Exhibit 10.28

 

Execution Version 

 

 

 

 

 

 

 

 

  

 

 

AMERICAN EAGLE ENERGY CORPORATION

 

and each of the Guarantors PARTY HERETO

 

11.0% SENIOR SECURED NOTES DUE 2019

 

 

 

INDENTURE

 

Dated as of August 27, 2014

 

 

 

 

 

 

U.S. BANK NATIONAL ASSOCIATION

 

Trustee

 

 

 

 

 

 

U.S. BANK NATIONAL ASSOCIATION

 

Collateral Agent

 

 

 

 

 

 

 

CROSS-REFERENCE TABLE*

 

Trust Indenture
Act Section Indenture Section 310(a)(1) 7.10 (a)(2) 7.10 (a)(3) N.A. (a)(4) N.A.
(a)(5) 7.10 (b) 7.10 (c) N.A. 311(a) 7.11 (b) 7.11 (c) N.A. 312(a) 2.05 (b)
12.03 (c) 12.03 313(a) 7.06 (b)(1) 10.03 (b)(2) 7.06; 7.07 (c) 7.06; 10.03;
12.02 (d) 7.06 314(a) 4.03;12.02; 12.05 (b) 10.02 (c)(1) 12.04 (c)(2) 12.04
(c)(3) N.A. (d) 10.03; 10.04; 10.05 (e) 12.05 (f) N.A. 315(a) 7.01 (b) 7.05;
12.02 (c) 7.01 (d) 7.01 (e) 6.11 316(a) (last sentence) 2.09 (a)(1)(A) 6.05
(a)(1)(B) 6.04 (a)(2) N.A. (b) 6.07 (c) 2.12 317(a)(1) 6.08 (a)(2) 6.09 (b) 2.04
318(a) 12.01 (b) N.A. (c) 12.01

 

N.A. means not applicable.

 

* This Cross Reference Table is not part of the Indenture.

 

 

 

 

TABLE OF CONTENTS

 

    Page         ARTICLE 1     DEFINITIONS AND INCORPORATION     BY REFERENCE  
    Section 1.01 Definitions. 1 Section 1.02 Other Definitions 32 Section 1.03
Incorporation by Reference of Trust Indenture Act. 33 Section 1.04 Rules of
Construction. 33         ARTICLE 2     THE NOTES         Section 2.01 Form and
Dating. 34 Section 2.02 Execution and Authentication. 34 Section 2.03 Registrar
and Paying Agent. 35 Section 2.04 Paying Agent to Hold Money in Trust. 35
Section 2.05 Holder Lists. 36 Section 2.06 Transfer and Exchange. 36 Section
2.07 Replacement Notes. 48 Section 2.08 Outstanding Notes. 48 Section 2.09
Treasury Notes. 48 Section 2.10 Temporary Notes. 48 Section 2.11 Cancellation.
49 Section 2.12 Defaulted Interest. 49         ARTICLE 3     REDEMPTION AND
PREPAYMENT         Section 3.01 Notices to Trustee. 49 Section 3.02 Selection of
Notes to Be Redeemed or Purchased. 49 Section 3.03 Notice of Redemption. 50
Section 3.04 Effect of Notice of Redemption. 51 Section 3.05 Deposit of
Redemption or Purchase Price. 51 Section 3.06 Notes Redeemed or Purchased in
Part. 51 Section 3.07 Optional Redemption. 51 Section 3.08 Mandatory Redemption.
52 Section 3.09 Offer to Purchase by Application of Excess Proceeds. 52        
ARTICLE 4     COVENANTS         Section 4.01 Payment of Notes. 54 Section 4.02
Maintenance of Office or Agency. 54 Section 4.03 Reports. 55 Section 4.04
Compliance Certificate. 56 Section 4.05 Taxes. 56 Section 4.06 Stay, Extension
and Usury Laws. 56 Section 4.07 Restricted Payments. 57 Section 4.08 Dividend
and Other Payment Restrictions Affecting Restricted Subsidiaries. 60 Section
4.09 Incurrence of Indebtedness and Issuance of Preferred Stock. 62 Section 4.10
Asset Sales. 65

 

 

 

 

    Page       Section 4.11 Transactions with Affiliates. 67 Section 4.12 Liens.
69 Section 4.13 Business Activities. 69 Section 4.14 Corporate Existence. 69
Section 4.15 Offer to Repurchase Upon Change of Control. 69 Section 4.16
Limitation on Sale and Leaseback Transactions 71 Section 4.17 Payments for
Consent. 71 Section 4.18 Additional Note Guarantees. 72 Section 4.19 Designation
of Restricted and Unrestricted Subsidiaries. 72 Section 4.20 Further Assurances.
72         ARTICLE 5     SUCCESSORS         Section 5.01 Merger, Consolidation
or Sale of Assets. 73 Section 5.02 Successor Corporation Substituted. 74        
ARTICLE 6     DEFAULTS AND REMEDIES         Section 6.01 Events of Default. 74
Section 6.02 Acceleration. 77 Section 6.03 Other Remedies. 77 Section 6.04
Waiver of Past Defaults. 77 Section 6.05 Control by Majority. 77 Section 6.06
Limitation on Suits. 78 Section 6.07 Rights of Holders of Notes to Receive
Payment. 78 Section 6.08 Collection Suit by Trustee and Collateral Agent. 78
Section 6.09 Trustee May File Proofs of Claim. 79 Section 6.10 Priorities. 79
Section 6.11 Undertaking for Costs. 79         ARTICLE 7     TRUSTEE        
Section 7.01 Duties of Trustee. 80 Section 7.02 Rights of Trustee. 81 Section
7.03 Individual Rights of Trustee. 81 Section 7.04 Trustee’s Disclaimer. 81
Section 7.05 Notice of Defaults. 82 Section 7.06 Reports by Trustee to Holders
of the Notes. 82 Section 7.07 Compensation and Indemnity. 82 Section 7.08
Replacement of Trustee. 83 Section 7.09 Successor Trustee by Merger, etc. 84
Section 7.10 Eligibility; Disqualification. 84 Section 7.11 Preferential
Collection of Claims Against Company. 84 Section 7.12 Collateral Agent. 84      
  ARTICLE 8     LEGAL DEFEASANCE AND COVENANT DEFEASANCE         Section 8.01
Option to Effect Legal Defeasance or Covenant Defeasance. 84 Section 8.02 Legal
Defeasance and Discharge. 85 Section 8.03 Covenant Defeasance. 85 Section 8.04
Conditions to Legal or Covenant Defeasance. 86

 

ii

 

 

    Page       Section 8.05 Deposited Money and Government Securities to be Held
in Trust; Other Miscellaneous Provisions. 87 Section 8.06 Repayment to Company.
87 Section 8.07 Reinstatement. 88         ARTICLE 9     AMENDMENT, SUPPLEMENT
AND WAIVER         Section 9.01 Without Consent of Holders of Notes. 88 Section
9.02 With Consent of Holders of Notes. 89 Section 9.03 Compliance with Trust
Indenture Act. 90 Section 9.04 Revocation and Effect of Consents. 91 Section
9.05 Notation on or Exchange of Notes. 91 Section 9.06 Trustee to Sign
Amendments, etc. 91         ARTICLE 10     COLLATERAL AND SECURITY        
Section 10.01 Security Documents. 91 Section 10.02 Recording and Opinions. 92
Section 10.03 Release of Collateral. 92 Section 10.04 Release of Liens in
Respect of Notes. 93 Section 10.05 Certificates of the Company. 93 Section 10.06
Certificates of the Trustee. 93 Section 10.07 Authorization of Actions to Be
Taken Under the Security Documents. 93 Section 10.08 Authorization of Receipt of
Funds by the Trustee Under the Security Documents. 94 Section 10.09
Intercreditor Agreement. 94         ARTICLE 11     NOTE GUARANTEES        
Section 11.01 Guarantee. 94 Section 11.02 Limitation on Guarantor Liability. 95
Section 11.03 Execution and Delivery of Note Guarantee. 96 Section 11.04
Guarantors May Consolidate, etc., on Certain Terms. 96 Section 11.05 Releases.
97         ARTICLE 12     satisfaction and discharge         Section 12.01
Satisfaction and Discharge. 98 Section 12.02 Application of Trust Money. 99    
    ARTICLE 13     MISCELLANEOUS         Section 13.01 Trust Indenture Act
Controls. 99 Section 13.02 Notices. 100 Section 13.03 Communication by Holders
of Notes with Other Holders of Notes. 101 Section 13.04 Certificate and Opinion
as to Conditions Precedent. 101 Section 13.05 Statements Required in Certificate
or Opinion. 101 Section 13.06 Rules by Trustee and Agents. 102 Section 13.07 No
Personal Liability of Directors, Officers, Employees and Stockholders. 102
Section 13.08 Governing Law. 102 Section 13.09 No Adverse Interpretation of
Other Agreements. 102 Section 13.10 Successors. 102

 

iii

 

 

    Page       Section 13.11 Severability. 102 Section 13.12 Counterpart
Originals. 103 Section 13.13 Table of Contents, Headings, etc. 103

 

EXHIBITS

 

Exhibit A FORM OF NOTE Exhibit B FORM OF CERTIFICATE OF TRANSFER Exhibit C FORM
OF CERTIFICATE OF EXCHANGE Exhibit D FORM OF CERTIFICATE OF ACQUIRING
INSTITUTIONAL ACCREDITED INVESTOR Exhibit E FORM OF NOTATION OF GUARANTEE
Exhibit F FORM OF SUPPLEMENTAL INDENTURE Exhibit G FORM OF INTERCREDITOR
AGREEMENT

 

iv

 

 

INDENTURE dated as of August 27, 2014 among American Eagle Energy Corporation, a
Nevada corporation, the Guarantors (as defined), U.S. Bank National Association,
as Trustee, and U.S. Bank National Association, as Collateral Agent.

 

The Company, the Guarantors, the Trustee and the Collateral Agent agree as
follows for the benefit of each other and for the equal and ratable benefit of
the Holders (as defined) of the 11.0% Senior Secured Notes due 2019 (the
“Notes”):

 

ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE

 

Section 1.01         Definitions.

 

“144A Global Note” means a Global Note substantially in the form of Exhibit A
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.

 

“Acquired Debt” means, with respect to any specified Person:

 

(1)         Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of such specified Person,
whether or not such Indebtedness is incurred in connection with, or in
contemplation of, such other Person merging with or into, or becoming a
Restricted Subsidiary of, such specified Person; and

 

(2)         Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.

 

“Act of Required Debtholders” means, as to any matter at any time:

 

(1)         prior to the Discharge of Priority Lien Obligations, a direction in
writing delivered to the Priority Lien Collateral Agent by or with the written
consent of the Required Priority Lien Debtholders; and

 

(2)         at any time after the Discharge of Priority Lien Obligations, a
direction in writing delivered to the Collateral Agent by or with the written
consent of the Required Noteholders.

 

For purposes of this definition, (a) Secured Debt registered in the name of, or
beneficially owned by, the Company or any Affiliate of the Company will be
deemed not to be outstanding, and (b) votes will be determined in accordance
with the provisions of the applicable Secured Debt Document.

 

“Additional Notes” means additional Notes (other than the Initial Notes) issued
under this Indenture in accordance with Sections 2.02 and 4.09 hereof, as part
of the same series as the Initial Notes.

 

“Adjusted Consolidated Net Tangible Assets” means (without duplication), as of
the date of determination,

 

(1)         the sum of:

 

1

 

 

(a)          the discounted future net revenues from Proved Reserves of the
Company and its Restricted Subsidiaries calculated in accordance with SEC
guidelines before any state or federal income taxes, as estimated in a Reserve
Report prepared as of the end of the Company’s most recently completed fiscal
year, which Reserve Report is prepared or audited by independent petroleum
engineers as to Proved Reserves accounting for at least 80% of all such
discounted future net revenues and by the Company’s petroleum engineers with
respect to any other Proved Reserves covered by such report, as increased by, as
of the date of determination, the estimated discounted future net revenues from:

 

(i)          estimated Proved Reserves of the Company and its Restricted
Subsidiaries acquired since the date of such year-end reserve report, and

 

(ii)         estimated Proved Reserves of the Company and its Restricted
Subsidiaries attributable to extensions, discoveries and other additions and
upward revisions of estimates of Proved Reserves (including previously estimated
development costs incurred during the period and the accretion of discount since
the prior period end) since the date of such year-end reserve report due to
exploration, development or exploitation, production or other activities which
would, in accordance with standard industry practice, cause such revisions,

 

and decreased by, as of the date of determination, the discounted future net
revenue attributable to:

 

(iii)        estimated Proved Reserves of the Company and its Restricted
Subsidiaries reflected in such Reserve Report produced or disposed of since the
date of such year-end Reserve Report, and

 

(iv)        reductions in estimated Proved Reserves of the Company and its
Restricted Subsidiaries reflected in such Reserve Report attributable to
downward revisions of estimates of Proved Reserves since such year-end due to
changes in geological conditions or other factors which would, in accordance
with standard industry practice, cause such revisions;

 

in the case of the preceding clauses (i) through (iv), calculated on a pre-tax
basis in accordance with SEC guidelines (utilizing the prices utilized in such
Person’s year-end Reserve Report) and estimated by the Company’s petroleum
engineers or any independent petroleum engineers engaged by the Company for that
purpose;

 

(b)          the capitalized costs that are attributable to Oil and Gas
Properties of the Company and its Restricted Subsidiaries to which no Proved
Reserves are attributable, based on the Company’s books and records as of a date
no earlier than the last day of the Company’s most recent quarterly or annual
period for which internal financial statements are available;

 

(c)          the Consolidated Net Working Capital of the Company and its
Restricted Subsidiaries as of a date no earlier than the last day of the
Company’s most recent quarterly or annual period for which internal financial
statements are available; and

 

(d)          the greater of:

 

2

 

 

(i)          the net book value, and

 

(ii)         the appraised value, as estimated by independent appraisers, of
other tangible assets (including, without limitation, Investments in
unconsolidated Subsidiaries),

 

in each case, of the Company and its Restricted Subsidiaries as of a date no
earlier than the last day of the date of the Company’s most recent quarterly or
annual period for which internal financial statements are available; provided
that if no such appraisal has been performed, the Company shall not be required
to obtain such an appraisal and only clause (1)(d)(i) of this definition shall
apply,

 

minus, to the extent not otherwise taken into account in this clause (1),

 

(2)         the sum of:

 

(a)          minority interests,

 

(b)          any net gas balancing liabilities of the Company and its Restricted
Subsidiaries as of the last day of the Company’s most recent annual or quarterly
period for which internal financial statements are available;

 

(c)          to the extent included in clause (1)(a) above, the discounted
future net revenues, calculated in accordance with SEC guidelines (utilizing the
prices utilized in the Company’s year-end Reserve Report), attributable to
reserves that are required to be delivered to third parties to fully satisfy the
obligations of the Company and its Restricted Subsidiaries with respect to
Volumetric Production Payments on the schedules specified with respect thereto,
and

 

(d)          the discounted future net revenues, calculated in accordance with
SEC guidelines, attributable to reserves subject to Dollar-Denominated
Production Payments that, based on the estimates of production and price
assumptions included in determining the discounted future net revenues specified
in (1)(a) above, would be necessary to fully satisfy the payment obligations of
the Company and its Restricted Subsidiaries with respect to Dollar-Denominated
Production Payments on the schedules specified with respect thereto.

 

If the Company changes its method of accounting from the full cost method to the
successful efforts method or a similar method of accounting, “Adjusted
Consolidated Net Tangible Assets” will continue to be calculated as if the
Company were still using the full cost method of accounting.

 

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

 

“Agent” means any Registrar, co-registrar, Paying Agent or additional paying
agent.

 

“Applicable Premium” means, with respect to any Note on any redemption date, the
greater of:

 

3

 

 

(1)         1.0% of the principal amount of the Note; or

 

(2)         the excess of:

 

(a)          the present value at such redemption date of (i) the redemption
price of the Note at September 1, 2016 (such redemption price being set forth in
the table appearing in Section 3.07 hereof) plus (ii) all required interest
payments due on the Note through September 1, 2016 (excluding accrued but unpaid
interest to the redemption date), computed using a discount rate equal to the
Treasury Rate as of such redemption date plus 50 basis points discounted to the
redemption date on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months); over

 

(b)          the principal amount of the Note.

 

“Applicable Procedures” means, with respect to any transfer or exchange of or
for beneficial interests in any Global Note, the rules and procedures of the
Depositary, Euroclear and Clearstream that apply to such transfer or exchange.

 

“Asset Sale” means:

 

(1)         the sale, lease, conveyance or other disposition of any assets or
rights by the Company or any of the Company’s Restricted Subsidiaries; provided
that the sale, lease, conveyance or other disposition of all or substantially
all of the properties or assets of the Company and its Restricted Subsidiaries
taken as a whole will be governed by Sections 4.15 and/or 5.01 hereof and not by
Section 4.10 hereof; and

 

(2)         the issuance of Equity Interests by any of the Company’s Restricted
Subsidiaries or the sale by the Company or any of the Company’s Restricted
Subsidiaries of Equity Interests in any of the Company’s Subsidiaries.

 

Notwithstanding the preceding, none of the following items will be deemed to be
an Asset Sale:

 

(1)         any single transaction or series of related transactions that
involves assets having a Fair Market Value of less than $5.0 million;

 

(2)         a transfer of assets between or among the Company and its Restricted
Subsidiaries;

 

(3)         an issuance or sale of Equity Interests by a Restricted Subsidiary
of the Company to the Company or to a Restricted Subsidiary of the Company;

 

(4)         the sale, lease or other transfer of products, services or accounts
receivable in the ordinary course of business and any sale or other disposition
of damaged, worn-out or obsolete assets in the ordinary course of business
(including, without limitation, the abandonment or other disposition of
intellectual property that is, in the reasonable judgment of the Company, no
longer economically practicable to maintain or useful in the conduct of the
business of the Company and its Restricted Subsidiaries taken as whole);

 

(5)         licenses and sublicenses by the Company or any of its Restricted
Subsidiaries of software or intellectual property in the ordinary course of
business;

 

4

 

 

(6)         any surrender or waiver of contract rights or settlement, release,
recovery on or surrender of contract, tort or other claims in the ordinary
course of business;

 

(7)         the granting of Liens not prohibited by Section 4.12 hereof and
dispositions in connection with Permitted Liens;

 

(8)         the sale or other disposition of cash or Cash Equivalents or other
financial instruments (other than Oil and Gas Hedging Contracts);

 

(9)         a Restricted Payment that does not violate Section 4.07 hereof, or a
Permitted Investment;

 

(10)        sale or other disposition of Hydrocarbons or other mineral products
in the ordinary course of business;

 

(11)        an Asset Swap;

 

(12)        dispositions of crude oil and natural gas properties; provided that
at the time of any such disposition such properties do not have associated with
them any Proved Reserves; and

 

(13)        any Production Payments and Reserve Sales; provided that any such
Production Payments and Reserve Sales, other than incentive compensation
programs on terms that are reasonably customary in the Oil and Gas Business for
geologists, geophysicists and other providers of technical services to the
Company or a Restricted Subsidiary, shall have been created, incurred, issued,
assumed or Guaranteed in connection with the financing of, and within 60 days
after the acquisition of, the property that is subject thereto.

 

“Asset Swap” means any substantially contemporaneous (and in any event occurring
within 180 days of each other) purchase and sale or exchange of any assets or
properties used or useful in the Oil and Gas Business between the Company or any
of its Restricted Subsidiaries and another Person; provided that the Fair Market
Value of the properties or assets traded or exchanged by the Company or such
Restricted Subsidiary (together with any cash) is reasonably equivalent to the
Fair Market Value of the properties or assets (together with any cash) to be
received by the Company or such Restricted Subsidiary, and provided further that
any net cash received must be applied in accordance with Section 4.10 hereof.

 

“Attributable Debt” in respect of a Sale and Leaseback Transaction means, at the
time of determination, the present value of the obligation of the lessee for net
rental payments during the remaining term of the lease included in such Sale and
Leaseback Transaction including any period for which such lease has been
extended or may, at the option of the lessor, be extended. Such present value
shall be calculated using a discount rate equal to the rate of interest implicit
in such transaction, determined in accordance with GAAP; provided, however, that
if such Sale and Leaseback Transaction results in a Capital Lease Obligation,
the amount of Indebtedness represented thereby will be determined in accordance
with the definition of “Capital Lease Obligation.”

 

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

 

5

 

 

“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule
13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular “person” (as that term is used in Section 13(d)(3)
of the Exchange Act), such “person” will be deemed to have beneficial ownership
of all securities that such “person” has the right to acquire by conversion or
exercise of other securities, whether such right is currently exercisable or is
exercisable only after the passage of time. The terms “Beneficially Owns” and
“Beneficially Owned” have a corresponding meaning. For purposes of this
definition, a Person shall be deemed not to Beneficially Own securities that are
the subject of a stock purchase agreement, merger agreement, amalgamation
agreement, arrangement agreement or similar agreement until consummation of the
transactions or, as applicable, series of related transactions contemplated
thereby.

 

“Board of Directors” means:

 

(1)         with respect to a corporation, the board of directors of the
corporation or any committee thereof duly authorized to act on behalf of such
board;

 

(2)         with respect to a partnership, the Board of Directors of the general
partner of the partnership;

 

(3)         with respect to a limited liability company, the managers, managing
member or members or any controlling committee of managing members thereof; and

 

(4)         with respect to any other Person, the board or committee of such
Person serving a similar function.

 

“Broker-Dealer” has the meaning set forth in the Registration Rights Agreement.

 

“Business Day” means any day other than a Legal Holiday.

 

“Calculation Date” has the meaning assigned to such term in the definition of
“Fixed Charge Coverage Ratio.”

 

“Capital Lease Obligation” means, at the time any determination is to be made,
the amount of the liability in respect of a capital lease that would at that
time be required to be capitalized on a balance sheet prepared in accordance
with GAAP, and the Stated Maturity thereof shall be the date of the last payment
of rent or any other amount due under such lease prior to the first date upon
which such lease may be prepaid by the lessee without payment of a penalty.
Notwithstanding the foregoing, any lease (whether entered into before or after
the date of this Indenture) that would have been classified as an operating
lease pursuant to GAAP as in effect on the date of this Indenture will be deemed
not to represent a Capital Lease Obligation.

 

“Capital Stock” means:

 

(1)         in the case of a corporation, corporate stock;

 

(2)         in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;

 

(3)         in the case of a partnership or limited liability company,
partnership interests (whether general or limited) or membership interests; and

 

(4)         any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person, but excluding from all of the foregoing any debt
securities convertible into Capital Stock, whether or not such debt securities
include any right of participation with Capital Stock.

 

6

 

 

“Cash Equivalents” means:

 

(1)         United States dollars;

 

(2)         securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality of the United States
government (provided that the full faith and credit of the United States is
pledged in support of those securities) having maturities of not more than one
year from the date of acquisition;

 

(3)         certificates of deposit and eurodollar time deposits with maturities
of one year or less from the date of acquisition, bankers’ acceptances with
maturities not exceeding one year and overnight bank deposits, in each case,
with any lender party to the Senior Credit Facility or with any domestic
commercial bank or any branch or agency of a non-U.S. bank licenses to conduct
business in the United States, in each case having combined capital and surplus
of at least $500.0 million and a Thomson BankWatch rating of “B” or better;

 

(4)         repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications specified
in clause (3) above;

 

(5)         commercial paper having one of the two highest ratings obtainable
from Moody’s or S&P and, in each case, maturing within six months after the date
of acquisition; and

 

(6)         money market funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (1) through (5) of this
definition.

 

“Change of Control” means the occurrence of any of the following:

 

(1)         the direct or indirect sale, lease, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or a series
of related transactions, of all or substantially all of the properties or assets
of the Company and its Subsidiaries taken as a whole to any Person (including,
without limitation, any “person” (as that term is used in Section 13(d)(3) of
the Exchange Act));

 

(2)         the adoption of a plan relating to the liquidation or dissolution of
the Company;

 

(3)         the consummation of any transaction (including, without limitation,
any merger or consolidation) the result of which is that any “person” (as
defined above) becomes the Beneficial Owner, directly or indirectly, of more
than 50% of the Voting Stock of the Company, measured by voting power rather
than number of shares, units or the like; or

 

(4)         the first day on which a majority of the members of the Board of
Directors of the Company are not Continuing Directors.

 

“Class” means (1) in the case of Priority Lien Debt, Indebtedness outstanding
under the Senior Credit Facility that constitutes Priority Lien Debt, and (2) in
the case of the Notes, the Notes and any Additional Notes, if and when issued,
taken together.

 

7

 

 

“Clearstream” means Clearstream Banking, S.A.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Collateral” means all properties and assets at any time owned or acquired by
the Company or any of the other Pledgors (or, in the case of the Company’s and
the Guarantors’ Oil and Gas Properties, all Oil and Gas Properties that secure
any Priority Lien Obligations, but in any event not less than 80% of the total
Recognized Value of the Company’s and the Guarantors’ Proved Reserves), except:

 

(1)         Excluded Assets;

 

(2)         any properties and assets in which the Collateral Agent is required
to release its Liens pursuant to the provisions of the Intercreditor Agreement;
and

 

(3)         any properties and assets that no longer secure the Notes or any
Obligations in respect thereof pursuant to Section 10.04 hereof;

 

provided that, in the case of clauses (2) and (3), if such Liens are required to
be released as a result of the sale, transfer or other disposition of any
properties or assets of the Company or any other Pledgor, such assets or
properties will cease to be excluded from the Collateral if the Company or any
other Pledgor thereafter acquires or reacquires such assets or properties.

 

The Collateral shall include not less than 80% of the total Recognized Value of
the Company’s and the Guarantors’ Proved Reserves located in the United States
or in adjacent Federal waters which are evaluated in the Company’s most recently
completed Reserve Report as filed with the SEC or furnished to the Collateral
Agent. If no such Reserve Report is filed with the SEC or furnished to the
Collateral Agent, the Company shall deliver to the Collateral Agent
semi-annually on or before March 1 and September 1 in each calendar year an
Officers’ Certificate certifying that, as of the date of such certificate, the
Collateral includes Oil and Gas Properties subject to Mortgages covering at
least 80% of the total Recognized Value of the Company’s and the Guarantors’
Proved Reserves located in the United States and adjacent Federal waters. To the
extent that any Oil and Gas Properties constituting Collateral are released
after the date of any applicable Reserve Report or Officers’ Certificate to be
delivered pursuant to the first or second preceding sentences, and are then
assigned to Persons other than the Company and the Guarantors, any Proved
Reserves attributable to such Oil and Gas Properties shall be deemed excluded
from such Reserve Report or Officers’ Certificate for the purpose of determining
whether such 80% requirement is met after giving effect to such release.

 

The Collateral will not include the following (collectively, the “Excluded
Assets”):

 

(1)         any lease (other than an oil and gas lease), license, contract or
agreement to which the Company or any other Pledgor is a party or any of its
rights or interests thereunder if and only for so long as the grant of a Lien
under the security documents will constitute or result in a termination under,
or a default or breach thereof that would give the other party thereto the right
to terminate, any such lease, license, contract or agreement (other than to the
extent that any such term would be rendered ineffective pursuant to
Sections 9-406, 9-407, 9-408 or 9-409 of the Uniform Commercial Code of any
relevant jurisdiction or any other applicable law or principles of equity);
provided that such lease, license, contract or agreement will cease to be an
Excluded Asset immediately and automatically, at such time as such consequences
will no longer result;

 

8

 

 

(2)         the Capital Stock of any Foreign Subsidiary to the extent that the
voting power of such Capital Stock aggregates to more than 65% of the voting
power of such Foreign Subsidiary or the Capital Stock of any Subsidiary of a
Foreign Subsidiary;

 

(3)         the Capital Stock of any Subsidiary to the extent (and only to the
extent) that, in the reasonable judgment of the Company, if such Capital Stock
were not excluded from the Collateral then Rule 3-16 or Rule 3-10 of
Regulation S-X under the Securities Act would require the filing of separate
financial statements of such Subsidiary with the SEC (or any other governmental
agency) in connection with a registration of the Notes under the Securities Act;
and

 

(4)         fixed or capital assets owned by the Company or any other Pledgor
that is subject to a purchase money Lien or a Capital Lease Obligation if the
contractual obligation pursuant to which such Lien is granted (or in the
document providing for such capital lease) prohibits or requires the consent of
any Person other than the Company or any of its Affiliates as a condition to the
creation of any other Lien on such fixed or capital assets.

 

“Collateral Agent” means U.S. Bank National Association, in its capacity as
collateral agent under the Security Documents, together with its successors in
such capacity.

 

“Company” means American Eagle Energy Corporation, and any and all successors
thereto.

 

“Consolidated Cash Flow” means, with respect to any specified Person for any
period, the Consolidated Net Income of such Person for such period plus, without
duplication:

 

(1)         an amount equal to any extraordinary loss plus any net loss realized
by such Person or any of its Restricted Subsidiaries in connection with an Asset
Sale, to the extent such losses were deducted in computing such Consolidated Net
Income; plus

 

(2)         provision for taxes based on income or profits of such Person and
its Restricted Subsidiaries for such period, to the extent that such provision
for taxes was deducted in computing such Consolidated Net Income; plus

 

(3)         the Fixed Charges of such Person and its Restricted Subsidiaries for
such period, to the extent that such Fixed Charges were deducted in computing
such Consolidated Net Income; plus

 

(4)         depreciation, depletion, amortization (including amortization of
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period), impairment and other non-cash charges and expenses
(excluding any such non-cash charge or expense to the extent that it represents
an accrual of or reserve for cash charges or expenses in any future period or
amortization of a prepaid cash charge or expense that was paid in a prior
period) of such Person and its Restricted Subsidiaries for such period to the
extent that such depreciation, depletion, amortization, impairment and other
non-cash charges or expenses were deducted in computing such Consolidated Net
Income; plus

 

(5)         if such Person accounts for its oil and natural gas operations using
successful efforts or a similar method of accounting, consolidated exploration
expense of such Person and its Restricted Subsidiaries; minus

 

(6)         non-cash items increasing such Consolidated Net Income for such
period, other than the accrual of revenue in the ordinary course of business;
and minus

 

9

 

 

(7)         to the extent increasing such Consolidated Net Income for such
period, the sum of (a) the amount of deferred revenues that are amortized during
such period and are attributable to reserves that are subject to Volumetric
Production Payments and (b) amounts recorded in accordance with GAAP as
repayments of principal and interest pursuant to Dollar-Denominated Production
Payments,

 

in each case, on a consolidated basis and determined in accordance with GAAP.

