To the extent that the
aggregate fair market value (determined at the time the respective Incentive
Stock Option is granted) of stock with respect to which Incentive Stock Options
granted after 1986 are exercisable for the first time by an individual during
any calendar year under all incentive stock option plans of the Company and its
parent and subsidiary corporations exceeds $100,000, such Incentive Stock
Options shall be treated as options which do not constitute Incentive Stock
Options. The Committee shall determine, in accordance with applicable provisions
of the Code, Treasury Regulations and other administrative pronouncements, which
of an optionee's Incentive Stock Options will not constitute Incentive Stock
Options because of such limitation and shall notify the optionee of such
determination as soon as practicable after such determination.
V. Shares Subject to the Plan
The aggregate number of shares which may be issued under Options granted
under the Plan shall not exceed 300,000 shares of Stock. Such shares may consist
of authorized but unissued shares of Stock or previously issued shares of Stock
reacquired by the Company. Any of such shares which remain unissued and which
are not subject to outstanding Options atthe termination of the Plan shall cease
to be subject to the Plan, but, until termination of the Plan, the Company shall
at all times make available a sufficient number of shares to meet the
requirements of the Plan. Should any Option here under expire or terminate prior
to its exercise in full, the shares theretofore subject to such Option may again
be subject to an Option granted under the Plan. The aggregate number of shares
which may be issued under the Plan shall be subject to adjustment in the same
manner as provided in Paragraph VIII hereof with respect to shares of Stock
subject to Options then outstanding. Exercise of an Option in any manner,
including an exercise involving a Stock Appreciation Right, shall result in a
decrease in the number of shares of Stock which may thereafter be available,
both for purposes of the Plan and for sale to any one individual, by the number
of shares as to which the Option is exercised. Separate stock certificates shall
be issued by the Company for those shares acquired pursuant to the exercise of
an Incentive Stock Option and for those shares acquired pursuant to the exercise
of any Option which does not constitute an Incentive Stock Option.
VI. Option Price
The purchase price of Stock issued under each Option shall be determined by
the Committee, but in the case of an Incentive Stock Option, such purchase price
shall not be less than the fair market value of Stock subject to the Option on
the date the Option is granted.
VII. Term of Plan
The Plan became effective upon December 30, 1983, the date of its adoption
by the Board. Except with respect to Options then outstanding, if not sooner
terminated under the provisions of Paragraph IX, the Plan shall terminate upon
and no further Options shall be granted after the expiration often years from
the date of its adoption by the Board.
VIII. Recapitalization or Reorganization
(a) The existence of the Plan and the Options granted hereunder shall not
affect in any way the right or power of the Board or the shareholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of debt or equity securities ahead of or
affecting Stock orthe rights thereof, the dissolution or liquidation of the
Company or any sale, lease, exchange or other disposition of all or any part of
its assets or business or any other corporate act or proceeding.
(b) The shares with respect to which Options may be granted are shares of
Stock as presently constituted, but if,and whenever, prior to the expiration of
an Option theretofore granted, the Company shall effect a subdivision or
consolidation of shares of Stock or the payment of a stock dividend on Stock
without receipt of consideration by the Company, the number of shares of Stock
with respect to which such Option may thereafter be exercised (i)in the event of
an increase in the number of outstanding shares shall be proportionately
increased, and the purchase price per share shall be proportionately reduced,
and (ii)in the event of a reduction in the number of outstanding shares shall be
proportionately reduced, and the purchase price per share shall be
proportionately increased.
(c) If the Company recapitalizes or otherwise changes its capital
structure, thereafter upon any exercise of an Option theretofore granted the
optionee shall be entitled to purchase under such Option, in lieu of the number
of shares of Stock as to which such Option shall then be exercisable, the number
and class of shares of stock and securities to which the optionee would have
been entitled pursuant to the terms of the recapitalization if, immediately
prior to such recapitalization, the optionee had been the holder of record of
the number of shares of Stock as to which such Option is then exercisable. If
(i) the Company shall not be the surviving entity in any merger or consolidation
(or survivesonly as a subsidiary of an entity other than a previously wholly
owned subsidiary of the Company), (ii) the Company sells, leases or exchanges or
agrees to sell, lease or exchange all or substantially all of its assets to any
other person or entity (other than a wholly-owned subsidiary of the Company),
(iii) the Company is to be dissolved and liquidated, (iv) any person or entity,
including a "group" as contemplated by Section 13(d)(3) of the 1934 Act,
acquires or gains ownership or control (including, without limitation, power to
vote) of more than 40% of the outstanding shares of Stock, or (v) as a result of
or in connection with a contested election of directors, the persons who were
directors of the Company before such election shall cease to constitute a
majority of the Board (each such event is referred to herein as a "Corporate
Change"), then, upon the occurrence of any such Corporate Change, each Option
then outstanding shall become fully exercisable and effective as of a date
(selected by the Committee) within (a) ten days after the approval by the
shareholders of the Company of such merger, consolidation, sale, lease or
exchange of assets or dissolution or such election of directors or (b) thirty
days of such change of control, the Committee, acting in its sole discretion
without the consent or approval of any optionee, shall effect one or more of the
following alternatives, which may vary among individual optionees: (1) establish
a limited period of time on or before a specified date (before or after such
Corporate Change) fixed by the Committee during which such outstanding Options
may be exercised, after which specified date all unexercised Options and all
rights of optionees thereunder shall terminate, (2) require the mandatory
surrender to the Company by selected optionees of some or all of the outstanding
Options held by such optionees as of a date,before or after such Corporate
Change, specified by theCommittee, in which event the Committee shall
thereuponcancel such Options and pay to each optionee an amount ofcash per share
equal to the excess of the amount calculatedin Subparagraph (d) below (the
"Change of Control Value") ofthe shares subject to such Option over the exercise
price(s)under such Options for such shares, (3) make such adjustmentsto Options
then outstanding as the Committee deems appropriate to reflect such Corporate
Change (provided, however, thatthe Committee may determine in its sole
discretion that noadjustment is necessary to Options then outstanding) or
(4)provide that thereafter upon any exercise of an Option theretofore granted
the optionee shall be entitled to purchaseunder such Option, in lieu of the
number of shares of Stockas to which such Option shall then be exercisable, the
numberand class of shares of stock or other securities or propertyto which the
optionee would have been entitled pursuant tothe terms of the agreement of
merger, consolidation or saleof assets and dissolution if, immediately prior to
suchmerger, consolidation or sale of assets and dissolution theoptionee had been
the holder of record of the number ofshares of Stock as to which such Option is
then exercisable.
(d) For the purposes of clause (2) in Subparagraph (c)above, the "Change of
Control Value" shall equal the amount determined in clause (i), (ii) or (iii),
whichever is applicable, as follows: (i) the per share price offered to
shareholders of the Company in any such merger, consolidation, sale of assets or
dissolution transaction, (ii) the price pershare offered to shareholders of the
Company in any tender offer or exchange offer whereby a Corporate Change takes
place, or (iii) if such Corporate Change occurs other than pursuant to a tender
or exchange offer, the fair market value per share of the shares into which such
Options being surrendered are exercisable, as determined by the Committee as of
the date determined by the Committee to be the date of cancellation and
surrender of such Options. In the event that the consideration offered to
shareholders of the Company in any transaction described in this Subparagraph
(d) or Subparagraph (c) above consists of anything other than cash, the
Committee shall determine the fair cash equivalent of the portion of the
consideration offered which is other than cash. (e) Any adjustment provided for
in Subparagraphs (b) or (c) above shall be subject to any required
shareholderaction.
(f) Except as herein before expressly provided, the issuance by the Company
of shares of stock of any class or securities convertible into shares of stock
of any class, for cash, property, labor or services, upon direct sale, upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, and in any case whether or not for fair value, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number of
shares of Stock subject to Options theretofore granted or the purchase price per
share.
IX. Amendment or Termination of the Plan
The Board in its discretion may terminate the Plan at any time with respect
to any shares for which Options have not theretofore been granted. The Board
shall have the right to alter or amend the Plan or any part thereof from time to
time; provided, that no change in any Option theretofore granted may be made
which would impair the rights of theoptionee without the consent of such
optionee; and provided, further, that the Board may not make any alteration or
amendment which would materially increase the benefits accruing to participants
under the Plan, increase the aggregate number of shares which may be issued
pursuant to the provisions of the Plan, change the class of individuals eligible
to receive Options under the Plan or extend the term of the Plan, without the
approval of the shareholders of the Company.
SEAGULL ENERGY CORPORATION
1986 STOCK OPTION PLAN
(RESTATED)
I. History and Purpose of the Plan
The Seagull Energy Corporation 1986 Stock Option Plan (the "Plan") was
originally adopted by Seagull Energy Corporation, a Texas corporation (the
"Company"), on February3, 1986 and was approved by the shareholders of the
Company on May 13, 1986. The Plan is intended to provide a means whereby certain
employees of the Company and its subsidiaries may develop a sense of
proprietorship and personal involvement in the development and financial success
of the Company, and to encourage them to remain with and devote their best
efforts to the business of the Company, thereby advancing the interests of the
Company and its shareholders. Accordingly, the Company may grant to certain
employees the option ("Option") to purchase shares ofthe common stock of the
Company ("Stock"), as hereinafter set forth. Options granted under the Plan may
be either incentive stock options, within the meaning ofsection 422A(b) of the
Internal Revenue Code of 1986, as amended (the "Code"),("Incentive Stock
Options") or options which do not constitute Incentive Stock Options. On
September 20, 1988, the Company restated the Plan in the form of this Seagull
Energy Corporation 1986 Stock Option Plan (Restated) for the purpose of
incorporating certain amendments previously adopted with respect to the Plan
into the text of the Plan and for purposes of amending the Plan in certain
respects. The terms and provisions of this restatement of the Plan are effective
only with respect to Options granted from and after September 20, 1988 and
Options granted prior to such date shall continue to be governed by the terms
and provisions of the Plan (and amendments thereto) as in effect on September
20, 1988.
II. Administration
The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board"). Members of
the Committee shall not be eligible, and shall not have been eligible at any
time within one year prior to their appointment to the Committee, to participate
in the Plan or in any other stock, stock option or stock appreciation rights
plan of the Company or any of its affiliates ("Company Stock Plan"). The
Committee shall have sole authority to select the individuals who are to be
granted Options from among those eligible hereunder and to establish the number
of shares which may be issued under each Option. TheCommittee is authorized to
interpret the Plan and may from time to time adopt such rules and regulations,
consistent with the provisions of the Plan, as it may deem advisable to carry
out the Plan. All decisions made by the Committee in selecting the individuals
to whom Options shall be granted, in establishing the number of shares which may
be issued under each Option and in construing the provisions of the Plan shall
befinal.
III. Option Agreements
Each Option shall be evidenced by an Option Agreement and shall contain
such terms and conditions, and may be exercisable for such periods, as may be
approved by the Committee. The terms and conditions of the respective Option
Agreements need not be identical. Specifically, an Option Agreement may provide
for the surrender of the right to purchase shares under the Option in return for
a payment in cash or shares of Stock or a combination of cash and shares of
Stock equal in value to the excess of the fair market value of the shares with
respect to which the right to purchase is surrendered over the option price
therefor ("Stock Appreciation Rights"), on such terms and conditions as the
Committee in its sole discretion may prescribe; provided, that with respect to
Stock Appreciation Rights granted to employees who are subject to Section 16 of
the Securities Exchange Act of 1934 (the "1934 Act"), except as provided in
Subparagraph VIII(c) hereof, the Committee shall retain final authority (i) to
determine whether an optionee shall be permitted, or (ii) to approve an
electionby an optionee, to receive cash in full or partial settlement of Stock
Appreciation Rights. Moreover, an Option Agreement may provide for the payment
of the option price, in whole or in part, by the delivery of a number of shares
of Stock (plus cash ifnecessary) having a fair market value equal to such option
price. Finally, an Option Agreement may provide for cash less exercise by
permitting an Optionee to withhold from shares of Stock acquirable upon exercise
of such Option shares of Stock equal in value to all or a specified portion of
the Option Price; all on such terms and subject to such conditions as shall be
established from time to time by the Committee. For all purposes under the Plan,
the fair market value of a share of Stock on a particular date shall be equal to
the closing price of the Stock on the New York Stock Exchange Composite Tape on
that date, or if no prices are reported on that date, on the last preceding date
on which such prices of the Stock are so reported. Each Option and all rights
granted thereunder shall not be transferable other than by will or the laws of
descentand distribution, and shall be exercisable during the optionee's lifetime
only by the optionee or the optionee's guardian or legal representative.
IV. Eligibility of Optionee
Options may be granted only to individuals who are key employees (including
officers and directors who are also key employees) of the Company or any parent
orsubsidiary corporation (as defined in section 425 of the Code) of the Company
at the time the Option is granted. Options may be granted to the same individual
on more than one occasion. No Incentive Stock Option shall be granted to an
individual if, atthe time the Option is granted, such individual owns stock
possessing more than 10%of the total combined voting power of all classes of
stock of the Company or of its parent or subsidiary corporation, within the
meaning of section 422A(b)(6) of the Code, unless (i)at the time such Option is
granted the option price is at least 110% of thefair market value of the Stock
subject to the Option and (ii)such Option by its terms is not exercisable after
the expiration of five years from the date of grant. To the extent that the
aggregate fair market value (determined at the time the respective Incentive
Stock Option is granted) of stock with respect to which Incentive Stock Options
granted after 1986 are exercisable for the first time by an individual during
any calendar year under all incentive stock option plans of the Company and its
parent andsubsidiary corporations exceeds $100,000, such Incentive Stock Options
shall be treatedas options which do not constitute Incentive Stock Options. The
Committee shall determine, in accordance with applicable provisions of the Code,
Treasury Regulations and other administrative pronouncements, which of an
optionee's Incentive Stock Options will not constitute Incentive Stock Options
because of such limitation and shall notify the optionee of such determination
as soon as practicable after such determination.
V. Shares Subject to the Plan
The aggregate number of shares which may be issued under Options granted
under the Plan shall not exceed 300,000 shares of Stock. Such shares may consist
of authorized but unissued shares of Stock or previously issued shares of Stock
reacquired by the Company. Any of such shares which remain unissued and which
are not subject to outstanding Options at the termination of the Plan shall
cease to be subject to the Plan, but, until termination of the Plan, the Company
shall at all times make available a sufficient number of shares to meet the
requirements of the Plan. Should any Option here under expire or terminate prior
to its exercise in full, the shares theretofore subject to such Option may again
be subject to an Option granted under the Plan. The aggregate number of shares
which may be issued under the Plan shall be subjectto adjustment in the same
manner as provided in Paragraph VIII hereof with respect to shares of Stock
subject to Options then outstanding. Exercise of an Option in any manner,
including an exercise involving a Stock Appreciation Right, shall result in a
decrease in the number of shares of Stock which may thereafter be available,
both for purposes of the Plan and for sale to any one individual, by the number
of shares as to which the Option is exercised. Separate stock certificates shall
be issued by the Company for those shares acquired pursuant to the exercise of
an Incentive Stock Option and for those shares acquired pursuant to the exercise
of any Option which does not constitute an Incentive Stock Option.
VI. Option Price
The purchase price of Stock issued under each Option shall be determined by
the Committee, but in the case of an Incentive Stock Option, such purchase price
shall not be less than the fair market value of Stock subject to the Option on
the date the Option is granted.
VII. Term of Plan
The Plan became effective upon February 3, 1986, the date of its adoption
by the Board. Except with respect to Options then outstanding, if not sooner
terminated under the provisions of Paragraph IX, the Plan shall terminate upon
and no further Options shall be granted after the expiration of ten years from
the date of its adoption by the Board.
VIII. Recapitalization or Reorganization
(a) The existence of the Plan and the Options granted hereunder shall
notaffect in any way the right or power of the Board or the shareholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or
other change inthe Company's capital structure or its business, any merger or
consolidation of the Company, any issue of debt or equity securities ahead of or
affecting Stock or the rights thereof, the dissolution or liquidation of the
Company or any sale, lease, exchange or other disposition of all or any part of
its assets or business or any othercorporate act or proceeding.
(b) The shares with respect to which Options may be granted are shares of
Stock as presently constituted, but if, and whenever, prior to the expiration of
an Option theretofore granted, the Company shall effect a subdivision or
consolidation of shares of Stock or the payment of a stock dividend on Stock
without receipt of consideration by the Company, the number of shares of Stock
with respect to which such Option may thereafter be exercised (i)in the event of
an increase in the number of outstanding shares shall be proportionately
increased, and the purchase price per shareshall be proportionately reduced, and
(ii)in the event of a reduction in the number of outstanding shares shall be
proportionately reduced, and the purchase price per shareshall be
proportionately increased.
(c) If the Company recapitalizes or otherwise changes its capital
structure, thereafter upon any exercise of an Option theretofore granted the
optionee shall be entitled to purchase under such Option, in lieu of the number
of shares of Stock as to which such Option shall then be exercisable, the number
and class of shares of stockand securities to which the optionee would have been
entitled pursuant to the terms of the recapitalization if, immediately prior to
such recapitalization, the optionee had been the holder of record of the number
of shares of Stock as to which such Option is then exercisable. If (i) the
Company shall not be the surviving entity in any merger or consolidation (or
survives only as a subsidiary of an entity other than a previously wholly owned
subsidiary of the Company), (ii) the Company sells, leases or exchanges or
agrees to sell, lease or exchange all or substantially all of its assets to any
other person or entity (other than a wholly-owned subsidiary of the Company),
(iii) the Company is to be dissolved and liquidated, (iv) any person or entity,
including a "group" as contemplated by Section 13(d)(3) of the 1934 Act,
acquires or gains ownership or control (including, without limitation, power to
vote) of more than 40% of the outstanding shares of Stock, or (v) as a result of
or in connection with a contested election of directors, the persons who were
directors of the Company before such election shall cease to constitute a
majority of the Board (each such event is referred to herein as a"Corporate
Change"), then, upon the occurrence of any such Corporate Change, each Option
then outstanding shall become fully exercisable and effective as of a date
(selected by the Committee) within (a) ten days after the approval by the
shareholders of the Company of such merger, consolidation, sale, lease or
exchange of assets or dissolution or such election of directors or (b) thirty
days of such change of control, the Committee, acting in its sole discretion
without the consent or approval of any optionee, shall effect one or more of the
following alternatives, which may vary among individual optionees: (1) establish
a limited period of time on or before a specified date (beforeor after such
Corporate Change) fixed by the Committee during which such outstanding Options
may be exercised, after which specified date all unexercised Options and
allrights of optionees thereunder shall terminate, (2) require the mandatory
surrender tothe Company by selected optionees of some or all of the outstanding
Options held by such optionees as of a date, before or after such Corporate
Change, specified by the Committee, in which event the Committee shall thereupon
cancel such Options and pay to each optionee an amount of cash per share equal
to the excess of the amount calculated in Subparagraph (d) below (the "Change of
Control Value") of the shares subject to such Option over the exercise price(s)
under such Options for such shares, (3) make such adjustments to Options then
outstanding as the Committee deems appropriate to reflect such Corporate Change
(provided, however, that the Committee may determinein its sole discretion that
no adjustment is necessary to Options then outstanding) (4) provide that
thereafter upon any exercise of an Option theretofore granted the optionee shall
be entitled to purchase under such Option, in lieu of the number of shares of
Stock as to which such Option shall then be exercisable, the number and class of
shares of stock or other securities or property to which the optionee would have
been entitled pursuant to the terms of the agreement of merger, consolidation or
sale of assets and dissolution if, immediately prior to such merger,
consolidation or sale of assets and dissolution the optionee had been the holder
of record of the number of shares of Stock as to which such Option is then
exercisable.
(d) For the purposes of clause (2) in Subparagraph (c) above, the "Change
of Control Value" shall equal the amount determined in clause (i), (ii) or
(iii), whichever is applicable, as follows: (i) the per share price offered to
shareholders of the Company in any such merger, consolidation, sale of assets or
dissolution transaction, (ii) the price per share offered to shareholders of the
Company in any tender offer or exchange offer whereby a Corporate Change takes
place, or (iii) if such Corporate Change occurs other than pursuant to a tender
or exchange offer, the fair market value per shareof the shares into which such
Options being surrendered are exercisable, as determined by the Committee as of
the date determined by the Committee to be the date of cancellation and
surrender of such Options. In the event that the consideration offered to
shareholders of the Company in any transaction described in this Subparagraph
(d) or Subparagraph (c) above consists of anything other than cash, the
Committee shall determine the fair cash equivalent of the portion of the
consideration offered which is other than cash.
(e) Any adjustment provided for in Subparagraphs(b) or (c) above shall be
subject to any required shareholder action.
(f) Except as herein before expressly provided, the issuance by the Company
of shares of stock of any class or securities convertible into shares of stock
of any class, for cash, property, labor or services, upon direct sale, upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, and in any case whether or notfor fair value, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number of
shares of Stock subject to Options theretofore granted or the purchase price per
share.
IX. Amendment or Termination of the Plan
"The Board in its discretion may terminate the Plan at any time with
respect to any shares for which Options have not theretofore been granted. The
Board shall have the right to alter or amend the Plan or any part thereof from
time to time; provided, that no change in any Option theretofore granted may be
made which would impair the rights of the optionee without the consent of such
optionee; and provided, further, that the Board may not make any alteration or
amendment which would materially increase the benefits accruing to participants
under the Plan, increase the aggregate number of shares which may be issued
pursuant to the provisions of the Plan, change the class of individuals eligible
to receive Options under the Plan or extend the term of the Plan, without the
approval of the shareholders of the Company.