 

“Consolidated Net Income” means, with respect to any specified Person for any
period, the aggregate of the net income (loss) of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis determined in accordance
with GAAP and without any reduction in respect of preferred stock dividends or
distributions; provided that:

 

(1)         all extraordinary gains (but not losses) and all gains (but not
losses) realized in connection with any Asset Sale or the disposition of
securities or the early extinguishment of Indebtedness, together with any
related provision for taxes on any such gain, will be excluded;

 

(2)         the net income (but not loss) of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of accounting will be
included only to the extent of the amount of dividends or similar distributions
paid in cash to the specified Person or a Restricted Subsidiary of the Person;

 

(3)         the net income (but not loss) of any Restricted Subsidiary will be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that net income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, partners or members;

 

(4)         the cumulative effect of a change in accounting principles will be
excluded;

 

(5)         unrealized losses and gains under derivative instruments included in
the determination of Consolidated Net Income, including, without limitation,
those resulting from the application of FASB ASC 815 will be excluded; and

 

(6)         any asset impairment writedowns on Oil and Gas Properties under GAAP
or SEC guidelines will be excluded.

 

“Consolidated Net Working Capital” means (a) all current assets of the Company
and its Restricted Subsidiaries except current assets from Oil and Natural Gas
Hedging Contracts, less (b) all current liabilities of the Company and its
Restricted Subsidiaries, except (i) current liabilities included in
Indebtedness, (ii) current liabilities associated with asset retirement
obligations relating to Oil and Gas Properties and (iii) any current liabilities
from Oil and Natural Gas Hedging Contracts, in each case as set forth in the
consolidated financial statements of the Company prepared in accordance with
GAAP (excluding any adjustments made pursuant to FASB ASC 815).

 

“continuing” means, with respect to any Default or Event of Default, that such
Default or Event of Default has not been cured or waived.

 

10

 

 

“Continuing Directors” means, as of any date of determination, any member of the
Board of Directors of the Company who:

 

(1)         was a member of such Board of Directors on the date of this
Indenture; or

 

(2)         was nominated for election or elected to such Board of Directors
with the approval of a majority of the Continuing Directors who were members of
such Board of Directors at the time of such nomination or election.

 

“Corporate Trust Office of the Trustee” means the address of the Trustee
specified in Section 13.02 hereof or such other address as to which the Trustee
may give notice to the Company.

 

“Credit Facilities” means one or more debt facilities (including, without
limitation, the Senior Credit Facility), indentures or commercial paper
facilities, in each case, with banks or other institutional lenders providing
for revolving credit loans, term loans, capital market financings, receivables
financing (including, without limitation, through the sale of receivables to
such lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced in any manner (whether upon or
after termination or otherwise) or refinanced (including by means of sales of
debt securities to institutional investors) in whole or in part from time to
time.

 

“Custodian” means the Trustee, as custodian with respect to the Notes in global
form, or any successor entity thereto.

 

“Customary Recourse Exceptions” means, with respect to any Non-Recourse Debt of
an Unrestricted Subsidiary, exclusions from the exculpation provisions with
respect to such Non-Recourse Debt for the voluntary bankruptcy of such
Unrestricted Subsidiary, fraud, misapplication of cash, environmental claims,
waste, willful destruction and other circumstances customarily excluded by
lenders from exculpation provisions or included in separate indemnification
agreements in non-recourse financings.

 

“Default” means any event that is, or with the passage of time or the giving of
notice or both would be, an Event of Default.

 

“Definitive Note” means a certificated Note registered in the name of the Holder
thereof and issued in accordance with Section 2.06 hereof, substantially in the
form of Exhibit A hereto except that such Note shall not bear the Global Note
Legend and shall not have the “Schedule of Exchanges of Interests in the Global
Note” attached thereto.

 

“Depositary” means, with respect to the Notes issuable or issued in whole or in
part in global form, the Person specified in Section 2.03 hereof as the
Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.

 

“Discharge of Priority Lien Obligations” means the occurrence of all of the
following:

 

(1)         termination or expiration of all commitments to extend credit that
would constitute Priority Lien Debt;

 

(2)         payment in full in cash of the principal of and interest and premium
(if any) on all Priority Lien Debt (other than any undrawn letters of credit);

 

11

 

 

(3)         discharge or cash collateralization (at the lower of (1) 105% of the
aggregate undrawn amount and (2) the percentage of the aggregate undrawn amount
required for release of liens under the terms of the applicable Priority Lien
Document) of all outstanding letters of credit constituting Priority Lien Debt;
and

 

(4)         payment in full in cash of all other Priority Lien Obligations that
are outstanding and unpaid at the time the Priority Lien Debt is paid in full in
cash (other than any obligations for taxes, costs, indemnifications,
reimbursements, damages and other liabilities in respect of which no claim or
demand for payment has been made at such time) (or the cash collateral of all
such Hedging Obligations on terms satisfactory to each applicable counterparty).

 

“Disqualified Stock” means any Capital Stock that, by its terms (or by the terms
of any security into which it is convertible, or for which it is exchangeable,
in each case, at the option of the holder of the Capital Stock), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
of the Capital Stock, in whole or in part, on or prior to the date that is 91
days after the date on which the Notes mature. Notwithstanding the preceding
sentence, any Capital Stock that would constitute Disqualified Stock solely
because the holders of the Capital Stock have the right to require the Company
to repurchase or redeem such Capital Stock upon the occurrence of a change of
control or an asset sale will not constitute Disqualified Stock if the terms of
such Capital Stock provide that the Company may not repurchase or redeem any
such Capital Stock pursuant to such provisions unless such repurchase or
redemption complies with Section 4.07 hereof. The amount of Disqualified Stock
deemed to be outstanding at any time for purposes of this Indenture will be the
maximum amount that the Company and its Restricted Subsidiaries may become
obligated to pay upon the maturity of, or pursuant to any mandatory redemption
provisions of, such Disqualified Stock, exclusive of accrued dividends.

 

“Dollar-Denominated Production Payments” means production payment obligations
recorded as liabilities in accordance with GAAP, together with all undertakings
and obligations in connection therewith.

 

“Domestic Subsidiary” means any Restricted Subsidiary of a Person that was
formed under the laws of the United States or any state of the United States or
the District of Columbia or that Guarantees or otherwise provides direct credit
support for any Indebtedness of such Person.

 

“Equity Interests” of any Person means (1) any and all Capital Stock of such
Person and (2) all rights to purchase, warrants or options (whether or not
currently exercisable), participations or other equivalents of or interests in
(however designated) such Capital Stock of such Person, but excluding from all
of the foregoing any debt securities convertible into Equity Interests,
regardless of whether such debt securities include any right of participation
with Equity Interests.

 

“Equity Offering” means a sale of Equity Interests of the Company (other than
Disqualified Stock and other than to a Subsidiary of the Company) made for cash
on a primary basis by the Company after the date of this Indenture.

 

“Euroclear” means Euroclear Bank, S.A./N.V., as operator of the Euroclear
system.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Exchange Notes” means the Notes issued in the Exchange Offer pursuant to
Section 2.06(f) hereof.

 

12

 

 

“Exchange Offer” has the meaning set forth in the Registration Rights Agreement.

 

“Exchange Offer Registration Statement” has the meaning set forth in the
Registration Rights Agreement.

 

“Excluded Assets” has the meaning assigned to such term in the definition of
“Collateral.”

 

“Existing Indebtedness” means all Indebtedness of the Company and its
Subsidiaries in existence on the date of this Indenture, until such amounts are
repaid.

 

“Fair Market Value” means the value that would be paid by a willing buyer to an
unaffiliated willing seller in a transaction not involving distress or necessity
of either party, determined in good faith by the Board of Directors of the
Company in the case of amounts of $10.0 million or more and otherwise by an
officer of the Company (unless otherwise provided in this Indenture).

 

“FASB ASC 815” means Financial Accounting Standards Board Accounting Standards
Codification Topic No. 815, Derivatives and Hedging.

 

“Fixed Charge Coverage Ratio” means, with respect to any specified Person for
any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person for such period. In the event that
the specified Person or any of its Restricted Subsidiaries incurs, assumes,
Guarantees, repays, repurchases, redeems, defeases or otherwise discharges any
Indebtedness (other than ordinary working capital borrowings) or issues,
repurchases or redeems Preferred Stock subsequent to the commencement of the
period for which the Fixed Charge Coverage Ratio is being calculated and on or
prior to the date on which the event for which the calculation of the Fixed
Charge Coverage Ratio is made (the “Calculation Date”), then the Fixed Charge
Coverage Ratio will be calculated giving pro forma effect to such incurrence,
assumption, Guarantee, repayment, repurchase, redemption, defeasance or other
discharge of Indebtedness, or such issuance, repurchase or redemption of
Preferred Stock, and the use of the proceeds therefrom, as if the same had
occurred at the beginning of the applicable four-quarter reference period. For
purposes of this definition, whenever pro forma effect is to be given to any
calculation under this definition, the pro forma calculations will be determined
in good faith by the chief financial or accounting officer of the specified
Person; provided that such officer may in his or her discretion include any
reasonably identifiable and factually supportable pro forma changes to
Consolidated Cash Flow, including any pro forma expenses and cost reductions,
that have occurred or in the judgment of such officer are reasonably expected to
occur within 12 months of the date of the applicable transaction (regardless of
whether such expense or cost reduction or any other operating improvements could
then be reflected properly in pro forma financial statements prepared in
accordance with Regulation S-X under the Securities Act or any other regulation
or policy of the SEC) and that are set forth in an Officers’ Certificate signed
by the chief financial or accounting officer that states (a) the amount of each
such adjustment and (b) that such adjustments are based on the reasonable good
faith belief of the officers executing such Officers’ Certificate at the time of
such execution and the factual basis on which such good faith belief is based.

 

In addition, for purposes of calculating the Fixed Charge Coverage Ratio:

 

(1)         acquisitions that have been made by the specified Person or any of
its Restricted Subsidiaries, including, without limitation, through mergers or
consolidations, or any Person or any of its Restricted Subsidiaries acquired by
the specified Person or any of its Restricted Subsidiaries, and including,
without limitation, all related financing transactions and including, without
limitation, increases in ownership of Restricted Subsidiaries, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date, or that are to be made on the Calculation Date,
will be given pro forma effect (in accordance with Regulation S-X under the
Securities Act) as if they had occurred on the first day of the four-quarter
reference period;

 

13

 

 

(2)         the Consolidated Cash Flow attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses (and
ownership interests therein) disposed of prior to the Calculation Date, will be
excluded;

 

(3)         the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses (and ownership
interests therein) disposed of prior to the Calculation Date, will be excluded,
but only to the extent that the obligations giving rise to such Fixed Charges
will not be obligations of the specified Person or any of its Restricted
Subsidiaries following the Calculation Date;

 

(4)         any Person that is a Restricted Subsidiary on the Calculation Date
will be deemed to have been a Restricted Subsidiary at all times during such
four-quarter period;

 

(5)         any Person that is not a Restricted Subsidiary on the Calculation
Date will be deemed not to have been a Restricted Subsidiary at any time during
such four-quarter period; and

 

(6)         if any Indebtedness bears a floating rate of interest, the interest
expense on such Indebtedness will be calculated as if the rate in effect on the
Calculation Date had been the applicable rate for the entire period (taking into
account any Hedging Obligation applicable to such Indebtedness if such Hedging
Obligation has a remaining term as at the Calculation Date in excess of 12
months).

 

“Fixed Charges” means, with respect to any specified Person for any period, the
sum, without duplication, of:

 

(1)         the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued (excluding (i) any
interest attributable to Dollar-Denominated Production Payments, (ii) write-off
of deferred financing costs and (iii) accretion of interest charges on future
plugging and abandonment obligations, future retirement benefits and other
obligations that do not constitute Indebtedness, but including, without
limitation, amortization of debt issuance costs and original issue discount,
non-cash interest payments, the interest component of all payments associated
with Capital Lease Obligations, imputed interest with respect to Attributable
Debt, commissions, discounts and other fees and charges incurred in respect of
letter of credit or bankers’ acceptance financings), and net of the effect of
all payments made or received pursuant to Hedging Obligations in respect of
interest rates; plus

 

(2)         the consolidated interest expense of such Person and its Restricted
Subsidiaries that was capitalized during such period; plus

 

(3)         any interest on Indebtedness of another Person that is Guaranteed by
such Person or one of its Restricted Subsidiaries or secured by a Lien on assets
of such Person or one of its Restricted Subsidiaries, whether or not such
Guarantee or Lien is called upon; plus

 

(4)         all dividends or distributions, whether paid or accrued and whether
or not in cash, on any series of Disqualified Stock of such Person or any series
of Preferred Stock of its Restricted Subsidiaries, other than dividends or
distributions on Equity Interests payable solely in Equity Interests of such
Person (other than Disqualified Stock) or to such Person or a Restricted
Subsidiary of such Person,

 

14

 

 

in each case, on a consolidated basis and determined in accordance with GAAP.

 

“Foreign Subsidiary” means any Restricted Subsidiary of a Person that is not a
Domestic Subsidiary of such Person.

 

“GAAP” means generally accepted accounting principles in the United States which
are in effect from time to time.

 

“Global Note Legend” means the legend set forth in Section 2.06(g)(2) hereof,
which is required to be placed on all Global Notes issued under this Indenture.

 

“Global Notes” means, individually and collectively, each of the Restricted
Global Notes and the Unrestricted Global Notes deposited with or on behalf of
and registered in the name of the Depository or its nominee, substantially in
the form of Exhibit A hereto and that bears the Global Note Legend and that has
the “Schedule of Exchanges of Interests in the Global Note” attached thereto,
issued in accordance with Section 2.01, 2.06(b)(3), 2.06(b)(4), 2.06(d)(2) or
2.06(f) hereof.

 

“Government Securities” means direct obligations of, or obligations guaranteed
by, the United States of America, and the payment for which the United States
pledges its full faith and credit.

 

“Guarantee” means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness (whether arising by virtue of
partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take or pay or to maintain financial statement
conditions or otherwise). When used as a verb, “Guarantee” has a correlative
meaning.

 

“Guarantors” means any Subsidiary of the Company that Guarantees the Notes in
accordance with the provisions of this Indenture, and their respective
successors and assigns, in each case, until the Note Guarantee of such Person
has been released in accordance with the provisions of this Indenture.

 

“Hedging Obligations” means, with respect to any specified Person, the
obligations of such Person under any (a) Interest Rate Agreement and (b) Oil and
Gas Hedging Contract.

 

“Holder” means a Person in whose name a Note is registered.

 

“Hydrocarbons” means oil, natural gas, casing head gas, drip gasoline, natural
gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and
all constituents, elements or compounds thereof and products refined or
processed therefrom.

 

“IAI Global Note” means a Global Note substantially in the form of Exhibit A
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold to Institutional Accredited Investors.

 

“Indebtedness” means, with respect to any specified Person, any indebtedness of
such Person (excluding accrued expenses and trade payables), whether or not
contingent:

 

15

 

 

(1)         in respect of borrowed money;

 

(2)         evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);

 

(3)         in respect of bankers’ acceptances;

 

(4)         representing Capital Lease Obligations or Attributable Debt in
respect of Sale and Leaseback Transactions;

 

(5)         representing the balance deferred and unpaid of the purchase price
of any property or services due more than six months after such property is
acquired or such services are completed; or

 

(6)         representing any Hedging Obligations,

 

if and to the extent any of the preceding items (other than letters of credit,
Attributable Debt and Hedging Obligations) would appear as a liability upon a
balance sheet of the specified Person prepared in accordance with GAAP. In
addition, the term “Indebtedness” includes all Indebtedness of others secured by
a Lien on any asset of the specified Person (whether or not such Indebtedness is
assumed by the specified Person) and, to the extent not otherwise included, the
Guarantee by the specified Person of any Indebtedness of any other Person.

 

In addition, “Indebtedness” of any Person shall include Indebtedness described
in the preceding paragraph that would not appear as a liability on the balance
sheet of such Person if:

 

(1)         such Indebtedness is the obligation of a partnership or joint
venture that is not a Restricted Subsidiary (a “Joint Venture”);

 

(2)         such Person or a Restricted Subsidiary of such Person is a general
partner of the Joint Venture (a “Joint Venture General Partner”); and

 

(3)         there is recourse, by contract or operation of law, with respect to
the payment of such Indebtedness to property or assets of such Person or a
Restricted Subsidiary of such Person; and then such Indebtedness shall be
included in an amount not to exceed:

 

(a)          the lesser of (i) the net assets of the Joint Venture General
Partner and (ii) the amount of such obligations to the extent that there is
recourse, by contract or operation of law, to the property or assets of such
Person or a Restricted Subsidiary of such Person; or

 

(b)          if less than the amount determined pursuant to clause (a)
immediately above, the actual amount of such Indebtedness that is recourse to
such Person or a Restricted Subsidiary of such Person, if the Indebtedness is
evidenced by a writing and is for a determinable amount and the related interest
expense shall be included in Fixed Charges to the extent actually paid by such
Person or its Restricted Subsidiaries.

 

Notwithstanding the preceding, “Indebtedness” of a Person shall not include:

 

16

 

 

(1)         any indebtedness that has been defeased in accordance with GAAP or
defeased pursuant to the deposit of cash or Cash Equivalents (in an amount
sufficient to satisfy all such indebtedness obligations at maturity or
redemption, as applicable, and all payments of interest and premium, if any) in
a trust or account created or pledged for the sole benefit of the holders of
such indebtedness, and subject to no other Liens;

 

(2)         any obligation of such Person in respect of a farm-in agreement or
similar arrangement whereby such Person agrees to pay all or a share of the
drilling, completion or other expenses of an exploratory or development well
(which agreement may be subject to a maximum payment obligation, after which
expenses are shared in accordance with the working or participation interest
therein or in accordance with the agreement of the parties) or perform the
drilling, completion or other operation on such well in exchange for an
ownership interest in an oil or gas property; and

 

(3)         any repayment or reimbursement obligation of such Person or any of
its Restricted Subsidiaries with respect to Customary Recourse Exceptions,
unless and until an event or circumstance occurs that triggers the Person’s or
such Restricted Subsidiary’s direct repayment or reimbursement obligation (as
opposed to contingent or performance obligations) to the lender or other Person
to whom such obligation is actually owed, in which case the amount of such
direct payment or reimbursement obligation shall constitute Indebtedness.

 

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

 

“Indirect Participant” means a Person who holds a beneficial interest in a
Global Note through a Participant.

 

“Initial Notes” means the first $175,000,000 million aggregate principal amount
of Notes issued under this Indenture on the date hereof.

 

“Initial Reserve Report” means, that certain reserve report prepared by Ryder
Scott Company, L.P., dated July 14, 2014, evaluating the Oil and Gas Properties
of the Company and its subsidiaries as of June 30, 2014, true and correct copies
of which have been delivered to the Collateral Agent.

 

“Initial Purchasers” means GMP Securities L.P., Canaccord Genuity Inc., Global
Hunter Securities LLC and Johnson Rice & Company L.L.C.

 

“insolvency or liquidation proceeding” means:

 

(1)         any case commenced by or against the Company or any other Pledgor
under Title 11, U.S. Code or any similar federal or state law for the relief of
debtors, any other proceeding for the reorganization, recapitalization or
adjustment or marshalling of the assets or liabilities of the Company or any
other Pledgor, any receivership or assignment for the benefit of creditors
relating to the Company or any other Pledgor or any similar case or proceeding
relative to the Company or any other Pledgor or its creditors, as such, in each
case whether or not voluntary;

 

(2)         any liquidation, dissolution, marshalling of assets or liabilities
or other winding up of or relating to the Company or any other Pledgor, in each
case whether or not voluntary and whether or not involving bankruptcy or
insolvency; or

 

(3)         any other proceeding of any type or nature in which substantially
all claims of creditors of the Company or any other Pledgor are determined and
any payment or distribution is or may be made on account of such claims.

 

17

 

 

“Institutional Accredited Investor” means an institution that is an “accredited
investor” as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act, who are not also QIBs.

 

“Intercreditor Agreement” means the intercreditor agreement, in form and
substance substantially identical to Exhibit G hereto, to be entered into by and
among the Company, the other Pledgors, the Priority Lien Collateral Agent, the
Trustee and the Collateral Agent, as amended, supplemented or otherwise modified
from time to time. By their acceptance of the Notes, Holders are deemed to have
authorized the Collateral Agent, on behalf of itself and the Holders of the
Notes, to enter into an Intercreditor Agreement with the Priority Lien
Collateral Agent, on behalf of itself and the other holders of any Priority Lien
Obligations. Although the Holders of the Notes will not be party to the
Intercreditor Agreement, by their acceptance of the Notes they agree to be bound
thereby.

 

“Interest Rate Agreement” means any interest rate swap agreement (whether from
fixed to floating or from floating to fixed), interest rate cap agreement,
interest rate collar agreement or other similar agreement or arrangement
designed to protect the Company or any of its Restricted Subsidiaries against
fluctuations in interest rates and is not for speculative purposes..

 

“Investments” means, with respect to any Person, all direct or indirect
investments by such Person in other Persons (including, without limitation,
Affiliates) in the forms of loans (including Guarantees or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities (excluding any interest in an oil or natural gas
leasehold to the extent constituting a security under applicable law), together
with all items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP. If the Company or any Restricted Subsidiary of
the Company sells or otherwise disposes of any Equity Interests of any direct or
indirect Restricted Subsidiary of the Company such that, after giving effect to
any such sale or disposition, such Person is no longer a Restricted Subsidiary
of the Company, the Company will be deemed to have made an Investment on the
date of any such sale or disposition equal to the Fair Market Value of the
Company’s Investments in such Subsidiary that were not sold or disposed of in an
amount determined as provided in Section 4.07(c) hereof. The acquisition by the
Company or any Restricted Subsidiary of the Company of a Person that holds an
Investment in a third Person will be deemed to be an Investment by the Company
or such Restricted Subsidiary in such third Person in an amount equal to the
Fair Market Value of the Investments held by the acquired Person in such third
Person in an amount determined as provided in Section 4.07(c) hereof. Except as
otherwise provided in this Indenture, the amount of an Investment will be
determined at the time the Investment is made and without giving effect to
subsequent changes in value.

 

“Joint Venture” has the meaning assigned to such term in the definition of
“Indebtedness.”

 

“Joint Venture General Partner” has the meaning assigned to such term in the
definition of “Indebtedness.”

 

“Legal Holiday” means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.

 

“Letter of Transmittal” means the letter of transmittal to be prepared by the
Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.

 

18

 

 

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law, including,
without limitation, any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction.

 

“Moody’s” means Moody’s Investors Service, Inc., and any successor to the
ratings business thereof.

 

“Mortgaged Property” means any property owned by the Company or any other
Pledgor that is subject to the Liens existing and to exist under the terms of
the Security Documents.

 

“Mortgages” means all mortgages, deeds of trust and similar documents,
instruments and agreements (and all amendments, modifications and supplements
thereof) creating, evidencing, perfecting or otherwise establishing the Liens on
Mortgaged Property to secure payment of the Notes and the Note Guarantees or any
party thereof.

 

“Net Proceeds” means the aggregate cash proceeds and Cash Equivalents received
by the Company or any of its Restricted Subsidiaries in respect of any Asset
Sale (including, without limitation, any cash or Cash Equivalents received upon
the sale or other disposition of any non-cash consideration received in any
Asset Sale but excluding any non-cash consideration deemed to be cash for
purposes of Section 4.10 hereof), net of the direct costs relating to such Asset
Sale, including, without limitation, legal, accounting and investment banking
fees, and sales commissions, and any relocation expenses incurred as a result of
the Asset Sale, taxes paid or payable as a result of the Asset Sale, in each
case, after taking into account any available tax credits or deductions and any
tax sharing arrangements, and amounts required to be applied to the repayment of
Indebtedness, other than revolving credit Indebtedness under a Credit Facility,
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment or indemnification obligations in respect of
the sale price of such asset or assets established in accordance with GAAP.

 

“Non-Recourse Debt” means Indebtedness:

 

(1)         as to which neither the Company nor any of its Restricted
Subsidiaries (a) provides credit support of any kind (including any undertaking,
agreement or instrument that would constitute Indebtedness) or (b) is directly
or indirectly liable as a guarantor or otherwise, except for Customary Recourse
Exceptions; and

 

(2)         as to which the lenders have been notified in writing that they will
not have any recourse to the Capital Stock or assets of the Company or any of
its Restricted Subsidiaries (other than the Equity Interests of an Unrestricted
Subsidiary), except for Customary Recourse Exceptions.

 

“Non-U.S. Person” means a Person who is not a U.S. Person.

 

“Note Documents” means this Indenture, the Notes and the Security Documents.

 

“Note Guarantee” means any Guarantee by a Guarantor of the Company’s obligations
under this Indenture and the Notes, as provided in this Indenture.

 

19

 

 

“Note Lien” means a Lien granted by a Security Document to the Collateral Agent,
at any time, upon any property of the Company or any other Pledgor to secure
Note Obligations.

 

“Note Obligations” means the Notes and all other Obligations in respect thereof.

 

“Notes” has the meaning assigned to it in the preamble to this Indenture. The
Initial Notes and the Additional Notes shall be treated as a single class for
all purposes under this Indenture, and unless the context otherwise requires,
all references to the Notes shall include the Initial Notes and any Additional
Notes.

 

“Obligations” means any principal (including reimbursement obligations with
respect to letters of credit whether or not drawn), interest (including, to the
extent legally permitted, all interest accrued thereon after the commencement of
any insolvency or liquidation proceeding at the rate, including any applicable
post-default rate, specified in the Note Documents, even if such interest is not
enforceable, allowable or allowed as a claim in such proceeding), premium (if
any), fees, indemnifications, reimbursements, expenses and other liabilities
payable under the documentation governing any Indebtedness.

 

“Offering Memorandum” means the Offering Memorandum of the Company dated August
13, 2014, relating to the initial offering of the Notes.

 

“Officer” means, with respect to any Person, the Chairman of the Board of
Directors, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary or any Vice-President of such Person.

 

“Officers’ Certificate” means a certificate signed on behalf of the Company by
two Officers of the Company, one of whom must be the principal executive
officer, the principal financial officer, the treasurer or the principal
accounting officer of the Company, that meets the requirements of Section 13.05
hereof.

 

“Oil and Gas Business” means (i) the acquisition, exploration, development,
production, operation and disposition of interests in oil, gas and other
Hydrocarbon properties, (ii) the gathering, marketing, treating, processing (but
not refining), storage, selling and transporting of any production from such
interests or properties, (iii) any business relating to exploration for or
development, production, treatment, processing (but not refining), storage,
transportation or marketing of oil, gas and other minerals and products produced
in association therewith and (iv) any activity that is ancillary to or necessary
or appropriate for the activities described in clauses (i) through (iii) of this
definition.

 

“Oil and Gas Hedging Contracts” means any puts, cap transactions, floor
transactions, collar transactions, forward contract, commodity swap agreement,
commodity option agreement or other similar agreement or arrangement in respect
of Hydrocarbons to be used, produced, processed or sold by the Company or any of
its Restricted Subsidiary that are customary in the Oil and Gas Business and
designed to protect such Person against fluctuation in Hydrocarbons prices and
not for speculative purposes.

 

“Oil and Gas Properties” means all properties, including, without limitation,
equity or other ownership interest therein, owned by such Person or any of its
Restricted Subsidiaries which contain or are believed to contain “proved oil and
gas reserves” as defined in Rule 4-10 of Regulation S-X of the Securities Act.

 

20

 

 

“Opinion of Counsel” means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 13.05 hereof.
The counsel may be an employee of or counsel to the Company, any Subsidiary of
the Company or the Trustee or the Collateral Agent.

 

“Participant” means, with respect to the Depositary, Euroclear or Clearstream, a
Person who has an account with the Depositary, Euroclear or Clearstream,
respectively (and, with respect to DTC, shall include Euroclear and
Clearstream).

 

“Permitted Acquisition Indebtedness” means Indebtedness or Disqualified Stock of
the Company or any of its Restricted Subsidiaries (a) incurred to finance an
acquisition of assets used or useful in the Oil and Gas Business by the Company
or any of its Restricted Subsidiaries or (b) to the extent such Indebtedness or
Disqualified Stock was Indebtedness or Disqualified Stock of any other Person
existing at the time (x) such Person became a Restricted Subsidiary of the
Company or (y) such Person was merged or consolidated with or into the Company
or any of its Restricted Subsidiaries (in either case under this clause (b),
whether or not such Indebtedness was incurred in contemplation of such merger or
consolidation); provided that on the date such (i) assets were acquired by the
Company or any of its Restricted Subsidiaries, (ii) Person became a Restricted
Subsidiary of the Company or (iii) Person was merged or consolidated with or
into the Company or any of its Restricted Subsidiaries, as applicable, either

 

(1)         immediately after giving effect to such transaction and any related
financing transaction on a pro forma basis as if the same had occurred at the
beginning of the applicable four-quarter period, the Company or such Person (if
the Company is not the survivor in the transaction) would be permitted to incur
at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in Section 4.09(a) hereof; or

 

(2)         immediately after giving effect to such transaction and any related
financing transaction on a pro forma basis as if the same had occurred at the
beginning of the applicable four-quarter period, the Fixed Charge Coverage Ratio
of the Company or such Person (if the Company is not the survivor in the
transaction) is equal to or greater than the Fixed Charge Coverage Ratio of the
Company immediately prior to such transaction.

 

“Permitted Investments” means:

 

(1)         any Investment in the Company or in a Restricted Subsidiary of the
Company;

 

(2)         any Investment in Cash Equivalents;

 

(3)         any Investment by the Company or any Restricted Subsidiary of the
Company in a Person, if as a result of such Investment:

 

(a)          such Person becomes a Restricted Subsidiary of the Company; or

 

(b)          such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its properties or assets to, or is
liquidated into, the Company or a Restricted Subsidiary of the Company;

 

(4)         any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in compliance
with Section 4.10 hereof, including pursuant to an Asset Swap;

 

21

 

 

(5)         any acquisition of assets or Capital Stock solely in exchange for
the issuance of Equity Interests (other than Disqualified Stock) of the Company;

 

(6)         any Investments received in compromise or resolution of
(a) obligations of trade creditors or customers that were incurred in the
ordinary course of business of the Company or any of its Restricted
Subsidiaries, including pursuant to any plan of reorganization or similar
arrangement upon the bankruptcy or insolvency of any trade creditor or customer;
or (b) litigation, arbitration or other disputes;

 

(7)         Investments represented by Hedging Obligations;

 

(8)         loans or advances to officers, directors or employees made in the
ordinary course of business of the Company or any Restricted Subsidiary of the
Company in an aggregate principal amount not to exceed $2.0 million at any one
time outstanding;

 

(9)         repurchases of the Notes;

 

(10)        any Guarantee of Indebtedness permitted to be incurred by Section
4.09 hereof other than a Guarantee of Indebtedness of an Affiliate of the
Company that is not a Restricted Subsidiary of the Company;

 

(11)        any Investment existing on, or made pursuant to binding commitments
existing on, the date of this Indenture and any Investment consisting of an
extension, modification or renewal of any Investment existing on, or made
pursuant to a binding commitment existing on, the date of this Indenture;
provided that the amount of any such Investment may be increased (a) as required
by the terms of such Investment as in existence on the date of this Indenture or
(b) as otherwise permitted under this Indenture;

 

(12)        Investments acquired after the date of this Indenture as a result of
the acquisition by the Company or any Restricted Subsidiary of the Company of
another Person, including by way of a merger, amalgamation or consolidation with
or into the Company or any of its Restricted Subsidiaries in a transaction that
is not prohibited by Section 5.01 hereof after the date of this Indenture to the
extent that such Investments were not made in contemplation of such acquisition,
merger, amalgamation or consolidation and were in existence on the date of such
acquisition, merger, amalgamation or consolidation;

 

(13)        Investments made in the ordinary course of, and of a nature that is
or shall have become customary in, the Oil and Gas Business as a means of
actively exploiting, exploring for, acquiring, developing, processing,
gathering, marketing or transporting oil and natural gas through agreements,
transactions, interests or arrangements which permit one to share risks or costs
jointly with third parties, including Investments in the form of or pursuant to
operating agreements, processing agreements, farm in agreements, farm-out
agreements, developments agreements, area of mutual interest agreements,
unitization agreements, pooling agreements, joint bidding agreements, service
contracts, subscription agreements, stock purchase agreements and other similar
agreements with third parties;

 

(14)        Investments constituting ownership interests in oil, natural gas,
other Hydrocarbon properties or any interest therein or gathering,
transportation, processing, storage or related systems, drilling rigs,
fracturing units and other related equity equipment; and

 

22

 

 

(15)        other Investments in any Person other than an Affiliate of the
Company that is not a Subsidiary of the Company having an aggregate Fair Market
Value (measured on the date each such Investment was made and without giving
effect to subsequent changes in value), when taken together with all other
Investments made pursuant to this clause (15) that are at the time outstanding
that do not exceed $20.0 million; provided, however, that if any Investment
pursuant to this clause (15) is made in any Person that is not a Restricted
Subsidiary at the date of the making of such Investment and such Person becomes
a Restricted Subsidiary after such date, such Investment shall thereafter be
deemed to have been made pursuant to clause (1) above and shall cease to have
been made pursuant to this clause (15) for so long as such Person continues to
be a Restricted Subsidiary.

 

“Permitted Liens” means:

 

(1)         Liens on assets of the Company or any Guarantor securing
Indebtedness and other Obligations under Credit Facilities that was permitted by
the terms of this Indenture to be incurred pursuant to clause (1) of the
definition of Permitted Debt or securing Hedging Obligations related thereto or
securing Obligations with regard to Treasury Management Arrangements;

 

(2)         Liens in favor of the Collateral Agent created pursuant to this
Indenture and the Security Documents with respect to the Notes, Note Guarantees,
the Exchange Notes and exchange guarantees, any Additional Notes and any Note
Guarantees related thereto; provided that the Company and the Guarantors may
only incur Liens to secure Additional Notes and Note Guarantees related to such
Additional Notes if the Company’s Secured Leverage Ratio, after giving effect to
the issuance of such Additional Notes and the application of the net proceeds
therefrom, is less than 3.0 to 1.0;

 

(3)         Liens in favor of the Company or the Guarantors;

 

(4)         Liens on property of a Person existing at the time such Person
becomes a Restricted Subsidiary of the Company or is merged with or into or
consolidated with the Company or any Restricted Subsidiary of the Company;
provided that such Liens were in existence prior to the contemplation of such
Person becoming a Restricted Subsidiary of the Company or such merger or
consolidation and do not extend to any assets other than those of the Person
that becomes a Restricted Subsidiary of the Company or is merged with or into or
consolidated with the Company or any Restricted Subsidiary of the Company;

 

(5)         Liens on property (including, without limitation, Capital Stock)
existing at the time of acquisition of the property by the Company or any
Subsidiary of the Company; provided that such Liens were in existence prior to
such acquisition and not incurred in contemplation of, such acquisition;

 

(6)         Liens to secure the performance of statutory obligations, insurance,
surety or appeal bonds, workers’ compensation obligations, bid, plugging and
abandonment and performance bonds or other obligations of a like nature incurred
in the ordinary course of business (including, without limitation, Liens to
secure letters of credit issued to assure payment of such obligations);

 

(7)         Liens to secure Indebtedness (including, without limitation, Capital
Lease Obligations) permitted by Section 4.09(b)(4) hereof covering only the
assets acquired with or financed by such Indebtedness;

 

23

 

 

(8)         Liens existing on the date of this Indenture;

 

(9)         Liens to secure any Permitted Refinancing Indebtedness permitted to
be incurred under this Indenture; provided, however, that:

 

(a)          the new Lien is limited to all or part of the same property and
assets that secured or, under the written agreements pursuant to which the
original Lien arose, could secure the original Lien (plus improvements and
accessions to, such property or proceeds or distributions thereof); and

 

(b)          the Indebtedness secured by the new Lien is not increased to any
amount greater than the sum of (x) the outstanding principal amount, or, if
greater, committed amount, of the Indebtedness renewed, refunded, refinanced,
replaced, defeased or discharged with such Permitted Refinancing Indebtedness
and (y) an amount necessary to pay any fees and expenses, including, without
limitation, premiums, related to such renewal, refunding, refinancing,
replacement, defeasance or discharge;

 

(10)        Liens on insurance policies and proceeds thereof, or other deposits,
to secure insurance premium financings;

 

(11)        filing of Uniform Commercial Code financing statements as a
precautionary measure in connection with operating leases;

 

(12)        bankers’ Liens, rights of setoff, Liens arising out of judgments or
awards not constituting an Event of Default and notices of lis pendens and
associated rights related to litigation being contested in good faith by
appropriate proceedings and for which adequate reserves have been made;

 

(13)        Liens on cash, Cash Equivalents or other property arising in
connection with the defeasance, discharge or redemption of Indebtedness;

 

(14)        Liens on specific items of inventory or other goods (and the
proceeds thereof) of any Person securing such Person’s obligations in respect of
bankers’ acceptances issued or created in the ordinary course of business for
the account of such Person to facilitate the purchase, shipment or storage of
such inventory or other goods;

 

(15)        grants of software and other technology licenses in the ordinary
course of business;

 

(16)        Liens arising out of conditional sale, title retention, consignment
or similar arrangements for the sale of goods entered into in the ordinary
course of business;

 

(17)        Liens in respect of Production Payments and Reserve Sales; provided
that such Liens are limited to the property that is subject to such Production
Payments and Reserve Sales;

 

(18)        Liens arising under oil and gas leases or subleases, assignments,
farm-out agreements, farm-in agreements, division orders, contracts for the
sale, purchase, exchange, transportation, gathering or processing of
Hydrocarbons, unitizations and pooling designations, declarations, orders and
agreements, development agreements, joint venture agreements, partnership
agreements, operating agreements, royalties, working interests, net profits
interests, joint interest billing arrangements, participation agreements,
production sales contracts, area of mutual interest agreements, gas balancing or
deferred production agreements, injection, repressuring and recycling
agreements, salt water or other disposal agreements, seismic or geophysical
permits or agreements, licenses, sublicenses and other agreements which are
customary in the Oil and Gas Business; provided, however, in all instances that
such Liens are limited to the assets that are the subject of the relevant
agreement, program, order or contract;

 

24

 

 

(19)        Liens to secure performance of Hedging Obligations of the Company or
any of its Restricted Subsidiaries entered into in the ordinary course of
business;

 

(20)        Liens incurred in the ordinary course of business of the Company or
any Restricted Subsidiary of the Company with respect to Indebtedness that does
not exceed in aggregate principal amount $20.0 million; and

 

(21)        any Lien renewing, extending, refinancing or refunding a Lien
permitted by clauses (1) through (20) above; provided that (a) the principal
amount of the Indebtedness secured by such Lien is not increased except by an
amount equal to a reasonable premium or other reasonable amount paid, and fees
and expenses reasonably incurred, in connection therewith and by an amount equal
to any existing commitments unutilized thereunder and (b) no assets are
encumbered by any such Lien other than the assets permitted to be encumbered
immediately prior to such renewal, extension, refinance or refund (other than
improvements thereon, accessions thereto and proceeds thereof).

 

“Permitted Prior Liens” means:

 

(1)         Liens described in clauses (4), (5), (6) or (7) of the definition of
“Permitted Liens” and, to the extent relating to any of the foregoing Liens,
Liens described in clause (21) of the definition of “Permitted Liens”; and

 

(2)         Permitted Liens that arise by operation of law and are not
voluntarily granted, to the extent entitled by law to priority over the Liens
created by the Priority Lien Security Documents or the Security Documents.

 

“Permitted Refinancing Indebtedness” means any Indebtedness of the Company or
any of its Restricted Subsidiaries or any Disqualified Stock of the Company
issued in exchange for, or the net proceeds of which are used to renew, refund,
refinance, replace, defease or discharge other Indebtedness of the Company or
any of its Restricted Subsidiaries (other than intercompany Indebtedness) or any
Disqualified Stock of the Company; provided that:

 

(1)         the principal amount (or accreted value, if applicable), or in the
case of Disqualified Stock, the amount thereof determined in accordance with the
definition of Disqualified Stock, of such Permitted Refinancing Indebtedness
does not exceed the principal amount (or accreted value, if applicable) of the
Indebtedness or the amount of the Disqualified Stock renewed, refunded,
refinanced, replaced, defeased or discharged (plus all accrued interest on the
Indebtedness or accrued and unpaid dividends on the Disqualified Stock, as the
case may be, and the amount of all fees and expenses, including premiums,
incurred in connection therewith);

 

(2)         such Permitted Refinancing Indebtedness has a final maturity date or
redemption date, as applicable, that is (a) later than the final maturity date
of, and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness or Disqualified Stock
being renewed, refunded, refinanced, replaced, defeased or discharged or
(b) more than 90 days after the final maturity date of the Notes;

 

25

 

 

(3)         if the Indebtedness being renewed, refunded, refinanced, replaced,
defeased or discharged is subordinated in right of payment to the Notes or the
Note Guarantees, such Permitted Refinancing Indebtedness is subordinated in
right of payment to the Notes or the Note Guarantees, as applicable, on terms at
least as favorable to the holders of the Notes as those contained in the
documentation governing the Indebtedness being renewed, refunded, refinanced,
replaced, defeased or discharged; and

 

(4)         such Indebtedness is not incurred (other than by way of a Guarantee)
by a Restricted Subsidiary of the Company if the Company is the issuer or other
primary obligor on the Indebtedness being renewed, refunded, refinanced,
replaced, defeased or discharged.

 

Notwithstanding the foregoing, any Indebtedness incurred under Credit Facilities
shall be subject to the refinancing provisions of the definition of “Credit
Facilities” and not pursuant to the requirements of the foregoing definition.

 

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

 

“Pledgors” means the Company, the Guarantors and any other Person (if any) that
provides collateral security for any Secured Debt Obligations.

 

“Preferred Stock” means, with respect to any Person, any and all preferred or
preference stock or other similar Equity Interests (however designated) of such
Person whether outstanding or issued after the date of this Indenture.

 

“Priority Lien” means a Lien granted by a security document to the Priority Lien
Collateral Agent, at any time, upon any property of the Company or any Guarantor
to secure Priority Lien Obligations.

 

“Priority Lien Collateral Agent” means the collateral agent or other
representative of lenders or holders of Priority Lien Obligations designated
pursuant to the terms of the Priority Lien Documents and the Intercreditor
Agreement.

 

“Priority Lien Debt” means Indebtedness of the Company or any Guarantor
consisting of Indebtedness under any Senior Credit Facility, Hedging Obligations
under any agreement pertaining to Hedging Obligations permitted to be incurred
under this Indenture or Obligations with respect to any Treasury Management
Arrangement permitted to be incurred under this Indenture; provided, that:

 

(a)          on or before the date on which such Indebtedness is incurred by the
Company, such Indebtedness is designated by the Company, in an Officers’
Certificate delivered to the Priority Lien Collateral Agent and the Collateral
Agent, as “Priority Lien Debt” for the purposes of the Secured Debt Documents
and the Intercreditor Agreement; provided that Notes may not be designated as
Priority Lien Debt;

 

(b)          the Priority Lien Collateral Agent, the Collateral Agent, the
Company and each applicable Guarantor have duly executed and delivered the
Intercreditor Agreement (or a joinder to the Intercreditor Agreement or a new
intercreditor agreement substantially similar to Exhibit G hereto, and in a form
reasonably acceptable to each of the parties thereto); and

 

26

 

 

(c)          all other requirements set forth in the Intercreditor Agreement as
to the confirmation, grant or perfection of the Priority Lien Collateral Agent’s
Liens to secure such Indebtedness or Obligations in respect thereof are
satisfied (and the satisfaction of such requirements and the other provisions of
this clause (c) will be conclusively established if the Company delivers to the
Priority Lien Collateral Agent and the Collateral Agent an Officers’ Certificate
stating that such requirements and other provisions have been satisfied and that
such Indebtedness is “Priority Lien Debt”).

 

“Priority Lien Documents” means the Senior Credit Facility pursuant to which any
Priority Lien Debt is incurred and the Priority Lien Security Documents.

 

“Priority Lien Obligations” means the Priority Lien Debt and all other
Obligations in respect of Priority Lien Debt together with Hedging Obligations.

 

“Priority Lien Representative” means the administrative agent under the Senior
Credit Facility.

 

“Priority Lien Security Documents” means the Intercreditor Agreement and all
security agreements, pledge agreements, collateral assignments, Mortgages, deeds
of trust, collateral agency agreements, control agreements or other grants or
transfers for security executed and delivered by the Company or any other
Pledgor creating (or purporting to create) a Priority Lien upon Collateral in
favor of the Priority Lien Collateral Agent, in each case, as amended, modified,
renewed, restated or replaced, in whole or in part, from time to time, in
accordance with its terms.

 

“Private Placement Legend” means the legend set forth in Section 2.06(g)(1)
hereof to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.

 

“Production Payments” means Dollar-Denominated Production Payments and
Volumetric Production Payments, collectively.

 

“Production Payments and Reserve Sales” means the grant or transfer by the
Company or any of its Restricted Subsidiaries to any Person of a royalty,
overriding royalty, net profits interest, Production Payment, partnership or
other interest in Oil and Gas Properties, reserves or the right to receive all
or a portion of the production or the proceeds from the sale of production
attributable to such properties where the holder of such interest has recourse
solely to such production or proceeds of production, subject to the obligation
of the grantor or transferor to operate and maintain, or cause the subject
interests to be operated and maintained, in a reasonably prudent manner or other
customary standard or subject to the obligation of the grantor or transferor to
indemnify for environmental, title or other matters customary in the Oil and Gas
Business, including any such grants or transfers pursuant to incentive
compensation programs on terms that are reasonably customary in the Oil and Gas
Business for geologists, geophysicists or other providers of technical services
to the Company or any of its Restricted Subsidiaries.

 

“Proved Reserves” shall mean those Oil and Gas Properties designated as “proved”
(in accordance with SEC definitions and regulations) in the most recently filed
or delivered Reserve Report.

 

“QIB” means a “qualified institutional buyer” as defined in Rule 144A.

 

27

 

 

“Recognized Value” means the present value of the future net revenues from
Proved Reserves of the Company and Guarantors, calculated in accordance with SEC
guidelines and pricing (and using the pricing utilized in such Reserve Report)
and using a 10% discount factor, before any state or federal income taxes, as
estimated in the Company’s most recent Reserve Report.

 

“Registration Rights Agreement” means the Registration Rights Agreement, dated
as of August 27, 2014, among the Company, the Guarantors and the Initial
Purchasers, as such agreement may be amended, modified or supplemented from time
to time, and, with respect to any Additional Notes, one or more registration
rights agreements among the Company, the Guarantors and the other parties
thereto, as such agreement(s) may be amended, modified or supplemented from time
to time, relating to rights given by the Company to the purchasers of Additional
Notes to register such Additional Notes under the Securities Act.

 

“Regulation S” means Regulation S promulgated under the Securities Act.

 

“Regulation S Global Note” means a Global Note substantially in the form of
Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend
and deposited with or on behalf of and registered in the name of the Depositary
or its nominee, issued in a denomination equal to the outstanding principal
amount of the Notes sold in reliance on Rule 903 of Regulation S.

 

“Related Party” means:

 

(1)         any controlling stockholder, majority owned Subsidiary, or immediate
family member (in the case of an individual) of any Person; or

 

(2)         any trust, corporation, partnership, limited liability company or
other entity, the beneficiaries, stockholders, partners, members, owners or
Persons beneficially holding a majority (and controlling) interest of which
consist of any one or more Persons and/or such other Persons referred to in the
immediately preceding clause (1).

 

“Required Noteholders” means, at any time, except as otherwise provided by this
Indenture, the holders of a majority in aggregate principal amount of all Notes
then outstanding, calculated in accordance with the provisions hereof. For
purposes of this definition, any Notes registered in the name of, or
beneficially owned by, the Company or any Affiliate of the Company will be
deemed not to be outstanding.

 

“Required Priority Lien Debtholders” means, at any time, the holders of more
than 50% of the sum of:

 

(a)          the aggregate outstanding principal amount of Priority Lien Debt
(including outstanding letters of credit whether or not then available or
drawn); and

 

(b)          other than in connection with the exercise of remedies, the
aggregate unfunded commitments to extend credit which, when funded, would
constitute Priority Lien Debt.

 

For purposes of this definition, (a) Priority Lien Debt registered in the name
of, or beneficially owned by, the Company or any Affiliate of the Company will
be deemed not to be outstanding, and (b) votes will be determined in accordance
with the provisions of the applicable Priority Lien Document.

 

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“Reserve Report” means a report as of each December 31st (in such case prepared
or reviewed by independent petroleum engineers) and June 30th (in such case
prepared or audited by independent petroleum engineers or prepared by the
Company’s internal petroleum engineer staff) setting forth the Proved Reserves
of the Company and the Guarantors, together with a projection of the rate of
production and future net income, taxes, operating expenses and capital
expenditures with respect thereto as of such date. Until superseded, the Initial
Reserve Report will be considered the Reserve Report

 

“Responsible Officer,” when used with respect to the Trustee, means any officer
within the Corporate Trust Administration of the Trustee (or any successor group
of the Trustee) or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.

 

“Restricted Definitive Note” means a Definitive Note bearing the Private
Placement Legend.

 

“Restricted Global Note” means a Global Note bearing the Private Placement
Legend.

 

“Restricted Investment” means an Investment other than a Permitted Investment.

 

“Restricted Subsidiary” of a Person means any Subsidiary of the referent Person
that is not an Unrestricted Subsidiary.

 

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

 

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

 

“Rule 903” means Rule 903 promulgated under the Securities Act.

 

“Rule 904” means Rule 904 promulgated under the Securities Act.

 

“S&P” means Standard & Poor’s Ratings Services, and any successor to the ratings
business thereof.

 

“Sale and Leaseback Transaction” means, with respect to the Company or any of
its Restricted Subsidiaries, any arrangement with any other Person providing for
the sale by the Company or any of its Restricted Subsidiaries to such other
Person of any real property or equipment, acquired or placed into service by the
Company or any of its Restricted Subsidiaries prior to such arrangement, whereby
such real property or equipment is concurrently leased back by the Company or
any of its Restricted Subsidiaries from such other Person.

 

“SEC” means the Securities and Exchange Commission.

 

“Secured Debt” means the Notes and Priority Lien Debt.

 

“Secured Debt Documents” means the Note Documents and the Priority Lien
Documents.

 

“Secured Debt Representative” means the Trustee and the Priority Lien
Representative.

 

“Secured Leverage Ratio” means, on any date, the ratio of:

 

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(1)         the aggregate principal amount of Secured Debt outstanding on such
date plus all Indebtedness of Restricted Subsidiaries of the Company that are
not Guarantors outstanding on such date, less the aggregate amount of
unrestricted cash and Cash Equivalents on hand as of such date (and, for this
purpose, letters of credit will be deemed to have a principal amount equal to
the face amount thereof, whether or not drawn), to:

 

(2)         the aggregate amount of the Company’s Consolidated Cash Flow for the
most recent four-quarter period for which financial information is available.

 

The Secured Leverage Ratio shall be calculated using the same methodology and
assumptions described in the definition of “Fixed Charge Coverage Ratio.”

 

“Secured Obligations” means the Note Obligations and Priority Lien Obligations.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Security Documents” means the Intercreditor Agreement and all security
agreements, pledge agreements, collateral assignments, Mortgages, deeds of
trust, collateral agency agreements, control agreements or other grants or
transfers for security executed and delivered by the Company or any other
Pledgor creating (or purporting to create) a Note Lien upon Collateral in favor
of the Collateral Agent, in each case, as amended, modified, renewed, restated
or replaced, in whole or in part, from time to time, in accordance with its
terms and the provisions described in the Security Documents.

 

“Senior Credit Facility” means any Credit Facility pursuant to which the Company
or any Guarantor incurs Indebtedness solely pursuant to clause (1) of the
definition of “Permitted Debt.”

 

“Series of Secured Debt” means the Notes and Indebtedness outstanding under any
Senior Credit Facility that constitutes Priority Lien Debt.

 

“Shelf Registration Statement” means the Shelf Registration Statement as defined
in the Registration Rights Agreement.

 

“Significant Subsidiary” means any Restricted Subsidiary that would be a
“significant subsidiary” as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date of this Indenture.

 

“Special Interest” has the meaning assigned to that term pursuant to the
Registration Rights Agreement.

 

“Stated Maturity” means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which the payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and will not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.

 

“Subsidiary” means, with respect to any specified Person:

 

(1)         any corporation, association or other business entity (other than a
partnership or limited liability company) of which more than 50% of the total
voting power of its Voting Stock is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person (or a combination thereof); and

 

30

 

 

(2)         any partnership or limited liability company of which (a) more than
50% of the capital accounts, distribution rights, total equity and voting
interests or general and limited partnership interests, as applicable, are owned
or controlled, directly or indirectly, by such Person or one or more of the
other Subsidiaries of that Person or a combination thereof, whether in the form
of membership, general, special or limited partnership interests or otherwise,
and (b) such Person or any Subsidiary of such Person is a controlling general
partner or otherwise controls such entity.

 

“TIA” means the Trust Indenture Act of 1939, as amended (15 U.S.C.
§§ 77aaa-77bbbb).

 

“Treasury Management Arrangement” means any agreement or other arrangement
governing the provision of treasury or cash management services, including
deposit accounts, overdraft, credit or debit card, funds transfer, automated
clearinghouse, zero balance accounts, returned check concentration, controlled
disbursement, lockbox, account reconciliation and reporting and trade finance
services and other cash management services.

 

“Treasury Rate” means, as of any redemption date, the yield to maturity as of
the time of computation of United States Treasury securities with a constant
maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
Business Days prior to the redemption date (or, if such Statistical Release is
no longer published, any publicly available source of similar market data)) most
nearly equal to the period from the redemption date to September 1, 2016;
provided, however, that if the period from the redemption date to September 1,
2016, is less than one year, the weekly average yield on actually traded United
States Treasury securities adjusted to a constant maturity of one year will be
used. The Company will (1) calculate the Treasury Rate on the second Business
Day immediately preceding the applicable redemption date and (2) prior to such
redemption date file with the Trustee an Officers’ Certificate setting forth the
Applicable Premium and the Treasury Rate and showing the calculation of each in
reasonable detail.

 

“Trustee” means U.S. Bank National Association, until a successor replaces it in
accordance with the applicable provisions of this Indenture and thereafter means
the successor serving hereunder.

 

“Unrestricted Definitive Note” means a Definitive Note that does not bear and is
not required to bear the Private Placement Legend.

 

“Unrestricted Global Note” means a Global Note that does not bear and is not
required to bear the Private Placement Legend.

 

“Unrestricted Subsidiary” means any Subsidiary of the Company (including any
newly acquired or newly formed Subsidiary or a Person becoming a Subsidiary
through merger or consolidation or Investment therein) that is designated by the
Board of Directors of the Company as an Unrestricted Subsidiary pursuant to a
resolution of the Board of Directors, but only to the extent that such
Subsidiary:

 

(1)         has no Indebtedness other than Non-Recourse Debt;

 

(2)         except as permitted by Section 4.11 hereof, is not party to any
agreement, contract, arrangement or understanding with the Company or any
Restricted Subsidiary of the Company unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable to the Company or
such Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company;

 

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(3)         is a Person with respect to which neither the Company nor any of its
Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe
for additional Equity Interests or (b) to maintain or preserve such Person’s
financial condition or to cause such Person to achieve any specified levels of
operating results; and

 

(4)         has not Guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of the Company or any of its Restricted
Subsidiaries, except to the extent such Guarantee would be released upon such
designation.

 

All Subsidiaries of an Unrestricted Subsidiary shall also be Unrestricted
Subsidiaries.

 

“U.S. Person” means a U.S. Person as defined in Rule 902(k) promulgated under
the Securities Act.

 

“Volumetric Production Payments” means production payment obligations recorded
as deferred revenue in accordance with GAAP, together with all undertakings and
obligations in connection therewith.

 

“Voting Stock” of any specified Person as of any date means the Capital Stock of
such Person entitling the holders thereof (whether at all times or only so long
as no senior class of Capital Stock has voting power by reason of any
contingency) to vote in the election of members of the Board of Directors of
such Person; provided that with respect to a limited partnership or other entity
which does not have a Board of Directors, Voting Stock means the Capital Stock
of the general partner of such limited partnership or other business entity with
the ultimate authority to manage the business and operations of such Person.

 

“Weighted Average Life to Maturity” means, when applied to any Indebtedness or
Disqualified Stock at any date, the number of years obtained by dividing:

 

(1)         the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other required
payments of principal, including payment at final maturity or redemption, in
respect of the Indebtedness or Disqualified Stock, by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and
the making of such payment; by

 

(2)         the then outstanding aggregate amount of such Indebtedness or
Disqualified Stock.

 

Section 1.02         Other Definitions

  

    Defined
in Term   Section “Affiliate Transaction”   4.11 “Asset Sale Offer”   3.09
“Authentication Order”   2.02 “Change of Control Offer”   4.15 “Change of
Control Payment”   4.15 “Change of Control Payment Date”   4.15 “Covenant
Defeasance”   8.03 “DTC”   2.03

 

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    Defined
in Term   Section “Event of Default”   6.01 “Excess Proceeds”   4.10 “incur”  
4.09 “Indemnified Party”   7.07 “Legal Defeasance”   8.02 “Offer Amount”   3.09
“Offer Period”   3.09 “Paying Agent”   2.03 “Permitted Debt”   4.09 “Payment
Default”   6.01 “Purchase Date”   3.09 “Registrar”   2.03 “Restricted Payments”
  4.07

 

Section 1.03         Incorporation by Reference of Trust Indenture Act.

 

Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.

 

The following TIA terms used in this Indenture have the following meanings:

 

“indenture securities” means the Notes;

 

“indenture security Holder” means a Holder of a Note;

 

“indenture to be qualified” means this Indenture;

 

“indenture trustee” or “institutional trustee” means the Trustee; and

 

“obligor” on the Notes and the Note Guarantees means the Company and the
Guarantors, respectively, and any successor obligor upon the Notes and the Note
Guarantees, respectively.

 

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

 

Section 1.04         Rules of Construction.

 

Unless the context otherwise requires:

 

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

 

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

 

(3)         “or” is not exclusive;

 

(4)         “including” is not limiting;

 

33

 

 

(5)         words in the singular include the plural, and in the plural include
the singular;

 

(6)         “will” shall be interpreted to express a command;

 

(7)         provisions apply to successive events and transactions;

 

(8)         all references to “interest” in this Indenture are deemed to include
any Special Interest that may be payable on the Notes pursuant to the
Registration Rights Agreement; and

 

(9)         references to sections of or rules under the Securities Act will be
deemed to include substitute, replacement of successor sections or rules adopted
by the SEC from time to time.

 

ARTICLE 2
THE NOTES

 

Section 2.01         Form and Dating.

 

(a)          General. The Notes and the Trustee’s certificate of authentication
will be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note will be dated the date of its authentication. The Notes shall
be in denominations of $2,000 and integral multiples of $1,000 in excess
thereof.

 

The terms and provisions contained in the Notes will constitute, and are hereby
expressly made, a part of this Indenture and the Company, the Guarantors and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby. However, to the extent any
provision of any Note conflicts with the express provisions of this Indenture,
the provisions of this Indenture shall govern and be controlling.

 

(b)          Global Notes. Notes issued in global form will be substantially in
the form of Exhibit A hereto (including the Global Note Legend thereon and the
“Schedule of Exchanges of Interests in the Global Note” attached thereto). Notes
issued in definitive form will be substantially in the form of Exhibit A hereto
(but without the Global Note Legend thereon and without the “Schedule of
Exchanges of Interests in the Global Note” attached thereto). Each Global Note
will represent such of the outstanding Notes as will be specified therein and
each shall provide that it represents the aggregate principal amount of
outstanding Notes from time to time endorsed thereon and that the aggregate
principal amount of outstanding Notes represented thereby may from time to time
be reduced or increased, as appropriate, to reflect exchanges and redemptions.
Any endorsement of a Global Note to reflect the amount of any increase or
decrease in the aggregate principal amount of outstanding Notes represented
thereby will be made by the Trustee or the Custodian, at the direction of the
Trustee, in accordance with instructions given by the Holder thereof as required
by Section 2.06 hereof.

 

(c)          Euroclear and Clearstream Procedures Applicable. The provisions of
the “Operating Procedures of the Euroclear System” and “Terms and Conditions
Governing Use of Euroclear” and the “General Terms and Conditions of Clearstream
Banking” and “Customer Handbook” of Clearstream will be applicable to transfers
of beneficial interests in the Regulation S Global Note that are held by
Participants through Euroclear or Clearstream.

 

Section 2.02         Execution and Authentication.

 

At least one Officer must sign the Notes for the Company by manual or facsimile
signature.

 

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If an Officer whose signature is on a Note no longer holds that office at the
time a Note is authenticated, the Note will nevertheless be valid.

 

A Note will not be valid until authenticated by the manual signature of the
Trustee. The signature will be conclusive evidence that the Note has been
authenticated under this Indenture.

 

The Trustee will, upon receipt of a written order of the Company signed by one
Officer (an “Authentication Order”), authenticate Notes for original issue that
may be validly issued under this Indenture, including any Additional Notes. The
aggregate principal amount of Notes outstanding at any time may not exceed the
aggregate principal amount of Notes authorized for issuance by the Company
pursuant to one or more Authentication Orders, except as provided in Section
2.07 hereof.