PURCHASE AND SALE AGREEMENT
Dated as of March 30, 1998
Between
SEAGULL ENERGY E&P INC., AS BUYER
and
The shareholders of BRG Petroleum, Inc.;
BRG 1998 Consolidated Limited Partnership, BRG 1997 Consolidated Limited
Partnership, BRG 1996-I Oil & Gas Limited Partnership, BRG 1996-II Oil & Gas
Income Fund Limited Partnership, BRG 1993-I Oil and Gas Limited Partnership, BRG
1992-I Oil & Gas Income Fund Limited Partnership, BRG 1990-II Oil and Gas
Limited Partnership and BRG 1989-II Oil & Gas Income Fund Limited Partnership;
and
The participants in the BRG 1997-I Oil and Gas Program,
AS SELLERS
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND INTERPRETATION....................................1
1.1 Definitions.................................................1
1.2 Interpretation.............................................12
ARTICLE II PURCHASE AND SALE; PURCHASE PRICE; EARNEST MONEY................12
2.1 Purchase and Sale..........................................12
2.2 Purchase Price; Earnest Money..............................13
2.3 Payment of Earnest Money...................................13
2.4 Allocation and Adjustment of Purchase Price................14
2.5 Purchase Price Adjustments.................................14
2.6 Calculation of Closing Statement...........................15
2.7 Adjusted Working Capital and Gas Balancing Reconciliation..16
ARTICLE III CLOSING........................................................17
3.1 Closing Date...............................................17
3.2 Sellers' Deliveries........................................17
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLERS........................18
4.1 Ownership of Shares; Organization and Authority............19
4.2 No Conflict................................................20
4.3 Organization and Capital Structure of BRG..................21
4.4 Subsidiaries...............................................21
4.5 Financial Statements.......................................22
4.6 Absence of Material Adverse Effect.........................22
4.7 Compliance with Agreements.................................23
4.8 Taxes......................................................24
4.9 Governmental Permits.......................................25
4.10 No Default.................................................25
4.11 Environmental Matters......................................25
4.12 Books and Records..........................................26
4.13 Oil and Gas Properties.....................................27
4.14 Compliance with Requirements of Laws.......................27
4.15 Payments...................................................27
4.16 Benefit Plans..............................................27
4.17 Litigation.................................................29
4.18 Insurance..................................................29
4.19 Gas Imbalances.............................................29
4.20 Public Utility Holding Company Act.........................30
4.21 Investment Company Act.....................................30
<PAGE>
4.22 Wells......................................................30
4.23 Condition of Equipment.....................................30
4.24 Evaluation Data............................................30
4.25 Interaffiliate Transactions and Relationships..............31
4.26 Well Status................................................31
4.27 Section 29 Status of Certain Properties....................31
4.28 Liabilities; Indebtedness..................................32
4.29 No Material Misstatements or Omissions.....................32
4.30 Bankruptcy.................................................32
4.31 Representations Apply to Subsidiaries of BRG...............32
4.32 Allocation of Purchase Price...............................32
4.33 BRG 1997-I Oil and Gas Program Funds.......................32
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER...........................32
5.1 Organization of Buyer......................................32
5.2 Authority of Buyer.........................................33
5.3 No Conflict................................................33
5.4 No Finder..................................................33
5.5 Investment Representation..................................33
5.6 Financial Ability..........................................33
ARTICLE VI ACTIONS PRIOR TO THE CLOSING DATE................................34
6.1 Investigation of the Company by Buyer......................34
6.2 Preserve Accuracy of Representations and Warranties........34
6.3 Consents to Third Parties; Governmental Approvals..........34
6.4 Excluded Assets............................................35
6.5 BRG .......................................................35
6.6 Covenants Regarding Employee Benefit Plan and Employees....36
6.7 Other Interim Covenants....................................36
6.8 Title Defects..............................................38
6.9 Audited Financials.........................................40
ARTICLE VII ADDITIONAL AGREEMENTS...........................................40
7.1 Access to Records after Closing............................40
7.2 Confidentiality Agreement..................................40
7.3 No Public Announcement.....................................41
7.4 Expenses and Sales Taxes...................................41
7.5 Further Assurances.........................................41
7.6 Change of Corporate Name...................................41
7.7 Indemnification of Sellers for Environmental Liabilities...42
7.8 Tax Returns; Payments and Refunds..........................42
7.9 Employee Relations and Benefits............................42
7.10 Release and Indemnification of Resigning
Officers and Directors...................................43
7.11 Insurance Coverage..........................................43
<PAGE>
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF PARTIES.................43
8.1 Conditions to Buyer's Obligations..........................43
8.2 Conditions to Sellers' Obligations.........................45
ARTICLE IX TERMINATION.....................................................46
9.1 Termination................................................46
9.2 Notice of Termination......................................46
9.3 Effect of Termination......................................46
ARTICLE X GENERAL PROVISIONS...............................................47
10.1 Survival of Representations, Warranties,
Covenants nad Agreemtns/Indemnities......................47
10.2 No Reliance................................................50
10.3 Notices....................................................50
10.4 Representation of Sellers by Sellers' Representative.......51
10.5 Successors and Assigns.....................................52
10.6 Entire Agreement; Amendments...............................52
10.7 Waivers....................................................53
10.8 Partial Invalidity.........................................53
10.9 Execution in Counterparts..................................53
10.10 Governing Law..............................................53
10.11 Certain Individuals........................................53
EXHIBIT A - Form of Conveyance, Assignment and Bill of Sale
Schedule 2.4 - Allocation of Purchase Price
Schedule 4.2 - No Conflict
Schedule 4.3 - Organization and Capital Structure of BRG
Schedule 4.5 - Financial Statements of BRG and the BRG Partnerships
Schedule 4.6 - Absence of Material Adverse Effect
Schedule 4.7 - Material Agreements
Schedule 4.8 - Taxes
Schedule 4.9 - Governmental Permits
Schedule 4.11 - Environmental Matters
Schedule 4.13 - Oil and Gas Properties
Schedule 4.14 - Compliance With Requirements of Laws
Schedule 4.15 - Payments
Schedule 4.16 - Benefit Plans
Schedule 4.17 - Litigation
Schedule 4.18 - Insurance
Schedule 4.19 - Gas Imbalances
Schedule 4.25 - Interaffiliate Transactions and Relationships
Schedule 4.26 - Plugging and Abandonment Obligations
<PAGE>
Schedule 4.27 - Section 29 Wells
Schedule 4.28 - Undisclosed Liabilities
Schedule 6.4 - Excluded Assets
Schedule 7.9 - Severance Plan
Schedule 10.1 - Principal Sellers
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT, dated as of March30, 1998, is between
Seagull Energy E&P Inc. ("Buyer"); and the shareholders of BRG Petroleum, Inc.,
an Oklahoma corporation ("BRG") listed on the signature page hereto (being
hereinafter collectively called the "BRG Shareholders"); BRG 1998 Consolidated
Limited Partnership, BRG 1997 Consolidated Limited Partnership, BRG 1996-I Oil &
Gas Limited Partnership, BRG 1996-II Oil & Gas Income Fund Limited Partnership,
BRG 1993-I Oil and Gas Limited Partnership, BRG 1992-I Oil & Gas Income Fund
Limited Partnership, BRG 1990-II Oil and Gas Limited Partnership and BRG 1989-II
Oil & Gas Income Fund Limited Partnership (being hereinafter collectively called
the "BRG Partnerships"); and the participants in the BRG 1997-I Oil and Gas
Program ("1997-I Program Participants") (BRG Shareholders, BRG Partnerships and
1997-I Program Participants being hereinafter collectively called "Sellers").
PRELIMINARY STATEMENTS
The BRG Shareholders are the owners, beneficially and of record, of all of
the issued and outstanding capital stock of BRG. The BRG Shareholders desire to
sell to Buyer, and Buyer desires to purchase from the BRG Shareholders, all of
the capital stock of BRG on the terms and subject to the conditions set forth
herein.
The BRG Partnerships each desire to sell to Buyer, and Buyer desires to
purchase from each of the BRG Partnerships, all of the oil and gas properties
and related assets of the BRG Partnerships (collectively, the "BRG Partnership
Properties," as more particularly described below) on the terms and subject to
the conditions set forth herein.
BRG, as the Program Administrator is the record owner of the interests
acquired on behalf of the 1997-I Program Participants in certain oil and gas
properties and related interests (collectively, the "1997-I Properties," as more
particularly described below). The 1997-I Program Participants desire to sell to
Buyer, and Buyer desires to purchase from the 1997-I Program Participants, the
1997-I Properties on the terms and subject to the conditions set forth herein.
Accordingly, in consideration of the mutual agreements hereinafter set
forth, Buyer and Sellers agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Definitions. In this Agreement, the following terms have the meanings
specified or referred to in this Section 1.1 and shall be equally applicable to
both the singular and plural forms.
<PAGE>
"Adjusted Working Capital" as of any date means the current assets less
current liabilities of BRG, any BRG Partnership, or any 1997-I Program
Participant on a consolidated basis (except that the balance sheets of BRG
Holding Company, inc. and BRG Production Company shall not be deemed to be part
of the BRG consolidated group for purposes of determining the Closing Adjusted
Working Capital) at such date determined in accordance with GAAP, except that
current assets will include amounts equal to (i) the estimate of the aggregate
of quantity of the crude oil attributable to BRG, the BRG Partnerships, or the
1997-I Program Participant, as the case may be, contained at such date in each
of the storage tanks in which production from the BRG Oil and Gas Properties or
the relevant BRG Partnership Properties or 1997-I Properties is stored pending
sale and/or transportation to the purchaser thereof multiplied by the price at
which the crude oil from each of such storage tanks is then being sold to such
purchaser, plus (ii) the amounts paid or payable to BRG in connection with
consummation of the sale of the stock of BRG Holding Company, Inc. and BRG
Production Company as contemplated by Section 6.4 and current liabilities will
include (i) the outstanding amount of all long-term debt (both the current and
long-term portions thereof at such date), (ii) the amounts necessary to pay all
state franchise taxes that are or will become payable by BRG and are
attributable to, or computed by reference to the income, operations, assets or
capital of BRG arising or existing during the period prior to and including the
Closing Date, (iii) the amounts paid or payable in respect of the BRG Options as
contemplated by Section 6.5, plus (iii) all Transaction Expenses paid or payable
on behalf of BRG, the BRG Partnerships or the 1997-I Program Participants, as
the case may be. The amount of the accrued federal, state and local tax
liability included in the current liabilities of BRG shall be determined after
taking into account the deductions arising by virtue of the amounts paid or
payable by BRG in respect of the BRG Options as set forth in Section 6.5 and the
gain realized by BRG in connection with the sale of the stock of BRG Holding
Company, Inc. and BRG Production Company and the gain allocated to BRG as the
general partner of each of the BRG Partnerships by virtue of the sale of the BRG
Partnership Properties. For purposes of this Agreement, the Adjusted Working
Capital of (i) each 1997-I Program Participant shall be limited to the assets
and liabilities which are directly attributable to his or her interests in the
1997-I Properties and the production and marketing activities conducted in
connection therewith and (ii) the BRG Partnerships shall be limited to the BRG
Partnership Properties and the liabilities directly attributable thereto and
production and marketing activities conducted in connection therewith.
"Accounting Firm" has the meaning specified in Section 2.7(c).
"Affiliate" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by or is under common control
with such Person.
"Benefit Plans" has the meaning specified in Section 4.16.
"Benefit Program or Agreement" has the meaning specified in Section
4.16(a).
"BRG" means BRG Petroleum, Inc., an Oklahoma corporation.
<PAGE>
"BRG Petroleum Corporation" has the meaning specified in Section 6.4.
"BRG Oil and Gas Properties" collectively means that portion of the BRG
Property which consists of Leases, Wells, Units and other interests in
Hydrocarbons prior to severance.
"BRG Option" has the meaning specified in Section 6.5.
"BRG Partnerships" has the meaning specified in the first paragraph of this
Agreement.
"BRG Partnership Properties" means (i) the interests in and to the Wells
described or referred to in Schedule 4.13, together with all of the BRG
Partnerships' respective rights, titles and interests in and to all property,
interests and rights incident or in any way relating to the Wells or which are
useful or appropriate in exploring for, developing, operating, producing,
treating, storing, marketing and transporting oil, gas and other minerals in,
under and that may be produced from the Wells, including but not limited to
contracts, agreements, rights-of-way, easements, licenses, permits and orders;
(ii) all of the BRG Partnerships' respective rights, titles and interests in and
to all physical property, including but not limited to wells, well and lease
equipment and surface equipment such as casing, tubing, connections, rods,
pipelines, gathering systems, compressors, separators, tanks, connections,
pumps, machinery, tools, materials, supplies, inventory, buildings and other
property and equipment of every kind, located upon or used in connection with
the Wells or the Leases relating thereto; (iii) without limiting and in addition
to the foregoing, all of the BRG Partnerships' respective rights, titles and
interests in and to the Wells and to the Leases and/or lands described or
referred to in Schedule 4.13 or relating to such Wells, and the physical
property thereon or used in connection therewith, even though such rights,
titles and interests be incorrectly or insufficiently described or referred to
in Schedule 4.13, and (iv) the additional assets and rights which are included
in the Adjusted Working Capital of the BRG Partnerships.
"BRG Property" means any and all real property (including, but not limited
to, surface estates and mineral fees and leaseholds), plant, building, facility,
structure, underground storage tank, personal property, equipment, unit, or
other asset owned, leased or operated by BRG or Charter Servicing Company as of
or prior to the Closing Date including without limitation the interests in
Leases, Units and Wells described or referred to in Schedule 4.13.
"BRG Shareholders" has the meaning specified in the first paragraph of this
Agreement.
"Buyer" has the meaning specified in the first paragraph of this Agreement.
<PAGE>
"Buyer Ancillary Agreements" means all agreements, instruments and
documents being or to be executed and delivered by Buyer under this Agreement or
in connection herewith.
"CERCLA" means the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. ss.ss. 9601 et seq.
"Closing" means the closing of the transfer of (i) the Shares from the BRG
Shareholders to Buyer, (ii) the BRG Partnership Properties from the BRG
Partnerships to Buyer, and (iii) the 1997-I Program Properties from the 1997-I
Program Participants to Buyer.
"Closing Adjusted Working Capital" has the meaning specified in Section
2.7(a).
"Closing Balance Sheet" has the meaning specified in Section 2.6.
"Closing Date" has the meaning specified in Section 3.1.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
"Common Stock" has the meaning specified in Section 4.3(b).
"Confidentiality Agreement" means the Confidentiality Agreement between
Buyer and BRG and delivered to BRG under cover of a transmittal letter dated
February 18, 1998.
"Contaminant" means any contaminant, waste, pollutant, petroleum waste,
used oil, hazardous or toxic substance or waste (as such terms are currently
defined in Environmental Laws), and any other substances that are regulated by
any Governmental Body under any Environmental Laws or any Hazardous Material.
"Court Order" means any judgment, order, award or decree of any foreign,
federal, state, local or other court or tribunal and any award in any
arbitration proceeding.
"Damages" shall mean the amount of any actual liability, loss, cost,
expense, claim, award or judgment incurred or suffered by any indemnified party
(after taking into account any insurance proceeds actually received) arising out
of or resulting from the indemnified matter, including reasonable Expenses
incidental to matters indemnified against, and the costs of enforcement of the
indemnity.
"Earnest Money" has the meaning specified in Section 2.2.
"Encumbrance" means any lien (statutory or other), claim, charge, security
<PAGE>
interest, mortgage, deed of trust, pledge, hypothecation, assignment,
conditional sale or other title retention agreement, preference, priority or
other security agreement or preferential arrangement of any kind or nature, and
any easement, encroachment, covenant, restriction, right of way, defect in or
cloud on title or other encumbrance of any kind.
"Environmental Encumbrance" means an Encumbrance in favor of any
Governmental Body for (i) any liability under any Environmental Law or (ii)
damages arising from, or costs incurred by such Governmental Body in response
to, a Release or threatened Release of a Contaminant into the environment.
"Environmental Laws" means all applicable Requirements of Laws derived from or
relating to foreign, federal, Indian, state and local laws and regulations
relating to or addressing the environment or occupational health or safety,
including but not limited to (i) CERCLA, OSHA and RCRA and any state equivalent
thereof and (ii) all applicable Requirements of Laws relating to the emission,
discharge, disposal, treatment, recycling, reclamation, permitting, manufacture,
processing, distribution, generation, storage, transportation, Release or
threatened Release of, or exposure of persons or property to, contaminants,
wastes, pollutants, petroleum wastes, used oil, hazardous or toxic substances or
wastes, or any other regulated substances.
"Environmental Liabilities" means any and all costs (including remedial,
removal, response, abatement, cleanup, investigative, and/or monitoring costs),
damages, liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise), settlements, expenses (including charges and assessments, and
expenses and costs of investigating, preparing or defending any action or
proceeding), liens, penalties, fines, taxes, prejudgment and post-judgment
interest, court costs and attorneys' fees incurred or imposed in connection with
an Environmental Matter or any Environmental Law, including, without limitation,
any of the foregoing which are incurred or imposed (i) pursuant to any
agreement, order, notice of responsibility, directive (including requirements
embodied in Environmental Laws), injunction, judgment or similar documents
(including settlements) attributable to or arising out of or under Environmental
Laws, or (ii) pursuant to any claim by a Governmental Body or other entity or
Person for personal injury, property damage, damage to natural resources,
remediation or response costs arising out of or attributable to any
Environmental Matter.
"Environmental Matters" means matters (i) resulting from or attributable to
actual, threatened, or alleged emissions, discharges, or releases of
Contaminants into ambient air, surface water, groundwater or land, (ii)
otherwise resulting from or attributable to the manufacture, generation,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of Contaminants or (iii) otherwise relating to any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and the regulations promulgated thereunder.
<PAGE>
"Evaluation Data" has the meaning specified in Section 4.24.
"Excluded Assets" means the assets of BRG as set forth on Schedule 6.4,
which will be transferred to BRG Holding Company, Inc. as contemplated by
Section 6.4.
"Expenses" means any and all expenses incurred in connection with
investigating, defending or asserting any claim, action, suit or proceeding
incident to any matter indemnified against hereunder (including court filing
fees, court costs, arbitration fees or costs, witness fees, and reasonable fees
and disbursements of legal counsel, investigators, expert witnesses,
consultants, accountants and other professionals).
"Financial Statements" has the meaning specified in Section 4.5. "GAAP"
means United States generally accepted accounting principles as in effect from
time to time.
"Good and Defensible Title" means, with respect to BRG's, the BRG
Partnerships' or the 1997-I Program Participants' respective ownership of
interests in a Lease, Unit or well, a record or beneficial title that (a)
entitles BRG, the BRG Partnerships or the 1997-I Program Participants, as the
case may be, to receive, throughout the life of a Lease, Unit or well, at least
the NRI for (i) the Wells shown in Schedule 4.13 (Producing Wells) and (ii) any
well drilled within the surface area of the Units or Leases shown in Schedule
4.13 (Undeveloped) as to the objective formation(s) identified, except for (x)
decreases in connection with those operations to which BRG or Buyer elects after
Closing or with Buyer's consent to become a non-consenting co-owner and (y)
decreases resulting from those wells where the owner is obligated to allow
others to make up past underproduction; (b) obligates either BRG, the BRG
Partnerships or the 1997-I Program Participants to bear, throughout the life of
a Lease, Unit or well (and the plugging, abandonment and salvage thereof), no
greater WI than the WI shown (i) for the Well in question on Schedule 4.13
(Producing Wells) or (ii) any well drilled within the surface area of the Unit
or Lease in question on Schedule 4.13 (Undeveloped) as to the objective
formation(s) identified, except increases in such WI that result in at least a
proportionate increase in BRG's, the BRG Partnerships', or the 1997-I Program
Participants' NRI for such Well or wells (including, without limitation,
increases resulting from co-owner non-consents) and increases that result from
contribution requirements with respect to defaulting co-owners, (c) is free and
clear of all Encumbrances except for Permitted Encumbrances, and (d) is held of
record by BRG. "Good and Defensible Title" means, with respect to any BRG Oil
and Gas Properties, BRG Partnership Properties or the 1997-I Properties which is
not a Lease attributable to a Well, a record title that (x) is free from
reasonable doubt as to all matters of law and fact such that a reasonably
prudent person, engaged in the ownership, development and operation of oil and
gas properties or assets (including gas plants, treating and measurement
facilities, and pipelines), with knowledge of all the facts and appreciation of
their legal significance, would be willing to accept title to such property
without a reduction in the value of such property and (y) is free and clear of
all Encumbrances, except for Permitted Encumbrances.
<PAGE>
"Governmental Body" means any foreign, federal, Indian, state, local or
other governmental authority or regulatory body.
"Governmental Permits" has the meaning specified in Section 4.9(a).
"Hazardous Material" means (a) any "hazardous substance," as defined by
CERCLA, (b) any "hazardous waste," as defined by the Resource Conservation and
Recovery Act, as amended, (c) any hazardous, dangerous or toxic chemical,
material, waste or substance, within the meaning of and regulated by any
Environmental Law, (d) any radioactive material, including any naturally
occurring radioactive material, and any source, special or byproduct material as
defined in 42 U.S.C. 2011 et seq. and any amendments or authorizations thereof,
(e) any asbestos-containing materials in any form or condition, or (f) any
polychlorinated biphenyls in any form or condition.
"Hydrocarbons" means oil, condensate, natural gas, casinghead gas and
liquid and gaseous hydrocarbons and any combination or mixture of the foregoing.