 

The Trustee may appoint an authenticating agent acceptable to the Company to
authenticate Notes. An authenticating agent may authenticate Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with Holders or an Affiliate of the Company.

 

Section 2.03         Registrar and Paying Agent.

 

The Company will maintain an office or agency where Notes may be presented for
registration of transfer or for exchange (“Registrar”) and an office or agency
where Notes may be presented for payment (“Paying Agent”). The Registrar will
keep a register of the Notes and of their transfer and exchange. The Company may
appoint one or more co-registrars and one or more additional paying agents. The
term “Registrar” includes any co-registrar and the term “Paying Agent” includes
any additional paying agent. The Company may change any Paying Agent or
Registrar without notice to any Holder. The Company will notify the Trustee in
writing of the name and address of any Agent not a party to this Indenture. If
the Company fails to appoint or maintain another entity as Registrar or Paying
Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may
act as Paying Agent or Registrar.

 

The Company initially appoints The Depository Trust Company (“DTC”) to act as
Depositary with respect to the Global Notes.

 

The Company initially appoints the Trustee to act as the Registrar and Paying
Agent and to act as Custodian with respect to the Global Notes.

 

Section 2.04         Paying Agent to Hold Money in Trust.

 

The Company will require each Paying Agent other than the Trustee to agree in
writing that the Paying Agent will hold in trust for the benefit of Holders or
the Trustee all money held by the Paying Agent for the payment of principal of,
premium, if any, on, or interest on, the Notes, and will notify the Trustee of
any default by the Company in making any such payment. While any such default
continues, the Trustee may require a Paying Agent to pay all money held by it to
the Trustee. The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent
(if other than the Company or a Subsidiary) will have no further liability for
the money. If the Company or a Subsidiary acts as Paying Agent, it will
segregate and hold in a separate trust fund for the benefit of the Holders all
money held by it as Paying Agent. Upon any bankruptcy or reorganization
proceedings relating to the Company, the Trustee will serve as Paying Agent for
the Notes.

 

35

 

 

Section 2.05         Holder Lists.

 

The Trustee will preserve in as current a form as is reasonably practicable the
most recent list available to it of the names and addresses of all Holders and
shall otherwise comply with TIA §312(a). If the Trustee is not the Registrar,
the Company will furnish to the Trustee at least seven Business Days before each
interest payment date and at such other times as the Trustee may request in
writing, a list in such form and as of such date as the Trustee may reasonably
require of the names and addresses of the Holders of Notes and the Company shall
otherwise comply with TIA §312(a).

 

Section 2.06         Transfer and Exchange.

 

(a)          Transfer and Exchange of Global Notes. A Global Note may not be
transferred except as a whole by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged by
the Company for Definitive Notes if:

 

(1)         DTC (a) notifies the Company that it is unwilling or unable to
continue as depositary for the Global Note or (b) has ceased to be a clearing
agency registered under the Exchange Act and, in either case, the Company fails
to appoint a successor depositary within 90 days;

 

(2)         the Company, at its option but subject to DTC’s requirements,
notifies the Trustee in writing that it elects to cause the issuance of the
Definitive Notes; or

 

(3)         there has occurred and is continuing an Event of Default, and DTC
notifies the Trustee of its decision to exchange such Global Note for Definitive
Notes.

 

Upon the occurrence of any of the preceding events in (1), (2) or (3) above,
Definitive Notes shall be issued in such names as the Depositary shall instruct
the Trustee. Global Notes also may be exchanged or replaced, in whole or in
part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and
delivered in exchange for, or in lieu of, a Global Note or any portion thereof,
pursuant to this Section 2.06 or Sections 2.07 or 2.10 hereof, shall be
authenticated and delivered in the form of, and shall be, a Global Note. A
Global Note may not be exchanged for another Note other than as provided in this
Section 2.06(a), however, beneficial interests in a Global Note may be
transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof.

 

(b)          Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes will be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes will be subject to restrictions on transfer comparable to those set
forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also will require compliance with
either subparagraph (1) or (2) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:

 

(1)         Transfer of Beneficial Interests in the Same Global Note. Beneficial
interests in any Restricted Global Note may be transferred to Persons who take
delivery thereof in the form of a beneficial interest in the same Restricted
Global Note in accordance with the transfer restrictions set forth in the
Private Placement Legend; provided, however, that prior to the expiration of the
Restricted Period, transfers of beneficial interests in the Regulation S Global
Note may not be made to a U.S. Person or for the account or benefit of a U.S.
Person (other than an Initial Purchaser). Beneficial interests in any
Unrestricted Global Note may be transferred to Persons who take delivery thereof
in the form of a beneficial interest in an Unrestricted Global Note. No written
orders or instructions shall be required to be delivered to the Registrar to
effect the transfers described in this Section 2.06(b)(1).

 

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(2)         All Other Transfers and Exchanges of Beneficial Interests in Global
Notes. In connection with all transfers and exchanges of beneficial interests
that are not subject to Section 2.06(b)(1) above, the transferor of such
beneficial interest must deliver to the Registrar either:

 

(A)         both:

 

(i)          a written order from a Participant or an Indirect Participant given
to the Depositary in accordance with the Applicable Procedures directing the
Depositary to credit or cause to be credited a beneficial interest in another
Global Note in an amount equal to the beneficial interest to be transferred or
exchanged; and

 

(ii)         instructions given in accordance with the Applicable Procedures
containing information regarding the Participant account to be credited with
such increase; or

 

(B)         both:

 

(i)          a written order from a Participant or an Indirect Participant given
to the Depositary in accordance with the Applicable Procedures directing the
Depositary to cause to be issued a Definitive Note in an amount equal to the
beneficial interest to be transferred or exchanged; and

 

(ii)         instructions given by the Depositary to the Registrar containing
information regarding the Person in whose name such Definitive Note shall be
registered to effect the transfer or exchange referred to in (1) above

 

Upon consummation of an Exchange Offer by the Company in accordance with Section
2.06(f) hereof, the requirements of this Section 2.06(b)(2) shall be deemed to
have been satisfied upon receipt by the Registrar of the instructions contained
in the Letter of Transmittal delivered by the Holder of such beneficial
interests in the Restricted Global Notes. Upon satisfaction of all of the
requirements for transfer or exchange of beneficial interests in Global Notes
contained in this Indenture and the Notes or otherwise applicable under the
Securities Act, the Trustee shall adjust the principal amount of the relevant
Global Note(s) pursuant to Section 2.06(h) hereof.

 

(3)         Transfer of Beneficial Interests to Another Restricted Global Note.
A beneficial interest in any Restricted Global Note may be transferred to a
Person who takes delivery thereof in the form of a beneficial interest in
another Restricted Global Note if the transfer complies with the requirements of
Section 2.06(b)(2) above and the Registrar receives the following:

 

(A)         if the transferee will take delivery in the form of a beneficial
interest in the 144A Global Note, then the transferor must deliver a certificate
in the form of Exhibit B hereto, including the certifications in item (1)
thereof;

 

37

 

 

(B)         if the transferee will take delivery in the form of a beneficial
interest in the Regulation S Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the certifications in
item (2) thereof; and

 

(C)         if the transferee will take delivery in the form of a beneficial
interest in the IAI Global Note, then the transferor must deliver a certificate
in the form of Exhibit B hereto, including the certifications, certificates and
Opinion of Counsel required by item (3) thereof, if applicable.

 

(4)         Transfer and Exchange of Beneficial Interests in a Restricted Global
Note for Beneficial Interests in an Unrestricted Global Note. A beneficial
interest in any Restricted Global Note may be exchanged by any holder thereof
for a beneficial interest in an Unrestricted Global Note or transferred to a
Person who takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note if the exchange or transfer complies with the
requirements of Section 2.06(b)(2) above and:

 

(A)         such exchange or transfer is effected pursuant to the Exchange Offer
in accordance with the Registration Rights Agreement and the holder of the
beneficial interest to be transferred, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (i) a Broker-Dealer, (ii) a Person participating in
the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as
defined in Rule 144) of the Company;

 

(B)         such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;

 

(C)         such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the Registration Rights
Agreement; or

 

(D)         the Registrar receives the following:

 

(i)          if the holder of such beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a beneficial interest in
an Unrestricted Global Note, a certificate from such holder in the form of
Exhibit C hereto, including the certifications in item (1)(a) thereof; or

 

(ii)         if the holder of such beneficial interest in a Restricted Global
Note proposes to transfer such beneficial interest to a Person who shall take
delivery thereof in the form of a beneficial interest in an Unrestricted Global
Note, a certificate from such holder in the form of Exhibit B hereto, including
the certifications in item (4) thereof;

 

and, in each such case set forth in this subparagraph (D), if the Registrar so
requests or if the Applicable Procedures so require, an Opinion of Counsel in
form reasonably acceptable to the Registrar to the effect that such exchange or
transfer is in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities Act.

 

38

 

 

If any such transfer is effected pursuant to subparagraph (B) or (D) above at a
time when an Unrestricted Global Note has not yet been issued, the Company shall
issue and, upon receipt of an Authentication Order in accordance with Section
2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global
Notes in an aggregate principal amount equal to the aggregate principal amount
of beneficial interests transferred pursuant to subparagraph (B) or (D) above.

 

Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or
transferred to Persons who take delivery thereof in the form of, a beneficial
interest in a Restricted Global Note.

 

(c)          Transfer or Exchange of Beneficial Interests for Definitive Notes.

 

(1)         Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a Restricted Definitive
Note or to transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Restricted Definitive Note, then, upon receipt by the
Registrar of the following documentation:

 

(A)         if the holder of such beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a Restricted Definitive
Note, a certificate from such holder in the form of Exhibit C hereto, including
the certifications in item (2)(a) thereof;

 

(B)         if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (1) thereof;

 

(C)         if such beneficial interest is being transferred to a Non-U.S.
Person in an offshore transaction in accordance with Rule 903 or Rule 904, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (2) thereof;

 

(D)         if such beneficial interest is being transferred pursuant to an
exemption from the registration requirements of the Securities Act in accordance
with Rule 144, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(a) thereof;

 

(E)         if such beneficial interest is being transferred to an Institutional
Accredited Investor in reliance on an exemption from the registration
requirements of the Securities Act other than those listed in subparagraphs (B)
through (D) above, a certificate to the effect set forth in Exhibit B hereto,
including the certifications, certificates and Opinion of Counsel required by
item (3) thereof, if applicable;

 

(F)         if such beneficial interest is being transferred to the Company or
any of its Subsidiaries, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (3)(b) thereof; or

 

(G)         if such beneficial interest is being transferred pursuant to an
effective registration statement under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in item
(3)(c) thereof,

 

39

 

 

the Trustee shall cause the aggregate principal amount of the applicable Global
Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the
Company shall execute and the Trustee shall authenticate and deliver to the
Person designated in the instructions a Definitive Note in the appropriate
principal amount. Any Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be
registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Notes to the
Persons in whose names such Notes are so registered. Any Definitive Note issued
in exchange for a beneficial interest in a Restricted Global Note pursuant to
this Section 2.06(c)(1) shall bear the Private Placement Legend and shall be
subject to all restrictions on transfer contained therein.

 

(2)         Beneficial Interests in Restricted Global Notes to Unrestricted
Definitive Notes. A holder of a beneficial interest in a Restricted Global Note
may exchange such beneficial interest for an Unrestricted Definitive Note or may
transfer such beneficial interest to a Person who takes delivery thereof in the
form of an Unrestricted Definitive Note only if:

 

(A)         such exchange or transfer is effected pursuant to the Exchange Offer
in accordance with the Registration Rights Agreement and the holder of such
beneficial interest, in the case of an exchange, or the transferee, in the case
of a transfer, certifies in the applicable Letter of Transmittal that it is not
(i) a Broker-Dealer, (ii) a Person participating in the distribution of the
Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of
the Company;

 

(B)         such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;

 

(C)         such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the Registration Rights
Agreement; or

 

(D)         the Registrar receives the following:

 

(i)          if the holder of such beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for an Unrestricted
Definitive Note, a certificate from such holder in the form of Exhibit C hereto,
including the certifications in item (1)(b) thereof; or

 

(ii)         if the holder of such beneficial interest in a Restricted Global
Note proposes to transfer such beneficial interest to a Person who shall take
delivery thereof in the form of an Unrestricted Definitive Note, a certificate
from such holder in the form of Exhibit B hereto, including the certifications
in item (4) thereof;

 

and, in each such case set forth in this subparagraph (D), if the Registrar so
requests or if the Applicable Procedures so require, an Opinion of Counsel in
form reasonably acceptable to the Registrar to the effect that such exchange or
transfer is in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities Act.

 

40

 

 

(3)         Beneficial Interests in Unrestricted Global Notes to Unrestricted
Definitive Notes. If any holder of a beneficial interest in an Unrestricted
Global Note proposes to exchange such beneficial interest for a Definitive Note
or to transfer such beneficial interest to a Person who takes delivery thereof
in the form of a Definitive Note, then, upon satisfaction of the conditions set
forth in Section 2.06(b)(2) hereof, the Trustee will cause the aggregate
principal amount of the applicable Unrestricted Global Note to be reduced
accordingly pursuant to Section 2.06(h) hereof, and the Company will execute and
the Trustee will authenticate and deliver to the Person designated in the
instructions a Definitive Note in the appropriate principal amount. Any
Definitive Note issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(3) will be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest requests through instructions to the Registrar from or through the
Depositary and the Participant or Indirect Participant. The Trustee will deliver
such Definitive Notes to the Persons in whose names such Notes are so
registered. Any Definitive Note issued in exchange for a beneficial interest
pursuant to this Section 2.06(c)(3) will not bear the Private Placement Legend.

 

(d)          Transfer and Exchange of Definitive Notes for Beneficial Interests.

 

(1)         Restricted Definitive Notes to Beneficial Interests in Restricted
Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange
such Note for a beneficial interest in a Restricted Global Note or to transfer
such Restricted Definitive Notes to a Person who takes delivery thereof in the
form of a beneficial interest in a Restricted Global Note, then, upon receipt by
the Registrar of the following documentation:

 

(A)         if the Holder of such Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note, a
certificate from such Holder in the form of Exhibit C hereto, including the
certifications in item (2)(b) thereof;

 

(B)         if such Restricted Definitive Note is being transferred to a QIB in
accordance with Rule 144A, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (1) thereof;

 

(C)         if such Restricted Definitive Note is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule
904, a certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (2) thereof;

 

(D)         if such Restricted Definitive Note is being transferred pursuant to
an exemption from the registration requirements of the Securities Act in
accordance with Rule 144, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (3)(a) thereof;

 

(E)         if such Restricted Definitive Note is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed in
subparagraphs (B) through (D) above, a certificate to the effect set forth in
Exhibit B hereto, including the certifications, certificates and Opinion of
Counsel required by item (3) thereof, if applicable;

 

(F)         if such Restricted Definitive Note is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(b) thereof; or

 

(G)         if such Restricted Definitive Note is being transferred pursuant to
an effective registration statement under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications in item
(3)(c) thereof,

 

41

 

 

the Trustee will cancel the Restricted Definitive Note, increase or cause to be
increased the aggregate principal amount of, in the case of clause (A) above,
the appropriate Restricted Global Note, in the case of clause (B) above, the
144A Global Note, in the case of clause (C) above, the Regulation S Global Note,
and in all other cases, the IAI Global Note.

 

(2)         Restricted Definitive Notes to Beneficial Interests in Unrestricted
Global Notes. A Holder of a Restricted Definitive Note may exchange such Note
for a beneficial interest in an Unrestricted Global Note or transfer such
Restricted Definitive Note to a Person who takes delivery thereof in the form of
a beneficial interest in an Unrestricted Global Note only if:

 

(A)         such exchange or transfer is effected pursuant to the Exchange Offer
in accordance with the Registration Rights Agreement and the Holder, in the case
of an exchange, or the transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a
Person participating in the distribution of the Exchange Notes or (iii) a Person
who is an affiliate (as defined in Rule 144) of the Company;

 

(B)         such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;

 

(C)         such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the Registration Rights
Agreement; or

 

(D)         the Registrar receives the following:

 

(i)          if the Holder of such Definitive Notes proposes to exchange such
Notes for a beneficial interest in the Unrestricted Global Note, a certificate
from such Holder in the form of Exhibit C hereto, including the certifications
in item (1)(c) thereof; or

 

(ii)         if the Holder of such Definitive Notes proposes to transfer such
Notes to a Person who shall take delivery thereof in the form of a beneficial
interest in the Unrestricted Global Note, a certificate from such Holder in the
form of Exhibit B hereto, including the certifications in item (4) thereof;

 

and, in each such case set forth in this subparagraph (D), if the Registrar so
requests or if the Applicable Procedures so require, an Opinion of Counsel in
form reasonably acceptable to the Registrar to the effect that such exchange or
transfer is in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities Act.

 

Upon satisfaction of the conditions of any of the subparagraphs in this Section
2.06(d)(2), the Trustee will cancel the Definitive Notes and increase or cause
to be increased the aggregate principal amount of the Unrestricted Global Note.

 

(3)         Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note or
transfer such Definitive Notes to a Person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note any time. Upon
receipt of a request for such an exchange or transfer, the Trustee will cancel
the applicable Unrestricted Definitive Note and increase or cause to be
increased the aggregate principal amount of one of the Unrestricted Global
Notes.

 

42

 

 

If any such exchange or transfer from a Definitive Note to a beneficial interest
is effected pursuant to subparagraphs (2)(B), (2)(D) or (3) above at a time when
an Unrestricted Global Note has not yet been issued, the Company will issue and,
upon receipt of an Authentication Order in accordance with Section 2.02 hereof,
the Trustee will authenticate one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of Definitive Notes so
transferred.

 

(e)          Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder’s compliance with
the provisions of this Section 2.06(e), the Registrar will register the transfer
or exchange of Definitive Notes. Prior to such registration of transfer or
exchange, the requesting Holder must present or surrender to the Registrar the
Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by its attorney, duly authorized in writing. In addition, the requesting Holder
must provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.06(e).

 

(1)         Restricted Definitive Notes to Restricted Definitive Notes. Any
Restricted Definitive Note may be transferred to and registered in the name of
Persons who take delivery thereof in the form of a Restricted Definitive Note if
the Registrar receives the following:

 

(A)         if the transfer will be made pursuant to Rule 144A, then the
transferor must deliver a certificate in the form of Exhibit B hereto, including
the certifications in item (1) thereof;

 

(B)         if the transfer will be made pursuant to Rule 903 or Rule 904, then
the transferor must deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (2) thereof; and

 

(C)         if the transfer will be made pursuant to any other exemption from
the registration requirements of the Securities Act, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by item (3)
thereof, if applicable.

 

(2)         Restricted Definitive Notes to Unrestricted Definitive Notes. Any
Restricted Definitive Note may be exchanged by the Holder thereof for an
Unrestricted Definitive Note or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Note if:

 

(A)         such exchange or transfer is effected pursuant to the Exchange Offer
in accordance with the Registration Rights Agreement and the Holder, in the case
of an exchange, or the transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a
Person participating in the distribution of the Exchange Notes or (iii) a Person
who is an affiliate (as defined in Rule 144) of the Company;

 

(B)         any such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;

 

43

 

 

(C)         any such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the Registration Rights
Agreement; or

 

(D)         the Registrar receives the following:

 

(i)          if the Holder of such Restricted Definitive Notes proposes to
exchange such Notes for an Unrestricted Definitive Note, a certificate from such
Holder in the form of Exhibit C hereto, including the certifications in item
(1)(d) thereof; or

 

(ii)         if the Holder of such Restricted Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in the form of
an Unrestricted Definitive Note, a certificate from such Holder in the form of
Exhibit B hereto, including the certifications in item (4) thereof;

 

and, in each such case set forth in this subparagraph (D), if the Registrar so
requests, an Opinion of Counsel in form reasonably acceptable to the Registrar
to the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in order to maintain compliance
with the Securities Act.

 

(3)         Unrestricted Definitive Notes to Unrestricted Definitive Notes. A
Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who
takes delivery thereof in the form of an Unrestricted Definitive Note. Upon
receipt of a request to register such a transfer, the Registrar shall register
the Unrestricted Definitive Notes pursuant to the instructions from the Holder
thereof.

 

(f)          Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company will issue and,
upon receipt of an Authentication Order in accordance with Section 2.02 hereof,
the Trustee will authenticate:

 

(1)         one or more Unrestricted Global Notes in an aggregate principal
amount equal to the principal amount of the beneficial interests in the
Restricted Global Notes accepted for exchange in the Exchange Offer by Persons
that certify in the applicable Letters of Transmittal that (A) they are not
Broker-Dealers, (B) they are not participating in a distribution of the Exchange
Notes and (C) they are not affiliates (as defined in Rule 144) of the Company;
and

 

(2)         Unrestricted Definitive Notes in an aggregate principal amount equal
to the principal amount of the Restricted Definitive Notes accepted for exchange
in the Exchange Offer by Persons that certify in the applicable Letters of
Transmittal that (A) they are not Broker-Dealers, (B) they are not participating
in a distribution of the Exchange Notes and (C) they are not affiliates (as
defined in Rule 144) of the Company.

 

Concurrently with the issuance of such Notes, the Trustee will cause the
aggregate principal amount of the applicable Restricted Global Notes to be
reduced accordingly, and the Company will execute and the Trustee will
authenticate and deliver to the Persons designated by the Holders of Definitive
Notes so accepted Unrestricted Definitive Notes in the appropriate principal
amount.

 

44

 

 

(g)          Legends. The following legends will appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.

 

(1)         Private Placement Legend.

 

(A)         Except as permitted by subparagraph (B) below, each Global Note and
each Definitive Note (and all Notes issued in exchange therefor or substitution
thereof) shall bear the legend in substantially the following form:

 

“THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”) AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A “QIB”), (B) IT IS NOT A U.S.
PERSON, IS NOT ACQUIRING THIS NOTE FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON
AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL “ACCREDITED
INVESTOR” (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER
THE SECURITIES ACT) (AN “IAI”), (2) AGREES THAT IT WILL NOT, WITHIN THE TIME
PERIOD REFERRED TO UNDER RULE 144 (TAKING INTO ACCOUNT THE PROVISIONS OF RULE
144(d) UNDER THE SECURITIES ACT, IF APPLICABLE) UNDER THE SECURITIES ACT AS IN
EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER
THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A PERSON
WHOM THE HOLDER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QIB IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT,
(C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE
903 OR 904 OF REGULATION S UNDER THE SECURITIES ACT, (D) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE
A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE REGISTRATION OF TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE TRUSTEE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS, AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THIS NOTE OR ANY INTEREST HEREIN WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE
HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING
TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. AS
USED HEREIN, THE TERMS “OFFSHORE TRANSACTION,” “UNITED STATES” AND “U.S. PERSON”
HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS.”

 

(B)         Notwithstanding the foregoing, any Global Note or Definitive Note
issued pursuant to subparagraphs (b)(4), (c)(2), (c)(3), (d)(2), (d)(3), (e)(2),
(e)(3) or (f) of this Section 2.06 (and all Notes issued in exchange therefor or
substitution thereof) will not bear the Private Placement Legend.

 

45

 

 

(2)         Global Note Legend. Each Global Note will bear a legend in
substantially the following form:

 

“THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.06 OF THE INDENTURE, (2) THIS GLOBAL NOTE MAY BE EXCHANGED
IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (3) THIS
GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION
2.11 OF THE INDENTURE AND (4) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR
DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF AMERICAN EAGLE ENERGY CORPORATION.

 

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
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. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (“DTC”), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.”

 

(h)          Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
beneficial interests in another Global Note or Definitive Notes or a particular
Global Note has been redeemed, repurchased or canceled in whole and not in part,
each such Global Note will be returned to or retained and canceled by the
Trustee in accordance with Section 2.11 hereof. At any time prior to such
cancellation, if any beneficial interest in a Global Note is exchanged for or
transferred to a Person who will take delivery thereof in the form of a
beneficial interest in another Global Note or for Definitive Notes, the
principal amount of Notes represented by such Global Note will be reduced
accordingly and an endorsement will be made on such Global Note by the Trustee
or by the Depositary at the direction of the Trustee to reflect such reduction;
and if the beneficial interest is being exchanged for or transferred to a Person
who will take delivery thereof in the form of a beneficial interest in another
Global Note, such other Global Note will be increased accordingly and an
endorsement will be made on such Global Note by the Trustee or by the Depositary
at the direction of the Trustee to reflect such increase.

 

(i)          General Provisions Relating to Transfers and Exchanges.

 

46

 

 

(1)         To permit registrations of transfers and exchanges, the Company will
execute and the Trustee will authenticate Global Notes and Definitive Notes upon
receipt of an Authentication Order in accordance with Section 2.02 hereof or at
the Registrar’s request.

 

(2)         No service charge will be made to a Holder of a beneficial interest
in a Global Note or to a Holder of a Definitive Note for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar governmental charge
payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10,
4.15 and 9.05 hereof).

 

(3)         The Registrar will not be required to register the transfer of or
exchange of any Note selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.

 

(4)         All Global Notes and Definitive Notes issued upon any registration
of transfer or exchange of Global Notes or Definitive Notes will be the valid
obligations of the Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Global Notes or Definitive Notes
surrendered upon such registration of transfer or exchange.

 

(5)         Neither the Registrar nor the Company will be required:

 

(A)         to issue, to register the transfer of or to exchange any Notes
during a period beginning at the opening of business 15 days before the day of
any selection of Notes for redemption under Section 3.02 hereof and ending at
the close of business on the day of selection;

 

(B)         to register the transfer of or to exchange any Note selected for
redemption in whole or in part, except the unredeemed portion of any Note being
redeemed in part; or

 

(C)         to register the transfer of or to exchange a Note between a record
date and the next succeeding interest payment date.

 

(6)         Prior to due presentment for the registration of a transfer of any
Note, the Trustee, any Agent and the Company may deem and treat the Person in
whose name any Note is registered as the absolute owner of such Note for the
purpose of receiving payment of principal of and interest on such Notes and for
all other purposes, and none of the Trustee, any Agent or the Company shall be
affected by notice to the contrary.

 

(7)         The Trustee will authenticate Global Notes and Definitive Notes in
accordance with the provisions of Section 2.02 hereof.

 

(8)         All certifications, certificates and Opinions of Counsel required to
be submitted to the Registrar pursuant to this Section 2.06 to effect a
registration of transfer or exchange may be submitted by facsimile.

 

47

 

 

Section 2.07         Replacement Notes.

 

If any mutilated Note is surrendered to the Trustee or the Company and the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Note, the Company will issue and the Trustee, upon receipt of an
Authentication Order, will authenticate a replacement Note if the Trustee’s
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note.

 

Every replacement Note is an additional obligation of the Company and will be
entitled to all of the benefits of this Indenture equally and proportionately
with all other Notes duly issued hereunder.

 

Section 2.08         Outstanding Notes.

 

The Notes outstanding at any time are all the Notes authenticated by the Trustee
except for those canceled by it, those delivered to it for cancellation, those
reductions in the interest in a Global Note effected by the Trustee in
accordance with the provisions hereof, and those described in this Section 2.08
as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not
cease to be outstanding because the Company or an Affiliate of the Company holds
the Note.

 

If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a protected purchaser.

 

If the principal amount of any Note is considered paid under Section 4.01
hereof, it ceases to be outstanding and interest on it ceases to accrue.

 

If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any
thereof) holds, on a redemption date or maturity date, money sufficient to pay
Notes payable on that date, then on and after that date such Notes will be
deemed to be no longer outstanding and will cease to accrue interest.

 

Section 2.09         Treasury Notes.

 

In determining whether the Holders of the required principal amount of Notes
have concurred in any direction, waiver or consent, Notes owned by the Company
or any Guarantor, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or any
Guarantor, will be considered as though not outstanding, except that for the
purposes of determining whether the Trustee will be protected in relying on any
such direction, waiver or consent, only Notes that the Trustee actually knows
are so owned will be so disregarded.

 

Section 2.10         Temporary Notes.

 

Until certificates representing Notes are ready for delivery, the Company may
prepare and the Trustee, upon receipt of an Authentication Order, will
authenticate temporary Notes. Temporary Notes will be substantially in the form
of certificated Notes but may have variations that the Company considers
appropriate for temporary Notes and as may be reasonably acceptable to the
Trustee. Without unreasonable delay, the Company will prepare and the Trustee
will authenticate definitive Notes in exchange for temporary Notes.

 

Holders of temporary Notes will be entitled to all of the benefits of this
Indenture.

 

48

 

 

Section 2.11         Cancellation.

 

The Company at any time may deliver Notes to the Trustee for cancellation. The
Registrar and Paying Agent will forward to the Trustee any Notes surrendered to
them for registration of transfer, exchange or payment. The Trustee and no one
else will cancel all Notes surrendered for registration of transfer, exchange,
payment, replacement or cancellation and will destroy canceled Notes (subject to
the record retention requirements of the Exchange Act). Certification of the
destruction of all canceled Notes will be delivered to the Company. The Company
may not issue new Notes to replace Notes that it has paid or that have been
delivered to the Trustee for cancellation.

 

Section 2.12         Defaulted Interest.

 

If the Company defaults in a payment of interest on the Notes, it will pay the
defaulted interest in any lawful manner plus, to the extent lawful, interest
payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.01 hereof. The Company will notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment. The Company will fix or cause to be fixed each such
special record date and payment date; provided that no such special record date
may be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the Company (or, upon
the written request of the Company, the Trustee in the name and at the expense
of the Company) will mail or cause to be mailed to Holders a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.

 

ARTICLE 3
REDEMPTION AND PREPAYMENT

 

Section 3.01         Notices to Trustee.

 

If the Company elects to redeem Notes pursuant to the optional redemption
provisions of Section 3.07 hereof, it must furnish to the Trustee, at least 30
days but not more than 60 days before a redemption date, an Officers’
Certificate setting forth:

 

(1)         the clause of this Indenture pursuant to which the redemption shall
occur;

 

(2)         the redemption date;

 

(3)         the principal amount of Notes to be redeemed; and

 

(4)         the redemption price.

 

Section 3.02         Selection of Notes to Be Redeemed or Purchased.

 

If less than all of the Notes are to be redeemed at any time, the Trustee will
select Notes for redemption on a pro rata basis (or, in the case of Notes issued
in global form pursuant to Article 2 hereof, based on a method as DTC or its
nominee or successor may require or, where such nominee or successor is the
Trustee, a method that most nearly approximates pro rata selection as the
Trustee deems fair and appropriate unless otherwise required by law) unless
otherwise required by law or applicable stock exchange or depositary
requirements.

 

The Trustee will promptly notify the Company in writing of the Notes selected
for redemption or purchase and, in the case of any Note selected for partial
redemption or purchase, the principal amount thereof to be redeemed or
purchased. Notes and portions of Notes selected will be in amounts of $2,000 or
whole multiples of $1,000 in excess thereof; except that if all of the Notes of
a Holder are to be redeemed or purchased, the entire outstanding amount of Notes
held by such Holder shall be redeemed or purchased. Except as provided in the
preceding sentence, provisions of this Indenture that apply to Notes called for
redemption or purchase also apply to portions of Notes called for redemption or
purchase.

 

49

 

 

Section 3.03         Notice of Redemption.

 

Subject to the provisions of Section 3.09 hereof, at least 30 days but not more
than 60 days before a redemption date, the Company will mail or cause to be
mailed, by first class mail, a notice of redemption to each Holder whose Notes
are to be redeemed at its registered address, except that redemption notices may
be mailed more than 60 days prior to a redemption date if the notice is issued
in connection with a defeasance of the Notes or a satisfaction and discharge of
this Indenture pursuant to Articles 8 or 12 hereof.

 

The notice will identify the Notes to be redeemed and will state:

 

(1)         the redemption date;

 

(2)         the redemption price;

 

(3)         if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion will be issued upon cancellation of the original Note;

 

(4)         the name and address of the Paying Agent;

 

(5)         that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;

 

(6)         that, unless the Company defaults in making such redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
redemption date;

 

(7)         the paragraph of the Notes and/or Section of this Indenture pursuant
to which the Notes called for redemption are being redeemed; and

 

(8)         that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the Notes.

 

At the Company’s request, the Trustee will give the notice of redemption in the
Company’s name and at its expense; provided, however, that the Company has
delivered to the Trustee, at least 45 days prior to the redemption date, an
Officers’ Certificate requesting that the Trustee give such notice and setting
forth the information to be stated in such notice as provided in the preceding
paragraph.

 

Any such redemption may, at the Company’s discretion, be subject to one or more
conditions precedent, including any related Equity Offering or a Change of
Control. In addition, if such redemption is subject to the satisfaction of one
or more conditions precedent, the related notice shall describe each such
condition, and if applicable, shall state that, in the Company’s discretion, the
redemption date may be delayed until such time as any or all such conditions
shall be satisfied or waived (provided that in no event shall such redemption
date be delayed to a date later than 60 days after the date on which such notice
was mailed), or such redemption may not occur and such notice may be rescinded
in the event that any or all such conditions shall not have been satisfied or
waived by the redemption date, or by the redemption date as so delayed.

 

50

 

 

Section 3.04         Effect of Notice of Redemption.

 

Once notice of redemption is mailed in accordance with Section 3.03 hereof,
Notes called for redemption become irrevocably due and payable on the redemption
date at the redemption price; provided, however, that in the event any
redemption is subject to conditions precedent pursuant to Section 3.03 hereof,
such Notes called for redemption shall become irrevocably due and payable on the
redemption date at the redemption price only upon the satisfaction or waiver of
such conditions precedent.

 

Section 3.05         Deposit of Redemption or Purchase Price.

 

One Business Day prior to the redemption or purchase date, the Company will
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption or purchase price of, and accrued interest, if any, on all Notes to
be redeemed or purchased on that date. The Trustee or the Paying Agent will
promptly return to the Company any money deposited with the Trustee or the
Paying Agent by the Company in excess of the amounts necessary to pay the
redemption or purchase price of, and accrued interest on all Notes to be
redeemed or purchased.

 

If the Company complies with the provisions of the preceding paragraph, on and
after the redemption or purchase date, interest will cease to accrue on the
Notes or the portions of Notes called for redemption or purchase. If a Note is
redeemed or purchased on or after an interest record date but on or prior to the
related interest payment date, then any accrued and unpaid interest shall be
paid to the Person in whose name such Note was registered at the close of
business on such record date. If any Note called for redemption or purchase is
not so paid upon surrender for redemption or purchase because of the failure of
the Company to comply with the preceding paragraph, interest shall be paid on
the unpaid principal, from the redemption or purchase date until such principal
is paid, and to the extent lawful on any interest not paid on such unpaid
principal, in each case at the rate provided in the Notes and in Section 4.01
hereof.

 

Section 3.06         Notes Redeemed or Purchased in Part.

 

Upon surrender of a Note that is redeemed or purchased in part, the Company will
issue and, upon receipt of an Authentication Order, the Trustee will
authenticate for the Holder at the expense of the Company a new Note equal in
principal amount to the unredeemed or unpurchased portion of the Note
surrendered.

 

Section 3.07         Optional Redemption.

 

(a)          At any time prior to September 1, 2016, the Company may on any one
or more occasions redeem up to 35% of the aggregate principal amount of Notes
issued under this Indenture, upon notice as provided in Section 3.03 hereof, at
a redemption price equal to 111.000% of the principal amount of the Notes
redeemed, plus accrued and unpaid interest, if any, to the date of redemption
(subject to the rights of Holders of Notes on the relevant record date to
receive interest on the relevant interest payment date), with an amount of cash
not greater than the net cash proceeds of an Equity Offering by the Company;
provided that:

 

(1)         at least 65% of the aggregate principal amount of Notes originally
issued under this Indenture (excluding Notes held by the Company and its
Subsidiaries) remains outstanding immediately after the occurrence of such
redemption; and

 

(2)         the redemption occurs within 90 days of the date of the closing of
such Equity Offering.

 

51

 

 

At any time prior to September 1, 2016, the Company may on any one or more
occasions redeem all or a part of the Notes, upon notice as provided in Section
3.03 hereof, at a redemption price equal to 100% of the principal amount of the
Notes redeemed, plus the Applicable Premium as of, and accrued and unpaid
interest, if any, to the applicable date of redemption, subject to the rights of
Holders of Notes on the relevant record date to receive interest due on the
relevant interest payment date.

 

(b)          On or after September 1, 2016, the Company may, on any one or more
occasions, redeem all or a part of the Notes, upon notice as provided in Section
3.03 hereof, at the redemption prices (expressed as percentages of principal
amount) set forth below, plus accrued and unpaid interest, if any, on the Notes
redeemed, to the applicable date of redemption, if redeemed during the
twelve-month period beginning on September 1 of the years indicated below,
subject to the rights of Holders of Notes on the relevant record date to receive
interest on the relevant interest payment date:

 

Year  Percentage  2016   108.250% 2017   105.500% 2018 and thereafter   100.000%

 

Unless the Company defaults in the payment of the redemption price, interest
will cease to accrue on the Notes or portions thereof called for redemption on
the applicable redemption date.

 

(c)          Except pursuant to the preceding paragraphs and Section 4.15(e)
hereof, the Notes will not be redeemable at the Company’s option prior to
September 1, 2016.

 

(d)          Any redemption pursuant to this Section 3.07 shall be made pursuant
to the provisions of Sections 3.01 through 3.06 hereof.

 

Section 3.08         Mandatory Redemption.

 

The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes. The Company and its Affiliates may at any
time and from time to time purchase Notes in the open market, by tender offer,
negotiated transactions or otherwise.

 

Section 3.09         Offer to Purchase by Application of Excess Proceeds.

 

In the event that, pursuant to Section 4.10 hereof, the Company is required to
commence an offer to all Holders to purchase Notes (an “Asset Sale Offer”), it
will follow the procedures specified below.

 

The Asset Sale Offer shall be made to all Holders and all holders of other
Indebtedness that is pari passu with the Notes containing provisions similar to
those set forth in this Indenture with respect to offers to purchase, prepay or
redeem with the proceeds of sales of assets. The Asset Sale Offer will remain
open for a period of at least 20 Business Days following its commencement and
not more than 30 Business Days, except to the extent that a longer period is
required by applicable law (the “Offer Period”). No later than three Business
Days after the termination of the Offer Period (the “Purchase Date”), the
Company will apply all Excess Proceeds (the “Offer Amount”) to the purchase of
Notes and such other pari passu Indebtedness (on a pro rata basis based on the
principal amount of Notes and such other pari passu Indebtedness surrendered, if
applicable) or, if less than the Offer Amount has been tendered, all Notes and
other Indebtedness tendered in response to the Asset Sale Offer. Payment for any
Notes so purchased will be made in the same manner as interest payments are
made.

 

52

 

 

If the Purchase Date is on or after an interest record date and on or before the
related interest payment date, any accrued and unpaid interest, if any, will be
paid to the Person in whose name a Note is registered at the close of business
on such record date, and no additional interest will be payable to Holders who
tender Notes pursuant to the Asset Sale Offer.

 

Upon the commencement of an Asset Sale Offer, the Company will send, by first
class mail, a notice to the Trustee and each of the Holders, with a copy to the
Trustee. The notice will contain all instructions and materials necessary to
enable such Holders to tender Notes pursuant to the Asset Sale Offer. The
notice, which will govern the terms of the Asset Sale Offer, will state:

 

(1)         that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer will
remain open;

 

(2)         the Offer Amount, the purchase price and the Purchase Date;

 

(3)         that any Note not tendered or accepted for payment will continue to
accrue interest;

 

(4)         that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer will cease to accrue
interest after the Purchase Date;

 

(5)         that Holders electing to have a Note purchased pursuant to an Asset
Sale Offer may elect to have Notes purchased in denominations of $2,000 or an
integral multiple of $1,000 in excess thereof;

 

(6)         that Holders electing to have Notes purchased pursuant to any Asset
Sale Offer will be required to surrender the Note, with the form entitled
“Option of Holder to Elect Purchase” attached to the Notes completed, or
transfer by book-entry transfer, to the Company, a Depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;

 

(7)         that Holders will be entitled to withdraw their election if the
Company, the Depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, electronic or
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Note the Holder delivered for purchase and a statement
that such Holder is withdrawing his election to have such Note purchased;

 

(8)         that, if the aggregate principal amount of Notes and other pari
passu Indebtedness surrendered by holders thereof exceeds the Offer Amount, the
Company will select the Notes and other pari passu Indebtedness to be purchased
on a pro rata basis based on the principal amount of Notes and such other pari
passu Indebtedness surrendered (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $2,000, or an
integral multiple of $1,000 in excess thereof, will be purchased); and

 

(9)         that Holders whose Notes were purchased only in part will be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered (or transferred by book-entry transfer).

 

53

 

 

On or before the Purchase Date, the Company will, to the extent lawful, accept
for payment, on a pro rata basis to the extent necessary, the Offer Amount of
Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less
than the Offer Amount has been tendered, all Notes tendered, and will deliver or
cause to be delivered to the Trustee the Notes properly accepted together with
an Officers’ Certificate stating that such Notes or portions thereof were
accepted for payment by the Company in accordance with the terms of this Section
3.09. The Company, the Depositary or the Paying Agent, as the case may be, will
promptly (but in any case not later than five days after the Purchase Date) mail
or deliver to each tendering Holder an amount equal to the purchase price of the
Notes tendered by such Holder and accepted by the Company for purchase, and the
Company will promptly issue a new Note, and the Trustee, upon written request
from the Company, will authenticate and mail or deliver (or cause to be
transferred by book entry) such new Note to such Holder, in a principal amount
equal to any unpurchased portion of the Note surrendered. Any Note not so
accepted shall be promptly mailed or delivered by the Company to the Holder
thereof. The Company will publicly announce the results of the Asset Sale Offer
on the Purchase Date except to the extent the Company reasonably believes such
announcement would conflict with applicable securities laws.

 

Other than as specifically provided in this Section 3.09, any purchase pursuant
to this Section 3.09 shall be made pursuant to the provisions of Sections 3.01
through 3.06 hereof.

 

ARTICLE 4
COVENANTS

 

Section 4.01         Payment of Notes.

 

The Company will pay or cause to be paid the principal of, premium, if any, on,
and interest on the Notes on the dates and in the manner provided in the Notes.
Principal, premium, if any, and interest will be considered paid on the date due
if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as
of 10:00 a.m. Eastern Time on the due date money deposited by the Company in
immediately available funds and designated for and sufficient to pay all
principal, premium, if any, and interest then due. The Company will pay all
Special Interest, if any, in the same manner on the dates and in the amounts set
forth in the Registration Rights Agreement.

 

The Company will pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at a rate that is 1%
higher than the then applicable interest rate on the Notes to the extent lawful;
it will pay interest (including post-petition interest in any proceeding under
any Bankruptcy Law) on overdue installments of interest, if any (without regard
to any applicable grace period), at the same rate to the extent lawful.

 

Section 4.02         Maintenance of Office or Agency.

 

The Company will maintain in the Borough of Manhattan, the City of New York, an
office or agency (which may be an office of the Trustee or an affiliate of the
Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
fails to maintain any such required office or agency or fails to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office of the Trustee.

 

The Company may also from time to time designate one or more other offices or
agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission will in any manner relieve the Company of
its obligation to maintain an office or agency in the Borough of Manhattan, the
City of New York for such purposes. The Company will give prompt written notice
to the Trustee of any such designation or rescission and of any change in the
location of any such other office or agency.

 

54

 

 

The Company hereby designates the Corporate Trust Office of the Trustee as one
such office or agency of the Company in accordance with Section 2.03 hereof.

 

Section 4.03         Reports.

 

(a)          Whether or not required by the rules and regulations of the SEC, so
long as any Notes are outstanding, the Company will furnish to the Holders of
Notes or cause the Trustee to furnish to the Holders of Notes (or file with the
SEC for public availability), within the time periods specified in the SEC’s
rules and regulations:

 

(1)         all quarterly and annual reports that would be required to be filed
with the SEC on Forms 10-Q and 10-K if the Company were required to file such
reports, including a “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and, with respect to the annual information
only, a report thereon by the Company’s certified independent accountants; and

 

(2)         all current reports that would be required to be filed with the SEC
on Form 8-K if the Company were required to file such reports.

 

All such reports will be prepared in all material respects in accordance with
all of the rules and regulations applicable to such reports. In addition, the
Company will file a copy of each of the reports referred to in clauses (1) and
(2) above with the SEC for public availability within the time periods specified
in the rules and regulations applicable to such reports (unless the SEC will not
accept such a filing) and will post the reports on its website within those time
periods. The Company will at all times comply with TIA §314(a).

 

If, at any time, the Company is no longer subject to the periodic reporting
requirements of the Exchange Act for any reason, the Company will nevertheless
continue filing the reports specified in the preceding paragraphs of this
covenant with the SEC within the time periods specified above unless the SEC
will not accept such a filing. The Company will not take any action for the
purpose of causing the SEC not to accept any such filings. If, notwithstanding
the foregoing, the SEC will not accept the Company’s filings for any reason, the
Company will post the reports referred to in the preceding paragraphs on its
website within the time periods that would apply if the Company were required to
file those reports with the SEC.

 

(b)          If the Company has designated any of its Subsidiaries as
Unrestricted Subsidiaries, then the quarterly and annual financial information
required by Section 4.03(a) hereof will include a reasonably detailed
presentation, either on the face of the financial statements or in the footnotes
thereto, and in Management’s Discussion and Analysis of Financial Condition and
Results of Operations, of the financial condition and results of operations of
the Company and its Restricted Subsidiaries separate from the financial
condition and results of operations of the Unrestricted Subsidiaries of the
Company.

 

(c)          The Company and the Guarantors agree that, for so long as any Notes
remain outstanding, if at any time they are not required to file with the SEC
the reports required by Sections 4.03(a) and 4.03(b) hereof, the Company and the
Guarantors will furnish to the Holders of Notes and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.

 

55

 

 

Section 4.04         Compliance Certificate.

 

(a)          The Company and each Guarantor (to the extent that such Guarantor
is so required under the TIA) shall deliver to the Trustee, within 120 days
after the end of each fiscal year, an Officers’ Certificate stating that a
review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture and the Security
Documents, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge the Company has kept,
observed, performed and fulfilled each and every covenant contained in this
Indenture and the Security Documents and is not in default in the performance or
observance of any of the terms, provisions and conditions of this Indenture or
the Security Documents (or, if a Default or Event of Default has occurred,
describing all such Defaults or Events of Default of which he or she may have
knowledge and what action the Company is taking or proposes to take with respect
thereto) and that to the best of his or her knowledge no event has occurred and
remains in existence by reason of which payments on account of the principal of,
premium, if any, on, or interest on the Notes is prohibited or if such event has
occurred, a description of the event and what action the Company is taking or
proposes to take with respect thereto.

 

(b)          So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03 above shall be accompanied by a
written statement of the Company’s independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.

 

(c)          So long as any of the Notes are outstanding, the Company will
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers’ Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.

 

Section 4.05         Taxes.

 

The Company will pay, and will cause each of its Subsidiaries to pay, prior to
delinquency, all material taxes, assessments, and governmental levies except
such as are contested in good faith and by appropriate proceedings or where the
failure to effect such payment is not adverse in any material respect to the
Holders of the Notes.

 

Section 4.06         Stay, Extension and Usury Laws.

 

The Company and each of the Guarantors covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company and
each of the Guarantors (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law has been enacted.

 

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Section 4.07         Restricted Payments.

 

(a)          The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:

 

(1)         declare or pay any dividend or make any other payment or
distribution on account of the Company’s or any of its Restricted Subsidiaries’
Equity Interests (including, without limitation, any payment in connection with
any merger or consolidation involving the Company or any of its Restricted
Subsidiaries) or to the direct or indirect holders of the Company’s or any of
its Restricted Subsidiaries’ Equity Interests in their capacity as such (other
than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company and other than dividends or distributions
payable to the Company or a Restricted Subsidiary of the Company);

 

(2)         repurchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any direct or
indirect parent of the Company;

 

(3)         make any payment on or with respect to, or repurchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness of the Company
or any Guarantor that is contractually subordinated to the Notes or to any Note
Guarantee (excluding any intercompany Indebtedness between or among the Company
and any of its Restricted Subsidiaries), except a payment of interest or
principal at the Stated Maturity thereof; or

 

(4)         make any Restricted Investment (all such payments and other actions
set forth in these clauses (1) through (4) being collectively referred to as
“Restricted Payments”),

 

unless, at the time of and after giving effect to such Restricted Payment:

 

(I)         no Default or Event of Default has occurred and is continuing or
would occur as a consequence of such Restricted Payment;

 

(II)        the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made at
the beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in Section 4.09(a) hereof; and

 

(III)       such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted Subsidiaries
since the date of this Indenture (excluding Restricted Payments permitted by
clauses (2), (3), (4), (5), (6), (7), (8) and (9) of Section 4.07(b) hereof), is
less than the sum, without duplication, of:

 

(A)         50% of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from the beginning of the first fiscal quarter
commencing after the date of this Indenture to the end of the Company’s most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated Net
Income for such period is a deficit, less 100% of such deficit); plus

 

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(B)         100% of the aggregate net cash proceeds and the Fair Market Value of
property or securities other than cash (including Capital Stock of Persons,
other than the Company or a Subsidiary of the Company, engaged primarily in the
Oil and Gas Business or assets used in the Oil and Gas Business), in each case
received by the Company since the date of this Indenture as a contribution to
its common equity capital or from the issue or sale of Equity Interests of the
Company (other than (i) Disqualified Stock and (ii) net cash proceeds received
from an issuance or sale of such Equity Interests to a Subsidiary of the Company
or an employee stock ownership plan, option plan or similar trust to the extent
such sale to an employee stock ownership plan, option plan or similar trust is
financed by loans from or Guaranteed by the Company or any Restricted Subsidiary
(unless such loans have been repaid with cash on or prior to the date of
determination)); plus

 

(C)         to the extent not already included in Consolidated Net Income for
such period, if any Restricted Investment that was made by the Company or any of
its Restricted Subsidiaries after the date of this Indenture is sold for cash
(other than to the Company or any Subsidiary of the Company) or otherwise
cancelled, liquidated or repaid for cash, the cash return of capital with
respect to such Restricted Investment resulting from such sale, liquidation or
repayment (less any out-of-pocket costs incurred in connection with any such
sale); plus

 

(D)         the amount by which Indebtedness of the Company or its Restricted
Subsidiaries is reduced on the Company’s balance sheet upon the conversion or
exchange (other than by a Subsidiary of the Company) subsequent to the date of
this Indenture of any such Indebtedness of the Company or its Restricted
Subsidiaries convertible or exchangeable for Equity Interests (other than
Disqualified Stock) of the Company (less the amount of any cash, or the Fair
Market Value of any other property (other than such Equity Interests),
distributed by the Company upon such conversion or exchange and excluding the
net cash proceeds from the conversion or exchange financed, directly or
indirectly, using funds borrowed from the Company or any Subsidiary), together
with the net proceeds, if any, received by the Company or any of its Restricted
Subsidiaries upon such conversion or exchange; plus

 

(E)         to the extent that any Unrestricted Subsidiary of the Company
designated as such after the date of this Indenture is redesignated as a
Restricted Subsidiary pursuant to the terms of this Indenture or is merged or
consolidated with or into, or transfers or otherwise disposes of all of
substantially all of its properties or assets to or is liquidated into, the
Company or a Restricted Subsidiary after the date of this Indenture, the lesser
of, as of the date of such redesignation, merger, consolidation, transfer,
disposition or liquidation, (A) the Fair Market Value of the Company’s
Restricted Investment in such Subsidiary (or of the properties or assets
disposed of, as applicable) as of the date of such redesignation, merger,
consolidation, transfer, disposition or liquidation and (B) such Fair Market
Value as of the date on which such Subsidiary was originally designated as an
Unrestricted Subsidiary after the date of this Indenture; plus

 

(F)          50% of any dividends or distributions received in cash by the
Company or a Restricted Subsidiary of the Company that is a Guarantor after the
date of this Indenture from an Unrestricted Subsidiary of the Company, to the
extent that such dividends or distributions were not otherwise included in the
Consolidated Net Income of the Company for such period.

 

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(b)          So long as no Default or Event of Default has occurred and is
continuing or would be caused thereby, the provisions of Section 4.07(a) hereof
will not prohibit:

 

(1)         the payment of any dividend or distribution or the consummation of
any irrevocable redemption within 60 days after the date of declaration of the
dividend or distribution or giving of the redemption notice, as the case may be,
if at the date of declaration or notice, the dividend, distribution or
redemption payment would have complied with the provisions of this Indenture;

 

(2)         the making of any Restricted Payment in exchange for, or out of or
with the net cash proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Company) of, Equity Interests of the Company (other than
Disqualified Stock) or from the substantially concurrent contribution of common
equity capital to the Company; provided that the amount of any such net cash
proceeds that are utilized for any such Restricted Payment will not be
considered to be net proceeds of Equity Interests for purposes of Section
4.07(a)(III)(B) and will not be considered to be net cash proceeds from an
Equity Offering for purposes of Section 3.07 of this Indenture;

 

(3)         the payment of any dividend or distribution by a Restricted
Subsidiary of the Company to the holders of its Equity Interests on a pro rata
basis;

 

(4)         the repurchase, redemption, defeasance or other acquisition or
retirement for value of Indebtedness of the Company or any Guarantor that is
contractually subordinated to the Notes or to any Note Guarantee with the net
cash proceeds from a substantially concurrent incurrence of Permitted
Refinancing Indebtedness;

 

(5)         repurchases of Indebtedness of the Company or any Guarantor that is
contractually subordinated in right of payment to the Notes or a Note Guarantee
at a purchase price not greater than (i) 101% of the principal amount of such
subordinated Indebtedness in the event of a Change of Control or (ii) 100% of
the principal amount of such subordinated Indebtedness in the event of an Asset
Sale, in each case plus accrued and unpaid interest thereon, to the extent
required by the terms of such Indebtedness, but only if:

 

(a)          in the case of a Change of Control, the Company has first complied
with and fully satisfied its obligations in accordance with Section 4.15 hereof;
or

 

(b)          in the case of an Asset Sale, the Company has complied with and
fully satisfied its obligations under Section 4.10 hereof;

 

(6)         the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company or any Restricted Subsidiary of the
Company held by any current or former officer, director or employee of the
Company or any of its Restricted Subsidiaries pursuant to any equity
subscription agreement, stock option agreement, shareholders’ agreement or
similar agreement; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests may not exceed $4.0
million in any twelve-month period;

 

(7)         the repurchase of Equity Interests deemed to occur upon the exercise
of stock or other equity options to the extent such Equity Interests represent a
portion of the exercise price of those stock or other equity options, and any
repurchase or other acquisition of Equity Interests made in lieu of withholding
taxes in connection with any exercise or exchange of stock options, warrants,
incentives or other rights to acquire Equity Interests;

 

59

 

 

(8)         the declaration and payment of regularly scheduled or accrued
dividends or distributions to holders of any class or series of Disqualified
Stock of the Company or any Preferred Stock of any Restricted Subsidiary of the
Company issued on or after the date of this Indenture in accordance with Section
4.09 hereof;

 

(9)         payments of cash, dividends, distributions, advances or other
Restricted Payments by the Company or any of its Restricted Subsidiaries to
allow the payment of cash in lieu of the issuance of fractional shares upon (i)
the exercise of options or warrants or (ii) the conversion or exchange of
Capital Stock of any such Person; and

 

(10)        other Restricted Payments in an aggregate amount not to exceed $20.0
million since the date of this Indenture.

 

(c)          The amount of all Restricted Payments (other than cash) will be the
Fair Market Value on the date of the Restricted Payment (or, in the case of a
dividend or distribution, on the date of declaration) of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The Fair Market Value of any assets or securities that are required to be valued
by this Section 4.07 will be determined, in the case of amounts under $10.0
million, by an Officer of the Company and, in the case of amounts of $10.0
million or more, by the Board of Directors of the Company whose resolution with
respect thereto will be delivered to the Trustee.

 

Section 4.08         Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries.

 

(a)          The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to:

 

(1)         pay dividends or make any other distributions on its Capital Stock
to the Company or any of its Restricted Subsidiaries or with respect to any
other interest or participation in, or measured by, its profits, or pay any
indebtedness owed to the Company or any of its Restricted Subsidiaries; provided
that the priority that any series of Preferred Stock of a Restricted Subsidiary
has in receiving dividends, distributions or liquidating distributions before
dividends, distributions or liquidating distributions are paid in respect of
common stock of such Restricted Subsidiary shall not constitute a restriction on
the ability to pay dividends or make distributions on Capital Stock for purposes
of this covenant;

 

(2)         make loans or advances to the Company or any of its Restricted
Subsidiaries (it being understood that the subordination of loans or advances
made to the Company or any of its Restricted Subsidiaries to other Indebtedness
incurred by the Company or any of its Restricted Subsidiaries shall not be
deemed a restriction on the ability to make loans or advances); or

 

(3)         sell, lease or transfer any of its properties or assets to the
Company or any of its Restricted Subsidiaries.

 

(b)          The restrictions in Section 4.08(a) hereof will not apply to
encumbrances or restrictions existing under or by reason of:

 

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(1)         agreements governing Existing Indebtedness and Credit Facilities as
in effect on the date of this Indenture and any amendments, restatements,
modifications, renewals, supplements, refundings, replacements or refinancings
of those agreements; provided that the encumbrances or restrictions contained in
the amendments, restatements, modifications, renewals, supplements, refundings,
replacements or refinancings are not materially more restrictive, taken as a
whole, with respect to such dividend and other payment restrictions than those
contained in those agreements on the date of this Indenture;

 

(2)         this Indenture, the Notes, the Note Guarantees and the Security
Documents;

 

(3)         agreements governing other Indebtedness permitted to be incurred
under Section 4.09 hereof and any amendments, restatements, modifications,
renewals, supplements, refundings, replacements or refinancings of those
agreements; provided that the encumbrances or restrictions contained therein are
not, in the reasonable good faith judgment of the Chief Executive Officer and
the Chief Financial Officer of the Company, materially more restrictive, taken
as a whole, than those contained in this Indenture, the Notes and the Note
Guarantees or the Security Documents;

 

(4)         applicable law, rule, regulation or order;

 

(5)         any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Company or any of its Restricted Subsidiaries as in effect at
the time of such acquisition (except to the extent such Indebtedness or Capital
Stock was incurred in connection with or in contemplation of such acquisition),
which encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property or
assets of the Person, so acquired, and any amendments, restatements,
modifications, renewals, extensions, supplements, increases, refundings,
replacements or refinancings thereof; provided, that the encumbrances and
restrictions in any such amendments, restatements, modifications, renewals,
extensions, supplements, increases, refundings, replacements or refinancings
are, in the reasonable good faith judgment of the Chief Executive Officer and
Chief Financial Officer of the Company, no more restrictive, taken as a whole,
than those in effect on the date of the acquisition; provided further, that, in
the case of Indebtedness, such Indebtedness was permitted to be incurred by the
terms of this Indenture;

 

(6)         customary non-assignment provisions in Hydrocarbon purchase and sale
or exchange agreements or similar operational agreements or in licenses,
easements or leases, in each case, entered into in the ordinary course of
business;

 

(7)         purchase money obligations for property acquired in the ordinary
course of business and Capital Lease Obligations that impose restrictions on the
property purchased or leased of the nature described in Section 4.08(a)(3)
hereof;

 

(8)         any agreement for the sale or other disposition of a Restricted
Subsidiary that restricts distributions by that Restricted Subsidiary pending
its sale or other disposition;

 

(9)         Permitted Refinancing Indebtedness; provided that the restrictions
contained in the agreements governing such Permitted Refinancing Indebtedness
are, in the reasonable good faith judgment of the Chief Executive Officer and
Chief Financial Officer of the Company, not materially more restrictive, taken
as a whole, than those contained in the agreements governing the Indebtedness
being refinanced;

 

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(10)        Liens permitted to be incurred under the provisions of Section 4.12
hereof that limit the right of the debtor to dispose of the assets subject to
such Liens;

 

(11)        provisions limiting the disposition or distribution of assets or
property in joint venture agreements, operating agreements, asset sale
agreements, sale-leaseback agreements, stock sale agreements and other similar
agreements (including, without limitation, agreements entered into in connection
with a Restricted Investment) entered into with the approval of the Company’s
Board of Directors, which limitation is applicable only to the assets that are
the subject of such agreements;

 

(12)        encumbrances or restrictions on cash or other deposits or net worth
imposed by customers or lessors under contracts or leases entered into in the
ordinary course of business; and

 

(13)        customary encumbrances and restrictions contained in agreements of
the types described in clauses (13) and (14) of the definition of “Permitted
Investments.”

 

Section 4.09         Incurrence of Indebtedness and Issuance of Preferred Stock.