"Individual Shareholder Interests" has the meaning specified in Section
2.1.
"Insurance Policies" has the meaning specified in Section 4.18.
"IRS" means the Internal Revenue Service.
"Leases" means the interests in the oil and gas leases, oil, gas and
mineral leases, royalties, overriding royalties, production payments, net
profits interests, fee minerals, and other oil, gas or mineral interests
(together with contractual rights, options or interests in and to any of the
foregoing) owned by either BRG, the BRG Partnerships or the 1997-I Program
Participants, including those associated with the Wells listed in Schedule 4.13.
"Losses" means any and all losses, costs, obligations, liabilities,
settlement payments, awards, judgments, fines, penalties, damages, expenses,
deficiencies or other charges.
"Material Adverse Effect" means any condition, circumstance, change or
effect that is materially adverse to the assets (or title thereto or the value
thereof), business, condition (financial or otherwise), results of operations or
prospects of BRG, the BRG Partnerships, the 1997-I Program Participants (as a
group) or the BRG Property other than (i) general industry, economic or
regulatory conditions or developments that affect oil and gas companies or their
assets or operations, or (ii) conditions affecting oil and gas companies
generally in the areas in which BRG or any of the BRG Partnerships conduct their
operations or where their properties or assets, or the 1997-I Properties, are
located.
<PAGE>
"1997-I Program Participants" has the meaning specified in the first
paragraph of this Agreement.
"1997-I Properties" means (i) the interests in and to the Wells described
or referred to in Schedule 4.13 that are owned in the name of BRG on behalf of
the 1997-I Program Participants, together with all of the rights, titles and
interests in and to all property, interests and rights incident or in any way
relating to such Wells or which are useful or appropriate in exploring for,
developing, operating, producing, treating, storing, marketing and transporting
oil, gas and other minerals in, under and that may be produced from such Wells,
including but not limited to contracts, agreements, rights-of-way, easements,
licenses, permits and orders; (ii) all of the rights, titles and interests in
and to all physical property that is owned in the name of BRG on behalf of the
1997-I Program Participants, including but not limited to wells, well and lease
equipment and surface equipment such as casing, tubing, connections, rods,
pipelines, gathering systems, compressors, separators, tanks, connections,
pumps, machinery, tools, materials, supplies, inventory, buildings and other
property and equipment of every kind, located upon or used in connection with
such Wells or the Leases relating thereto; (iii) without limiting and in
addition to the foregoing, all of the rights, titles and interests in and to the
Wells and to the Leases and/or lands described or referred to in Schedule 4.13
or relating to such Wells that are owned in the name of BRG on behalf of the
1997-I Program Participants, and the physical property thereon or used in
connection therewith, even though such rights, titles and interests be
incorrectly or insufficiently described or referred to in Schedule 4.13, and
(iv) the additional assets and rights which are included in the Adjusted Working
Capital of the 1997-I Program Participants.
"NRI" means a fractional or percentage interest in and to all Hydrocarbons
produced from or allocated to (i) a Well described in Schedule 4.13 (Producing
Wells) or (ii) any well drilled within the surface area of a Unit or Lease
identified on Schedule 4.13 (Undeveloped) as to the objective formation(s)
identified, after deduction of all lessors' royalties, overriding royalties, and
other burdens and payments out of production that burden such fractional or
percentage interest in such Well.
"Offsite Environmental Liability" means an Environmental Liability arising
from or relating or attributable to either (i) Contaminants that have been
transported (whether for treatment, storage, disposal, reclamation, recycling or
otherwise), or that have otherwise migrated or been moved, from any BRG
Property, the BRG Partnership Properties or the 1997-I Properties to any other
property owned by a third party or (ii) a property previously owned by BRG, the
BRG Partnerships or the 1997-I Program Participants and conveyed or alienated by
BRG, the BRG Partnerships or the 1997-I Program Participants prior to Closing.
"Onsite Environmental Liability" means an Environmental Liability (i) that
arises from or relates or is attributable to BRG Property, the BRG Partnership
Properties or the 1997-I Properties as of the Closing Date, but (ii) is not an
Offsite Environmental Liability. <PAGE>
"Organizational Document" means the charter, bylaws, partnership agreement,
limited partnership agreement, certificate of limited partnership, certificate
of organization, regulations or other organizing or constituent document
governing the general affairs or existence of a corporation, partnership,
limited liability company or other entity.
"OSHA" means the Occupational Safety and Health Act, 29 U.S.C.ss.ss. 651
et seq.
"Permitted Encumbrances" means:
(i) liens for taxes and other governmental charges and assessments arising
in the ordinary course of business which are not yet due and payable,
or, if due, are being challenged in good faith by appropriate
proceedings and as to which adequate reserves have been established
and are reflected on the Financial Statements;
(ii) liens of landlords, carriers, warehousemen, mechanics and materialmen
and other like liens arising in the ordinary course of business for
sums not yet due and payable, and that will be paid or discharged in
the ordinary course of business or, if delinquent, that are being
contested in good faith in the ordinary course of business and as to
which adequate reserves have been established and are reflected on the
Financial Statements;
(iii)liens under operating agreements, unitization and pooling arrangements
and Hydrocarbon sales contracts that secure payment of amounts not yet
due and payable, or, if due, being contested in good faith in the
ordinary course of business, which are of a nature and scope customary
in connection with oil and gas drilling and producing operations and
as to which adequate reserves have been established and are reflected
on the Financial Statements;
(iv) easements, rights-of-way, servitudes, permits, surface leases, and
other rights in respect of surface operations that do not materially
interfere with BRG's, the BRG Partnerships' or the 1997-I Program
Participants' operations of the portion of the property burdened
thereby or otherwise have a Material Adverse Effect on the ownership,
operation, value or use of such Person's property;
(v) rights reserved to or vested in any Governmental Body to control or
regulate any of the Wells or Units and all applicable laws, rules,
regulations, and orders of such authorities so long as the same do not
(i) decrease BRG's, the BRG Partnerships' or the 1997-I Program
<PAGE>
Participants' NRI below the NRI shown in Schedule 4.13, or increase
BRG's, the BRG Partnerships' or the 1997-I Program Participants' WI
above the WI shown in Schedule 4.13, without at least a proportionate
increase in BRG's, the BRG Partnerships' or the 1997-I Program
Participants' NRI, (ii) create any liens in respect of such Wells or
Units, or (iii) otherwise have a Material Adverse Effect on the
ownership, operation, value or use of such Wells or Units.
(vi) any title defects that Buyer may have expressly waived in writing;
(vii)the terms and conditions of contracts and agreements relating to the
Leases, Wells and Units including, without limitation, exploration
agreements, gas sales contracts, processing agreements, farmins,
farmouts, operating agreements, and right-of-way agreements, to the
extent such terms and conditions (i) do not decrease BRG's, the BRG
Partnerships' or the 1997-I Program Participants' NRI below the NRI
shown in Schedule 4.13, or increase BRG's, the BRG Partnerships' or
the 1997-I Program Participants' WI above the WI shown in Schedule
4.13, without at least a proportionate increase in BRG's, the BRG
Partnerships' or the 1997-I Program Participants' NRI, (ii) are normal
and customary in the oil and gas industry, and (iii) do not have a
Material Adverse Effect on the ownership, operation, value or use of
such Leases, Wells or Units;
(viii) royalties, overriding royalties, net profits interests, production
payments, reversionary interests, and similar interests that do not
decrease BRG's, the BRG Partnerships' or the 1997-I Program
Participants' NRI below the NRI shown in Schedule 4.13, or increase
BRG's, the BRG Partnerships' or the 1997-I Program Participants' WI
above the WI shown in Schedule 4.13, without at least a proportionate
increase in the owner's NRI;
(ix) conventional rights of reassignment requiring notice to the holders of
the rights prior to surrendering or releasing a Lease; and
(x) consents to assignment and preferential rights to purchase any or all
of the BRG Property, the BRG Partnership Properties or the 1997-I
Properties so long as (a) any required consents or waivers are
obtained from the appropriate Persons prior to Closing, (b) the
appropriate time period for asserting such rights, if any, has expired
without an exercise of such rights prior to Closing, or (c) such
consents or rights are not triggered or put into effect as a result of
the transactions provided for in this Agreement.
<PAGE>
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization or Governmental Body.
"Post-Closing Taxable Period" means (i) any taxable period beginning after
the Closing Date and (ii) with respect to any taxable period beginning on or
before the Closing Date and ending after the Closing Date, the portion of such
taxable period that is after the Closing Date.
"Pre-Closing Taxable Period" means all or a portion of (i) any taxable
period up to and including the Closing Date or (ii) any taxable period with
respect to which the Tax is computed by reference to Tax items, assets, capital
or operations of BRG or any BRG Partnership arising on or before, or existing as
of, the Closing Date.
"Purchase Price" has the meaning specified in Section 2.2.
"RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C. ss.ss.
6901 et seq.
"Release" means any release, spill, emission, leaking, pumping, pouring,
emitting, emptying, injection, deposit, disposal, discharge, dispersal,
escaping, leaching, dumping (including the abandonment or discarding of barrels,
containers, and other closed receptacles containing any Contaminant), or
migration of a Contaminant into the environment or into or out of any BRG
Property, the BRG Partnership Properties or the 1997-I Properties, including the
movement of Contaminants through or in the air, soil, surface water,
groundwater, BRG Property, the BRG Partnership Properties or the 1997-I
Properties.
"Remedial Action" means actions required under Environmental Laws to (i)
clean up, remove, treat or in any other way address Contaminants in the indoor
or outdoor environment, (ii) prevent the Release or threatened Release or
minimize the further Release of Contaminants or (iii) investigate and determine
if a remedial response is needed and to design such a response and post-remedial
investigation, monitoring, operation and maintenance and care.
"Requirements of Laws" means (i) any foreign, federal, Indian, state and
local laws, statutes, regulations, rules, codes or ordinances enacted, adopted,
issued or promulgated by any Governmental Body, (ii) any injunctions, judgments,
orders, decrees, or rulings of any court or Governmental Body, and (iii) common
law, including, in each case, any such requirements of laws pertaining to
electrical, building, zoning, subdivision, land use, environmental, or
occupational safety and health requirements, in all cases as currently enacted,
interpreted, enforced or implemented by the Governmental Bodies having
jurisdiction thereunder. <PAGE>
"Section 29 Well" has the meaning specified in Section 4.27.
"Sellers" has the meaning specified in the first paragraph of this
Agreement.
"Sellers Ancillary Agreements" means all agreements, instruments and
documents being or to be executed and delivered by the Sellers under this
Agreement or in connection herewith.
"Sellers' Representative" has the meaning specified in Section 10.4.
"Shares" means all of the issued and outstanding Common Stock of BRG.
"Subsidiary Transfer" has the meaning specified in Section 6.4.
"Tax" (and, with correlative meaning, "Taxes" and "Taxable") shall mean any
federal, Indian, state, local or foreign income, gross receipts, property,
sales, use, license, excise, franchise, employment, payroll, withholding,
alternative or add-on minimum, ad valorem, value added, transfer or excise tax,
or any other tax, custom, duty, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest or penalty, imposed by
any Governmental Body.
"Tax Return" means any return, report or similar statement (including any
attached schedules), required to be filed with respect to any Tax including any
information return, claim for refund, amended return or declaration of estimated
Tax.
"Transaction Expenses" has the meaning specified in Section 7.4.
"Units" means (i) all unitization, communication, and pooling agreements
and orders covering the lands subject to the Leases, or any portion thereof, and
the units and pooled or communitized areas created thereby, and (ii) all
existing or projected future units and pooled or communitized areas, including
those described in, or associated with the Wells listed in, Schedule 4.13.
"Wells" means wells for the production of Hydrocarbons which are listed in
Schedule 4.13.
"WI" means a fraction or percentage of the costs and expenses associated
with the maintenance, exploration, development, operation and abandonment of the
BRG Oil and Gas Properties, the BRG Partnership Properties or the 1997-I
Properties as it applies to a (i) Well described in Schedule 4.13 (Producing
Wells) or (ii) any well drilled within the surface area of a Unit or Lease
identified on Schedule 4.13 (Undeveloped) as to the objective formation(s)
identified. <PAGE>
1.2 Interpretation. As used in this Agreement, the word "including" means
without limitation, the word "or" is not exclusive and the words "herein",
"hereof", "hereby", "hereto" and "hereunder" refer to this Agreement as a whole.
Unless the context otherwise requires, references herein: (i) to Articles,
Sections, Exhibits and Schedules mean the Articles and Sections of and the
Exhibits and Schedules attached to this Agreement; (ii) to an agreement,
instrument or other document means such agreement, instrument or other document
as amended, supplemented and modified from time to time to the extent permitted
by the provisions thereof and by this Agreement; and (iii) to a statute means
such statute as amended from time to time and includes any successor legislation
thereto. The Schedules and Exhibits referred to herein shall be construed with
and as an integral part of this Agreement to the same extent as if they were set
forth verbatim herein. Titles to Articles and headings of Sections are inserted
for convenience of reference only and shall not be deemed a part of or to affect
meaning or interpretation of this Agreement. References herein to the knowledge
of a party or matters or information known to a party mean the actual knowledge
or conscious awareness, after reasonable investigation, of such party or a
director or an officer of such party or a direct or indirect subsidiary of such
party or a manager or employee of such party or a direct or indirect subsidiary
of such party in charge of a discrete business area or function having
responsibility for the referenced matter. References herein to BRG's knowledge
shall include the knowledge of each of the Sellers who has signed this Agreement
personally (as opposed to signing it by an attorney-in-fact).
ARTICLE II
PURCHASE AND SALE; PURCHASE PRICE; EARNEST MONEY
2.1 Purchase and Sale. Upon the terms and subject to the conditions of this
Agreement, at the Closing, the following transactions shall occur, in the
sequence set forth below:
(a) First, the BRG Partnerships shall sell and convey to Buyer, and
Buyer shall purchase from the BRG Partnerships, the BRG Partnership
Properties and the 1997-I Program Participants shall sell and convey to
Buyer, and Buyer shall purchase from the 1997-I Program Participants, the
1997-I Properties;
(b) Second, immediately following the foregoing transaction, BRG shall
transfer as a capital contribution to BRG Holding Company, Inc. all of its
rights, obligations and liabilities as a general partner of the BRG
Partnerships (less and except any proceeds distributed or distributable to
such general partner in connection with the sales described in Section
2.1(a) above) and, in consideration for such contribution, BRG Holding
Company, Inc. shall assume all of BRG's obligations and liabilities
(whether attributable to the time period prior to or after the
contribution) arising from its serving as a general partner of the BRG
Partnerships;
<PAGE>
(c) Third, immediately following the foregoing transactions, BRG and
BRG Petroleum Corporation shall consummate the Subsidiary Transfer
described in Section 6.4; and
(d) Fourth, immediately following the foregoing transactions, the BRG
Shareholders shall sell, transfer, assign, convey and deliver to Buyer, and
Buyer shall purchase from the BRG Shareholders, the Shares, free and clear
of all Encumbrances;
It is understood and agreed that certain of the BRG Shareholders own
interests in certain of the BRG Oil and Gas Properties and such interests are
not being sold hereto but are to be retained by such BRG Shareholders (the
"Individual Shareholder Interests").
2.2 Purchase Price; Earnest Money. Upon the terms and subject to the
conditions of this Agreement and the adjustment provided for in Section 2.5
hereof, the Buyer shall pay to Sellers an aggregate of $102,000,000 (the
"Purchase Price") for the Shares, the BRG Partnership Properties and the 1997-I
Properties, to be allocated and paid as provided in Schedule 2.4 below.
Contemporaneous with Buyer's execution of this Agreement, Buyer shall pay the
sum of $1,000,000 (the "Earnest Money") to Sellers' Representative (as defined
in Section 10.4) for the benefit of Sellers. In the event the Closing occurs,
the Earnest Money shall be applied upon the Purchase Price but held and
distributed in accordance with Section 2.3, or if the Closing does not occur,
the Earnest Money shall be paid in accordance with Section 2.3. The Purchase
Price, less the Earnest Money, and as adjusted pursuant to Sections 2.4 and 2.5,
shall be payable in immediately available funds at Closing as specified by the
Sellers' Representative and shall be held and distributed by the Sellers'
Representative to the Sellers in accordance with the allocation set forth in
Schedule 2.4. Sellers agree that Buyer shall have no responsibility or liability
for the distribution of the adjusted Purchase Price by Sellers' Representative.
As further consideration, the Buyer will assume and agree to pay all of the
liabilities, obligations, indebtedness and commitments of each of the BRG
Partnerships and 1997-I Program Participants to the extent specifically included
in the Adjusted Working Capital of such BRG Partnership or 1997-I Program
Participant calculated for purposes of Section 2.5 hereof in accordance with the
allocation set forth in Schedule 2.4.
2.3 Payment of Earnest Money. Upon its receipt, the Sellers' Representative
shall deposit the Earnest Money in a segregated account (which may be interest
paying) and shall pay out and distribute it only in accordance with this Section
2.3. In the event Buyer breaches this Agreement by failing or refusing to close
the sale contemplated hereby on the Closing Date and provided that the
conditions contained in this Agreement to which the duties and obligations of
Buyer are subject as set forth in Section 8.1 shall have been fulfilled in all
material respects and not waived by Buyer, Sellers shall retain the Earnest
Money as liquidated damages in lieu of all other damages (and as Sellers' sole
remedy in such event). The parties hereby acknowledge that the extent of damages
to Sellers occasioned by such failure or refusal by Buyer would be impossible or
<PAGE>
extremely impractical to ascertain and that the amount of the Earnest Money is a
fair and reasonable estimate of such damages under the circumstances. In the
event the Closing does not occur and the Earnest Money is not applied pursuant
to Section 2.2 or retained pursuant to the foregoing provisions of this Section
2.3, the Earnest Money shall be returned to Buyer without interest. In the event
the Closing occurs, Sellers' Representative will retain the Earnest Money in the
segregated account until such time as the Adjusted Working Capital
reconciliation contemplated by Section 2.7 has been completed and the final
Closing Adjusted Working Capital has been determined. If, as a result of such
determination, any amount is owing to Buyer, Sellers' Representative shall pay
such amount to Buyer on behalf of Sellers and shall distribute the balance of
the Earnest Money to the Sellers as appropriate.
2.4 Allocation and Adjustment of Purchase Price. The allocation of the
Purchase Price for the Shares, the BRG Partnership Properties of each BRG
Partnership and the 1997-I Properties being acquired by Buyer, from Sellers
shall be as set forth in Schedule 2.4. Sellers and Buyer agree that they will
not take any position inconsistent with such allocation in preparing all Tax
Returns and reports to Governmental Bodies. Sellers and Buyer shall duly prepare
and timely file such reports and information returns as may be required under
Section 1060 of the Code and any corresponding or comparable provisions of
applicable foreign, state and local Tax laws to report the allocation of the
Purchase Price. The Purchase Price is based on all of the Shares, the BRG
Partnership Properties owned by all BRG Partnerships and the interests of all
1997-I Program Participants in the 1997-I Properties. Should any of the BRG
Partnership Properties or the 1997-I Properties not be included in the purchase
and sale hereunder because the requisite approvals of the limited partners in
any of the BRG Partnerships or any of the 1997-I Program Participants are not
obtained and Buyer agrees in writing to waive the condition to closing set forth
in Section 8.1(f), then the Purchase Price shall be decreased by the amount of
such property not included in the purchase and sale as such amount is set forth
in Schedule 2.4.
2.5 Purchase Price Adjustments. At Closing the aggregate Purchase Price
payable to the BRG Shareholders for the Shares, to each of the BRG Partnerships
for the BRG Partnership Properties and to each of the 1997-I Program
Participants for his or her interests in the 1997-I Properties shall be adjusted
as follows:
(a) upward by the amount of the positive Adjusted Working Capital
attributable to BRG, the BRG Partnership or the 1997-I Program Participant,
as the case may be, as of the Closing Date, or downward by the amount of
the negative Adjusted Working Capital attributable to BRG, each of the BRG
Partnerships or the 1997-I Program Participant, as the case may be, as of
such date;
(b) downward by the aggregate Defect Value of all uncured Title
Defects determined in accordance with Section 6.8 below if and to the
extent that such aggregate Defect Value (as offset by the aggregate value
of any increase in the NRI of any Well/objective formation(s) listed on
Schedule 4.13 because the actual NRI of such Well/objective formation(s) is
determined to be greater than the NRI indicated therefor on Schedule 4.13)
<PAGE>
exceeds $100,000, and upward by an amount equal to the aggregate value of
any increase in the NRI of any Well/objective formation(s) listed on
Schedule 4.13 because the actual NRI of such Well/formation(s) is
determined to be greater than the NRI indicated therefor on Schedule 4.13,
if and to the extent that such aggregate value (as offset by the aggregate
Defect Value of all uncured Title Defects determined in accordance with
Section 6.8 below) exceeds $100,000; and
(c) downward by the amount of $1.00 per Mcf to the extent of any net
gas overproduction attributable to the BRG Oil & Gas Properties, BRG
Partnership Properties of any BRG Partnership or all of the 1997-I
Properties as a group as of the Closing Date, and upward by the amount of
$1.00 per Mcf to the extent of any net gas underproduction attributable to
the BRG Oil & Gas Properties, BRG Partnership Properties of any BRG
Partnership or the 1997-I Properties, as a group, as of the Closing Date.