 

(a)          The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, Guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, “incur”) any Indebtedness (including Acquired
Debt), and the Company will not issue any Disqualified Stock and will not permit
any of its Restricted Subsidiaries to issue any Preferred Stock; provided,
however, that the Company may incur Indebtedness (including Acquired Debt) or
issue Disqualified Stock, and the Guarantors may incur Indebtedness (including
Acquired Debt) or issue Preferred Stock, if the Fixed Charge Coverage Ratio for
the Company’s most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock or such Preferred
Stock is issued, as the case may be, would have been at least 2.25 to 1.0,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred or the
Disqualified Stock or the Preferred Stock had been issued, as the case may be,
at the beginning of such four-quarter period.

 

(b)          Section 4.09(a) hereof will not prohibit the incurrence of any of
the following items of Indebtedness or issuances of Disqualified Stock or
Preferred Stock, as applicable (collectively, “Permitted Debt”):

 

(1)         the incurrence by the Company and any Guarantor of additional
Indebtedness and letters of credit under Credit Facilities in an aggregate
principal amount at any one time outstanding under this clause (1) (with letters
of credit being deemed to have a principal amount equal to the maximum potential
liability of the Company and its Restricted Subsidiaries thereunder) not to
exceed the greater of (a) $60.0 million and (b) 20.0% of the Company’s Adjusted
Consolidated Net Tangible Assets determined on the date of such incurrence;

 

(2)         the incurrence by the Company and its Restricted Subsidiaries of the
Existing Indebtedness;

 

(3)         the incurrence by the Company and the Guarantors of Indebtedness
represented by the Notes to be issued on the date of this Indenture and the
related Note Guarantees, their respective Obligations arising under the Security
Documents to the extent such obligations constitute Indebtedness, and the
Exchange Notes and the related Note Guarantees to be issued pursuant to the
Registration Rights Agreement;

 

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(4)         the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness represented by Capital Lease Obligations, mortgage financings or
purchase money obligations, in each case, incurred for the purpose of financing
all or any part of the purchase price or cost of design, construction,
installation or improvement of property, plant or equipment used in the business
of the Company or any of its Restricted Subsidiaries, in an aggregate principal
amount outstanding, including all Permitted Refinancing Indebtedness incurred to
renew, refund, refinance, replace, defease or discharge any Indebtedness
incurred pursuant to this clause (4), not to exceed at any time outstanding
$15.0 million;

 

(5)         the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to renew, refund, refinance, replace, defease or discharge any
Indebtedness (other than intercompany Indebtedness) of the Company or any of its
Restricted Subsidiaries or any Disqualified Stock of the Company, in each case
that was to be incurred under Section 4.09(a) hereof or clauses (2), (3), (4),
(5), (14) or (15) of this Section 4.09(b);

 

(6)         the incurrence by the Company or any Guarantor of intercompany
Indebtedness between or among the Company and any Guarantor; provided, however,
that:

 

(A)         such Indebtedness must be unsecured and expressly subordinated to
the prior payment in full in cash of all Obligations then due with respect to
the Notes, in the case of the Company, or the Note Guarantee, in the case of a
Guarantor; and

 

(B)          (i) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than the Company
or a Guarantor of the Company and (ii) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a Guarantor,

 

will be deemed, in each case, to constitute an incurrence of such Indebtedness
by the Company or such Guarantor, as the case may be, that was not permitted by
this clause (6);

 

(7)         the issuance by any of the Company’s Restricted Subsidiaries to the
Company or to any of its Restricted Subsidiaries of any Preferred Stock;
provided, however, that:

 

(A)         any subsequent issuance or transfer of Equity Interests that results
in any such Preferred Stock being held by a Person other than the Company or a
Restricted Subsidiary of the Company; and

 

(B)         any sale or other transfer of any such Preferred Stock to a Person
that is not either the Company or a Restricted Subsidiary of the Company,

 

will be deemed, in each case, to constitute an issuance of such Preferred Stock
by such Restricted Subsidiary that was not permitted by this clause (7);

 

(8)         the incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations in the ordinary course of business and not for
speculative purposes;

 

(9)         the Guarantee by the Company or any of the Guarantors of
Indebtedness of the Company or a Restricted Subsidiary of the Company to the
extent that the guaranteed Indebtedness was permitted to be incurred by another
provision of this Section 4.09; provided that if the Indebtedness being
guaranteed is subordinated to or pari passu with the Notes, then the Guarantee
must be subordinated or pari passu, as applicable, to the same extent as the
Indebtedness guaranteed;

 

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(10)        the incurrence by the Company or any of the Guarantors of
Indebtedness in respect of self-insurance obligations or bid, plugging and
abandonment, appeal, reimbursement, performance, surety and similar bonds and
completion guarantees provided by the Company or a Restricted Subsidiary in the
ordinary course of business and any Guarantees or letters of credit functioning
as or supporting any of the foregoing bonds or obligations and workers’
compensation claims in the ordinary course of business;

 

(11)        the incurrence by the Company or any of the Guarantors of
Indebtedness arising from the honoring by a bank or other financial institution
of a check, draft or similar instrument inadvertently drawn against insufficient
funds, so long as such Indebtedness is covered within five Business Days;

 

(12)        the incurrence by the Company or any of its Restricted Subsidiaries
of in kind obligations relating to net oil or natural gas balancing positions
arising in the ordinary course of business;

 

(13)        any obligation arising from agreements of the Company or any
Restricted Subsidiary of the Company providing for indemnification, adjustment
of purchase price, earn outs, or similar obligations, in each case, incurred or
assumed in connection with the disposition or acquisition of any business,
assets or Capital Stock of a Restricted Subsidiary in a transaction permitted by
this Indenture; provided that such obligation is not reflected as a liability on
the face of the balance sheet of the Company or any Restricted Subsidiary;

 

(14)        the incurrence by the Company and its Restricted Subsidiaries of any
Permitted Acquisition Indebtedness; and

 

(15)        the incurrence by the Company or any of its Restricted Subsidiaries
of additional Indebtedness or the issuance by the Company of any Disqualified
Stock in an aggregate principal amount (or accreted value, as applicable) at any
time outstanding, including all Permitted Refinancing Indebtedness incurred to
renew, refund, refinance, replace, defease or discharge any Indebtedness
incurred or Disqualified Stock issued pursuant to this clause (15), not to
exceed $20.0 million.

 

The Company will not incur, and will not permit any Guarantor to incur, any
Indebtedness (including Permitted Debt) that is contractually subordinated in
right of payment to any other Indebtedness of the Company or such Guarantor
unless such Indebtedness is also contractually subordinated in right of payment
to the Notes or the applicable Note Guarantee on substantially identical terms;
provided, however, that no Indebtedness will be deemed to be contractually
subordinated in right of payment to any other Indebtedness of the Company or any
Guarantor solely by virtue of being unsecured or by virtue of being secured on a
junior priority basis.

 

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For purposes of determining compliance with this Section 4.09, in the event that
an item of Indebtedness meets the criteria of more than one of the categories of
Permitted Debt described in clauses (2) through (15) of Section 4.09(b) hereof,
or is entitled to be incurred pursuant to Section 4.09(a) hereof, the Company
will be permitted to divide, classify and reclassify such item of Indebtedness
on the date of its incurrence, or later redivide or reclassify all or a portion
of such item of Indebtedness, in any manner that complies with this Section
4.09. Indebtedness under Senior Credit Facilities outstanding on the date on
which Notes are first issued and authenticated under this Indenture will
initially be deemed to have been incurred on such date in reliance on the
exception provided by clause (1) of the definition of Permitted Debt. The
accrual of interest or Preferred Stock or Disqualified Stock dividends or
distributions, the accretion or amortization of original issue discount, the
payment of interest on any Indebtedness not secured by a Lien in the form of
additional Indebtedness with the same terms, the reclassification of Preferred
Stock or Disqualified Stock as Indebtedness due to a change in accounting
principles, and the payment of dividends or distributions on Preferred Stock or
Disqualified Stock in the form of additional securities of the same class of
Preferred Stock or Disqualified Stock will not be deemed to be an incurrence of
Indebtedness or an issuance of Preferred Stock or Disqualified Stock for
purposes of this Section 4.09; provided that the amount thereof is included in
Fixed Charges of the Company as accrued to the extent required by the definition
of such term.

 

The amount of any Indebtedness outstanding as of any date will be:

 

(a)          the accreted value of the Indebtedness, in the case of any
Indebtedness issued with original issue discount;

 

(b)          the principal amount of the Indebtedness, in the case of any other
Indebtedness; and

 

(c)          in respect of Indebtedness of another Person secured by a Lien on
the assets of the specified Person, the lesser of:

 

(A)         the Fair Market Value of such assets at the date of determination;
and

 

(B)         the amount of the Indebtedness of the other Person.

 

Section 4.10         Asset Sales.

 

(a)          The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:

 

(1)         the Company (or a Restricted Subsidiary, as the case may be)
receives consideration at the time of the Asset Sale at least equal to the Fair
Market Value (measured as of the date of the definitive agreement with respect
to such Asset Sale) of the assets or Equity Interests issued or sold or
otherwise disposed of; and

 

(2)         at least 75% of the aggregate consideration received in such Asset
Sale by the Company or a Restricted Subsidiary is in the form of cash or Cash
Equivalents. For purposes of this provision, each of the following will be
deemed to be cash:

 

(A)         any liabilities, as shown on the Company’s most recent consolidated
balance sheet, of the Company or any Restricted Subsidiary (other than
contingent liabilities and liabilities that are by their terms subordinated to
the Notes or any Note Guarantee) that are assumed by the transferee of any such
assets pursuant to a customary novation or indemnity agreement that releases the
Company or such Restricted Subsidiary from or indemnifies the Company or such
Restricted Subsidiary against further liability;

 

(B)         with respect to any Asset Sale of Oil and Gas Properties by the
Company or any Restricted Subsidiary where the Company or such Restricted
Subsidiary retains an interest in such Oil and Gas Properties, any agreement by
the transferee (or an Affiliate thereof) to pay all or a portion of the costs
and expenses of the Company or such Restricted Subsidiary related to the
exploration, development, completion or production of such Oil and Gas
Properties and activities related thereto;

 

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(C)         any securities, notes or other obligations received by the Company
or any Restricted Subsidiary from such transferee that are, within 30 days of
the Asset Sale, converted by the Company or such Restricted Subsidiary into
cash, to the extent of the cash received in that conversion; and

 

(D)         any Capital Stock or assets of the kind referred to in clause (2) or
(4) Section 4.10(b) hereof.

 

(b)          Within 360 days after the receipt of any Net Proceeds from an Asset
Sale, the Company (or any Restricted Subsidiary) may apply such Net Proceeds at
its option to any combination of the following:

 

(1)         to repay Indebtedness and other Obligations under a Senior Credit
Facility that are secured by a Lien or which are secured by a Permitted Prior
Lien;

 

(2)         to acquire all or substantially all of the assets, or any Capital
Stock, of, one or more other Persons primarily engaged in the Oil and Gas
Business, if, after giving effect to any such acquisition of Capital Stock, such
Person becomes a Restricted Subsidiary of the Company;

 

(3)         to make capital expenditures in respect of the Company’s or any
Restricted Subsidiaries’ Oil and Gas Business; or

 

(4)         to acquire other assets that are not classified as current assets
under GAAP and that are used or useful in the Oil and Gas Business.

 

The requirement of clause (2) or (4) of this Section 4.09(b) shall be deemed to
be satisfied if a bona fide binding contract committing to make the investment,
acquisition or expenditure referred to therein is entered into by the Company or
any of its Restricted Subsidiaries with a Person other than an Affiliate of the
Company within the time period specified in Section 4.09(b) and such Net
Proceeds are subsequently applied in accordance with such contract within
180 days following the date such agreement is entered into.

 

Pending the final application of any Net Proceeds, the Company (or any of its
Restricted Subsidiaries) may invest the Net Proceeds in any manner that is not
prohibited by this Indenture.

 

(c)          Any Net Proceeds from Asset Sales that are not applied or invested
as provided in Section 4.10(b) hereof will constitute “Excess Proceeds.” When
the aggregate amount of Excess Proceeds exceeds $20.0 million, within five days
thereof, the Company will make an offer (an “Asset Sale Offer”) to all Holders
of Notes and all holders of other Indebtedness that is pari passu with the Notes
containing provisions similar to those set forth in this Indenture with respect
to offers to purchase, prepay or redeem with the proceeds of sales of assets in
accordance with Section 3.09 hereof to purchase, prepay or redeem, on a pro rata
basis, the maximum principal amount of Notes and such other pari passu
Indebtedness (plus all accrued interest on the Indebtedness and the amount of
all fees and expenses, including premiums, incurred in connection therewith)
that may be purchased, prepaid or redeemed out of the Excess Proceeds. The offer
price in any Asset Sale Offer will be equal to 100% of the principal amount,
plus accrued and unpaid interest, if any, to the date of purchase, prepayment or
redemption, subject to the rights of Holders of Notes on the relevant record
date to receive interest due on the relevant interest payment date, and will be
payable in cash. If any Excess Proceeds remain after consummation of an Asset
Sale Offer, the Company or any of its Restricted Subsidiaries may use those
Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If
the aggregate principal amount of Notes tendered in such Asset Sale Offer
exceeds the amount of Excess Proceeds allocated to the purchase of the Notes,
the Trustee will select the Notes to be purchased on a pro rata basis (except
that any Notes represented by a Note in global form will be selected by such
method as DTC or its nominee or successor may require or, where such nominee or
successor is the Trustee, a method that most nearly approximates pro rata
selection as the Trustee deems fair and appropriate unless otherwise required by
law), based on the amounts tendered (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $2,000, or an
integral multiple of $1,000 in excess thereof, will be purchased). Upon
completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset
at zero.

 

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(d)          The Company will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent those laws and regulations are applicable in connection with each
repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with the provisions of
Section 3.09 hereof or this Section 4.10, the Company will comply with the
applicable securities laws and regulations and will not be deemed to have
breached its obligations under Section 3.09 hereof or this Section 4.10 by
virtue of such compliance.

 

Section 4.11         Transactions with Affiliates.

 

(a)          The Company will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate of the Company (each, an “Affiliate Transaction”) involving
aggregate payments or consideration in excess of $1.0 million, unless:

 

(1)         the Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person or, if in the good faith judgment of the
Board of Directors of the Company, no comparable transaction is available with
which to compare such Affiliate Transaction, such Affiliate Transaction is
otherwise fair to the Company or the relevant Restricted Subsidiary from a
financial point of view; and

 

(2)         the Company delivers to the Trustee:

 

(A)         with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $10.0
million, an Officers’ Certificate certifying that such Affiliate Transaction or
series of related Affiliate Transactions complies with this Section 4.11;

 

(B)         with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$20.0 million, a resolution of the Board of Directors of the Company set forth
in an Officers’ Certificate certifying that such Affiliate Transaction or series
of related Affiliated Transactions complies with this Section 4.11 and that such
Affiliate Transaction or series of related Affiliate Transactions has been
approved by a majority of the disinterested members of the Board of Directors of
the Company, if any; and

 

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(C)         with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $30.0
million, an opinion as to the fairness to the Company or such Restricted
Subsidiary of such Affiliate Transaction or series of related Affiliate
Transactions from a financial point of view issued by an accounting, appraisal
or investment banking firm of national standing.

 

(b)          The following items will not be deemed to be Affiliate Transactions
and, therefore, will not be subject to the provisions of Section 4.11(a) hereof:

 

(1)          any employment or consulting agreement, employee benefit plan,
officer or director indemnification, compensation or severance agreement or any
similar arrangement entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business and payments pursuant thereto;

 

(2)         transactions between or among the Company and/or its Restricted
Subsidiaries;

 

(3)         payment of reasonable and customary fees and reimbursements of
expenses (pursuant to indemnity arrangements or otherwise) of officers,
directors, employees or consultants of the Company or any of its Restricted
Subsidiaries;

 

(4)         any issuance of Equity Interests (other than Disqualified Stock) of
the Company to Affiliates of the Company;

 

(5)         transactions effected in accordance with the terms of the agreements
described in the Offering Memorandum under the caption “Certain Relationships
and Related Transactions,” as such agreements are in effect on the date of this
Indenture, and any amendment or replacement of any of such agreements so long as
such amendment or replacement agreement is no less advantageous to the Company
in any material respect than the agreement so amended or replaced;

 

(6)         advances to or reimbursements of expenses incurred by employees for
moving, entertainment and travel expenses and similar expenditures in the
ordinary course of business;

 

(7)         transactions between the Company or any of its Restricted
Subsidiaries and any other Person, a director of which is also on the Board of
Directors of the Company or any direct or indirect parent company of the
Company, and such common director is the sole cause for such other Person to be
deemed an Affiliate of the Company or any of its Restricted Subsidiaries;
provided, however, that such director abstains from voting as a member of the
Board of Directors of the Company or any direct or indirect parent company of
the Company, as the case may be, on any transaction with such other Person; and

 

(8)         in the case of contracts for exploring for, producing, marketing,
storing or otherwise handling Hydrocarbons, or activities or services reasonably
related or ancillary thereto, or other operational contracts, any such contracts
entered into in the ordinary course of business and otherwise in compliance with
the terms of this Indenture (a) which are fair to the Company and its Restricted
Subsidiaries, in the reasonable determination of the Board of Directors of the
Company or the senior management thereof, or are on terms at least as favorable
as might reasonably have been obtained at such time from an unaffiliated party
and (b) with respect to which the Company has complied with Section
4.11(a)(2)(A), Section 4.11(a)(2)(B) and Section 4.11(a)(2)(C) hereof.

 

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Section 4.12         Liens.

 

The Company will not and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create, incur, assume or suffer to exist any Lien of any
kind other than Permitted Liens.

 

Section 4.13         Business Activities.

 

The Company will not, and will not permit any of its Restricted Subsidiaries to,
engage in any business other than the Oil and Gas Business, except to such
extent as would not be material to the Company and its Restricted Subsidiaries
taken as a whole.

 

Section 4.14         Corporate Existence.

 

Subject to Article 5 hereof, the Company shall do or cause to be done all things
necessary to preserve and keep in full force and effect:

 

(1)         its corporate existence, and the corporate, partnership or other
existence of each of its Subsidiaries, in accordance with the respective
organizational documents (as the same may be amended from time to time) of the
Company or any such Subsidiary; and

 

(2)         the rights (charter and statutory), licenses and franchises of the
Company and its Subsidiaries;

 

provided, however, that the Company shall not be required to preserve any such
right, license or franchise, or the corporate, partnership or other existence of
any of its Subsidiaries, if the Board of Directors of the Company shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and its Subsidiaries, taken as a whole, and that the
loss thereof is not adverse in any material respect to the Holders of the Notes.

 

Section 4.15         Offer to Repurchase Upon Change of Control.

 

(a)          Upon the occurrence of a Change of Control, the Company will make
an offer (a “Change of Control Offer”) to each Holder to repurchase all or any
part (equal to $2,000 or an integral multiple of $1,000 in excess thereof) of
that Holder’s Notes pursuant to a Change of Control Offer on the terms set forth
in this Indenture (including, but not limited to, this Section 4.15 and Article
3 hereof). In the Change of Control Offer, the Company will offer to make a cash
payment (a “Change of Control Payment”) equal to 101% of the aggregate principal
amount of Notes repurchased, plus accrued and unpaid interest, if any, on the
Notes repurchased to the date of purchase (the “Change of Control Purchase
Date”), subject to the rights of Holders of the Notes on the relevant record
date to receive interest due on the relevant interest payment date. Within ten
days following any Change of Control, the Company will mail a notice to each
Holder describing the transaction or transactions that constitute the Change of
Control and stating:

 

(1)         that the Change of Control Offer is being made pursuant to this
Section 4.15 and that all Notes tendered will be accepted for payment;

 

(2)         the purchase price and the purchase date, which shall be no earlier
than 30 days and no later than 60 days from the date such notice is mailed (the
“Change of Control Payment Date”);

 

(3)         that any Note not tendered will continue to accrue interest;

 

69

 

 

(4)         that, unless the Company defaults in the payment of the Change of
Control Payment, all Notes accepted for payment pursuant to the Change of
Control Offer will cease to accrue interest after the Change of Control Payment
Date;

 

(5)         that Holders electing to have any Notes purchased pursuant to a
Change of Control Offer will be required to surrender the Notes, with the form
entitled “Option of Holder to Elect Purchase” attached to the Notes completed,
or transfer by book-entry transfer, to the Paying Agent at the address specified
in the notice prior to the close of business on the third Business Day preceding
the Change of Control Payment Date;

 

(6)         that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the second
Business Day preceding the Change of Control Payment Date, a telegram,
electronic or facsimile transmission or letter setting forth the name of the
Holder, the principal amount of Notes delivered for purchase, and a statement
that such Holder is withdrawing his election to have the Notes purchased; and

 

(7)         that Holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered, which unpurchased portion must be equal to $2,000 in
principal amount or an integral multiple of $1,000 in excess thereof.

 

The Company will comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent those
laws and regulations are applicable in connection with the repurchase of the
Notes as a result of a Change in Control. To the extent that the provisions of
any securities laws or regulations conflict with the provisions of this Section
4.15, the Company will comply with the applicable securities laws and
regulations and will not be deemed to have breached its obligations under this
Section 4.15 by virtue of such compliance.

 

(b)          Promptly following the expiration of the Change of Control Offer,
the Company will, to the extent lawful, accept for payment all Notes or portions
of Notes properly tendered pursuant to the Change of Control Offer. Promptly
after such acceptance, the Company will, on the Change of Control Purchase Date:

 

(1)         deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all Notes or portions of Notes properly tendered;
and

 

(2)         deliver or cause to be delivered to the Trustee the Notes properly
accepted together with an Officers’ Certificate stating the aggregate principal
amount of Notes or portions of Notes being purchased by the Company.

 

The Paying Agent will promptly mail (but in any case not later than five days
after the Change of Control Payment Date) to each Holder of Notes properly
tendered the Change of Control Payment for such Notes (or, if all the Notes are
then in global form, make such payment through the facilities of DTC), and the
Trustee will promptly authenticate and mail (or cause to be transferred by book
entry) to each Holder a new Note equal in principal amount to any unpurchased
portion of the Notes surrendered, if any. The Company will announce to the
Holders of Notes the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Purchase Date.

 

(c)          Notwithstanding anything to the contrary in this Section 4.15, the
Company will not be required to make a Change of Control Offer upon a Change of
Control if (1) a third party makes the Change of Control Offer in the manner, at
the time and otherwise in compliance with the requirements set forth in this
Section 4.15 and purchases all Notes properly tendered and not withdrawn under
the Change of Control Offer or (2) notice of redemption of all outstanding Notes
has been given pursuant to Section 3.07 hereof, unless and until there is a
default in payment of the applicable redemption price.

 

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(d)          Notwithstanding anything to the contrary contained herein, a Change
of Control Offer may be made in advance of a Change of Control, conditioned upon
the consummation of such Change of Control, if a definitive agreement is in
place for the Change of Control at the time the Change of Control Offer is made.
In such a case, the related notice shall describe such condition, and if
applicable, shall state that, in the Company’s discretion, the purchase date may
be delayed until such time as such condition shall be satisfied (provided that
in no event shall such purchase date be delayed to a date later than 60 days
after the date on which such notice was mailed), or such purchase may not occur
and such notice may be rescinded in the event that such condition shall not have
been satisfied by the purchase date, or by the purchase date as so delayed.

 

(e)          In the event that Holders of not less than 90% in aggregate
principal amount of the outstanding Notes accept a Change of Control Offer and
the Company (or any third party making such Change of Control Offer in lieu of
the Company as described above) purchases all of the Notes held by such Holders,
the Company will have the right, upon not less than 30 nor more than 60 days
prior notice, given not more than 30 days following the purchase pursuant to the
Change of Control Offer described above, to redeem all of the Notes that remain
outstanding following such purchase at a redemption price equal to the Change of
Control Payment plus, to the extent not included in the Change of Control
Payment, accrued and unpaid interest, if any, on the Notes that remain
outstanding, to the date of redemption (subject to the rights of Holders of
record on the relevant record date to receive interest due on an interest
payment date that is on or prior to the redemption date).

 

Section 4.16         Limitation on Sale and Leaseback Transactions

 

The Company will not, and will not permit any of its Restricted Subsidiaries to,
enter into any Sale and Leaseback Transaction; provided that the Company or any
Guarantor may enter into a Sale and Leaseback Transaction if:

 

(1)         the Company or that Guarantor, as applicable, could have (a)
incurred Indebtedness in an amount equal to the Attributable Debt relating to
such Sale and Leaseback Transaction under the Fixed Charge Coverage Ratio test
in Section 4.09(a) hereof and (b) incurred a Lien to secure such Indebtedness
pursuant to Section 4.12 hereof;

 

(2)         the gross proceeds of that Sale and Leaseback Transaction are at
least equal to the Fair Market Value of the real property or equipment that is
the subject of that Sale and Leaseback Transaction; and

 

(3)         the sale of assets in that Sale and Leaseback Transaction is
permitted by, and the application of the Net Proceeds of such transaction by the
lessee does not violate, Section 4.10 hereof.

 

Section 4.17         Payments for Consent.

 

The Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration to or for the
benefit of any Holder of Notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of this Indenture or the Notes
unless such consideration is offered to be paid and is paid to all Holders of
the Notes that consent, waive or agree to amend in the time frame set forth in
the solicitation documents relating to such consent, waiver or agreement.

 

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Section 4.18         Additional Note Guarantees.

 

If the Company or any of its Restricted Subsidiaries acquires or creates another
Domestic Subsidiary after the date of this Indenture or any other Subsidiary of
the Company that is not already a Guarantor becomes obligated with respect to
any Indebtedness in excess of $1.0 million, then, in either case, that
Subsidiary will, within 30 days after the date that Subsidiary was acquired or
created or on which it became obligated with respect to such Indebtedness,
(i) become a Guarantor by executing a supplemental indenture in substantially
the form attached as Exhibit E hereto, (ii) deliver an Opinion of Counsel to the
Trustee reasonably acceptable to the Trustee and (iii) execute and deliver a
joinder to each of the necessary Security Documents in form and substance
reasonably acceptable to the Collateral Agent.

 

Section 4.19         Designation of Restricted and Unrestricted Subsidiaries.

 

The Board of Directors of the Company may designate any Restricted Subsidiary to
be an Unrestricted Subsidiary if that designation would not cause a Default. If
a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the
aggregate Fair Market Value of all outstanding Investments owned by the Company
and its Restricted Subsidiaries in the Subsidiary designated as Unrestricted
will be deemed to be either an Investment made as of the time of the designation
that will reduce the amount available for Restricted Payments under Section 4.07
hereof or represent a Permitted Investment under one or more clauses of the
definition of Permitted Investments, as determined by the Company. That
designation will only be permitted if the Investment would be permitted at that
time and if the Restricted Subsidiary otherwise meets the definition of an
Unrestricted Subsidiary.

 

Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary
will be evidenced to the Trustee by filing with the Trustee a certified copy of
a resolution of the Board of Directors of the Company giving effect to such
designation and an Officers’ Certificate certifying that such designation
complied with the preceding conditions and was permitted by Section 4.07 hereof.
If, at any time, any Unrestricted Subsidiary would fail to meet the preceding
requirements as an Unrestricted Subsidiary, it will thereafter cease to be an
Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of
such Subsidiary will be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date and, if such Indebtedness is not permitted to be
incurred as of such date under Section 4.09 hereof, the Company will be in
default of such covenant.

 

The Board of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary of the Company; provided that such
designation will be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted
Subsidiary, and such designation will only be permitted if (1) such Indebtedness
is permitted under Section 4.09 hereof, calculated on a pro forma basis as if
such designation had occurred at the beginning of the applicable reference
period; and (2) no Default or Event of Default would be in existence following
such designation.

 

Section 4.20         Further Assurances.

 

The Company and each of the other Pledgors will do or cause to be done all acts
and things that may be required, or that the Collateral Agent from time to time
may reasonably request, to assure and confirm that the Collateral Agent holds
(or, as provided in the Intercreditor Agreement, the Priority Lien Collateral
Agent holds), for the benefit of the Holders of Notes, duly created and
enforceable and perfected Note Liens upon the Collateral (including any property
or assets that are acquired or otherwise become Collateral after the Notes are
issued), in each case, as contemplated by, and with the Lien priority required
under, the Note Documents.

 

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Upon the reasonable request of the Collateral Agent or the Trustee at any time
and from time to time, the Company and each of the other Pledgors will promptly
execute, acknowledge and deliver such Security Documents, instruments,
certificates, notices and other documents, and take such other actions as shall
be reasonably required, or that the Collateral Agent may reasonably request, to
create, perfect, protect, assure or enforce the Liens and benefits intended to
be conferred, in each case as contemplated by the Note Documents for the benefit
of the Holders of Notes.

 

If at any time of certification by the Company with respect to the Recognized
Value of Oil and Gas Properties subject to a Mortgage as described in the
definition of the term “Collateral” in this Indenture, such Oil and Gas
Properties represent less than 80% of the Recognized Value of the Company’s and
the Guarantors’ Proved Reserves located in the United States and adjacent
Federal waters, the Company will promptly, and in any event within 90 days after
the date of such certification, cause to be delivered to the Collateral Agent
(in form and substance reasonably satisfactory to the Collateral Agent) such
Mortgages or amendments or supplements to prior Mortgages as may be necessary to
increase such percentage to at least 80% of such Recognized Value.

 

If the Company or any other Pledgor creates any additional Lien upon any Oil and
Gas Properties to secure a Senior Credit Facility, the Company or such other
Pledgor will grant a Note Lien upon such property, subject to Permitted Prior
Liens, and the relevant Priority Lien, as security for the Note Obligations
substantially concurrently with granting any such additional Lien.

 

ARTICLE 5
SUCCESSORS

 

Section 5.01         Merger, Consolidation or Sale of Assets.

 

The Company will not, directly or indirectly: (1) consolidate or merge with or
into another Person (whether or not the Company is the survivor); or (2) sell,
assign, transfer, convey, lease or otherwise dispose of all or substantially all
of its properties or assets, in one or more related transactions, to another
Person, unless:

 

(1)         either:

 

(A)         the Company is the surviving Person; or

 

(B)         the Person formed by or surviving any such consolidation or merger
(if other than the Company) or to which such sale, assignment, transfer,
conveyance, lease or other disposition has been made is an entity organized or
existing under the laws of the United States, any state of the United States or
the District of Columbia; and, if such entity is not a corporation, a co-obligor
of the Notes is a corporation organized or existing under any such laws;

 

(2)         the Person formed by or surviving any such consolidation or merger
(if other than the Company) or the Person to which such sale, assignment,
transfer, conveyance, lease or other disposition has been made assumes all the
obligations of the Company under the Notes, this Indenture, the Registration
Rights Agreement and the Security Documents pursuant to agreements in a form
reasonably satisfactory to the Trustee;

 

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(3)          immediately after giving effect to such transaction, no Default or
Event of Default exists; and

 

(4)         immediately after giving effect to such transaction and any related
financing transaction on a pro forma basis as if the same had occurred at the
beginning of the applicable four-quarter period, either (a) the Company or the
Person formed by or surviving any such consolidation or merger (if other than
the Company), or to which such sale, assignment, transfer, conveyance, lease or
other disposition has been made, would be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in Section 4.09(a) hereof or (b) the Fixed Charge Coverage Ratio of the
Company or the Person formed by or surviving any such consolidation or merger
(if other than the Company), or to which such sale, assignment, transfer,
conveyance, lease or other disposition has been made, is equal to or greater
than the Fixed Charge Coverage Ratio of the Company immediately prior to such
transaction.