After taking into account the foregoing adjustments, the aggregate Purchase
Price payable to the BRG Shareholders shall then be reduced by the amount, if
any, paid or payable by BRG to the holders of outstanding options to purchase
Shares as contemplated by Section 6.5 hereof. The per share price payable for
the Shares after the adjustments provided for herein shall be determined as
follows:
(y) The aggregate Purchase Price payable for the Shares after taking
into account the adjustment provided for in the first sentence of this
Section 2.5 shall be increased by an amount equal to the total purchase
price that would be payable by the holders of all of the options referred
to in Section 6.5 upon exercise of all of the options for the total number
of Shares subject thereto.
(z) The amount determined in accordance with subparagraph (y) above
shall then be divided by an amount equal to the total number of Shares that
would be issued upon exercise of all of such options for the full number of
Shares covered thereby plus the total number of Shares that are issued and
outstanding on the Closing Date. The resulting amount shall be the per
share Purchase Price paid to the BRG Shareholders for each of the Shares
purchased pursuant to this Agreement.
2.6 Calculation of Closing Statement. On the day that is two (2) business
days prior to the date scheduled for Closing, Sellers shall furnish to Buyer a
pro forma consolidated balance sheet of BRG (provided that the subsidiaries of
BRG being sold pursuant to Section 6.4 hereof shall not be deemed part of the
BRG consolidated group and will be shown separately), balance sheets reflecting
the Adjusted Working Capital of each of the BRG Partnerships and a balance sheet
reflecting the Adjusted Working Capital of the BRG 1997-I Oil and Gas Program to
be determined for Purchase Price adjustments (each, a "Closing Balance Sheet")
at the date scheduled for Closing, certified by Sellers' Representative as
having been prepared in good faith using the best information then available. On
<PAGE>
the day that is one business day prior to the Closing, Sellers and Buyer will
cooperatively prepare a Closing statement listing each of the Purchase Price
adjustments to be effected at the Closing pursuant hereto and the estimated
Purchase Price after such Adjustments. Such estimate, less the Earnest Money,
shall be paid by Buyer to Sellers at Closing in accordance with Section 2.2
above.
2.7 Adjusted Working Capital and Gas Balancing Reconciliation.
(a) Within the period ending ninety (90) days after the Closing Date,
Buyer shall furnish to Sellers' Representative (i) a Closing Balance Sheet
of BRG, of each of the BRG Partnerships and of the 1997-I Oil and Gas
Program, together with a calculation of the actual Adjusted Working Capital
for each determined for Purchase Price adjustments (the "Closing Adjusted
Working Capital") and (ii) a statement of the net gas overproduction or
underproduction for BRG, each of the BRG Partnerships and the 1997-I
Properties, each certified by the chief financial officer of the Buyer as
having been prepared based upon the best information reasonably available.
Sellers' Representative shall have such access to the offices, records,
files, books of account and other information of BRG and the Buyer as may
be reasonably necessary to audit and verify the information set out on the
balance sheets and gas production statements furnished by Buyer. Buyer
shall cause its and BRG's personnel to reasonably assist Sellers'
Representative in conducting such audit. Upon completion of such audit,
Sellers' Representative and Buyer shall meet and attempt to reach agreement
on the actual Adjusted Working Capital of each as of the date of such
balance sheet and as to the accuracy of the gas production statements. Any
such agreement shall be evidenced by a written memorandum of agreement
executed by Sellers' Representative and Buyer and shall be final,
conclusive and binding on the parties.
(b) If within 30 days after receipt by Sellers' Representative of the
Closing Balance Sheet or the gas production statements furnished by Buyer
pursuant to (a) above, the parties are unable to reach agreement on the
actual amount of the Adjusted Working Capital or gas overproduction or
underproduction figures, then (i) if the parties so agree, the period for
attempting to reach agreement shall be extended for an additional specified
period, or (ii) if the parties cannot or do not choose to agree on an
extension, the amount of the Adjusted Working Capital or the gas net
overproduction or underproduction shall be determined pursuant to
subsection (c) of this Section 2.7.
(c) Buyer shall submit to Sellers' Representative the names of two
national independent public accounting firms, neither of which shall have
been engaged by Sellers or the Buyer during the three-year period ending on
the Closing Date. Sellers' Representative shall select one of said firms by
written notice to Sellers within three business days after receipt of
Buyer's nomination. The independent public accounting firm selected by
Sellers' Representative (the "Accounting Firm") shall be engaged jointly by
Buyer and Sellers' Representative and shall meet with representatives of
Buyer and Sellers' Representative and his representatives and be apprised
of their respective calculations of the Closing Adjusted Working Capital
and the gas overproduction or underproduction. The Accounting Firm then
shall make such independent study as it shall deem appropriate to
determine, as nearly as possible, the actual Closing Adjusted Working
<PAGE>
Capital or gas overproduction or underproduction. Sellers' Representative
and Buyer shall make available to the Accounting Firm all information
reasonably requested by the Accounting Firm to make such determination.
Said determination when made shall be conveyed to Sellers' Representative
and Buyer in writing and shall be final, conclusive and binding on the
parties with respect to such issue. All fees and expenses charged by the
Accounting Firm in connection with the above-described engagement and the
costs and expenses of any audit performed pursuant to subparagraph 2.7(a)
above, shall be paid by the party whose calculation of the Closing Adjusted
Working Capital or gas overproduction or underproduction originally
submitted to the Accounting Firm bears the greatest difference from the
Closing Adjusted Working Capital or gas overproduction or underproduction
determined by the Accounting Firm.
(d) Promptly after the Closing Adjusted Working Capital or net gas
overproduction or underproduction is determined by agreement of the parties
pursuant to (b) above or by the Accounting Firm pursuant to (c) above, a
revised Closing statement shall be prepared with the only changed entry
being the adjustment for Closing Adjusted Working Capital or the net gas
overproduction or underproduction, as the case may be. Promptly thereafter
the party in whose favor such changed entry is made shall be paid by the
other party the amount of the change, to the same end as if the revised
Closing statement had been the Closing statement upon which the payments at
Closing were based.
ARTICLE III
CLOSING
3.1 Closing Date. The Closing shall take place at 10:00 A.M., local time,
on June 1, 1998, or such other date as may be agreed upon by Buyer and Sellers
at the offices of BRG, 7134 South Yale, Suite 600, Tulsa, Oklahoma 74136, or at
such other place or at such other time as shall be agreed upon by Buyer and
Sellers. The time and date on which the Closing is actually held are sometimes
referred to herein as the "Closing Date".
3.2 Sellers' Deliveries. At the Closing, Sellers shall deliver to Buyer all
of the following:
(a) Copy of the certificate of incorporation of BRG certified as of a
recent date by the Secretary of State of the State of Oklahoma;
(b) Certificate of good standing of BRG issued as of a recent date by
the Secretary of State of the State of Oklahoma;
<PAGE>
(c) Certificate of the secretary or an assistant secretary of BRG,
dated the Closing Date, in form and substance reasonably satisfactory to
Buyer, as to (i) no amendments to the certificate of incorporation of BRG
other than as attached and (ii) the By-laws of BRG, together with all
amendments thereto;
(d) All consents, waivers or approvals obtained by the Sellers or BRG
with respect to the consummation of the transactions contemplated by this
Agreement, including without limitation, evidence of (i) the requisite
approval of the limited partners of each of the BRG Partnerships (ii) the
requisite approval of each of the participants in the 1997-I Program, and
(iii) any required consents or waivers of preferential purchase rights
applicable to the transfer of assets by the BRG Partnerships and the 1997-I
Program Participants.
(e) The certificates contemplated by Sections 8.1(a) and 8.1(b), duly
executed by Sellers' Representative;
(f) A signed resignation by each of the directors and officers of BRG
and terminations of all powers of attorney granted by BRG;
(g) The Organizational Documents of BRG and the books of minutes of
meetings of the boards of directors, committees thereof, shareholders,
managers, management committees and other similar records of BRG certified
as true and correct by the secretary or assistant secretary of BRG;
(h) Certificates representing the Shares duly endorsed for transfer to
Buyer or with duly executed stock powers attached;
(i) The entities/persons included within the group comprising Sellers
that own interests in the BRG Partnership Properties and the 1997-I
Properties shall execute and deliver a Conveyance, Assignment and Bill of
Sale in substantially the form set forth in Exhibit A attached hereto and
made a part hereof in as many counterparts as may be required to convey the
beneficial ownership of such properties to BRG;
(j) The BRG Partnerships and the 1997-I Program Participants shall
deliver possession of the BRG Partnership Properties and the 1997-I
Properties, respectively, to Buyer;
(k) An executed statement described in Treasury Regulation ss.
1.1445-2(b)(2) from or on behalf of each party constituting Sellers
certifying that such party Seller is not a foreign person within the
meaning of the Code;
(l) A copy of the executed stock purchase agreement entered into by
BRG pursuant to Section 6.4; and
<PAGE>
(m) A copy of the executed form of assignment and assumption agreement
or other instrument referred to in Section 8.1(g).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS
As an inducement to Buyer to enter into this Agreement and to consummate
the transactions contemplated hereby, each of the Persons that make up Sellers,
severally, but not jointly, represents and warrants to Buyer (i) if such Seller
is a BRG Shareholder, as to himself/herself/itself, BRG and his/her/its Shares,
(ii) if such Seller is a BRG Partnership, as to such partnership and such
partnership's assets , or (iii) if such Seller is a 1997-I Program Participant,
as to himself/herself/itself and its interests in the 1997-I Properties, as
follows:
4.1 Ownership of Shares; Organization and Authority.uthority
(a) Each of the BRG Shareholders is the owner, free and clear of any
lien, charge or Encumbrance, of the number of Shares set opposite his or
her name in Schedule 2.4 and each has full right and authority to transfer
the Shares to Buyer. Schedule 2.4 also reflects each holder of the
outstanding BRG Options and the amounts payable to such holder as
contemplated by Section 6.5. None of the BRG Shareholders is a party to any
option, warrant, purchase right, or other contract or commitment (other
than this Agreement) that could require him or her to sell, transfer, or
otherwise dispose of any Shares. None of the BRG Shareholders is a party to
any voting trust, proxy, or other agreement or understanding with respect
to the voting of any of the Shares. Upon the consummation of the
transaction described herein, Buyer will have good and valid title to the
Shares free and clear of all liens, charges and Encumbrances and the Shares
will be validly issued, fully paid and nonassessable.
(b) Each of the BRG Partnerships is a limited partnership duly
organized, validly existing and in good standing under the laws of the
State of Oklahoma and is duly qualified to do business and is in good
standing in each jurisdiction in which the nature of its business
activities or its ownership or leasing of property makes such qualification
necessary and in which the failure to qualify would not or could not
reasonably be expected to have a Material Adverse Effect. Each of the BRG
Partnerships has full power and authority to own or lease and to operate
and use its properties and to carry on its business as now conducted. True
and correct copies of each of the partnership agreements of the BRG
Partnerships, as amended to date, have been delivered to Buyer.
(c) Each of the BRG Partnerships has full power and authority to
execute, deliver and perform this Agreement and all of the Sellers
<PAGE>
Ancillary Agreements. The execution, delivery and performance of this
Agreement and the Sellers Ancillary Agreements by the BRG Partnerships have
been duly authorized and approved by all requisite action on the part of
the BRG Partnerships, subject to the requirement that this Agreement be
approved by the limited partners of each BRG Partnership. Each Person
executing this Agreement as attorney in fact for a BRG Shareholder or a
1997-I Program Participant has the full power and authority to execute this
Agreement and any of the Sellers Ancillary Agreements on behalf of such
party. This Agreement has been duly authorized, executed and delivered by
each of Sellers and, subject to the requirement that this Agreement be
approved by the limited partners of each BRG Partnership in accordance with
the terms of its partnership agreement, is the legal, valid and binding
obligation of each of Sellers enforceable in accordance with its terms.
Each of the Sellers Ancillary Agreements has been duly authorized by each
of Sellers and upon execution and delivery by each of Sellers who is a
party thereto will be a legal, valid and binding obligation of each of
Sellers enforceable in accordance with its terms.
(d) BRG has full power and authority to execute, deliver and perform
this Agreement and all of the Sellers Ancillary Agreements as Program
Administrator and Attorney-In-Fact for the 1997-I Program Participants
under the terms of the BRG 1997-I Oil and Gas Program Agreement. This
Agreement has been duly authorized, executed and delivered by BRG as
Program Administrator and Attorney-In-Fact for the 1997-I Program
Participants and is the legal, valid and binding obligation of the 1997-I
Program Participants enforceable in accordance with its terms (subject to
normal equitable principles and subject to bankruptcy, insolvency,
fraudulent conveyance and similar laws affecting the rights of creditors),
and upon execution and delivery by BRG as Program Administrator and
Attorney-In-Fact for the 1997-I Program Participants will be a legal, valid
and binding obligation of the 1997-I Program Participants enforceable in
accordance with its terms (subject to normal equitable principles and
subject to bankruptcy, insolvency, fraudulent conveyance and similar laws
affecting the rights of creditors).
(e) BRG Holding Company, Inc. is a corporation duly organized, validly
existing and in good standing under the laws of the State of Oklahoma and
it has full power and authority to own or lease and to operate and use its
properties and to carry on its business as now conducted and to become and
serve as the substitute general partner of the BRG Partnerships. Neither
the consummation of any of the transactions contemplated hereby nor the
substitution of or service by BRG Holding Company, Inc. as a general
partner of the BRG Partnerships will conflict with, result in a breach of
the terms, conditions or provisions of, or constitute a default, an event
of default or an event creating rights of acceleration, termination or
cancellation or a loss of rights under, or result in the creation or
imposition of any Encumbrance upon any of the assets or properties of BRG
Holding Company, Inc. under (i) the Organizational Documents of BRG Holding
Company, Inc., (ii) any note, instrument, agreement, mortgage, lease,
license, franchise, permit or other authorization, right, restriction or
obligation to which BRG Holding Company, Inc. is a party or any of its
<PAGE>
assets or properties or by which BRG Holding Company, Inc. is bound, (iii)
any Court Order to which BRG Holding Company, Inc. is a party or any of its
assets or properties or by which it is bound, or (iv) any Requirements of
Laws affecting BRG Holding Company, Inc. or its assets or properties; or
require the approval, consent, authorization, order or act of, or the
making by BRG Holding Company, Inc. of any declaration, filing or
registration with, any Person or court.
4.2 No Conflict. Except as set forth in Schedule 4.2, neither (i) the
execution and delivery of this Agreement or any of the Sellers Ancillary
Agreements to which it is a party, (ii) the consummation of any of the
transactions contemplated hereby or thereby nor (iii) compliance with or
fulfillment of the terms, conditions and provisions hereof or thereof will:
(a) violate or conflict with, result in a breach of the terms,
conditions or provisions of, or constitute a default, an event of default
or an event creating rights of acceleration, termination or cancellation or
a loss of rights under, or result in the creation or imposition of any
Encumbrance upon any of the assets or properties of BRG, the BRG
Partnerships or the 1997-I Program Participants, under (i) the
Organizational Documents of BRG or the BRG Partnerships, (ii) any note,
instrument, mortgage, lease, license, franchise, permit or other
authorization, right, restriction, obligation or agreement to which BRG,
the BRG Partnerships or the 1997-I Program Participants is a party or any
of the respective assets or properties of BRG, the BRG Partnerships or the
1997-I Program Participants is subject or by which BRG, the BRG
Partnerships or the 1997-I Program Participants is bound, (iii) any Court
Order to which BRG, the BRG Partnerships or the 1997-I Program Participants
is a party or any of the respective assets or properties of BRG, the BRG
Partnerships or the 1997-I Program Participants is subject or by which BRG,
the BRG Partnerships or the 1997-I Program Participants is bound, or (iv)
any Requirements of Laws affecting BRG, the BRG Partnerships or the 1997-I
Program Participants or their respective assets or properties; or
(b) require the approval, consent, authorization, order or act of, or
the making by BRG, the BRG Partnerships or the 1997-I Program Participants
of any declaration, filing or registration with, any Person or court.
4.3 Organization and Capital Structure of BRG.e of BRG.
(a) BRG is a corporation duly organized, validly existing and in good
standing under the laws of the State of Oklahoma. BRG is duly qualified to
transact business as a foreign corporation and is in good standing in each
of the jurisdictions set forth in Schedule 4.3, and there are no other
jurisdictions in which the ownership or leasing of any of BRG's assets or
the conduct of its business requires such qualification, except where the
failure to be so qualified would not or could not reasonably be expected to
have a Material Adverse Effect. BRG has full corporate power and authority
to own or lease and to operate and use its properties and assets and to
carry on its business as now conducted.
<PAGE>
(b) The authorized capital stock of BRG consists of 50,000
shares of Common Stock, par value $1.00 per share (the "Common Stock"),
of which 9,500 shares are issued and outstanding, 500 shares are issued
and held in the Company's treasury (all of which are reserved for
issuance upon the exercise of currently outstanding stock options) and
40,000 shares are unissued and not reserved for any purpose. Except for
this Agreement and as set forth in Schedule 4.3, there are no
agreements, arrangements, options, warrants, calls, rights or
commitments of any character relating to the issuance, sale, purchase
or redemption of any shares of capital stock of BRG. No holder of the
Common Stock has any preemptive, stock purchase or other rights to
acquire Common Stock. All of the outstanding shares of the Common Stock
are validly issued, fully paid and nonassessable and were not issued in
violation of any preemptive or similar rights. The BRG Shareholders are
the record and beneficial owners of all of the issued and outstanding
shares of the Common Stock.
(c) Attached hereto as part of Schedule 4.3(c) are true and
complete copies of the certificate of incorporation and all amendments
thereto and of the By-laws, as amended to date. A true and complete
copy of the stock ledger of BRG has been delivered to Buyer prior to
the execution hereof.
4.4 Subsidiaries. Other than BRG Holding Company, Inc., BRG Production
Company, Charter Servicing Company, the BRG Partnerships and the Excluded
Assets, BRG does not own, directly or indirectly, any interest or investment in
any corporation, association, joint venture, partnership, limited liability
company or other business organization, firm or enterprise of any character
whatsoever. Charter Servicing Company is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has full corporate power and authority to conduct its business
as it is now being conducted and to own, operate or lease the properties and
assets it currently owns, operates or holds under lease. Charter Servicing
Company is duly qualified to do business and is in good standing in each
jurisdiction where the character of its business or the nature of its properties
makes such qualification necessary and in which the failure to qualify would
have a Material Adverse Effect. All of the outstanding shares of capital stock
or similar equity interests of Charter Servicing Company are validly issued, are
fully paid and nonassessable, and are owned by BRG free and clear of any
Encumbrance. Charter Servicing Company is not a party to, or otherwise subject
to any legal restriction or any agreement (other than this Agreement and
customary limitations imposed by corporate law statutes) restricting the ability
of such entity to pay dividends out of profits or make any other similar
distributions of profits to BRG.
4.5 Financial Statements. Attached as Schedule 4.5 are the following
financial statements of BRG and the BRG Partnerships (collectively the
"Financial Statements"): (i) the audited consolidated financial statements for
the year ended December 31, 1996, and (ii) the unaudited consolidated financial
statements for the year ended December 31, 1997. The Financial Statements
<PAGE>
(including the notes thereto) have been prepared in accordance with GAAP applied
on a consistent basis throughout the periods covered thereby (except, in the
case of (ii), for normally recurring audit adjustments) and present fairly the
financial condition as of such dates and the results of operations for such
periods.
4.6 Absence of Material Adverse Effect. Except as disclosed in Schedule 4.6
or as contemplated by this Agreement, since December 31, 1997:
(a) To the knowledge of BRG, there has been no Material Adverse
Effect;
(b) Each of BRG, the BRG Partnerships and the 1997-I Program
Participants has conducted its business in the ordinary course and in
conformity with past practice; and
(c) Each of BRG, the BRG Partnerships and the 1997-I Program
Participants has not (i) discharged or satisfied any Encumbrance or
paid any obligation or liability, absolute or contingent, other than
current liabilities incurred and paid in the ordinary course of
business and consistent with past practices;
(d) Except for Permitted Encumbrances, each of BRG, the BRG
Partnerships and the 1997-I Program Participants has not suffered or
permitted any Encumbrance to arise or be granted or created against or
upon any of its assets;
(e) None of BRG or any of the BRG Partnerships has amended its
Organizational Documents;
(f) None of BRG, any of the BRG Partnerships or the 1997-I
Program Participants has agreed, whether in writing or otherwise, to
do any of the foregoing.
4.7 Compliance with Agreements.reements
(a) None of BRG, any of the BRG Partnerships or the 1997-I
Program Participants is in violation of, or in default in any material
respect under, and no event has occurred that (with notice or the
lapse of time or both) would constitute a violation of or default
under, (i) its Organizational Documents, as applicable, or (ii) any
agreement, except for any violation or default that would not or could
not reasonably be expected to, individually or in the aggregate, have
a Material Adverse Effect.