 

This Section 5.01 will not apply to any sale, assignment, transfer, conveyance,
lease or other disposition of properties or assets between or among the Company
and its Restricted Subsidiaries. Clauses (3) and (4) of this Section 5.01 will
not apply to (1) any merger or consolidation of the Company with or into one of
its Restricted Subsidiaries for any purpose or (2) any merger with or into an
Affiliate solely for the purpose of reincorporating the Company in another
jurisdiction.

 

Section 5.02         Successor Corporation Substituted.

 

Upon any consolidation or merger, or any sale, assignment, transfer, conveyance,
lease or other disposition of all or substantially all of the properties or
assets of the Company in a transaction that is subject to, and that complies
with the provisions of, Section 5.01 hereof, the successor Person formed by such
consolidation or into or with which the Company is merged or to which such sale,
assignment, transfer, conveyance, lease or other disposition is made shall
succeed to, and be substituted for (so that from and after the date of such
consolidation, merger, sale, assignment, transfer, lease, conveyance or other
disposition, the provisions of this Indenture referring to the “Company” shall
refer instead to the successor Person and not to the Company), and may exercise
every right and power of, the Company under this Indenture with the same effect
as if such successor Person had been named as the Company herein; provided,
however, that the predecessor Company shall not be relieved from the obligation
to pay the principal of, premium, if any, on, and interest on the Notes except
in the case of a sale of all of the Company’s assets in a transaction that is
subject to, and that complies with the provisions of, Section 5.01 hereof.

 

ARTICLE 6
DEFAULTS AND REMEDIES

 

Section 6.01         Events of Default.

 

Each of the following is an “Event of Default”:

 

(1)         default for 30 days in the payment when due of interest on the
Notes;

 

(2)         default in the payment when due (at Stated Maturity, upon redemption
or otherwise) of the principal of, or premium, if any, on the Notes;

 

(3)         failure by the Company to comply with the provisions of Sections
4.07, 4.09, 4.10, 4.15 or 5.01 hereof;

 

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(4)         failure by the Company for 180 days after notice from the Trustee or
Holders of at least 25% in aggregate principal amount of the Notes then
outstanding to comply with Section 4.03 hereof.

 

(5)         failure by the Company for 60 days after notice to the Company by
the Trustee or the Holders of at least 25% in aggregate principal amount of the
Notes then outstanding to comply with any of its other agreements in this
Indenture (other than a default referred to in clause (1), (2), (3) or (4) of
this Section 6.01);

 

(6)         default 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 Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries), whether such Indebtedness or Guarantee now exists, or
is created after the date of this Indenture, if that default:

 

(A)         is caused by a failure to pay principal of, premium, if any, on, or
interest on such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of such default (a “Payment Default”);
or

 

(B)         results in the acceleration of such Indebtedness prior to its Stated
Maturity,

 

and, in each case, the principal amount of any such Indebtedness, together with
the principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$25.0 million or more; provided, however, that if, prior to any acceleration of
the Notes, (i) any such Payment Default is cured or waived, (ii) any such
acceleration is rescinded, or (iii) such Indebtedness is repaid during the 10
Business Day period commencing upon the end of any applicable grace period for
such Payment Default or the occurrence of such acceleration, as the case may be,
any Default or Event of Default (but not any acceleration of the Notes) caused
by such Payment Default or acceleration shall be automatically rescinded, so
long as such rescission does not conflict with any judgment, decree or
applicable law;

 

(7)         failure by the Company or any of its Restricted Subsidiaries to pay
final judgments entered by a court or courts of competent jurisdiction
aggregating in excess of $25.0 million (to the extent not covered by insurance
by a reputable and creditworthy insurer as to which the insurer has not
disclaimed coverage), which judgments are not paid, discharged or stayed, for a
period of 60 days;

 

(8)         the occurrence of any of the following:

 

(a)          except as permitted by this Indenture, any Security Document ceases
for any reason to be fully enforceable; provided, that it will not be an Event
of Default under this clause (8)(a) if the sole result of the failure of one or
more Security Documents to be fully enforceable is that any Note Lien purported
to be granted under such Security Documents on Collateral, individually or in
the aggregate, having a Fair Market Value of not more than $10.0 million ceases
to be an enforceable and perfected first-priority Lien, subject only to the
Priority Liens and Permitted Prior Liens;

 

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(b)          any Note Lien purported to be granted under any Security Document
on Collateral, individually or in the aggregate, having a Fair Market Value in
excess of $25.0 million ceases to be an enforceable and perfected first-priority
Lien, subject only to the Priority Liens and Permitted Prior Liens; or

 

(c)          the Company or any other Pledgor, or any Person acting on behalf of
any of them, denies or disaffirms, in writing, any obligation of the Company or
any other Pledgor set forth in or arising under any Security Document;

 

(9)         except as permitted by this Indenture, any Note Guarantee is held in
any judicial proceeding to be unenforceable or invalid or ceases for any reason
to be in full force and effect, or any Guarantor, or any Person acting on behalf
of any Guarantor, denies or disaffirms its obligations under its Note Guarantee;

 

(10)        the Company or any of its Restricted Subsidiaries that is a
Significant Subsidiary or any group of Restricted Subsidiaries of the Company
that, taken together, would constitute a Significant Subsidiary pursuant to or
within the meaning of Bankruptcy Law:

 

(A)         commences a voluntary case,

 

(B)         consents to the entry of an order for relief against it in an
involuntary case,

 

(C)         consents to the appointment of a custodian of it or for all or
substantially all of its property,

 

(D)         makes a general assignment for the benefit of its creditors, or

 

(E)         generally is not paying its debts as they become due; and

 

(11)        a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:

 

(A)         is for relief against the Company or any of its Restricted
Subsidiaries that is a Significant Subsidiary or any group of Restricted
Subsidiaries of the Company that, taken together, would constitute a Significant
Subsidiary in an involuntary case;

 

(B)         appoints a custodian of the Company or any of its Restricted
Subsidiaries that is a Significant Subsidiary or any group of Restricted
Subsidiaries of the Company that, taken together, would constitute a Significant
Subsidiary or for all or substantially all of the property of the Company or any
of its Restricted Subsidiaries that is a Significant Subsidiary or any group of
Restricted Subsidiaries of the Company that, taken together, would constitute a
Significant Subsidiary; or

 

(C)         orders the liquidation of the Company or any of its Restricted
Subsidiaries that is a Significant Subsidiary or any group of Restricted
Subsidiaries of the Company that, taken together, would constitute a Significant
Subsidiary;

 

and the order or decree remains unstayed and in effect for 60 consecutive days.

 

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Section 6.02         Acceleration.

 

In the case of an Event of Default specified in clause (10) or (11) of Section
6.01 hereof, with respect to the Company, any Restricted Subsidiary of the
Company that is a Significant Subsidiary or any group of Restricted Subsidiaries
of the Company that, taken together, would constitute a Significant Subsidiary,
all outstanding Notes will become due and payable immediately without further
action or notice. If any other Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in aggregate principal amount of the then
outstanding Notes may declare all the Notes to be due and payable immediately.

 

Upon any such declaration, the Notes shall become due and payable immediately.

 

The Holders of a majority in aggregate principal amount of the then outstanding
Notes by written notice to the Trustee may, on behalf of all of the Holders of
all the Notes, rescind an acceleration and its consequences hereunder, if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default (except nonpayment of principal of, premium, if any, on, or
interest on the Notes that has become due solely because of the acceleration)
have been cured or waived.

 

Section 6.03         Other Remedies.

 

If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal of, premium, if any, on, or
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.

 

The Trustee may maintain a proceeding even if it does not possess any of the
Notes or does not produce any of them in the proceeding. A delay or omission by
the Trustee or any Holder of a Note in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. All remedies are cumulative
to the extent permitted by law.

 

Section 6.04         Waiver of Past Defaults.

 

The Holders of a majority in aggregate principal amount of the then outstanding
Notes by written notice to the Trustee may, on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
hereunder, except a continuing Default or Event of Default in the payment of
principal of, premium, if any, on, or interest on the Notes (including in
connection with an offer to purchase); provided, however, that the Holders of a
majority in aggregate principal amount of the then outstanding Notes may rescind
an acceleration and its consequences, including any related payment default that
resulted from such acceleration. Upon any such waiver, such Default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been cured for every purpose of this Indenture; but no such waiver shall extend
to any subsequent or other Default or impair any right consequent thereon.

 

Section 6.05         Control by Majority.

 

Holders of a majority in aggregate principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or the Collateral Agent or
exercising any trust or power conferred on it, as applicable. However, the
Trustee may refuse to follow any direction that conflicts with law or this
Indenture that the Trustee determines may be unduly prejudicial to the rights of
other Holders of Notes or that may involve the Trustee in personal liability.

 

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Section 6.06         Limitation on Suits.

 

Except to enforce the right to receive payment of principal, premium, if any, or
interest when due, no Holder of a Note may pursue any remedy with respect to
this Indenture or the Notes unless:

 

(1)         such Holder has previously given the Trustee written notice that an
Event of Default is continuing;

 

(2)         Holders of at least 25% in aggregate principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;

 

(3)         such Holder or Holders offer and, if requested, provide to the
Trustee security or indemnity reasonably satisfactory to the Trustee against any
loss, liability or expense;

 

(4)         the Trustee does not comply with such request within 60 days after
receipt of the request and the offer of security or indemnity; and

 

(5)         during such 60-day period, Holders of a majority in aggregate
principal amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with such request.

 

A Holder of a Note may not use this Indenture to prejudice the rights of another
Holder of a Note or to obtain a preference or priority over another Holder of a
Note.

 

Section 6.07         Rights of Holders of Notes to Receive Payment.

 

Notwithstanding any other provision of this Indenture, the right of any Holder
of a Note to receive payment of principal of, premium, if any, on, or interest
on the Note, on or after the respective due dates expressed in the Note
(including in connection with an offer to purchase), or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder; provided that a Holder
shall not have the right to institute any such suit for the enforcement of
payment if and to the extent that the institution or prosecution thereof or the
entry of judgment therein would, under applicable law, result in the surrender,
impairment, waiver or loss of the Lien of this Indenture upon any property
subject to such Lien.

 

Section 6.08         Collection Suit by Trustee and Collateral Agent.

 

If an Event of Default specified in Section 6.01(1) or (2) hereof occurs and is
continuing, the Trustee or the Collateral Agent is authorized to recover
judgment (a) in its own name and (b)(i) in the case of the Trustee, as trustee
of an express trust or (ii) in the case of the Collateral Agent, as collateral
agent on behalf of the Holders, in each case against the Company for the whole
amount of principal of, premium, if any, on, and interest remaining unpaid on
the Notes and, to the extent lawful, interest on overdue principal and interest
and such further amount as shall be sufficient to cover the costs and expenses
of collection, including the reasonable compensation, expenses, disbursements
and advances of the Trustee, the Collateral Agent and their respective agents
and counsel.

 

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Section 6.09         Trustee May File Proofs of Claim.

 

The Trustee or the Collateral Agent is authorized 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 or the Collateral Agent (including any claim for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
the Collateral Agent and their respective agents and counsel) and the Holders of
the Notes allowed in any judicial proceedings relative to the Company (or any
other obligor upon the Notes), its creditors or its property and shall be
entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee or the Collateral Agent, and in the event that the Trustee or the
Collateral Agent shall consent to the making of such payments directly to the
Holders, to pay to the Trustee or the Collateral Agent, as applicable, any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, the Collateral Agent and their respective agents and
counsel, and any other amounts due the Trustee or the Collateral Agent under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, the Collateral Agent and
their respective agents and counsel, and any other amounts due the Trustee or
the Collateral Agent under Section 7.07 hereof out of the estate in any such
proceeding, 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,
money, securities and other properties that the Holders may be entitled to
receive in such proceeding whether in liquidation or under any plan of
reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee or the Collateral Agent to authorize or consent
to or accept or adopt on behalf of any Holder any plan of reorganization,
arrangement, adjustment or composition affecting the Notes or the rights of any
Holder, or to authorize the Trustee or the Collateral Agent to vote in respect
of the claim of any Holder in any such proceeding.

 

Section 6.10         Priorities.

 

If the Trustee collects any money or property pursuant to this Article 6, it
shall pay out the money or property in the following order:

 

First:       to the Trustee, the Collateral Agent and their respective agents
and attorneys for amounts due under Section 7.07 hereof, including payment of
all compensation, expenses and liabilities incurred, and all advances made, by
the Trustee and the Collateral Agent and the costs and expenses of collection;

 

Second:    to Holders of Notes for amounts due and unpaid on the Notes for
principal, premium, if any, and interest ratably, without preference or priority
of any kind, according to the amounts due and payable on the Notes for
principal, premium, if any, and interest respectively; and

 

Third:       to the Company or to such party as a court of competent
jurisdiction shall direct.

 

The Trustee may fix a record date and payment date for any payment to Holders of
Notes pursuant to this Section 6.10.

 

Section 6.11         Undertaking for Costs.

 

In any suit for the enforcement of any right or remedy under this Indenture or
in any suit against the Trustee or the Collateral Agent, as the case may be, for
any action taken or omitted by it as Trustee or Collateral Agent, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys’ fees, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section 6.11 does not apply
to a suit by the Trustee or the Collateral Agent, as the case may be, a suit by
a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more
than 10% in aggregate principal amount of the then outstanding Notes.

 

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ARTICLE 7
TRUSTEE

 

Section 7.01         Duties of Trustee.

 

(a)          If an Event of Default has occurred and is continuing, the Trustee
will exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent person would
exercise or use under the circumstances in the conduct of such person’s own
affairs.

 

(b)          Except during the continuance of an Event of Default:

 

(1)         the duties of the Trustee will be determined solely by the express
provisions of this Indenture and the Trustee need perform only those duties that
are specifically set forth in this Indenture and no others, and no implied
covenants or obligations shall be read into this Indenture against the Trustee;
and

 

(2)         in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture. However, the
Trustee will examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture.

 

(c)          The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:

 

(1)         this paragraph does not limit the effect of paragraph (b) of this
Section 7.01;

 

(2)         the Trustee will not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and

 

(3)         the Trustee will not be liable with respect to any action it takes
or omits to take in good faith in accordance with a direction received by it
pursuant to Section 6.05 hereof.

 

(d)          Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section 7.01.

 

(e)          No provision of this Indenture will require the Trustee to expend
or risk its own funds or incur any liability. The Trustee will be under no
obligation to exercise any of its rights or powers under this Indenture at the
request of any Holders, unless such Holder has furnished to the Trustee security
and indemnity satisfactory to it against any loss, liability or expense.

 

(f)          The Trustee will not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.

 

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Section 7.02         Rights of Trustee.

 

(a)          The Trustee may conclusively rely upon any document believed by it
to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.

 

(b)          Before the Trustee acts or refrains from acting, it may require an
Officers’ Certificate or an Opinion of Counsel or both. The Trustee will not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers’ Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel will be
full and complete authorization and protection from liability in respect of any
action taken, suffered or omitted by it hereunder in good faith and in reliance
thereon.

 

(c)          The Trustee may act through its attorneys and agents and will not
be responsible for the misconduct or negligence of any agent appointed with due
care.

 

(d)          The Trustee will not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.

 

(e)          Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company will be sufficient if
signed by an Officer of the Company.

 

(f)          The Trustee will be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders have furnished to the Trustee reasonable
indemnity or security satisfactory to the Trustee against the losses,
liabilities and expenses that might be incurred by it in compliance with such
request or direction.

 

Section 7.03         Individual Rights of Trustee.

 

The Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Company or any Affiliate of the
Company with the same rights it would have if it were not Trustee. However, in
the event that the Trustee acquires any conflicting interest (as defined in the
TIA) after a Default has occurred and is continuing, it must eliminate such
conflict within 90 days, apply to the SEC for permission to continue as trustee
(if this Indenture has been qualified under the TIA) or resign. Any Agent may do
the same with like rights and duties. The Trustee is also subject to Sections
7.10 and 7.11 hereof.

 

Section 7.04         Trustee’s Disclaimer.

 

The Trustee will not be responsible for and makes no representation as to the
validity or adequacy of this Indenture or the Notes, it shall not be accountable
for the Company’s use of the proceeds from the Notes or any money paid to the
Company or upon the Company’s direction under any provision of this Indenture,
it will not be responsible for the use or application of any money received by
any Paying Agent other than the Trustee, and it will not be responsible for any
statement or recital herein or any statement in the Notes or any other document
in connection with the sale of the Notes or pursuant to this Indenture other
than its certificate of authentication.

 

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Section 7.05         Notice of Defaults.

 

If a Default or Event of Default occurs and is continuing and if it is actually
known to the Trustee, the Trustee will mail to Holders of Notes, with a copy to
the Collateral Agent, a notice of the Default or Event of Default within 90 days
after it occurs. Except in the case of a Default or Event of Default in payment
of principal of, premium, if any, on, or interest on, any Note, the Trustee may
withhold the notice if and so long as the Trustee in good faith determines that
withholding the notice is in the interests of the Holders of the Notes.

 

Section 7.06         Reports by Trustee to Holders of the Notes.

 

(a)          Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee will mail to the Holders of the Notes a brief report
dated as of such reporting date that complies with TIA §313(a) (but if no event
described in TIA §313(a) has occurred within the twelve months preceding the
reporting date, no report need be transmitted). The Trustee also will comply
with TIA §313(b)(2). The Trustee will also transmit by mail all reports as
required by TIA §313(c).

 

(b)          A copy of each report at the time of its mailing to the Holders of
Notes will be mailed by the Trustee to the Company and filed by the Trustee with
the SEC and each stock exchange on which the Notes are listed in accordance with
TIA §313(d). The Company will promptly notify the Trustee when the Notes are
listed on any stock exchange.

 

Section 7.07         Compensation and Indemnity.

 

(a)          The Company will pay to the Trustee and the Collateral Agent (each,
an “Indemnified Party”) from time to time reasonable compensation for its
acceptance of this Indenture, the Security Documents and services hereunder and
thereunder. The Trustee’s compensation will not be limited by any law on
compensation of a trustee of an express trust. The Company will reimburse the
Indemnified Party promptly upon request for all reasonable disbursements,
advances and expenses incurred or made by it in addition to the compensation for
its services. Such expenses will include the reasonable compensation,
disbursements and expenses of the Indemnified Party’s agents and counsel.

 

(b)          The Company and the Guarantors will indemnify and hold harmless the
Indemnified Party against any and all losses, liabilities or expenses incurred
by it arising out of or in connection with the acceptance or administration of
its duties under this Indenture, including the costs and expenses of enforcing
this Indenture or the Security Documents, against the Company and the Guarantors
(including this Section 7.07) and defending itself against any claim (whether
asserted by the Company, the Guarantors, any Holder or any other Person) or
liability in connection with the exercise or performance of any of its powers or
duties hereunder, except to the extent any such loss, liability or expense may
be attributable to its negligence, willful misconduct or bad faith. The
Indemnified Party will notify the Company promptly of any claim for which it may
seek indemnity. Failure by the Indemnified Party to so notify the Company will
not relieve the Company or any of the Guarantors of their obligations hereunder,
except to the extent such failure is prejudicial to the Company. The Company or
such Guarantor will defend the claim and the Indemnified Party will cooperate in
the defense. The Indemnified Party may have separate counsel and the Company
will pay the reasonable fees and expenses of such counsel. Neither the Company
nor any Guarantor need pay for any settlement made without its consent, which
consent will not be unreasonably withheld.

 

(c)          The obligations of the Company and the Guarantors under this
Section 7.07 will survive the satisfaction and discharge of this Indenture and
the termination of the Security Documents or earlier resignation or removal of
the Trustee.

 

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(d)          To secure the Company’s and the Guarantors’ payment obligations in
this Section 7.07, each Indemnified Party will have a Lien prior to the Notes on
all money or property held or collected by the Trustee, in its capacity as
trustee, or the Collateral Agent, in its capacity as collateral agent, except,
in the case of the Trustee, that held in trust to pay principal of, premium, if
any, on, or interest on, particular Notes. Such Lien will survive the
satisfaction and discharge of this Indenture or earlier resignation or removal
of the Trustee.

 

(e)          When an Indemnified Party incurs expenses or renders services after
an Event of Default specified in clause (10) or (11) of Section 6.01 hereof
occurs, the expenses and the compensation for the services (including the fees
and expenses of its agents and counsel) are intended to constitute expenses of
administration under any Bankruptcy Law.

 

(f)          The Trustee will comply with the provisions of TIA §313(b)(2) to
the extent applicable.

 

Section 7.08         Replacement of Trustee.

 

(a)          A resignation or removal of the Trustee and appointment of a
successor Trustee will become effective only upon the successor Trustee’s
acceptance of appointment as provided in this Section 7.08.

 

(b)          The Trustee may resign in writing at any time and be discharged
from the trust hereby created by so notifying the Company. The Holders of a
majority in aggregate principal amount of the then outstanding Notes may remove
the Trustee by so notifying the Trustee and the Company in writing. The Company
may remove the Trustee if:

 

(1)         the Trustee fails to comply with Section 7.10 hereof;

 

(2)         the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;

 

(3)         a custodian or public officer takes charge of the Trustee or its
property; or

 

(4)         the Trustee becomes incapable of acting.

 

(c)          If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company will promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in aggregate principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.

 

(d)          If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee, the Company,
or the Holders of at least 10% in aggregate principal amount of the then
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.

 

(e)          If the Trustee, after written request by any Holder who has been a
Holder for at least six months, fails to comply with Section 7.10 hereof, such
Holder may petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.

 

(f)          A successor Trustee will deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee will become effective, and the
successor Trustee will have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee will mail a notice of its succession
to Holders. The retiring Trustee will promptly transfer all property held by it
as Trustee to the successor Trustee; provided all sums owing to the Trustee
hereunder have been paid and subject to the Lien provided for in Section 7.07
hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company’s obligations under Section 7.07 hereof will continue for the
benefit of the retiring Trustee.

 

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Section 7.09         Successor Trustee by Merger, etc.

 

If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act will be the successor Trustee.

 

Section 7.10         Eligibility; Disqualification.

 

There will at all times be a Trustee hereunder that is a corporation organized
and doing business under the laws of the United States of America or of any
state thereof that is authorized under such laws to exercise corporate trustee
power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100.0
million as set forth in its most recent published annual report of condition.

 

This Indenture will always have a Trustee who satisfies the requirements of TIA
§310(a)(1), (2) and (5). The Trustee is subject to TIA §310(b).

 

Section 7.11         Preferential Collection of Claims Against Company.

 

The Trustee is subject to TIA §311(a), excluding any creditor relationship
listed in TIA §311(b). A Trustee who has resigned or been removed shall be
subject to TIA §311(a) to the extent indicated therein.

 

Section 7.12         Collateral Agent.

 

(a)          References to the Trustee in Sections 7.01(b) and (f) (“Duties of
Trustee”), 7.02 (“Rights of Trustee”), 7.03 (“Individual Rights of Trustee”),
7.04 (“Trustee’s Disclaimer”), 7.07 (“Compensation and Indemnity”), 7.08
(“Replacement of Trustee”) and 7.09 (“Successor Trustee by Merger, etc.”) shall
be read to apply to the Collateral Agent and the Security Documents, mutatis
mutandis, in addition to this Indenture. The privileges, rights, indemnities,
immunities and exculpatory provisions contained in this Indenture, including the
right to be indemnified, shall apply to the Collateral Agent, whether it is
acting under this Indenture or the Security Documents, and shall be enforceable
by the Collateral Agent.

 

ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE

 

Section 8.01         Option to Effect Legal Defeasance or Covenant Defeasance.

 

The Company may at any time, at the option of its Board of Directors evidenced
by a resolution set forth in an Officers’ Certificate, elect to have either
Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance
with the conditions set forth below in this Article 8.

 

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Section 8.02         Legal Defeasance and Discharge.

 

Upon the Company’s exercise under Section 8.01 hereof of the option applicable
to this Section 8.02, the Company and each of the Guarantors will, subject to
the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed
to have been discharged from their obligations with respect to all outstanding
Notes (including the Note Guarantees) on the date the conditions set forth below
are satisfied (hereinafter, “Legal Defeasance”). For this purpose, Legal
Defeasance means that the Company and the Guarantors will be deemed to have paid
and discharged the entire Indebtedness represented by the outstanding Notes
(including the Note Guarantees), which will thereafter be deemed to be
“outstanding” only for the purposes of Section 8.05 hereof and the other
Sections of this Indenture referred to in clauses (1) and (2) below, and to have
satisfied all their other obligations under such Notes, the Note Guarantees and
this Indenture (and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging the same), except for the
following provisions which will survive until otherwise terminated or discharged
hereunder:

 

(1)         the rights of Holders of outstanding Notes to receive payments in
respect of the principal of, premium, if any, on, or interest on, such Notes
when such payments are due from the trust referred to in Section 8.04 hereof;

 

(2)         the Company’s obligations with respect to such Notes under Article 2
and Section 4.02 hereof;

 

(3)         the rights, powers, trusts, duties and immunities of the Trustee
hereunder and the Company’s and the Guarantors’ obligations in connection
therewith; and

 

(4)         this Section 8.02.

 

Subject to compliance with this Article 8, the Company may exercise its option
under this Section 8.02 notwithstanding the prior exercise of its option under
Section 8.03 hereof.

 

Section 8.03         Covenant Defeasance.

 

Upon the Company’s exercise under Section 8.01 hereof of the option applicable
to this Section 8.03, the Company and each of the Guarantors will, subject to
the satisfaction of the conditions set forth in Section 8.04 hereof, be released
from each of their obligations under the covenants and restrictions contained in
Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18, 4.19
and 4.20 hereof and clause (4) of Section 5.01 hereof with respect to the
outstanding Notes on and after the date the conditions set forth in Section 8.04
hereof are satisfied (hereinafter, “Covenant Defeasance”), and the Notes will
thereafter be deemed not “outstanding” for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but will continue to be deemed
“outstanding” for all other purposes hereunder (it being understood that such
Notes will not be deemed outstanding for accounting purposes). For this purpose,
Covenant Defeasance means that, with respect to the outstanding Notes and Note
Guarantees, the Company and the Guarantors may omit to comply with and will have
no liability in respect of any term, condition or limitation set forth in any
such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply will not constitute a Default or an Event of Default under
Section 6.01 hereof, but, except as specified above, the remainder of this
Indenture and such Notes and Note Guarantees will be unaffected thereby. In
addition, upon the Company’s exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, subject to the satisfaction of the conditions
set forth in Section 8.04 hereof, Sections 6.01(3), (4), (5), (6), (7), (8) and
(9) hereof will not constitute Events of Default.

 

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Section 8.04         Conditions to Legal or Covenant Defeasance.

 

In order to exercise either Legal Defeasance or Covenant Defeasance under either
Section 8.02 or 8.03 hereof:

 

(1)         the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders of Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in amounts as will be
sufficient, in the opinion of an accounting, appraisal or investment banking
firm of national standing, to pay the principal of, premium, if any, and
interest on the outstanding Notes on the stated date for payment thereof or on
the applicable redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to such stated date for payment or to a
particular redemption date (provided that if such redemption is made as provided
in the second paragraph of Section 3.07(a) hereof, (x) the amount of cash in
U.S. dollars, non-callable Government Securities, or a combination thereof, that
must be irrevocably deposited will be determined using an assumed Applicable
Premium calculated as of the date of such deposit and (y) the depositor must
irrevocably deposit or cause to be deposited additional money in trust two days
immediately prior to the redemption date as necessary to pay the Applicable
Premium as determined on such date);

 

(2)         in the case of an election under Section 8.02 hereof, the Company
must deliver to the Trustee an Opinion of Counsel reasonably acceptable to the
Trustee confirming that:

 

(A)         the Company has received from, or there has been published by, the
Internal Revenue Service a ruling; or

 

(B)         since the date of this Indenture, there has been a change in the
applicable federal income tax law,

 

in either case to the effect that, and based thereon such Opinion of Counsel
shall confirm that, the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;

 

(3)         in the case of an election under Section 8.03 hereof, the Company
must deliver to the Trustee an Opinion of Counsel reasonably acceptable to the
Trustee confirming that the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred;

 

(4)         no Default or Event of Default shall have occurred and is continuing
on the date of such deposit (other than a Default or Event of Default resulting
from the borrowing of funds to be applied to such deposit (and any similar
concurrent deposit relating to other Indebtedness), and the granting of Liens to
secure such borrowings);

 

(5)         such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than this Indenture and the agreements governing any other
Indebtedness being defeased, discharged or replaced) to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;

 

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(6)         the Company must deliver to the Trustee an Officers’ Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders of Notes over the other creditors of the Company with the
intent of defeating, hindering, delaying or defrauding any creditors of the
Company or others; and

 

(7)         the Company must deliver to the Trustee an Officers’ Certificate and
an Opinion of Counsel, each stating that all conditions precedent relating to
the Legal Defeasance or the Covenant Defeasance have been complied with.

 

The Collateral will be released from the Lien securing the Notes, as provided in
Section 10.04 hereof, upon a Legal Defeasance or Covenant Defeasance in
accordance with the provisions described above.

 

Section 8.05         Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions.

 

Subject to Section 8.06 hereof, all money and non-callable Government Securities
(including the proceeds thereof) deposited with the Trustee (or other qualifying
trustee, collectively for purposes of this Section 8.05, the “Trustee”) pursuant
to Section 8.04 hereof in respect of the outstanding Notes will be held in trust
and applied by the Trustee, in accordance with the provisions of such Notes and
this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as Paying Agent) as the Trustee may determine, to
the Holders of such Notes of all sums due and to become due thereon in respect
of principal, premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law.

 

The Company will pay and indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.

 

Notwithstanding anything in this Article 8 to the contrary, the Trustee will
deliver or pay to the Company from time to time upon the request of the Company
any money or non-callable Government Securities held by it as provided in
Section 8.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(1) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.

 

Section 8.06         Repayment to Company.