(b) Set forth in Schedule 4.7 hereto are the following agreements
to which BRG or Charter Servicing Company are subject or to which
their respective properties or the BRG Partnership Properties or the
1997-I Program Properties are bound: (i) all employment or consulting
contracts; (ii) all capital redemption or purchase agreements; (iii)
all agreements providing for the indemnification of others against any
liabilities or the sharing of the tax liability of others (except for
such obligations incurred in the ordinary course of business as an
<PAGE>
operator of oil and gas properties under service, drilling or other
similar agreements); (iv) all license agreements (as licensor or
licensee); (v) all material operating agreements; (vi) all production
sales or purchase contracts that are not terminable without penalty on
30 days notice or less; (vii) all material transportation and gas
balancing agreements; (viii) all agreements for the purchase of any
commodity, material or equipment except purchase orders in the
ordinary course of business consistent with past practice; (ix) all
other agreements creating any obligations that require aggregate
future payments in excess of $100,000 by (a) BRG, (b) Charter
Servicing Company, (c) the BRG Partnerships with respect to the BRG
Partnership Properties, or (d) the 1997-I Program Participants with
respect to the 1997-I Properties; (x) all agreements containing
covenants limiting or restricting the freedom of BRG, the BRG
Partnerships or their respective affiliates to compete in any line of
business or territory or with any person or entity; (xi) area of
mutual interest agreements, (xii) all agreements for capital
expenditures or the acquisition or construction of fixed assets that
requires aggregate future payments in excess of $100,000, (xiii) all
agreements for or that contemplate the sale of any of the BRG
Properties, the BRG Partnership Properties or the 1997-I Properties,
and (xiv) all indentures, mortgages, promissory notes, loan
agreements, guaranties or other agreements or commitments for the
borrowing of money or any related security agreements. Except as set
forth in Schedule 4.7 hereof, none of the contracts described in such
schedule have been amended or modified except as set forth in Schedule
4.7. BRG has no knowledge of any notice or threat of or basis for the
termination, expiration or modification of any contract described in
Schedule 4.7 within one year from the date hereof, which termination,
expiration or modification would have a Material Adverse Effect. Buyer
has been provided with access to true and complete copies of each
contract, agreement and instrument listed in Schedule 4.7.
4.8 Taxes.
(a) Except as set forth in Schedule 4.8, (i) all Tax Returns of or
with respect to any Tax which are required to be filed on or before the
Closing Date by or with respect to BRG or any BRG Partnership or the
business operations of BRG or any BRG Partnership have been or will be duly
and timely filed, (ii) all items of income, gain, loss, deduction and
credit or other items required to be included in each such Tax Return have
been or will be so included and all information provided in each such Tax
Return is true, correct and complete, (iii) all Taxes which have become or
will become due with respect to the period covered by each such Tax Return
have been or will be timely paid in full, (iv) all withholding Tax
requirements imposed on or with respect to BRG or any BRG Partnership have
been or will be satisfied in full in all respects, and (v) no penalty,
interest or other charge is or will become due with respect to the late
filing of any such Tax Return or late payment of any such Tax.
(b) There is no claim against BRG or any BRG Partnership for any
Taxes, and no assessment, deficiency or adjustment has been asserted or
proposed with respect to any Tax Return of or with respect to BRG or any
BRG Partnership.
(c) Except as set forth in Schedule 4.8, there is not in force any
extension of time with respect to the due date for the filing of any Tax
Return of or with respect to BRG or any BRG Partnership or any waiver or
agreement for any extension of time for the assessment or payment of any
Tax of or with respect to BRG or any BRG Partnership.
(d) The total amounts set up as liabilities for current and deferred
Taxes in the December 31, 1997 Balance Sheet are sufficient to cover the
payment of all Taxes, whether or not assessed or disputed, which are, or
are hereafter found to be, or to have been, due by or with respect to BRG,
its subsidiaries and their business up to and through the periods covered
thereby.
(e) None of BRG or any BRG Partnership is a party to any Tax
allocation or sharing agreement and no payments are due or will become due
by BRG or any BRG Partnership pursuant to any such agreement or
arrangement.
(f) Except as set forth in Schedule 4.8, none of the property of BRG
(other than its interests in the BRG Partnerships and the 1997-I
Properties) or any BRG Partnership is held in an arrangement that could be
classified as a partnership for Tax purposes.
(g) Except as set forth in Schedule 4.8, neither BRG nor any BRG
Partnership will be required to include any amount in income for any
taxable period beginning after or including the Closing Date as a result of
a change in accounting method for any taxable period ending on or before
the Closing Date or pursuant to any agreement with any Tax authority with
respect to any such taxable period.
(h) BRG has not consented to have the provisions of section 341(f)(2)
of the Code apply with respect to a sale of its stock.
4.9 Governmental Permits.
(a) Except as set forth on Schedule 4.9, each of BRG, the BRG
Partnerships and the 1997-I Program Participants owns, holds or possesses
all material licenses, franchises, permits, privileges, immunities,
concessions, approvals and other authorizations from all Governmental
Bodies which are necessary to entitle it to own or lease, operate and use
its assets and to carry on and conduct its business as currently conducted
(herein collectively called "Governmental Permits").
(b) Each of BRG, the BRG Partnerships and the 1997-I Program
Participants has fulfilled and performed their respective obligations under
each of the
<PAGE>
Governmental Permits, and no event has occurred or condition or state of
facts exists which constitutes or, after notice or lapse of time or both,
would constitute a breach or default under any such Governmental Permit or
which permits or, after notice or lapse of time or both, would permit
revocation or termination of any such Governmental Permit, and which would
or reasonably could be expected to have a Material Adverse Effect.
4.10 No Default. There is no uncorrected event of default by BRG or the BRG
Partnerships under the terms of their Organizational Documents. In addition,
there is no uncorrected event of default or breach by BRG, the BRG Partnerships
or the 1997-I Program Participants or, to Sellers' knowledge, by any other party
which has occurred under the terms of any contract, agreement, document, lease,
commitment, license, franchise, permit, authorization, concession, order, law,
rule or regulation, which violation could reasonably be expected to have a
Material Adverse Effect, and no event has occurred that is, or which with notice
or lapse of time or both would constitute, such a default under any such
contract, agreement, documents, lease, commitment, license, franchise, permit,
authorization, concession, order, law, rule or regulation.
4.11 Environmental Matters. Except as set forth in Schedule 4.11:
(a) Each of BRG and the BRG Partnerships has conducted its business
and operated its assets, and is conducting its business and operating its
assets, in material compliance with all Environmental Laws and the BRG
Properties, the BRG Partnership Properties and the 1997-I Properties are in
material compliance with all applicable Environmental Laws;
(b) Each of BRG and the BRG Partnerships has not been notified by any
Governmental Body that any of the operations or assets of BRG or the BRG
Partnerships is the subject of any investigation or inquiry by any
Governmental Body evaluating whether any remedial action is needed to
respond to a release of any Contaminant or to the improper storage or
disposal (including storage or disposal at offsite locations) of any
Contaminant;
(c) Neither BRG, the BRG Partnerships nor any other Person has filed
any notice under any federal, state or local law indicating that (i) BRG,
any of the BRG Partnerships or any of the 1997-I Program Participants is
responsible for the improper release into the environment, or the improper
storage or disposal, of any Hazardous Material, or (ii) any Contaminant is
improperly stored or disposed of upon any BRG Property, BRG Partnership
Property or 1997-I Property;
(d) None of BRG, any of the BRG Partnerships nor any of the 1997-I
Program Participants has any material contingent liability in connection
with (i) the release into the environment at or on (x) any property now or
previously owned or leased by BRG, or any BRG Partnerships or (y) any
1997-I Program Property, or (ii) the storage or disposal of, any
Contaminant;
<PAGE>
(e) Neither BRG nor the BRG Partnerships has received any claim,
complaint, notice, inquiry or request for information which remains
unresolved as of the date hereof with respect to any alleged material
violation of any Environmental Law or regarding potential liability under
any Environmental Law relating to operations or conditions of any
facilities or property owned, leased or operated by BRG, the BRG
Partnerships or the 1997-I Program Participants (to the extent of their
interests in the 1997-I Properties);
(f) No property now or previously owned, leased or operated by BRG ,
the BRG Partnerships or the 1997-I Program Participants (to the extent of
their interests in the 1997-I Properties) is listed on the National
Priorities List pursuant to CERCLA or on any other federal or state list as
sites requiring investigation or cleanup;
(g) Neither BRG nor the BRG Partnerships is directly transporting, has
directly transported, is directly arranging for the transportation of, or
has directly transported, any Contaminant to any location which is listed
on the National Priorities List pursuant to CERCLA or on any similar
federal or state list or which is the subject of federal, state or local
enforcement actions or other investigations that may lead to material
claims against such company for remedial work, damage to natural resources
or personal injury, including claims under CERCLA; and
(h) There are no sites, locations or operations at which either BRG or
the BRG Partnerships is currently undertaking, or has completed, any
remedial or response action relating to any such disposal or release, as
required by Environmental Laws.
4.12 Books and Records. To BRG's knowledge, all books, records and files of
BRG, the BRG Partnerships and the BRG 1997-I Oil and Gas Program (including
those pertaining to the BRG Oil and Gas Properties, the BRG Partnership
Properties, the 1997-I Properties, wells and other assets, those pertaining to
the production, gathering, transportation and sale of Hydrocarbons, and
corporate, accounting and financial records) (a) have been prepared, assembled
and maintained in accordance with usual and customary policies and procedures
and (b) fairly and accurately reflect the ownership, use, enjoyment and
operation of BRG and the BRG Partnerships of their respective assets and the
1997-I Program Participants of the 1997-I Properties.
4.13 Oil and Gas Properties
(a) Each of BRG, and the BRG Partnerships and the 1997-I Program
Participants has Good and Defensible Title to its respective interests in
the BRG Oil and Gas Properties, the BRG Partnership Properties and the
1997-I Properties. None of the reserve or financial information relating to
the transactions described herein and provided to Buyer cover the
Individual Shareholder Interests.
(b) Each of BRG and the BRG Partnerships and the 1997-I Program
<PAGE>
Participants has complied in all material respects with the terms of its
Leases and other agreements relating to the BRG Oil and Gas Properties, the
BRG Partnership Properties and the 1997-I Properties, and no claim adverse
to the rights of BRG or the BRG Partnerships and the 1997-I Program
Participants as lessee or assignee under any of such Leases or questioning
their respective rights to the continued possession of the lands subject to
the Leases has been asserted by any party.
4.14 Compliance with Requirements of Laws. Except as listed or referred to
in Schedule 4.14, and except as to matters not having a Material Adverse Effect,
to BRG's knowledge, BRG, the BRG Partnerships and the 1997-I Program
Participants and their respective properties are in compliance with all
applicable Requirements of Laws.
4.15 Payments. Except as set forth in Schedule 4.15, all accrued rentals,
royalties, operating costs and expenses and other costs and expenses which are
due from or are the responsibility of owners of the BRG Properties, the BRG
Partnership Properties or the 1997-I Properties, as the case may be, have been
timely paid, or if not paid, are being contested in good faith in the normal
course of business under circumstances where adequate reserves have been
established therefor and reflected in all appropriate financial statements.
Schedule 4.15 lists all outstanding payments or obligations exceeding the sum of
$1,000 which are being contested by BRG, the BRG Partnerships or the 1997-I
Program Participants.
4.16 Benefit Plans.
(a) Schedule 4.16(a) provides a description of each of the following
which is sponsored, maintained or contributed to by BRG for the benefit of
the employees of BRG, or has been so sponsored, maintained or contributed
to within six years prior to the Closing Date:
(i) each "employee benefit plan," as such term is defined in
Section 3(3) of ERISA (including, but not limited to, employee benefit
plans, such as foreign plans, which are not subject to the provisions
of ERISA) ("Benefit Plan");
(ii) each personnel policy, stock option plan, collective
bargaining agreement, bonus plan or arrangement, incentive award plan
or arrangement, vacation policy, severance pay plan, policy, or
agreement, deferred compensation agreement or arrangement, executive
compensation or supplemental income arrangement, consulting agreement,
employment agreement, and each other employee benefit plan, agreement,
arrangement, program, practice, or understanding which is not
described in Section 4.16(a)(i) ("Benefit Program or Agreement").
(b) True, correct, and complete copies of each of the Benefit Plans,
and related trusts, if applicable, including all amendments thereto, have
<PAGE>
been furnished or made available to Buyer. There has also been furnished or
made available to Buyer, with respect to each Benefit Plan required to file
such report and description, the most recent report on Form 5500 and the
summary plan description. True, correct, and complete copies or
descriptions of all Benefit Programs and Agreements have also been
furnished or made available to Buyer.
(c) Except as otherwise set forth on Schedule 4.16(c),
(i) BRG does not contribute to or have an obligation to
contribute to, and has not at any time within six years prior to the
Closing Date contributed to or had an obligation to contribute to, a
multiemployer plan within the meaning of Section 3(37) of ERISA;
(ii) All reports and disclosures relating to the Benefit Plans
required to be filed with or furnished to governmental agencies,
Benefit Plan participants or Benefit Plan beneficiaries have been
filed or furnished in accordance with applicable law in a timely
manner, and each Benefit Plan and each Benefit Program or Agreement
has been administered in substantial compliance with its governing
documents;
(iii) Each of the Benefit Plans intended to be qualified under
Section 401 of the Code, (A) satisfies in form and operation the
requirements of such Section except to the extent amendments are not
required by law to be made until a date after the Closing Date, (B)
has received a favorable determination letter from the Internal
Revenue Service regarding such qualified status, (C) has not, since
receipt of the most recent favorable determination letter, been
amended, and (D) has not been operated in a way that would adversely
affect its qualified status;
(iv) No Benefit Plan subject to Title IV of ERISA is sponsored,
maintained or contributed to or has been sponsored, maintained or
contributed to within six years prior to the Closing Date by BRG or
any corporation, trade business or entity under common control with
BRG, within the meaning of Section 414(b), (c) or (m) of the Code or
Section 4001 of ERISA;
(v) As to any Benefit Plan intended to be qualified under Section
401 of the Code, there has been no termination or partial termination
of the Benefit Plan within the meaning of Section 411(d)(3) of the
Code;
(vi) No act, omission or transaction has occurred which would
result in imposition on BRG of (A) breach of fiduciary duty liability
damages under Section 409 of ERISA, (B) a civil penalty assessed
pursuant to subsections (c), (i) or (l) of Section 502 of ERISA, or
(C) a tax imposed pursuant to Chapter 43 of Subtitle D of the Code;
<PAGE>
(vii) No Benefit Plan is or has been funded by BRG through a trust
which is intended to be exempt from federal income taxation pursuant
to Section 501(c)(9) of the Code;
(d) Except as otherwise set forth in Schedule 7.9, BRG is not a party
to any agreement, nor has it established any policy or practice, requiring
it to make a payment or provide any other form of compensation or benefit
to any person performing services for BRG upon termination of such services
which would not be payable or provided in the absence of the consummation
of the transactions contemplated by this Agreement.
(e) Each Benefit Plan which is an "employee welfare benefit plan," as
such term is defined in Section 3(1) of ERISA, may be unilaterally amended
or terminated in its entirety without liability except as to benefits
accrued thereunder prior to such amendment or termination.
4.17 Litigation. Except as set forth in Schedule 4.17, there is no
judgment, order, decree, injunction or award, or claim, suit, action or
administrative, arbitration or other proceeding (including but not limited to
bankruptcy proceedings) or any kind of investigation pending or, to BRG's
knowledge, threatened against or relating to BRG, the BRG Partnerships, the BRG
Properties, the BRG Partnership Properties or the 1997-I Properties which seeks
injunctive or other equitable relief or which reasonably may be expected to have
a Material Adverse Effect, and none of BRG, the BRG Partnerships, any of their
present directors, officers or employees, or, to the knowledge of BRG, any of
their former directors, officers or employees or the 1997-I Program Participants
has received or been advised of any unsatisfied request for information, notice,
administrative inquiry or claim that could reasonably be expected to result in
such judgment, order, decree, injunction, award, claim, suit, action or
proceeding.
4.18 Insurance. Schedule 4.18 sets forth a true and correct description of
the insurance policies maintained by BRG and the BRG Partnerships (the
"Insurance Policies"), including the amounts and type of coverage, applicable
deductibles and any material exclusions thereto. No notice of cancellation or
termination has been given to BRG or the BRG Partnerships by an insurer and none
of BRG and the BRG Partnerships have any reason to believe that any insurer is
contesting or intends to contest the validity, enforceability or collectibility
of any of the Insurance Policies or intends to deny coverage thereunder. All
premiums required to be paid have been paid in full through the Closing Date. No
claims have been made against BRG or the BRG Partnerships with respect to the
types of loss or damage covered by any of the Insurance Policies in excess of
coverage under such policies or in excess of adequate reserves established
therefor and reflected on the proper financial statements.
4.19 Gas Imbalances. Schedule 4.19 sets forth (a) imbalances for
overproduction and underproduction of Hydrocarbons from the BRG Oil and Gas
Properties, the BRG Partnership Properties and the 1997-I Properties as of the
<PAGE>
dates shown on such Schedule 4.19, or as a result of the sale or transportation
of Hydrocarbons by BRG, the 1997-I Program Participants or the BRG Partnerships
or the pipeline operations of Charter Servicing Company, and (b) obligations of
BRG, the 1997-I Program Participants and the BRG Partnerships as of the dates
shown on such Schedule 4.19, for the delivery of Hydrocarbons attributable to
the BRG Oil and Gas Properties, the BRG Partnership Properties and the 1997-I
Properties in the future on account of prepayment, advance payment, take-or-pay
or similar obligations without then or thereafter being entitled to receive full
value therefor.
4.20 Public Utility Holding Company Act. Neither BRG nor any subsidiary of
BRG is subject to regulation under the Public Utility Holding Company Act of
1935, as amended, and the rules and regulations thereunder.
4.21 Investment Company Act.panNeither BRG nor any of Sellers is an
"investment company" or a company "controlled" by an "investment company," in
each case within the meaning of the Investment Company Act of 1940, as amended.
4.22 Wells. During any period operated by BRG, and to the knowledge of BRG,
during other periods (a) all of the wells in which BRG, the BRG Partnerships and
the 1997-I Program Participants have an interest have been drilled and completed
within the boundaries of the Leases or Units relating to such wells or within
the limits otherwise permitted by contract, pooling or unitization agreement and
by applicable law and (b) all such wells have been produced in compliance with
allowables allocated thereto by the applicable governmental authority, except
for such violations that would not or could not reasonably be expected to have a
Material Adverse Effect.
4.23 Condition of Equipment. To the knowledge of BRG, all wells, platforms,
facilities, equipment, machinery and personal property owned or leased by BRG,
the BRG Partnerships and the 1997-I Program Participants (a) are in an operable
state of repair, subject to ordinary wear and tear, so as to be adequate for
normal operations in accordance with standard industry practice, and to comply
with the requirements of all applicable contracts, and (b) meet and comply with
all Requirements of Law, in each case except where any such failure to be in
good repair or comply with Requirements of Law would not or could not reasonably
be expected to have a Material Adverse Effect. NOTWITHSTANDING THE FOREGOING,
BUYER UNDERSTANDS AND AGREES THAT THE CONVEYANCE OF THE PERSONAL PROPERTY
REFERRED TO HEREIN AT THE CLOSING SHALL BE MADE ON AN "AS IS, WHERE IS" BASIS,
WITHOUT ANY WARRANTIES AS TO THE CONDITION OF THE PERSONAL PROPERTY INCLUDING,
WITHOUT LIMITATION, ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
4.24 Evaluation Data. BRG, the BRG Partnerships, and the 1997-I Program
Participants own or have the right to use without any limitations or
restrictions adversely affecting the use of the same in the ordinary conduct of
<PAGE>
its business, all material technology, processes, maps, seismic records, shot
points, field notes, interpretations and programs, all seismic, geological and
geophysical information and libraries, and other proprietary information
relating to the BRG Properties, the BRG Partnership Properties and the 1997-I
Properties (collectively, "Evaluation Data"), and this Agreement has not altered
or impaired, nor will alter or impair, any such rights or has breached, or will
breach, any agreements with third party vendors or has required, or may require
(whether in Sellers' or BRG's opinion or a third party vendor's opinion),
payments of additional sums thereto, or has required, or may require (whether in
BRG's opinion or a third party vendor's opinion), the return of any records or
information, except in each case as would not or could not reasonably be
expected to have a Material Adverse Effect. No person has any right to use or
obtain access to any of the Evaluation Data, and no person has overtly
challenged or questioned the validity or effectiveness of any license or
agreement relating to the same or the right of BRG, the BRG Partnerships or the
1997-I Program Participants, as applicable, to use the same, except for such
challenges or questions that could not reasonably be expected to have a Material
Adverse Effect.
4.25 Interaffiliate Transactions and Relationships. Except as set forth in
Schedule 4.25, BRG is not a party to and none of the BRG Properties, BRG
Partnership Properties or the 1997-I Program Properties is subject to any
agreement with any of Sellers, or BRG Holding Company or BRG Production Company
that survive the Closing.
4.26 Well Status. Except as set forth in Schedule 4.26, there are no wells
located on the Leases or included in the BRG Properties, the BRG Partnership
Properties or the 1997-I Properties:
(i) that any of BRG, the BRG Partnerships or the 1997-I Program
Participants is currently obligated by law or contract to plug and abandon
or will be obligated by law or contract to plug and abandon with the lapse
of time or notice or both because the wells are not currently capable of
producing in commercial quantities;
(ii) are subject to exceptions to a requirement to plug and abandon
issued by a regulatory authority having jurisdiction over the BRG
Properties, the BRG Partnership Properties or the 1997-I Properties; or
(iii) to the knowledge of BRG, have been plugged and abandoned but
have not been plugged or reclaimed in accordance with all applicable
requirements of each regulatory authority having jurisdiction over such
properties.
4.27 Section 29 Status of Certain Properties. (a) Each Well listed in
Schedule 4.27 (a "Section 29 Well") (i) was drilled and fully completed as a
well capable of producing from the formation(s) specified on such schedule after
December 31, 1979 and prior to January 1, 1993, and (ii) produces gas that is a
"qualified fuel" under section 29(c) of the Code and that qualifies for the
maximum production tax credit under section 29(a) of the Code and is not subject
to any limitation under section 29(b) of the Code; (b) no property (as such term
<PAGE>
is used in section 29(d)(4) of the Code) included in the properties listed on
Schedule 4.27 produced gas in marketable quantities from Devonian shale, coal
seams, geopressurized brine or tight formation(s) prior to January 1, 1980; and
(c) the Section 29 Wells are perforated only in the formation(s) specified on
such schedule and the gas produced from each Section 29 Well is not commingled
with any gas that is not produced from such formation(s).
4.28 Liabilities; Indebtedness. Except for liabilities incurred in the
ordinary course of business and not material individually or in the aggregate to
BRG and the BRG Partnerships on a consolidated basis, none of BRG, its
subsidiaries or the BRG Partnerships (with respect to the BRG Partnership
Properties) have any material (individually or in the aggregate) liabilities,
direct or contingent except as provided for the Financial Statements or
disclosed in Schedule 4.28 or any of the other Schedules hereto.
4.29 No Material Misstatements or Omissions. Neither this Agreement nor any
certificates or documents made or delivered in connection herewith contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements herein or therein not misleading, in view of the
circumstances in which they were made. To the knowledge of BRG, there is no fact
or information relating to the business, prospects, condition (financial or
otherwise), affairs, operations, or assets of BRG that has not been disclosed to
Buyer in writing by Sellers' Representative which could result in a Material
Adverse Effect.
4.30 Bankruptcy. There is no bankruptcy, reorganization or arrangement
proceedings pending, being contemplated by or, to the knowledge of Sellers,
threatened against any of Sellers or their respective affiliates.
4.31 Representations Apply to Subsidiaries of BRG. The representations and
warranties contained in this Article IV to the extent applicable to BRG or its
assets shall also be deemed to cover and extend to Charter Servicing Company and
its assets in all respects.
4.32 Allocation of Purchase Price. The allocation of the Purchase Price
with respect to each of the BRG Partnerships and to the BRG 1997-I Oil and Gas
Program has been independently made by BRG and has been made (i) in accordance
with the partnership agreements of the BRG Partnerships and the program
agreement of the BRG 1997-I Oil and Gas Program, and (ii) in full satisfaction
of BRG's fiduciary responsibilities and duties to the limited partners of the
BRG Partnerships and the 1997-I Program Participants.
4.33 BRG 1997-I Oil and Gas Program Funds. All monies in program funds
relating to the BRG 1997-I Oil and Gas Program have been expended and no further
drilling obligations by BRG as program administrator, exist or are continuing
under the BRG 1997-I Oil and Gas Program
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
<PAGE>
As an inducement to Sellers to enter into this Agreement and to consummate
the transactions contemplated hereby, Buyer hereby represents and warrants to
Sellers and agrees as follows:
5.1 Organization of Buyer. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
duly qualified to do business and is in good standing in each jurisdiction in
which the nature of its business activities or its ownership or leasing of
property makes such qualification necessary. Buyer has full corporate power and
authority to own or lease and to operate and use its properties and assets and
to carry on its business as now conducted.
5.2 Authority of Buyer. Buyer has full power and authority to execute,
deliver and perform this Agreement and all of the Buyer Ancillary Agreements.
The execution, delivery and performance of this Agreement and the Buyer
Ancillary Agreements by Buyer have been duly authorized and approved by Buyer's
board of directors and do not require any further authorization or consent of
Buyer or its stockholders. This Agreement has been duly authorized, executed and
delivered by Buyer and is the legal, valid and binding agreement of Buyer
enforceable in accordance with its terms, and each of the Buyer Ancillary
Agreements has been duly authorized by Buyer and upon execution and delivery by
Buyer will be a legal, valid and binding obligation of Buyer enforceable in
accordance with its terms.
5.3 No Conflict. Neither the execution and delivery of this Agreement or
any of the Buyer Ancillary Agreements or the consummation of any of the
transactions contemplated hereby or thereby nor compliance with or fulfillment
of the terms, conditions and provisions hereof or thereof will:
(a) violate or conflict with, result in a breach of the terms,
conditions or provisions of, or constitute a default, an event of default
or an event creating rights of acceleration, termination or cancellation or
a loss of rights under (i) the certificate or articles of incorporation or
By-laws of Buyer, (ii) any material note, instrument, agreement, mortgage,
lease, license, franchise, permit or other authorization, right,
restriction obligation or agreement to which Buyer is a party or any of its
properties is subject or by which Buyer is bound, (iii) any Court Order to
which Buyer is a party or by which it is bound or (iv) any Requirements of
Laws affecting Buyer; or
(b) require the approval, consent, authorization or act of, or the
making by Buyer of any declaration, filing or registration with, any Person
or court.
5.4 No Finder. None of Buyer, any of its Affiliates nor any Person acting
on behalf of any of them has paid or become obligated to pay any fee or
commission to any broker, finder or intermediary for or on account of the
transactions contemplated by this Agreement.
<PAGE>
5.5 Investment Representation. The Shares, the BRG Partnership Properties
and the 1997-I Properties are being acquired by Buyer for its own account for
investment purposes only, and not with a view to the sale or distribution of any
part thereof.
5.6 Financial Ability. Buyer has sufficient cash, commitments from
responsible lending institutions, available lines of credit or such other
sources of immediately available cash, to enable it to deliver the Purchase
Price (less the Earnest Money) at the Closing.
ARTICLE VI
ACTIONS PRIOR TO THE CLOSING DATE
The respective parties hereto covenant and agree to take the following
actions between the date hereof and the Closing Date:
6.1 Investigation of the Company by Buyer. Sellers shall afford to the
officers, employees and authorized representatives of Buyer (including its
independent public accountants and attorneys) complete access during normal
business hours to the offices, properties, employees, books, contracts,
documents and business and financial records of BRG and the BRG Partnerships
(and the 1997-I Program Participants to the extent relating to the 1997-I
Properties) to the extent Buyer shall deem necessary or desirable and shall
furnish to Buyer or its authorized representatives such additional information,
including an opportunity to discuss such information with senior management,
concerning the assets, business and the operations of BRG and the BRG
Partnerships (and the 1997-I Program Participants to the extent relating to the
1997-I Properties) as shall be reasonably requested, including all such
information as shall be necessary to enable Buyer or its representatives to
verify the accuracy of the representations and warranties contained in this
Agreement, to verify that the covenants of Sellers contained in this Agreement
have been complied with, to determine whether the conditions set forth herein
have been satisfied or to satisfy due diligence requirements of Buyer's lender,
if any, or as may otherwise be necessary to enable Buyer to obtain financing.
Without limiting the foregoing, Buyer shall have the right to conduct an
environmental audit of the BRG Properties, the BRG Partnership Properties and
the 1997-I Properties. Buyer agrees that all such investigations shall be
conducted in such a manner as not to interfere unreasonably with the operations
of BRG or the BRG Partnerships. All inspections pursuant to this Section 6.1
shall be at Buyer's sole risk, cost and expense and Buyer agrees to comply with
the rules, regulations and instructions issued by Sellers and other operators
regarding the actions of Buyer while upon, entering or leaving the property of
BRG and the BRG Partnerships.
6.2 Preserve Accuracy of Representations and Warranties. Each of the
parties hereto shall refrain from taking any action which would render any
representation or warranty contained in Article IV or V of this Agreement
inaccurate as of the Closing Date. Each party shall promptly notify the other of
any action, suit, claim, investigation or proceeding that shall be instituted or
threatened against such party to restrain, prohibit or otherwise challenge the
<PAGE>
legality of any transaction contemplated by this Agreement. Sellers shall
promptly notify Buyer of any lawsuit, claim, proceeding or investigation that
may be threatened, brought, asserted or commenced against BRG or the BRG
Partnerships or affecting the BRG Properties, the BRG Partnership Properties or
the 1997-I Properties.
6.3 Consents to Third Parties; Governmental Approvals. During the period
prior to the Closing Date, Sellers and Buyer shall act diligently and
reasonably, and shall cooperate with each other, in making any required filing
or notification and in securing any consents, approvals and waivers of any
Governmental Body or any third Persons required to be obtained in order to
permit the consummation of the transactions contemplated by this Agreement.
Sellers' Representative shall use its reasonable efforts to obtain the consents
and approvals to the applicable transactions contemplated hereby from all of the
limited partners of the BRG Partnerships and all of the 1997-I Program
Participants. Sellers' Representative shall consult with Buyer regarding the
form and substance of requests for consents, waivers and approvals.
6.4 Excluded Assets. Prior to the Closing, BRG shall contribute to BRG
Holding Company, Inc. the Excluded Assets specifically set forth in Schedule 6.4
and BRG Holding Company, Inc. shall assume all liabilities associated with such
Excluded Assets, whether attributable to the time period prior to or after such
contribution. It is understood and acknowledged that BRG and BRG Petroleum
Corporation have entered into, or will enter into, a stock purchase agreement
reasonably acceptable in form and substance to Buyer, pursuant to which, at the
time specified in Section 2.1 hereof, BRG Petroleum Corporation will purchase
from BRG all of the outstanding capital stock of BRG Holding Company, Inc. and
BRG Production Company for an aggregate purchase price of $2,472,000 and the
indemnification of BRG, its affiliates, shareholders, officers, directors,
employees and agents for all liabilities associated with the ownership of BRG
Holding Company, Inc. or BRG Production Company or the assets or operations of
such companies (the "Subsidiary Transfer"). Also, the Principal Sellers will
guarantee unto BRG (and each indemnified party above mentioned) the performance
and payment of all obligations of BRG Petroleum Corporation under the terms of
such stock purchase agreement. In addition, prior to the Closing, BRG Holding
Company, Inc. shall be substituted for, to the extent reasonably possible, as
program administrator of the 1997-I Oil and Gas Program with respect to the
1997-I Program Participants. To the extent BRG Holding Company, Inc. is not
substituted as program administrator of the 1997-I Oil and Gas Program, at
Buyer's request prior to the Closing, it shall contract with BRG to perform all
of the services required of the program administrator. BRG Holding Company, Inc.
shall indemnify BRG, its affiliates, shareholders, officers, directors,
employees and agents and hold it harmless from any liability, loss, cost,
expenses or damages BRG may incur or suffer after Closing as a current or former
general partner of any of the BRG Partnerships or as program administrator of
the 1997-I Oil and Gas Program (whether such liability, loss, cost, expenses or
damages relate to periods of time prior to or after the Closing Date). Buyer and
the BRG Shareholders specifically acknowledge and consent to such transfer and
assignment of assets and the proposed sale of BRG Holding Company, Inc. and BRG
Production Company to BRG Petroleum Corporation.
6.5 BRG Options. On the Closing Date, each outstanding employee stock
option to purchase shares of the capital stock of BRG (a "BRG Option") shall be
converted into the right to receive a cash amount equal to (i) the product of
the number of the shares which are issuable upon exercise of such BRG Option in
full, multiplied by the Purchase Price per Share as set forth on Schedule 2.4
after taking into account the adjustments provided for in Section 2.5 above,
less (ii) the aggregate exercise price of such BRG Option. BRG shall take all
necessary action prior to the Closing Date to facilitate the conversion and
payment in consideration for the BRG Options described in this Section 6.5,
including without limitation, the agreement and consent from each holder of a
BRG Option agreeing to exchange his or her BRG Options at the Closing Date for
the cash payment set forth above. BRG shall withhold all income or other taxes
as required under applicable law prior to distribution of the cash amount
received under this Section 6.5 to the holders of BRG Options.
6.6 Covenants Regarding Employee Benefit Plan and Employees. BRG shall:
(a) not adopt, amend (other than amendments that reduce the amounts
payable by BRG, or amendments required by law to preserve the qualified
status of a Benefit Plan) or assume an obligation to contribute to any
Benefit Plan or collective bargaining agreement or enter into any
employment, severance or similar contract with any person (including
without limitation, contracts with management of BRG that might require
that payments be made upon the consummation of the transactions
contemplated hereby) or amend any such existing contracts to increase any
amounts payable thereunder or benefits provided thereunder;
(b) not grant any increase in compensation or pay any bonus to any
employees except for bonuses or other payments to employees which result in
corresponding adjustments to the Adjusted Working Capital of BRG at the
Closing Date;
(c) not (i) engage in any transaction (either acting alone or in
conjunction with Seller, any Benefit Plan or trust created thereunder) in
connection with which BRG could be subjected (directly or indirectly) to
either breach of fiduciary duty liability damages under Section 409 of
ERISA, a civil penalty assessed pursuant to subsections (c), (i) or (1) of
Section 502 of ERISA or a tax imposed pursuant to Chapter 43 of Subtitle D
of the Code, (ii) terminate any Benefit Plan in a manner, or take any other
action with respect to any Benefit Plan, that could result in the liability
of BRG to any person, (iii) take any action that could adversely affect the
qualification of any Benefit Plan or its compliance with the applicable
requirements of ERISA or (iv) fail to make full payment when due of all
amounts which, under the provisions of any Benefit Plan, any agreement
relating thereto or applicable law, BRG is required to pay as contributions
thereto; and
(d) file, on a timely basis, all reports and forms required by federal
regulations with respect to any Benefit Plan.
6.7 Other Interim Covenants. Until the Closing, BRG and its subsidiaries
and the BRG Partnerships shall comply, and Sellers shall cause BRG and its
subsidiaries and the BRG Partnerships to comply, with the provisions set forth
below except as may otherwise be agreed to by Buyer in writing:
(a) BRG and the BRG Partnerships shall operate their respective
businesses and the BRG Properties and the BRG Partnership Properties in the
ordinary course;
(b) None of BRG, the BRG Partnerships (with respect to the BRG
Partnership Properties) or the 1997-I Program Participants (with respect to
the 1997-I Properties) will, without the prior written consent of Buyer,
which consent shall not be unreasonably withheld, commit to any operation
reasonably anticipated by Sellers to require future capital expenditures by
any of such parties, individually or in the aggregate, in excess of
$100,000, or terminate, materially amend, execute or extend any material
agreements affecting the BRG Properties, the BRG Partnership Properties or
the 1997-I Properties;
(c) none of BRG or any BRG Partnership shall (i) amend its
Organizational Documents or enter into any merger or consolidation
agreement, (ii) acquire or agree to acquire all or substantially all of the
assets of another entity, (iii) authorize for issuance, issue, sell,
deliver or agree or commit to issue, sell or deliver (whether through the
issuance or granting of options, warrants, commitments, subscriptions,
rights to purchase or otherwise) any capital stock of any class or any
other securities or equity equivalents or amend any of the terms of any
such securities or agreements or enter into any voting agreements with
respect to any capital stock of the Company, (iv) except for distribution
and/or dividends of cash (without duplication) (A) not in excess of the
amount of cash in bank accounts immediately prior to May 1, 1998, or (B)
from revenues, proceeds and/or receivables attributable to the period of
time prior to May 1, 1998, declare or pay of any dividend on, or make any
other distribution with respect to, the BRG Shares or BRG Partnerships;
(d) none of BRG, the BRG Partnerships or the 1997-I Program
Participants shall transfer, sell, hypothecate, encumber or otherwise
dispose of any of the material BRG Properties, BRG Partnership Properties
or the 1997-I Properties, or incur or assume any material liabilities
except for dispositions made, or liabilities incurred, in the ordinary
course of business consistent with past practices;
(e) none of BRG, the BRG Partnerships or the 1997-I Program
Participants shall, with respect to the BRG Properties, the BRG Partnership
Properties or the 1997-I Properties, assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other Person or entity except in the
ordinary course of business consistent with past practices and in amounts
not material taken as a whole or make any loans, advances or capital
<PAGE>
contributions to or investments in any other Person, other than in the
ordinary course of business consistent with past practices and in amounts
not material taken as a whole;
(f) Sellers shall maintain generally insurance coverage on the BRG
Properties, the BRG Partnership Properties and the 1997-I Properties
presently furnished by nonaffiliated third parties in the amounts and of
the types currently in force;
(g) BRG shall not implement or adopt (i) any material change in its
accounting methods or principles or the application thereof (including
depreciation lives) or (ii) any material change in its tax methods or
principles or the application thereof (including depreciation lives) except
as may be required by Requirements of Law;
(h) BRG shall not identify any additional prospects to become subject
to the terms of those certain participation program agreements dated
various dates between BRG and James L. Burkhart, B. J. Reid, Robert E. Gee,
Michael W. Burkhart and J. Keith Burkhart; and
(i) during the period prior to the Closing Date, Sellers'
Representative shall use its reasonable efforts to obtain a release of
liability from the 1997-I Program Participants associated with BRG acting
in the capacity as program administrator of the BRG 1997-I Oil & Gas
Program in a form acceptable to Buyer.
No provisions of this Section 6.7 shall prohibit Sellers from performing
any of their respective obligations under any of the provisions of this
Agreement.
6.8 Title Defects.
(a) At least 15 days prior to Closing (the "Notification Deadline"),
Buyer shall notify BRG in writing (such notice being herein referred to as
a "Defect Notice") of any matter that causes the title of BRG or any of the
BRG Partnerships or any of the 1997-I Program Participants to any of the
Units, Lease or Wells not to be Good and Defensible Title (a "Title
Defect"). Such Defect Notice shall include:
(i) a description of the Title Defect and the basis for claiming
same;
(ii) the Lease, Unit or Well (or portions thereof) affected by
such Title Defect;
(iii) the Buyer's proposed Designated Value of the property
subject to such Title Defect; and
(iv) the amount that Buyer believes to be the Defect Value
attributable to such Title Defect.
<PAGE>
Additionally, from the date hereof until the fifth day prior to the
Notification Deadline, BRG shall, and shall cause their respective
officers and employees to, notify Buyer in writing of any Title Defects
discovered by such Person promptly following such discovery.
(b) BRG shall use its best efforts to cure, at BRG's sole cost
and expense (which costs and expenses will be reflected in the
Adjusted Working Capital reflected in the Closing Balance Sheet), all
Title Defects of which it becomes aware prior to Closing, and in each
case with respect to any Title Defects that are cured, shall provide
Buyer with reasonably satisfactory proof thereof; provided, however,
that Sellers shall not be required to use such best efforts with
respect to any Title Defects for which Sellers' Representative and
Buyer have agreed upon a Defect Value.
(c) The "Designated Value" for any Lease, Unit or Well shall be
the amount agreed upon by Buyer and BRG which the parties commit to
negotiate in good faith, provided, however, that in the event that the
parties are unable to reach agreement on the Designated Value after a
period of one full business day after the receipt by BRG of the Defect
Notice containing Buyer's proposed Designated Value, the Designated
Value shall be determined by the independent petroleum engineering
firm of Ryder Scott Company. Each of the parties commits to promptly
provide all information and material relevant to the issue in its
possession to such firm as promptly as practical. Such firm shall
provide its opinion of the Designated Value within two business days
from the date of receipt of the information and materials from all
parties and the decision of such firm shall be final and binding on
all parties. The costs and expenses of obtaining such determination
shall be paid and borne by the parties equally.
(d) As used herein, the term "Defect Value" shall mean with
respect to each Title Defect, the reduction in the Designated Value of
the affected Lease, Unit or Well, as applicable, as a result of the
existence of such Title Defect.
(e) If BRG does not agree with Buyer's proposed Defect Value with
respect to a Title Defect or the parties are unable to agree upon
whether a Title Defect exists, then Buyer and BRG shall enter into
good-faith negotiations and shall attempt to agree upon such matter,
and any values to be agreed upon shall be based on the allocated value
on Schedule 2.4 for the group of properties to which such Lease, Unit,
or Well relates; provided that if the Title Defect is the result of a
discovery that BRG, any of the BRG Partnerships or any of the 1997-I
Program Participants owns less than the NRI for such Well or Unit,
then Buyer and BRG agree that the reduction to the Purchase Price
shall be equal to the product of the Designated Value of such Well or
Unit and the percentage reduction in such NRI as a result of the Title
Defect.
(f) If Buyer and BRG cannot reach agreement on the existence of a
<PAGE>
Title Defect, or the Defect Value attributable to a Title Defect, in
any case within 10 days after the commencement of good-faith
negotiations pursuant to subparagraph (e) above, at either party's
option, upon notice to the other party, such matter shall be
determined by a title attorney with at least 10 years' experience in
oil and gas titles in the state in which the Units or Wells (or
majority of Units or Wells) in question are located as selected by
mutual agreement of Buyer and BRG or absent such agreement during the
10-day period, by the Houston office of the American Arbitration
Association (the "Title Arbitrator"). The arbitration proceeding shall
be held in Houston, Texas and shall be conducted in accordance with
the Commercial Arbitration Rules of the American Arbitration
Association, to the extent such rules do not conflict with the terms
of this Section. The Title Arbitrator's determination shall be made
within 10 days after submission of the matters in dispute and shall be
final and binding upon both parties, without right of appeal. The
Title Arbitrator shall act as an expert for the limited purpose of
determining the specific disputed Title Defect or Defect Value
submitted by either party and may not award damages, interest or
penalties to either party with respect to any matter. Sellers and
Buyer shall bear their own respective legal fees and other costs of
presenting its case. Each party shall bear one-half of the costs and
expenses of the Title Arbitrator.
(g) To the extent that Buyer has knowledge of any Title Defect
prior to the execution of this Agreement, the Sellers acknowledge that
Buyer shall not be deemed to have waived any of its rights hereunder
to an adjustment in the Purchase Price on account of any such Title
Defect.
6.9 Audited Financials. On or before April 15, 1998, Sellers shall deliver
to Buyer the audited consolidated financial statement for the year ended
December 31, 1997. The defined term "Financial Statements" shall be deemed to
include (in addition to the other financial statements included in such defined
term) such audited financial statements for all purposes after the delivery
thereof. Such audited financials shall not be materially different from the
draft audited financials previously submitted to Buyer by Sellers.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Access to Records after Closing.
(a) For a period of six years after the Closing Date, Sellers and
their representatives shall have reasonable access to all of the
files, data, books and records of BRG, the BRG Partnerships and the
BRG 1997-I Oil and Gas Program relating to the period of time prior to
and including the Closing Date and shall have an opportunity to make
copies of such materials. Such access shall be afforded by Buyer upon
receipt of reasonable advance notice and during normal business hours.
Sellers shall be solely responsible for any costs or expenses incurred
by it pursuant to this Section 7.1. If Buyer shall desire to dispose
<PAGE>
or permit the disposal of any of such files, data, books and records
prior to the expiration of such six-year period, Buyer shall, prior to
such disposition, give Sellers a reasonable opportunity, at Sellers'
expense, to segregate and remove such files, data, books and records
as Sellers may select. Sellers shall keep, and shall cause their
respective agents, employees, representatives and affiliates to keep,
confidential, and not use for any competitive purposes, any
confidential information to which they have access pursuant hereto for
a period of two years from the date after the Closing Date that they
access such confidential information.
(b) For a period of six years after the Closing Date, Buyer and
its representatives shall have reasonable access to all of the files,
data, books and records relating to BRG, the BRG Partnerships and the
BRG 1997-I Oil and Gas Program, if any, which Sellers may retain after
the Closing Date and shall have an opportunity to make copies of such
materials. Such access shall be afforded by Sellers upon receipt of
reasonable advance notice and during normal business hours. Buyer
shall be solely responsible for any costs and expenses incurred by it
pursuant to this Section 7.1. If Sellers shall desire to dispose or
permit the disposal of any of such files, data, books and records
prior to the expiration of such six-year period, Sellers shall, prior
to such disposition, give Buyer a reasonable opportunity, at Buyer's
expense, to segregate and remove such files, data, books and records
as Buyer may select.
7.2 Confidentiality Agreement. The Confidentiality Agreement shall remain
in full force and effect following the execution of this Agreement until Closing
or as provided in Section 9.3 and is hereby incorporated herein by reference and
shall constitute a part of this Agreement for all purposes. Any and all
information received by Buyer pursuant to the terms and provisions of this
Agreement shall be governed by the applicable terms and provisions of the
Confidentiality Agreement.
7.3 No Public Announcement. Except as Buyer and Sellers may otherwise
consent to in writing (which consent shall not be unreasonably withheld),
neither Buyer nor Sellers shall, without the approval of the other, make any
press release or other public announcement concerning the transactions
contemplated by this Agreement, except as and to the extent that any such party
shall be so obligated by law or the rules of any stock exchange or quotation
system, in which case, to the extent practicable, the other party shall be
advised and the parties shall use their best efforts to cause a mutually
agreeable release or announcement to be issued; provided that the foregoing
shall not preclude communications or disclosures necessary to implement the
provisions of this Agreement or to comply with the accounting and, if
applicable, Securities and Exchange Commission disclosure obligations.
7.4 Expenses and Sales Taxes. All legal, accounting and other fees, costs
and expenses incurred in connection with, or arising out of the obligations
contained in this Agreement and the transactions contemplated hereby
("Transaction Expenses") which are attributable to the BRG Shareholders shall be
<PAGE>
payable by BRG, all Transaction Expenses attributable to each BRG Partnership
shall be paid by that BRG Partnership and all Transaction Expenses attributable
to each 1997-I Program Participant shall be payable by such 1997-I Program
Participant. All such Transaction Expenses shall be paid by the Purchase Price
adjustment provided for in the first sentence of Section 2.5 hereof, except for
Transactional Expenses incurred pursuant to Section 2.7(c) hereof. All
Transaction Expenses attributable to Buyer shall be paid by Buyer. All sales
taxes, if any, payable by reason of the transfers of the BRG Partnership
Properties and the 1997-I Properties will be paid by Buyer and Buyer shall, or
shall cause BRG to, file all returns, reports or statements, if any, that may be
required or appropriate in connection with the transactions contemplated by this
Agreement.
7.5 Further Assurances. From time to time following the Closing, each of
the parties hereto shall execute, acknowledge and deliver or cause to be
executed, acknowledged and delivered such instruments and take such other action
as may be necessary or advisable to carry out their obligations under this
Agreement and under any document, certificate or other instrument delivered
pursuant hereto.
7.6 Change of Corporate Name. Buyer will cause BRG to change its corporate
name to a name not confusingly similar to "BRG Petroleum" within 120 days
following the Closing Date. Prior to such change of name, Buyer shall, if
requested by Sellers' Representative, give Sellers' Representative or its
designee consent to use of the name "BRG" or "BRG Petroleum." Following such
change of name, Buyer shall (a) remove or cause to be removed the name, marks
and logos of BRG from the BRG Property, the BRG Partnership Properties and the
1997-I Properties, and (b) file an appropriate notice of such change of name in
the real estate records of each county of each state where the BRG Oil and Gas
Properties, the BRG Partnership Properties and the 1997-I Properties are
located.
7.7 Indemnification of Sellers for Environmental Liabilities. All
Environmental Liabilities attributable to conditions existing and operations
conducted on the BRG Property (except for the Excluded Assets), the BRG
Partnership Properties and the 1997-I Properties, whenever discovered, shall be
liabilities of BRG, and from and after the Closing Buyer shall indemnify,
defend, and hold harmless Sellers from and against all loss, cost, liability or
expense attributable thereto or resulting therefrom.
7.8 Tax Returns; Payments and Refunds. Following the Closing Date, Sellers'
Representative shall prepare, with the assistance of Magee Rausch & Shelton,
LLP, Tulsa, Oklahoma, and timely file with the appropriate federal, state and
local agencies all Tax Returns relating to BRG, the BRG Partnerships and the tax
partnership comprised of 1997-I Program Participants for periods ending on or
prior to the Closing Date, including the consolidated federal income Tax Return
of the affiliated group of which BRG is the common parent for the short period
ending on the Closing Date. Not later than 30 days prior to the due date
(including extensions) for filing any Tax Return described in the preceding
sentence, Sellers' Representative shall deliver to Buyer a copy of such Tax
Return and shall allow Buyer to review, comment upon and approve such Tax Return
without unreasonable delay. The parties good faith estimate of the costs
<PAGE>
associated with the preparation of such Tax Returns and the Taxes due by BRG for
the period ending on the Closing Date shall be a liability of each of BRG and
the BRG Partnerships for purposes of calculating its Adjusted Working Capital.
The parties good faith estimate of any refund of Taxes due to BRG for the period
ending on the Closing Date shall be an asset of BRG for purposes of calculating
its Adjusted Working Capital. Buyer shall pay to Sellers' Representative the
amount of any refund of federal income Taxes related to the carryback of any
losses incurred during the taxable year of BRG that includes the Closing Date,
but only to the extent the amount of such Tax refund (i) is actually received by
the Buyer, (ii) is specifically attributable to the carryback of such losses,
and (iii) is not reflected or otherwise provided for in the Closing Date Balance
Sheet. Buyer shall have no obligation to pursue any such claim for refund.
7.9 Employee Relations and Benefits. Sellers' Representative shall take
such action as is necessary to transfer the employment of the employees of BRG
and Charter Servicing Company to BRG Petroleum Corporation prior to the Closing
Date. Sellers' Representative shall take such action as is necessary and
possible under the terms of the Benefit Plans to cause (i) the Benefit Plans and
all liabilities thereunder (whether occurring prior to or after the Closing
Date) to be assumed by BRG Petroleum Corporation, (ii) BRG to cease as of the
Closing Date to be participating employers in any of the Benefit Plans and (iii)
BRG to have no liability as of and after the Closing Date in respect of any
Benefit Plan. It is understood that Buyer has no commitment or plans to employ
any of the employees of BRG or any of its subsidiaries after the Closing.
Nevertheless, in the event that any such employee is offered employment with and
is employed by Buyer or BRG or any Affiliate thereof within three months after
Closing, service by such employees with BRG shall be recognized under the
employee benefit plans maintained by the Buyer, BRG or any Affiliate thereof for
the benefit of such employees, for all purposes, including without limitation
participation, coverage, vesting and level of benefits, as applicable, but not
in excess of the maximum credit available to Buyer's employees under such plans.
Schedule 7.9 describes the severance benefits to be provided by BRG for its
employees. Any amounts payable to such employees by BRG shall be taken into
account in connection with the calculation of the Closing Adjusted Working
Capital of BRG for purposes of Section 2.5.
7.10 Release and Indemnification of Resigning Officers and Directors. Upon
receipt of the resignation of each of the officers and directors of BRG at the
Closing, Buyer and BRG shall agree to release such individual from any and all
claims, costs, liabilities and actions that they may have against such
individual (except in connection with the transactions contemplated hereby).
Buyer further agrees to not allow BRG to amend its Organizational Documents to
eliminate or alter (except to provide more generous indemnification or
limitation of liability provisions for former officers and directors) any
indemnification or limitation of liability provisions intended to benefit the
officers and directors of BRG.
7.11 Insurance Coverage. Subject to approval by the BRG insurance carrier
or carriers, prior to the Closing Date, BRG and Sellers shall take such action
<PAGE>
as may be necessary and as is reasonably acceptable to Buyer to split the
current insurance coverage of BRG, the BRG Partnerships and the 1997-I
Properties so that the Excluded Assets and operations to be conducted in
connection therewith will continue to be covered as will the BRG Properties, BRG
Partnership Properties, 1997-I Properties and the ongoing operations and
activities of BRG.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF PARTIES
8.1 Conditions to Buyer's Obligations. The obligations of Buyer to purchase
the Shares, the BRG Partnership Properties and the 1997-I Properties pursuant to
this Agreement shall, at the option of Buyer, be subject to the satisfaction, on
or prior to the Closing Date, of the following conditions:
(a) There shall have been no material breach or breaches by Sellers in
the performance of any of their covenants and agreements herein; each of
the representations and warranties of Sellers contained or referred to
herein shall be true and correct on the Closing Date as though made on the
Closing Date, except for changes therein specifically permitted by this
Agreement or resulting from any transaction expressly consented to in
writing by Buyer; and there shall have been delivered to Buyer a
certificate to such effect, dated the Closing Date and signed on behalf of
BRG and the BRG Partnerships by the chief executive officer of Sellers'
Representative in addition to the other deliveries specified in Section
3.2.
(b) There shall not be any injunction, judgment, order, decree,
ruling, or charge in effect preventing consummation of any of the
transactions contemplated by this Agreement; and Sellers shall have
delivered to Buyer a certificate to such effect, dated the Closing Date and
signed on behalf of BRG and the BRG Partnerships by Seller's
Representative.
(c) The parties shall have received all approvals and actions of or by
all Governmental Bodies and other Persons which are necessary to consummate
the transactions contemplated hereby and which are required to be obtained
prior to the Closing by applicable Requirements of Laws or contractual or
other obligations.
(d) BRG and the BRG Partnerships shall have received consents or
waivers of preferential purchase rights from the other parties to all
contracts, leases, agreements and permits to which either BRG or the BRG
Partnerships is a party or by which BRG or the BRG Partnerships or any of
its assets or properties is affected and which are required to consummate
the transactions contemplated hereby.
(e) All actions to be taken by Sellers in connection with consummation
of the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
<PAGE>
contemplated hereby will be reasonably satisfactory in form and substance
to Buyer.
(f) All of the BRG Partnerships shall have received the necessary
consents required from the limited partners thereof as may be required for
the sale of the BRG Partnership Properties.
(g) BRG Holding Company, Inc. shall have become the general partner of
the BRG Partnerships (and the liabilities associated therewith assumed by
BRG Holding Company, Inc.) pursuant to an assignment and assumption form or
other appropriate instrument acceptable to Buyer.
(h) The transactions contemplated by the stock purchase agreement
entered into by BRG pursuant to Section 6.4 hereof shall have been
consummated on terms acceptable to Buyer and any demand note or other
payment obligations given by the purchaser in connection therewith shall
have been fully satisfied.
(i) A majority in interest of the limited partners of the BRG
Partnerships shall have provided a release of liability associated with BRG
acting in the capacity as general partner of the BRG Partnerships in a form
acceptable to Buyer.
(j) Buyer shall have received an opinion of Conner & Winters, A
Professional Corporation, dated as of the Closing Date, that addresses the
matters set forth in Sections 4.1(a), 4.1(b), 4.1(c), 4.2, 4.3(a), 4.3(b)
and 10.4 hereof, including such exceptions and assumptions as are customary
in such opinions, in form and substance acceptable to Buyer.
(k) The consents of all of the holders of the outstanding options to
purchase shares of BRG stock and/or the amendments to the stock option
agreements contemplated by Section 6.5 hereof shall have been obtained or
agreed to by each of the holders of such stock options and Buyer shall have
received evidence of such consents or amendments.
(l) All credit cards and turnpike passes held in the name of BRG shall
have either been canceled or a release of liability shall have been
obtained and delivered to Buyer evidencing the release of any and all
liability or obligation of BRG as to such credit cards and turnpike passes
and such accounts shall have been transferred out of the name of BRG.
(m) All of the participation program agreements entered into between
BRG and James L. Burkhart, B.J. Reid, Robert E. Gee, Michael W. Burkhart
and J. Keith Burkhart, shall have been terminated; provided, however, all
obligations and benefits arising under such participation program
agreements for prospects identified prior to the execution of this
Agreement shall remain in full force and effect.
<PAGE>
(n) All amounts owing under the Special Loan Agreement dated August
30, 1996, between BRG and NationsBank, N.A. as ultimate successor to Bank
IV Oklahoma, National Association and the Supplemental Loan Agreement dated
December 31, 1996, between BRG and NationsBank, N.A., as successor to
Boatman's National Bank of Oklahoma, shall have been fully satisfied and
releases of all liens on BRG Properties shall have been obtained from the
respective bank.
(o) All intercompany indebtedness among BRG and its subsidiaries shall
have been paid in full or otherwise eliminated and evidence thereof shall
be provided to Buyer.
8.2 Conditions to Sellers' Obligations. The obligations of Sellers to sell
the Shares, the BRG Partnership Properties and the 1997-I Properties pursuant to
this Agreement shall, at the option of Sellers, be subject to the satisfaction,
on or prior to the Closing Date, of the following conditions:
(a) There shall have been no material breach by Buyer in the
performance of any of its covenants and agreements herein; each of the
representations and warranties of Buyer contained or referred to in this
Agreement shall be true and correct on the Closing Date as though made on
the Closing Date; and there shall have been delivered to Sellers a
certificate to such effect, dated the Closing Date and signed on behalf of
Buyer by the chief executive officer of Buyer.
(b) There shall not be any injunction, judgment, order, decree,
ruling, or charge in effect preventing consummation of any of the
transactions contemplated by this Agreement; and Buyer shall have delivered
to Sellers a certificate to such effect, dated the Closing Date and signed
on behalf of Buyer by the chief executive officer of Buyer.
(c) The parties shall have received all approvals and actions of or by
all Governmental Bodies necessary to consummate the transactions
contemplated hereby and which are required to be obtained prior to the
Closing by applicable Requirements of Laws.
(d) BRG shall have received the requisite approvals from the
participants of the 1997-I Program for the sale of the 1997-I Properties
and the BRG Partnerships shall have
<PAGE>
received the necessary consents required from the limited partners of the BRG
Partnerships for the sale of the BRG Partnership Properties.
(e) BRG shall have consummated a stock purchase agreement with
BRG Petroleum Corporation, providing for, among other things, the sale
of all of the capital stock of BRG Holding Company, Inc. and BRG
Production Company to BRG Petroleum Corporation, and the consummation
of the transactions contemplated thereunder shall have occurred prior
to the Closing.
(f) All actions to be taken by Buyer in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to Sellers.
ARTICLE IX
TERMINATION TERMINATION
9.1 Termination. Anything contained in this Agreement to the contrary
notwithstanding, this Agreement may be terminated at any time prior to the
Closing Date:
(a) by the mutual consent of Buyer and Sellers;
(b) by Buyer or Sellers if the Closing shall not have occurred on or
before June 15, 1998 (or such later date as may be mutually agreed to by
Buyer and Sellers), for any reason other than the breach or default by the
party desiring to terminate;
(c) by Buyer in the event of any material breach or breaches by
Sellers of any of Sellers' agreements, representations or warranties
contained herein;
(d) by Sellers in the event of any material breach by Buyer of any of
Buyer's agreements, representations or warranties contained herein.
9.2 Notice of Termination. Any party desiring to terminate this Agreement
pursuant to Section 9.1 shall give notice of such termination to the other party
to this Agreement.
9.3 Effect of Termination. In the event that this Agreement shall be
terminated pursuant to this Article IX, all further obligations of the parties
under this Agreement shall be terminated without further liability of any party
to the other, provided that nothing herein shall relieve any party from
liability for its breach of this Agreement. Notwithstanding the preceding
sentence, the provisions of Sections 2.3, 7.3 and 7.4 , and the Confidentiality
Agreement (which shall continue pursuant to its terms) shall survive any
termination hereof pursuant to Section 9.1. <PAGE>
ARTICLE X
GENERAL PROVISIONS
10.1 Survival of Representations, Warranties, Covenants and
Agreements/Indemnities
(a) Except as provided in this Section 10.1(a), none of the
representations, warranties, covenants or agreements contained in this
Agreement or in any instrument delivered pursuant to this Agreement, and no
agreements or obligations arising under the Confidentiality Agreement,
shall survive the consummation of the transactions contemplated hereunder.
The representations and warranties contained in Sections 4.2, 4.3, 4.8, and
4.28 and the agreements contained in Sections 6.7, 7.1, 7.3, 7.5, 7.6, and
7.8, and the certificates delivered at Closing, to the extent pertaining to
such representations, warranties and agreements, shall survive the Closing
until the first anniversary of the Closing Date at which time they shall
expire. The representations and warranties contained in Sections 4.1, 4.16,
4.32, 6.4, 6.6., 7.7., 7.9 and 7.10 and Article 10 and the certificates
delivered at Closing, to the extent pertaining to such representations,
warranties and agreements, shall survive the Closing until the expiration
of the applicable limitations period. Notwithstanding the foregoing, any
representation, warranty or agreement that is the subject of a Claim Notice
timely delivered shall survive with respect to the specific matter
described in the such Claim Notice until the earlier to occur of (i) the
date on which a final nonappealable resolution of the matter described in
such Claim Notice has been reached or (ii) the date on which the matter
described in such Claim Notice has otherwise reached final resolution.
(b) Sellers severally and not jointly hereby agree to protect, defend,
indemnify and hold harmless Buyer and BRG and their respective affiliates,
officers, directors, agents and representatives (the "Indemnitees") from
and against,
(i) all Taxes imposed and all costs and expenses (including,
without limitation, litigation costs and reasonable attorneys' and
accountants' fees and disbursements) incurred as a result of a claim,
notice of deficiency, or assessment by, or any obligation owing to,
any taxing authority for:
(A) Any Taxes of BRG or any BRG Partnership attributable to
any Pre-Closing Taxable Period to the extent such Taxes exceed
the aggregate amount accrued or reserved for Taxes on the Closing
Date Balance Sheet (the "Tax Accrual"); provided, however, that
amounts accrued or reserved for deferred Taxes established to
reflect timing differences between book and Tax income shall not
be included in the Tax Accrual.
<PAGE>
(B) Any Taxes of any entity (other than BRG and the BRG
Partnerships) that is or was a member of any group of entities
filing a consolidated, combined or unitary Tax Return of which
BRG or any BRG Partnership was a member at any time on or prior
to the Closing Date;
(C) Any Taxes attributable to the transactions contemplated
by this Agreement other than any Taxes that may be incurred as a
result of an election made or other action taken by Buyer or BRG
after the Closing, including any election under Section 338 of
the Code; and
(ii) all Damages arising out of, resulting from or relating to
any breach of the representations and warranties or obligations of
Sellers that survive the Closing under this Agreement.
Notwithstanding anything in this Agreement to the contrary, no
indemnification payment for Damages suffered or incurred by an
Indemnitee shall be made to such Indemnitee, until the amount which all
Indemnitees under this Agreement would otherwise be entitled to receive
as indemnification under this Agreement aggregates in excess of the sum
of $1,000,000 (such sum, hereinafter, the "Threshold"), at which time
each Indemnitee shall be entitled to recover any and all amounts for
which a claim for indemnity has theretofore been made, in excess of the
amount of the Threshold. Each Seller other than those Sellers listed in
Schedule 10.1 (the "Principal Sellers"); shall be obligated to
indemnify the Indemnitees only for such Seller's pro rata portion
(based on such Sellers' relative ownership interests) of any Damages
which are attributable to the entity or assets in which such Seller had
an ownership interest. The Sellers listed in Schedule 10.1 shall be
jointly and severally liable to any Indemnitee for indemnification
claims hereunder; provided, however, that the limitation provided in
the last sentence of this subparagraph (b) shall still be applicable
and that such Sellers shall have rights of contribution from all other
Sellers who may be liable for any such claim. No claim for
indemnification may be submitted under subparagraph (i) hereof after
the limitations period for asserting or claiming an assessment by a
Governmental Body or other taxing authority has expired or would have
expired but for extensions of filing any returns or tolling or
extensions of the applicable limitations period that may have been
obtained, requested or agreed to subsequent to Closing. No claim for
indemnification may be submitted under subparagraph (ii) after the
expiration of the survival period provided for in subparagraph (a). No
Seller shall be liable for indemnification hereunder for an amount in
excess of the portion of the Purchase Price finally received by him,
her or it after all adjustments.
(c) All claims for indemnification under this Agreement shall be
asserted and resolved as follows:
(i) To make claim for indemnification under this Agreement,
an indemnified party shall notify the indemnifying party of its
claim under the applicable indemnity, including the specific
details of and specific basis under this Agreement for its claim
(the "Claim Notice"). In the event that the claim for
indemnification is based upon a claim by a third party against
the indemnified party (a "Claim"), the indemnified party shall
provide its Claim Notice promptly after the indemnified party has
actual knowledge of the Claim and shall enclose a copy of all
papers (if any) served with respect to the Claim; provided that
the failure of any indemnified party to give notice of a Claim as
provided in this Section 10.1(c) shall not relieve the
indemnifying party of its obligations under the indemnities set
forth in this Agreement except to the extent such failure results
in insufficient time being available to permit the indemnifying
party to effectively defend against the Claim or otherwise
prejudices the indemnifying party's ability to defend against the
claim. In the event that the claim for indemnification is based
upon an inaccuracy or breach of a representation, warranty,
covenant or agreement that survives the Closing, then the Claim
Notice shall specify the representation, warranty, covenant or
agreement which was inaccurate or breached.
(ii) In the case of a claim for indemnification based upon a
Claim, the indemnifying party shall have 30 days from its receipt
of the Claim Notice to notify the indemnified party whether it
admits or denies its liability to defend the indemnified party
against such Claim at the sole cost and expense of the
indemnifying party. The indemnified party is authorized, prior to
and during such 30-day period, to file any motion, answer or
other pleading that it shall deem necessary or appropriate to
protect its interests or those of the indemnifying party and that
is not prejudicial to the indemnifying party.
(iii) If the indemnifying party admits its liability, it
shall have the right and obligation to diligently defend, at its
sole cost and expense, the Claim. The indemnifying party shall
have full control of such defense and proceedings, including any
compromise or settlement thereof. If requested by the
Indemnifying Party, the indemnified party agrees to cooperate in
contesting any Claim which the indemnifying party elects to
contest. The indemnified party may participate in, but not
control, any defense or settlement of any Claim controlled by the
indemnifying party pursuant to this Section. An indemnifying
party shall not, without the written consent of the indemnified
party, (i) settle any Claim or consent to the entry of any
judgment with respect thereto which does not include an
unconditional written release of the indemnified party from all
liability in respect of such Claim or (ii) settle any Claim or
consent to the entry of any judgment with respect thereto in any
manner that may materially and adversely affect the indemnified
party (other than as a result of money damages covered by the
indemnity).
(iv) If the indemnifying party does not admit its liability
or admits its liability but fails to diligently prosecute or
settle the Claim, then the indemnified party shall have the right
to defend against the Claim at the sole cost and expense of the
indemnifying party, with counsel of the indemnified party's
choosing, subject to the right of the indemnifying party to admit
its liability and assume the defense of the Claim at any time
prior to settlement or final determination thereof. If the
indemnifying party has not yet admitted its liability for a
Claim, the indemnified party shall send written notice to the
indemnifying party of any proposed settlement and the
indemnifying party shall have the option for 10 days following
receipt of such notice to (i) admit in writing its liability for
the Claim and (ii) if liability is so admitted, reject, in its
reasonable judgment, the proposed settlement.
<PAGE>
(v) In the case of a claim for indemnification not based
upon a Claim, the indemnifying party shall have 30 days from its
receipt of the Claim Notice to (i) cure the losses or damages
complained of, (ii) admit its liability for such losses or
damages or (iii) dispute the claim for such losses or damages. If
the indemnifying party does not notify the indemnified party
within such 30 day period that it has cured the losses or damages
or that it disputes the claim for such losses or damages, the
amount of such losses or damages shall conclusively be deemed a
liability of the indemnifying party hereunder.
(d) Any outstanding breach on or as of the Closing Date of the
representations, warranties, covenants or agreements contained in this
Agreement or in any instrument delivered pursuant to this Agreement is
deemed to be waived by the party entitled to the benefit thereof, upon the
Closing of the transactions contemplated hereunder to the extent such
breach is known to such party as acknowledged in writing. Following the
Closing Date, no suit or action may be commenced for claims based on a
breach of the representations, warranties, covenants or agreements
contained in this Agreement or in any instrument delivered pursuant to this
Agreement that do not survive the Closing which is alleged to have occurred
on or prior to the Closing Date. To the extent that Buyer has knowledge of
any breach by Sellers of their representations or warranties herein prior
to the execution of this Agreement, Sellers acknowledge that Buyer shall
not be deemed to have waived any of its rights or remedies hereunder with
respect to any such breach.
10.2 No Reliance. Except as to the representations and warranties of
Sellers expressly set forth in Article IV hereof any of the closing certificates
and schedules delivered pursuant to this Agreement, Buyer has not relied upon
any oral or written statements, representations, or warranties which may have
been made by or on behalf of Sellers or upon any written reports, financial
data, business plans, projections, forecasts or any environmental reports,
audits, studies or assessments, copies of which may have been furnished to Buyer
<PAGE>
or as to which Buyer may have been provided access in connection with the
transactions contemplated by this Agreement. TO THE EXTENT THAT BUYER HAS BEEN
FURNISHED COPIES OF OR BEEN PROVIDED ACCESS TO ANY OF THE FOREGOING, BUYER
ACKNOWLEDGES THAT NEITHER SELLERS NOR ANY OF THEIR RESPECTIVE SUBSIDIARIES, OR
ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES AND
AGENTS, HAS MADE, AND HEREBY EXPRESSLY DISCLAIM, ANY REPRESENTATIONS OR
WARRANTIES AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION, DATA OR
MATERIALS (WHETHER WRITTEN OR ORAL) WHICH MAY HAVE BEEN FURNISHED TO BUYER OR
ITS REPRESENTATIVES OR AGENTS BY OR ON BEHALF OF SELLERS IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED HEREBY.
Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given or delivered
(i) when delivered personally, (ii) if transmitted by fax, when confirmation of
transmission is received, or (iii) if sent by registered mail, return receipt
requested, or by private courier, when received; and shall be addressed as
follows:
If to Buyer, to:
Seagull Energy E&P Inc.
1001 Fannin, Suite 1700
Houston, Texas 77002
Attention: K. R. Sanders, Vice President-Exploitation,
Engineering & Acquisitions
With a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002
Attention: J. Mark Metts
If to Sellers or Sellers' Representative, to:
BRG Petroleum Corporation
7134 South Yale
Suite 600
Tulsa, Oklahoma 74136
Attention: President
<PAGE>
with a copy to:
Conner & Winters,
A Professional Corporation
3700 First Place Tower
15 East Fifth Street
Tulsa, Oklahoma 74103
Attention: Lynnwood R. Moore, Jr.
or to such other address as such party may indicate by a notice delivered to the
other party hereto.
10.4 Representation of Sellers by Sellers' Representative. Each of the
Sellers hereby irrevocably appoints BRG Petroleum Corporation (the "Sellers'
Representative") the agent and attorney-in-fact of each of the Sellers for the
purposes of acting in the name and stead of such Seller in: (i) receiving,
holding and distributing the Purchase Price and paying any associated costs and
expenses of the transactions hereunder required to be paid by such Seller; (ii)
giving and receiving all notices permitted or required by this Agreement and
acting on Sellers' behalf under Section 6.8 hereof for all purposes; (iii)
delivering the certificates for the Shares endorsed by Sellers or accompanied by
stock powers executed by Sellers to Buyer at Closing and any and all assignments
relating thereto; (iv) agreeing with Buyer as to any amendments to this
Agreement which the Sellers' Representative may deem necessary or advisable,
including but not limited to the extension of time in which to consummate the
transactions contemplated by this Agreement, and the waiver of any closing
conditions; (v) employing legal counsel; (vi) paying any legal and any other
fees and expenses incurred by the Sellers' Representative in consummating the
transactions contemplated by this Agreement; and (vii) making, executing,
acknowledging, and delivering all such contracts, orders, receipts, notices,
requests, instructions, certificates, letters, and other writings, and in
general doing all things and taking all actions which the Sellers'
Representative, in its sole discretion, may consider necessary or proper in
connection with or to carry out the terms of this Agreement, as fully as if such
Sellers were personally present and acting. This power of attorney and all
authority conferred hereby is granted and conferred subject to the interests of
the other parties to this Agreement, and in consideration of those interests and
for the purpose of completing the transactions contemplated hereby, this power
of attorney and all authority conferred hereby shall be irrevocable and shall
not be terminated by Sellers or by operation of law, whether by the death,
incompetency or incapacity of the BRG Shareholders or 1997-I Program
Participants, or any of them, or by the occurrence of any other event. If any
BRG Shareholder should die or become incompetent or incapacitated, or any other
event should occur before the delivery of certificates representing the Shares
pursuant to this Agreement, such certificates shall be delivered by or on behalf
of such BRG Shareholder in accordance with the terms and conditions of this
Agreement, and all actions taken by the Sellers' Representative pursuant to this
Agreement shall be as valid as if such death, incompetence, or incapacity or
other event had not occurred, regardless of whether Buyer or the Sellers'
Representative, or any of them, shall have received notice of such death,
incompetence, incapacity, or other event.
<PAGE>
10.5 Successors and Assigns. Assigns
(a) The rights of the parties under this Agreement shall not be
assignable by any such parties hereto prior to the closing without the
written consent of the other. Following the Closing, either party may
assign any of its rights hereunder, but no such assignment shall relieve it
of its obligations hereunder.
(b) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their successors and permitted assigns. The
successors and permitted assigns hereunder shall include, without
limitation, any permitted assignee as well as the successors in interest to
such permitted assignee (whether by merger, liquidation (including
successive mergers or liquidations) or otherwise). Nothing in this
Agreement, expressed or implied, is intended or shall be construed to
confer upon any Person other than the parties and successors and assigns
permitted by this Section 10.5(b) or any indemnified Person any right,
remedy or claim under or by reason of this Agreement.
10.6 Entire Agreement; Amendments. This Agreement and the Exhibits and
Schedules referred to herein and the documents delivered pursuant hereto and the
Confidentiality Agreement contain the entire understanding of the parties hereto
with regard to the subject matter contained herein or therein, and supersede all
prior agreements, understandings or letters of intent between or among any of
the parties hereto. This Agreement shall not be amended, modified or
supplemented except by a written instrument signed by an authorized
representative of Buyer and the Sellers' Representative.
10.7 Waivers. Any term or provision of this Agreement may be waived, or the
time for its performance may be extended, by the party or parties entitled to
the benefit thereof. Any such waiver shall be validly and sufficiently given for
the purposes of this Agreement if, as to any party, it is in writing signed by
an authorized representative of such party. The failure of any party hereto to
enforce at any time any provision of this Agreement shall not be construed to be
a waiver of such provision, nor in any way to affect the validity of this
Agreement or any part hereof or the right of any party thereafter to enforce
each and every such provision. No waiver of any breach of this Agreement shall
be held to constitute a waiver of any other or subsequent breach.
10.8 Partial Invalidity. Wherever possible, each provision hereof shall be
interpreted in such manner as to be effective and valid under applicable law,
but in case any one or more of the provisions contained herein shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
provision shall be ineffective to the extent, but only to the extent, of such
invalidity, illegality or unenforceability without invalidating the remainder of
such provision or provisions or any other provisions hereof, unless such a
construction would be unreasonable.
10.9 Execution in Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be considered an original instrument, but
<PAGE>
all of which shall be considered one and the same agreement, and shall become
binding when one or more counterparts have been signed by each of the parties
hereto and delivered to each of Sellers and Buyer.
10.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (as opposed to the conflicts of law
provisions) of the State of Oklahoma.
10.11 Certain Individuals. Each of James L. Burkhart and Robert E. Gee are
executing this Agreement in his individual capacity and as a trustee of a trust.
All references in this Agreement to "Sellers" and to the "BRG Shareholders"
shall be deemed to also include each such individual in his individual capacity
to the extent that such references would be applicable to the trust on whose
behalf such individual executed this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
BUYER:
SEAGULL ENERGY E&P INC.
By:
Barry J. Galt, Chairman of the Board
SELLERS:
James L. Burkhart,Individually, and as
Trustee of the James L. Burkhart Living Trust
dated September 17, 1997
B. J. Reid
Robert E. Gee, Individually, and as Trustee
of the Gee Family Trust u/t/d 12/23/92
<PAGE>
BKM Family Limited Partnership
By:
Robert E. Gee, General Partner
Jere Lynn Burkhart, Individually, and as
Trustee of the Jere Lynn Burkhart Living
Trust dtd /17/97
Michael W. Burkhart
J. Keith Burkhart
Jamie Lynn Burkhart Hunt, by James L.
Burkhart, Attorney-in-Fact
James Bryan Burkhart, by James L. Burkhart,
Attorney-in-Fact
Matthew Michael Burkhart, by James L.
Burkhart, Attorney-in-Fact
Joshua Keith Hunt, by James L. Burkhart,
Attorney-in-Fact
<PAGE>
John Michael Hunt, by James L. Burkhart,
Attorney-in-Fact
M. Faye Irwin, by James L. Burkhart,
Attorney-in-Fact
Boyce W. Irwin, by James L. Burkhart,
Attorney-in-Fact
William R. Irwin, by James L. Burkhart,
Attorney-in-Fact
Denise G. Irwin MacDougall, by James L.
Burkhart, Attorney-in-Fact
Sarah H. Marcum, by Robert E. Gee,
Attorney-in-Fact
Bruce C. Johnson, by Robert E. Gee,
Attorney-in-Fact
Meg Stuart Maloney, by Robert E. Gee,
Attorney-in-Fact
William L. Gee, by Robert E. Gee,
Attorney-in-Fact
<PAGE>
BRG 1998 Consolidated Limited Partnership
By: BRG Petroleum, Inc., General Partner
By:
James L. Burkhart, President
BRG 1997 Consolidated Limited Partnership
By: BRG Petroleum, Inc., General Partner
By:
James L. Burkhart, President
BRG 1996-I Oil & Gas Limited Partnership
By: BRG Petroleum, Inc., General Partner
By:
James L. Burkhart, President
BRG 1996-II Oil & Gas Income Fund Limited
Partnership
By: BRG Petroleum, Inc., General Partner
By:
James L. Burkhart, President
<PAGE>
BRG 1993-I Oil and Gas Limited Partnership
By: BRG Petroleum, Inc., General Partner
By:
James L. Burkhart, President
BRG 1992-I Oil & Gas Income Fund
Limited Partnership
By: BRG Petroleum, Inc., General Partner
By:
James L. Burkhart, President
BRG 1990-II Oil and Gas Limited Partnership
By: BRG Petroleum, Inc., General Partner
By:
James L. Burkhart, President
BRG 1989-II Oil & Gas Income Fund Limited
Partnership
By: BRG Petroleum, Inc., General Partner
By:
James L. Burkhart, President
Each of those Participants in the BRG 1997-I
Oil and Gas Program Listed on Attachment A
hereto
By: BRG Petroleum, Inc., as Program
Administrator
<PAGE>
By:
James L. Burkhart, President
SELLERS' REPRESENTATIVE:
BRG PETROLEUM CORPORATION
By:
James L. Burkhart,
Chairman of the Board
<PAGE>
EXHIBIT A
Form of Conveyance, Assignment and Bill of Sale
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 17,729
<SECURITIES> 0
<RECEIVABLES> 132,319
<ALLOWANCES> 0
<INVENTORY> 14,345
<CURRENT-ASSETS> 179,754
<PP&E> 2,107,581
<DEPRECIATION> 947,956
<TOTAL-ASSETS> 1,381,525
<CURRENT-LIABILITIES> 183,648
<BONDS> 469,016
0
0
<COMMON> 6,391
<OTHER-SE> 644,540
<TOTAL-LIABILITY-AND-EQUITY> 1,381,525
<SALES> 122,325
<TOTAL-REVENUES> 122,325
<CGS> 14,763
<TOTAL-COSTS> 104,740
<OTHER-EXPENSES> (532)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,547
<INCOME-PRETAX> 6,186
<INCOME-TAX> 3,031
<INCOME-CONTINUING> 3,155
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,155
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-mos 6-mos 9-mos
<FISCAL-YEAR-END> Dec-31-1997 Dec-31-1997 Dec-31-1997
<PERIOD-END> Mar-31-1997 Jun-30-1997 Sep-30-1997
<CASH> 27,283 29,465 15,755
<SECURITIES> 0 0 0
<RECEIVABLES> 135,949 149,346 146,049
<ALLOWANCES> 0 0 0
<INVENTORY> 15,486 13,638 18,271
<CURRENT-ASSETS> 191,539 207,720 196,505
<PP&E> 2,099,143 2,177,335 2,241,442
<DEPRECIATION> 844,353 890,298 933,638
<TOTAL-ASSETS> 1,490,268 1,537,768 1,548,277
<CURRENT-LIABILITIES> 189,982 210,415 207,534
<BONDS> 564,936 588,752 604,783
0 0 0
0 0 0
<COMMON> 6,334 6,343 6,375
<OTHER-SE> 609,884 613,919 615,789
<TOTAL-LIABILITY-AND-EQUITY> 1,490,268 1,537,768 1,548,277
<SALES> 159,573 281,753 402,408
<TOTAL-REVENUES> 159,573 281,753 402,408
<CGS> 16,722 23,966 28,523
<TOTAL-COSTS> 110,657 211,913 314,218
<OTHER-EXPENSES> (698) (913) (1,539)
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 10,410 19,995 29,985
<INCOME-PRETAX> 36,894 45,335 49,427
<INCOME-TAX> 19,640 25,460 26,350
<INCOME-CONTINUING> 17,254 19,875 23,077
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 17,254 19,875 23,077
<EPS-PRIMARY> 0.27 <F1> 0.31 <F1> 0.36 <F1>
<EPS-DILUTED> 0.27 <F1> 0.31 <F1> 0.36 <F1>
<FN>
<F1> Earnings per share has been restated to reflect the Company's adoption of
Statement of Financial Accounting Standards No. 128, "Earnings Per Share."
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-mos 6-mos 9-mos
<FISCAL-YEAR-END> Dec-31-1996 Dec-31-1996 Dec-31-1996
<PERIOD-END> Mar-31-1996 Jun-30-1996 Sep-30-1996
<CASH> 38,044 31,205 32,937
<SECURITIES> 0 0 0
<RECEIVABLES> 139,778 120,982 107,232
<ALLOWANCES> 0 0 0
<INVENTORY> 6,618 6,806 14,080
<CURRENT-ASSETS> 199,301 168,233 165,355
<PP&E> 1,807,328 1,862,023 1,973,664
<DEPRECIATION> 689,218 717,319 751,857
<TOTAL-ASSETS> 1,364,512 1,358,892 1,432,383
<CURRENT-LIABILITIES> 136,534 137,984 133,193
<BONDS> 546,535 538,882 604,583
0 0 0
0 0 0
<COMMON> 6,280 6,296 6,304
<OTHER-SE> 571,227 569,960 577,915
<TOTAL-LIABILITY-AND-EQUITY> 1,364,512 1,358,892 1,432,383
<SALES> 136,575 248,864 358,795
<TOTAL-REVENUES> 136,575 248,864 358,795
<CGS> 16,200 22,457 26,974
<TOTAL-COSTS> 95,471 189,510 277,607
<OTHER-EXPENSES> (1,155) (1,919) (7,151)
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 11,446 22,683 33,478
<INCOME-PRETAX> 27,084 30,227 43,864
<INCOME-TAX> 8,772 14,849 21,028
<INCOME-CONTINUING> 18,312 15,378 22,836
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 18,312 15,378 22,836
<EPS-PRIMARY> 0.29 <F1> 0.24 <F1> 0.36 <F1>
<EPS-DILUTED> 0.29 <F1> 0.24 <F1> 0.36 <F1>
<FN>
<F1> Earnings per share has been restated to reflect the Company's adoption of
Statement of Financial Accounting Standards No. 128, "Earnings Per Share."
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> Year Year
<FISCAL-YEAR-END> Dec-31-1996 Dec-31-1995
<PERIOD-END> Dec-31-1996 Dec-31-1995
<CASH> 15,284 21,477
<SECURITIES> 0 5,004
<RECEIVABLES> 193,659 133,190
<ALLOWANCES> 0 0
<INVENTORY> 12,285 5,488
<CURRENT-ASSETS> 227,617 181,431
<PP&E> 2,049,356 1,783,163
<DEPRECIATION> 804,715 652,985
<TOTAL-ASSETS> 1,515,063 1,359,125
<CURRENT-LIABILITIES> 231,370 146,192
<BONDS> 573,455 557,107
0 0
0 0
<COMMON> 6,307 6,598
<OTHER-SE> 591,423 556,023
<TOTAL-LIABILITY-AND-EQUITY> 1,515,063 1,359,125
<SALES> 517,211 406,280
<TOTAL-REVENUES> 517,211 406,280
<CGS> 42,600 46,328
<TOTAL-COSTS> 396,335 421,281
<OTHER-EXPENSES> 3,745 (90,791)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 44,842 52,978
<INCOME-PRETAX> 54,856 1,044
<INCOME-TAX> 25,895 2,782
<INCOME-CONTINUING> 25,895 (1,738)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 25,895 (1,738)
<EPS-PRIMARY> 0.46 <F1> (0.03) <F1>
<EPS-DILUTED> 0.46 <F1> (0.03) <F1>
<FN>
<F1> Earnings per share has been restated to reflect the Company's adoption of
Statement of Financial Accounting Standards No. 128, "Earnings Per Share."
</FN>
</TABLE>