 

Any money deposited with the Trustee or any Paying Agent, or then held by the
Company, in trust for the payment of the principal of, premium, if any, on, or
interest on any Note and remaining unclaimed for two years after such principal,
premium, if any, or interest has become due and payable shall be paid to the
Company on its request or (if then held by the Company) will be discharged from
such trust; and the Holder of such Note will thereafter be permitted to look
only to the Company for payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, will thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in the New York
Times and The Wall Street Journal (national edition), notice that such money
remains unclaimed and that, after a date specified therein, which will not be
less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining will be repaid to the Company.

 

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Section 8.07         Reinstatement.

 

If the Trustee or Paying Agent is unable to apply any U.S. dollars or
non-callable Government Securities in accordance with Section 8.02 or 8.03
hereof, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company’s and the Guarantors’ obligations under this
Indenture and the Notes and the Note Guarantees will be revived and reinstated
as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until
such time as the Trustee or Paying Agent is permitted to apply all such money in
accordance with Section 8.02 or 8.03 hereof, as the case may be; provided,
however, that, if the Company makes any payment of principal of, premium, if
any, on, or interest on any Note following the reinstatement of its obligations,
the Company will be subrogated to the rights of the Holders of such Notes to
receive such payment from the money held by the Trustee or Paying Agent.

 

ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER

 

Section 9.01         Without Consent of Holders of Notes.

 

Notwithstanding Section 9.02 of this Indenture, without the consent of any
Holder of Notes, the Company, the Guarantors and the Trustee may amend or
supplement this Indenture, the Notes or the Note Guarantees:

 

(1)         to cure any ambiguity, defect or inconsistency;

 

(2)         to provide for uncertificated Notes in addition to or in place of
certificated Notes;

 

(3)         to provide for the assumption of the Company’s or a Guarantor’s
obligations to the Holders of the Notes and Note Guarantees by a successor to
the Company or such Guarantor pursuant to Article 5 or Article 11 hereof;

 

(4)         to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any Holder; including, without limitation, to comply with
requirements of the SEC or DTC in order to maintain the transferability of the
Notes pursuant to Rule 144A or Regulation S;

 

(5)         to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;

 

(6)         to conform the text of this Indenture, the Notes or the Note
Guarantees to any provision of the “Description of Notes” section of the
Offering Memorandum;

 

(7)         to provide for the issuance of Additional Notes in accordance with
the limitations set forth in this Indenture as of the date hereof; or

 

(8)         to secure the Notes or the Note Guarantees pursuant to the
requirements of Section 4.12 hereof;

 

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(9)         to make, complete or confirm any grant of Collateral permitted or
required by this Indenture or any of the Security Documents or any release of
Collateral that becomes effective as set forth herein or therein;

 

(10)        to add any additional Guarantor or to evidence the release of any
Guarantor from its Note Guarantee, in each case as provided in this Indenture;
or

 

(11)        to evidence or provide for the acceptance of appointment under this
Indenture of a successor Trustee.

 

After an amendment, supplement or waiver under this Indenture requiring the
approval of the Holders becomes effective, the Company will mail to the Holders
a notice briefly describing the amendment, supplement or waiver. However, the
failure to give such notice, or any defect in the notice, will not impair or
affect the validity of the amendment, supplement or waiver.

 

Upon the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee will join with the Company and the Guarantors in the
execution of any amended or supplemental indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee will not be
obligated to enter into such amended or supplemental indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.

 

Section 9.02         With Consent of Holders of Notes.

 

Except as provided below in this Section 9.02, the Company, the Trustee and the
Collateral Agent may amend or supplement this Indenture (including, without
limitation, Sections 3.09, 4.10 and 4.15 hereof) and the Notes and the Note
Guarantees with the consent of the Holders of at least a majority in aggregate
principal amount of the then outstanding Notes (including, without limitation,
Additional Notes, if any) voting as a single class (including, without
limitation, consents obtained in connection with a tender offer or exchange
offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07
hereof, any existing Default or Event of Default (other than a Default or Event
of Default in the payment of the principal of, premium, if any, on, or interest
on the Notes, except a payment default resulting from an acceleration that has
been rescinded) or compliance with any provision of this Indenture or the Notes
or the Note Guarantees may be waived with the consent of the Holders of a
majority in aggregate principal amount of the then outstanding Notes (including,
without limitation, Additional Notes, if any) voting as a single class
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Notes).

 

Upon the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee will
join with the Company, the Guarantors and the Collateral Agent in the execution
of such amended or supplemental indenture unless such amended or supplemental
indenture directly affects the Trustee’s own rights, duties or immunities under
this Indenture or otherwise, in which case the Trustee may in its discretion,
but will not be obligated to, enter into such amended or supplemental Indenture.

 

It is not necessary for the consent of the Holders of Notes under this Section
9.02 to approve the particular form of any proposed amendment, supplement or
waiver, but it is sufficient if such consent approves the substance thereof.

 

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After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company will mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, will not, however, in
any way impair or affect the validity of any such amended or supplemental
indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes then outstanding voting as a
single class may waive compliance in a particular instance by the Company with
any provision of this Indenture, the Notes or the Note Guarantees. However,
without the consent of each Holder of Notes affected, an amendment, supplement
or waiver under this Section 9.02 may not (with respect to any Notes held by a
non-consenting Holder):

 

(1)         reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver;

 

(2)         reduce the principal of or change the fixed maturity of any Note or
alter or waive any of the provisions with respect to the redemption or
repurchase of the Notes (except as provided above with respect to Sections 3.09,
4.10 and 4.15 hereof);

 

(3)         reduce the rate of or change the time for payment of interest,
including default interest, on any Note;

 

(4)         waive a Default or Event of Default in the payment of principal of,
premium, if any, on, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of a majority in aggregate principal
amount of the then outstanding Notes and a waiver of the payment default that
resulted from such acceleration);

 

(5)         make any Note payable in money other than that stated in the Notes;

 

(6)         make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of, premium, if any, on, or interest on the Notes (other than as
permitted by clause (7) of this Section 9.02);

 

(7)         waive a redemption or repurchase payment with respect to any Note
(other than a payment required by Sections 3.09, 4.10 or 4.15 hereof);

 

(8)         release any Guarantor from any of its obligations under its Note
Guarantee or this Indenture, except in accordance with the terms of this
Indenture; or

 

(9)         make any change in the preceding amendment, supplement and waiver
provisions.

 

In addition, any amendment to, or waiver of, the provisions of this Indenture or
any Security Document that has the effect of releasing all or substantially all
of the Collateral from the Liens securing the Notes will require the consent of
the Holders of at least 662/3% in aggregate principal amount of the Notes then
outstanding.

 

Section 9.03         Compliance with Trust Indenture Act.

 

Every amendment or supplement to this Indenture or the Notes will be set forth
in an amended or supplemental indenture that complies with the TIA as then in
effect.

 

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Section 9.04         Revocation and Effect of Consents.

 

Until an amendment, supplement or waiver becomes effective, a consent to it by a
Holder of a Note is a continuing consent by the Holder of a Note and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder’s Note, even if notation of the consent is not made on any
Note. However, any such Holder of a Note or subsequent Holder of a Note may
revoke the consent as to its Note if the Trustee receives written notice of
revocation before the date the amendment, supplement or waiver becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.

 

Section 9.05         Notation on or Exchange of Notes.

 

The Trustee may place an appropriate notation about an amendment, supplement or
waiver on any Note thereafter authenticated. The Company in exchange for all
Notes may issue and the Trustee shall, upon receipt of an Authentication Order,
authenticate new Notes that reflect the amendment, supplement or waiver.

 

Failure to make the appropriate notation or issue a new Note will not affect the
validity and effect of such amendment, supplement or waiver.

 

Section 9.06         Trustee to Sign Amendments, etc.

 

The Trustee will sign any amended or supplemental indenture authorized pursuant
to this Article 9 if the amendment or supplement does not adversely affect the
rights, duties, liabilities or immunities of the Trustee. The Company may not
sign an amended or supplemental indenture until the Board of Directors of the
Company approves it. In executing any amended or supplemental indenture, the
Trustee will be entitled to receive and (subject to Section 7.01 hereof) will be
fully protected in relying upon, in addition to the documents required by
Section 12.04 hereof, an Officers’ Certificate and an Opinion of Counsel stating
that the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.

 

ARTICLE 10
COLLATERAL AND SECURITY

 

Section 10.01         Security Documents.

 

(a)          The due and punctual payment of the principal of, premium, if any,
on, and interest on the Notes when and as the same shall be due and payable,
whether on an interest payment date, at maturity, by acceleration, repurchase,
redemption or otherwise, and interest on the overdue principal of, premium, if
any, on, and interest (to the extent permitted by law) on the Notes and
performance of all other obligations of the Company to the Holders of Notes or
the Trustee under this Indenture and the Notes (including, without limitation,
the Note Guarantees), according to the terms hereunder or thereunder, are
secured as provided in the Security Documents.

 

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(b)          Each Holder of Notes, by its acceptance thereof, consents and
agrees to the terms of each Security Document (including, without limitation,
the provisions providing for foreclosure and release of Collateral) as the same
may be in effect or may be amended from time to time in accordance with its
terms and authorizes and directs the Collateral Agent to enter into the Security
Documents (including, if applicable, the Intercreditor Agreement or any
replacement of such agreement, in either case substantially in the form of
Exhibit G hereto) and to perform its obligations and exercise its rights
thereunder in accordance therewith. The Company will deliver to the Trustee
copies of all documents delivered to the Collateral Agent pursuant to the
Security Documents, and will do or cause to be done all such acts and things as
may be necessary or proper, or as may be required by the provisions of the
Security Documents, to assure and confirm to the Trustee and the Collateral
Agent the security interest in the Collateral contemplated hereby, by the
Security Documents or any part thereof, as from time to time constituted, so as
to render the same available for the security and benefit of this Indenture and
of the Notes secured hereby, according to the intent and purposes herein
expressed. Subject to the Intercreditor Agreement, the Company will take, and
will cause its Subsidiaries to take, upon request of the Collateral Agent, any
and all actions reasonably required to cause the Security Documents to create
and maintain, as security for the Obligations of the Company hereunder, a valid
and enforceable perfected first priority Lien in and on all the Collateral, in
favor of the Collateral Agent for the benefit of the Holders of Notes, superior
to and prior to the rights of all third Persons, other than holders of Priority
Lien Debt and Permitted Priority Liens, and subject to no other Liens than
Permitted Liens.

 

Section 10.02         Recording and Opinions.

 

(a)          The Company will furnish to the Collateral Agent and to the Trustee
simultaneously with the execution and delivery of this Indenture a reliance
letter with respect to the Opinion of Counsel of the Company delivered to the
Initial Purchasers on the date of this Indenture regarding the Lien intended to
be created by the Security Documents.

 

(b)          The Company will furnish to the Collateral Agent and the Trustee on
May 1 in each year beginning with May 1, 2015, an Opinion of Counsel, dated as
of such date, either:

 

(1)         (A) stating that, in the opinion of such counsel, action has been
taken with respect to the recording, registering, filing, re-recording,
re-registering and re-filing of all supplemental indentures, financing
statements, continuation statements or other instruments of further assurance as
is necessary to maintain the Lien of the Security Documents and reciting with
respect to the security interests in the Collateral the details of such action
or referring to prior Opinions of Counsel in which such details are given, and
(B) stating that, in the opinion of such counsel, based on relevant laws as in
effect on the date of such Opinion of Counsel, all financing statements and
continuation statements have been executed and filed that are necessary as of
such date and during the succeeding 12 months fully to preserve and protect, to
the extent such protection and preservation are possible by filing, the rights
of the Holders of Notes and the Collateral Agent and the Trustee hereunder and
under the Security Documents with respect to the security interests in the
Collateral;

 

(2)         stating that, in the opinion of such counsel, no such action is
necessary to maintain such Lien and assignment.

 

(c)          The Company will otherwise comply with the provisions of TIA §314.

 

Section 10.03        Release of Collateral.

 

(a)          Collateral may be released only in accordance with the terms of
this Indenture and the Security Documents, as applicable.

 

(b)          The release of any Collateral in accordance with the terms of this
Indenture and the Security Documents, shall not be deemed to impair the security
under this Indenture and the Liens in favor of the Collateral Agent on the
remaining Collateral in contravention of the provisions hereof if and to the
extent the Collateral is released pursuant to the terms of the applicable
Security Documents.

 

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Section 10.04         Release of Liens in Respect of Notes.

 

The Collateral Agent’s Note Liens upon the Collateral will no longer secure the
Notes outstanding under this Indenture or any other Obligations under this
Indenture, and the right of the Holders of the Notes and such Obligations to the
benefits and proceeds of the Collateral Agent’s Note Liens on the Collateral
will terminate and be discharged:

 

(1)         upon satisfaction and discharge as set forth in Article 12 hereof;

 

(2)         upon a Legal Defeasance or Covenant Defeasance of the Notes as set
forth in Article 8 hereof;

 

(3)         upon payment in full and discharge of all Notes under this Indenture
and all Obligations that are outstanding, due and payable under this Indenture
at the time the Notes are paid in full and discharged; or

 

(4)         in whole or in part, with the consent of the Holders of the
requisite percentage of Notes in accordance with the provisions of Article 9
hereof.

 

Section 10.05         Certificates of the Company.

 

The Company will furnish to the Trustee and the Collateral Agent, prior to each
proposed release of Collateral pursuant to the Security Documents:

 

(1)         all documents required by TIA §314(d); and

 

(2)         an Opinion of Counsel, which may be rendered by internal counsel to
the Company, to the effect that such accompanying documents constitute all
documents required by TIA §314(d).

 

The Trustee may, to the extent permitted by Sections 7.01 and 7.02 hereof,
accept as conclusive evidence of compliance with the foregoing provisions the
appropriate statements contained in such documents and such Opinion of Counsel.

 

Section 10.06         Certificates of the Trustee.

 

In the event that the Company wishes to release Collateral in accordance with
the Security Documents and has delivered the certificates and documents required
by the Security Documents and Sections 13.03 and 13.04 hereof, the Trustee will
determine whether it has received all documentation required by TIA §314(d) in
connection with such release and, based on such determination and the Opinion of
Counsel delivered pursuant to Section 13.04(2) hereof, will deliver a
certificate to the Collateral Agent setting forth such determination.

 

Section 10.07         Authorization of Actions to Be Taken Under the Security
Documents.

 

Subject to the provisions of Section 7.01 and 7.02 hereof and to the terms of
the Intercreditor Agreement, the Trustee may, in its sole discretion and without
the consent of the Holders of Notes, direct, on behalf of the Holders of Notes,
the Collateral Agent to, take all actions it deems necessary or appropriate in
order to:

 

(1)         enforce any of the terms of the Security Documents; and

 

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(2)         collect and receive any and all amounts payable in respect of the
Obligations of the Company hereunder and under the Security Documents.

 

The Collateral Agent will have power to institute and maintain such suits and
proceedings as it may deem expedient to prevent any impairment of the Collateral
by any acts that may be unlawful or in violation of the Security Documents or
this Indenture, and such suits and proceedings as the Collateral Agent may deem
expedient to preserve or protect its interests and the interests of the Holders
of Notes in the Collateral (including power to institute and maintain suits or
proceedings to restrain the enforcement of or compliance with any legislative or
other governmental enactment, rule or order that may be unconstitutional or
otherwise invalid if the enforcement of, or compliance with, such enactment,
rule or order would impair the security interest hereunder or be prejudicial to
the interests of the Holders of Notes, of the Collateral Agent or of the
Trustee).

 

Section 10.08         Authorization of Receipt of Funds by the Trustee Under the
Security Documents.

 

Subject to the terms of the Intercreditor Agreement, proceeds in respect of the
Collateral received by the Collateral Agent shall be passed on to the Trustee.
The Trustee is authorized to receive any funds for the benefit of the Holders of
Notes distributed under the Security Documents, and to make further
distributions of such funds to the Holders of Notes according to the provisions
of this Indenture.

 

Section 10.09         Intercreditor Agreement.

 

(a)          If the Company or any Guarantor enters into a Senior Credit
Facility after the date hereof, the Company shall instruct the Trustee in the
form of an Officers’ Certificate to cause the Collateral Agent to enter into an
Intercreditor Agreement substantially in the form attached hereto as Exhibit G.

 

(b)          This Indenture and the Security Documents are subject to the terms,
limitations and conditions set forth in the Intercreditor Agreement.
Notwithstanding anything herein to the contrary, the lien and security interest
granted to the Collateral Agent pursuant to this Indenture and the Security
Documents and the exercise of any right or remedy by the Collateral Agent
hereunder and thereunder are subject to the provisions of the Intercreditor
Agreement. In the event of any conflict between the terms of the Intercreditor
Agreement, and this Indenture with respect to lien priority or rights and
remedies in connection with any Collateral that also secures a Senior Credit
Facility, the terms of the Intercreditor Agreement shall govern.

 

ARTICLE 11
NOTE GUARANTEES

 

Section 11.01         Guarantee.

 

(a)          Subject to this Article 11, each of the Guarantors hereby, jointly
and severally, unconditionally guarantees to each Holder of a Note authenticated
and delivered by the Trustee and to the Trustee and the Collateral Agent and
their respective successors and assigns, irrespective of the validity and
enforceability of this Indenture, the Notes, the Security Documents or the
obligations of the Company hereunder or thereunder, that:

 

(1)          the principal of, premium, if any, on, and interest on the Notes
will be promptly paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue principal of, premium, if
any, on, and interest on the Notes, if lawful, and all other obligations of the
Company to the Holders, the Trustee and the Collateral Agent hereunder or
thereunder or under any Security Document will be promptly paid in full or
performed, all in accordance with the terms hereof and thereof; and

 

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(2)         in case of any extension of time of payment or renewal of any Notes
or any of such other obligations, that same will be promptly paid in full when
due or performed in accordance with the terms of the extension or renewal,
whether at stated maturity, by acceleration or otherwise.

 

Failing payment when due of any amount so guaranteed or any performance so
guaranteed for whatever reason, the Guarantors will be jointly and severally
obligated to pay the same immediately. Each Guarantor agrees that this is a
guarantee of payment and not a guarantee of collection.

 

(b)          The Guarantors hereby agree that their obligations hereunder are
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenant that this Note Guarantee will not be discharged except by complete
performance of the obligations contained in the Notes and this Indenture.

 

(c)          If any Holder, the Collateral Agent or the Trustee is required by
any court or otherwise to return to the Company, the Guarantors or any
custodian, trustee, liquidator or other similar official acting in relation to
either the Company or the Guarantors, any amount paid by either to the Trustee,
the Collateral Agent or such Holder, this Note Guarantee, to the extent
theretofore discharged, will be reinstated in full force and effect.

 

(d)          Each Guarantor agrees that it will not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders, the Collateral Agent and the Trustee, on the other hand, (1) the
maturity of the obligations guaranteed hereby may be accelerated as provided in
Article 6 hereof for the purposes of this Note Guarantee, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the obligations guaranteed hereby, and (2) in the event of any declaration of
acceleration of such obligations as provided in Article 6 hereof, such
obligations (whether or not due and payable) will forthwith become due and
payable by the Guarantors for the purpose of this Note Guarantee. The Guarantors
will have the right to seek contribution from any non-paying Guarantor so long
as the exercise of such right does not impair the rights of the Holders under
the Note Guarantee.

 

Section 11.02       Limitation on Guarantor Liability.

 

Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms
that it is the intention of all such parties that the Note Guarantee of such
Guarantor not constitute a fraudulent transfer or conveyance for purposes of
Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar federal or state law to the extent applicable to any
Note Guarantee. To effectuate the foregoing intention, the Trustee, the Holders
and the Guarantors hereby irrevocably agree that the obligations of such
Guarantor will be limited to the maximum amount that will, after giving effect
to such maximum amount and all other contingent and fixed liabilities of such
Guarantor that are relevant under such laws, and after giving effect to any
collections from, rights to receive contribution from or payments made by or on
behalf of any other Guarantor in respect of the obligations of such other
Guarantor under this Article 11, result in the obligations of such Guarantor
under its Note Guarantee not constituting a fraudulent transfer or conveyance.

 

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Section 11.03       Execution and Delivery of Note Guarantee.

 

To evidence its Note Guarantee set forth in Section 11.01 hereof, each Guarantor
hereby agrees that a notation of such Note Guarantee substantially in the form
attached as Exhibit E hereto will be endorsed by an Officer of such Guarantor on
each Note authenticated and delivered by the Trustee and that this Indenture
will be executed on behalf of such Guarantor by one of its Officers.

 

Each Guarantor hereby agrees that its Note Guarantee set forth in Section 11.01
hereof will remain in full force and effect notwithstanding any failure to
endorse on each Note a notation of such Note Guarantee.

 

If an Officer whose signature is on this Indenture or on the Note Guarantee no
longer holds that office at the time the Trustee authenticates the Note on which
a Note Guarantee is endorsed, the Note Guarantee will be valid nevertheless.

 

The delivery of any Note by the Trustee, after the authentication thereof
hereunder, will constitute due delivery of the Note Guarantee set forth in this
Indenture on behalf of the Guarantors.

 

In the event that the Company or any of its Restricted Subsidiaries creates or
acquires any Domestic Subsidiary after the date of this Indenture, if required
by Section 4.19 hereof, the Company will cause such Domestic Subsidiary to
comply with the provisions of Section 4.19 hereof and this Article 11, to the
extent applicable.

 

Section 11.04       Guarantors May Consolidate, etc., on Certain Terms.

 

Except as otherwise provided in Section 11.05 hereof, no Guarantor may, directly
or indirectly, sell, assign, transfer, convey, or otherwise dispose of, in one
or more related transactions, all or substantially all of its properties or
assets to, or consolidate with or merge with or into (whether or not such
Guarantor is the surviving Person) another Person, other than the Company or
another Guarantor, unless:

 

(1)         immediately after giving effect to such transaction or series of
transactions, no Default or Event of Default exists; and

 

(2)         either:

 

(a)          subject to Section 11.05 hereof, the Person acquiring the property
in any such sale, assignment, transfer, conveyance or disposition or the Person
formed by or surviving any such sale, assignment, transfer, conveyance,
consolidation or merger unconditionally assumes all the obligations of that
Guarantor under its Note Guarantee, this Indenture, the Registration Rights
Agreement and the Security Documents on the terms set forth herein or therein,
pursuant to a supplemental indenture and appropriate security documents in form
and substance reasonably satisfactory to the Trustee;

 

(b)          the Net Proceeds of such sale, assignment, transfer, conveyance, or
other disposition are applied in accordance with the applicable provisions of
this Indenture, including without limitation, Section 4.10 hereof.

 

96

 

 

In case of any such consolidation, merger, sale, assignment, transfer, or
conveyance and upon the assumption by the successor Person, by supplemental
indenture, executed and delivered to the Trustee and satisfactory in form to the
Trustee, of the Note Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Guarantor, such successor Person will succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor. Such successor Person thereupon may cause to be signed
any or all of the Note Guarantees to be endorsed upon all of the Notes issuable
hereunder which theretofore shall not have been signed by the Company and
delivered to the Trustee. All the Note Guarantees so issued will in all respects
have the same legal rank and benefit under this Indenture as the Note Guarantees
theretofore and thereafter issued in accordance with the terms of this Indenture
as though all of such Note Guarantees had been issued at the date of the
execution hereof.

 

Except as set forth in Articles 4 and 5 hereof, and notwithstanding clauses 2(a)
and (b) above, nothing contained in this Indenture or in any of the Notes will
prevent any consolidation or merger of a Guarantor with or into the Company or
another Guarantor, or will prevent any sale, assignment, transfer, or conveyance
of the property of a Guarantor as an entirety or substantially as an entirety to
the Company or another Guarantor.

 

Section 11.05       Releases.

 

(a)          The Note Guarantee of a Guarantor will be released:

 

(1)         in connection with any sale or other disposition of all or
substantially all of the properties or assets of that Guarantor, by way of
merger, consolidation or otherwise, to a Person that is not (either before or
after giving effect to such transaction) the Company or a Restricted Subsidiary
of the Company, if the sale or other disposition does not violate Sections 3.09
and 4.10 hereof; or

 

(2)         in connection with any sale or other disposition of the Capital
Stock of that Guarantor to a Person that is not (either before or after giving
effect to such transaction) the Company or a Restricted Subsidiary of the
Company, if the sale or other disposition does not violate Sections 3.09 and
4.10 hereof and the Guarantor ceases to be a Restricted Subsidiary of the
Company as a result of the sale or other disposition;

 

provided, in both cases, that the Net Proceeds of such sale, assignment,
transfer, conveyance, or other disposition are applied in accordance with the
applicable provisions of this Indenture, including without limitation Section
4.10 hereof. Upon delivery by the Company to the Trustee of an Officers’
Certificate and an Opinion of Counsel to the effect that such sale, assignment,
transfer, conveyance, or other disposition was made by the Company in accordance
with the provisions of this Indenture, including without limitation Section 4.10
hereof, the Trustee will execute any documents reasonably required in order to
evidence the release of any Guarantor from its obligations under its Note
Guarantee;

 

(3)         upon designation of any Restricted Subsidiary that is a Guarantor as
an Unrestricted Subsidiary in accordance with the terms of this Indenture;

 

(4)         upon Legal Defeasance or Covenant Defeasance in accordance with
Article 8 hereof or satisfaction and discharge of this Indenture in accordance
with Article 12 hereof, in which event each Guarantor will be released and
relieved of any obligations under its Note Guarantee;

 

97

 

 

(5)         upon the liquidation or dissolution of such Guarantor; or

 

(6)         upon such Guarantor consolidating with, merging into or transferring
all or substantially all of its properties or assets to the Company or another
Guarantor.

 

Upon the release of a Note Guarantee in accordance with the terms of this
Indenture, all Collateral owned by the released Guarantor and, solely with
respect to the release of a Note Guarantee under clauses (2) or (4) of the
immediately preceding paragraph, the Capital Stock of the released Guarantor,
will also be automatically released.

 

(b)          Any Guarantor not released from its obligations under its Note
Guarantee as provided in this Section 11.05 will remain liable for the full
amount of principal of, premium, if any, and interest on the Notes and for the
other obligations of any Guarantor under this Indenture as provided in this
Article 11.

 

ARTICLE 12
satisfaction and discharge

 

Section 12.01       Satisfaction and Discharge.

 

This Indenture will be satisfied and discharged and will cease to be of further
effect as to all Notes issued hereunder (except as to surviving rights of
registration, of transfer or exchange of the Notes and as otherwise provided in
this Indenture), when:

 

(1)         either:

 

(a)          all Notes that have been authenticated, except lost, stolen or
destroyed Notes that have been replaced or paid and Notes for whose payment
money has been deposited in trust and thereafter repaid to the Company, have
been delivered to the Trustee for cancellation; or

 

(b)          all Notes that have not been delivered to the Trustee for
cancellation have become due and payable by reason of the mailing of a notice of
redemption or otherwise or will become due and payable within one year and
either the Company or any Guarantor has irrevocably deposited or caused to be
deposited with the Trustee as trust funds in trust solely for the benefit of the
Holders, cash in U.S. dollars, non-callable Government Securities, or a
combination thereof, in such amounts as will be sufficient, without
consideration of any reinvestment of interest, to pay and discharge the entire
Indebtedness on the Notes not delivered to the Trustee for cancellation for
principal, premium, if any, on, and interest to the date of Stated Maturity or
redemption (provided that if such redemption is made as provided in the second
paragraph of Section 3.07(a), (x) the amount of cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, that must be
irrevocably deposited will be determined using an assumed Applicable Premium
calculated as of the date of such deposit and (y) the depositor must irrevocably
deposit or cause to be deposited additional money in trust on the redemption
date as necessary to pay the Applicable Premium as determined by such date);

 

(2)         in respect of Section 12.01(b)(1) hereof, no Event of Default has
occurred and is continuing on the date of the deposit (other than an Event of
Default resulting from the borrowing of funds to be applied to such deposit and
any similar deposit relating to other Indebtedness and, in each case, the
granting of Liens to secure such borrowings) and the deposit will not result in
a breach or violation of, or constitute a default under, any other instrument to
which the Company or any Guarantor is a party or by which the Company or any
Guarantor is bound (other than with respect to the borrowing of funds to be
applied concurrently to make the deposit required to effect such satisfaction
and discharge and any similar concurrent deposit relating to other Indebtedness,
and in each case the granting of Liens to secure such borrowings);

 

98

 

 

(3)         the Company or any Guarantor has paid or caused to be paid all other
sums payable by it under this Indenture; and

 

(4)         the Company has delivered irrevocable instructions to the Trustee to
apply the deposited money toward the payment of the Notes at Stated Maturity or
on the redemption date, as the case may be.

 

In addition, the Company must deliver an Officers’ Certificate and an Opinion of
Counsel to the Trustee stating that all conditions precedent to satisfaction and
discharge have been satisfied.

 

Notwithstanding the satisfaction and discharge of this Indenture, if money has
been deposited with the Trustee pursuant to subclause (b) of clause (1) of this
Section 12.01, the provisions of Sections 12.02 and 8.06 hereof will survive. In
addition, nothing in this Section 12.01 will be deemed to discharge those
provisions of Section 7.07 hereof, that, by their terms, survive the
satisfaction and discharge of this Indenture.

 

The Collateral will be released from the Lien securing the Notes and the other
Note Documents, as provided in Section 10.04 hereof, upon a satisfaction and
discharge in accordance with the provisions described above.

 

Section 12.02        Application of Trust Money.

 

Subject to the provisions of Section 8.06 hereof, all money deposited with the
Trustee pursuant to Section 12.01 hereof shall be held in trust and applied by
it, in accordance with the provisions of the Notes and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal, premium, if any, and interest, for whose
payment such money has been deposited with the Trustee; but such money need not
be segregated from other funds except to the extent required by law.

 

If the Trustee or Paying Agent is unable to apply any money or Government
Securities in accordance with Section 12.01 hereof by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company’s and any Guarantor’s obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 12.01 hereof; provided that if the Company has made any payment of
principal of, premium, if any, on, or interest, on any Notes because of the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money or
Government Securities held by the Trustee or Paying Agent.

 

ARTICLE 13
MISCELLANEOUS

 

Section 13.01       Trust Indenture Act Controls.

 

If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA §318(c), the imposed duties will control.

 

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Section 13.02        Notices.

 

Any notice or communication by the Company, any Guarantor, the Trustee or the
Collateral Agent to the others is duly given if in writing and delivered in
Person or by first class mail (registered or certified, return receipt
requested), facsimile transmission or overnight air courier guaranteeing next
day delivery, to the others’ address:

 

If to the Company and/or any Guarantor:

American Eagle Energy Corporation
2549 W. Main Street, Suite 202
Littleton, Colorado 80120
Facsimile No.: 303-798-5767
Attention: Marty Beskow

 

With copies to:

Baker Hostetler LLP

600 Anton Blvd., Suite 900

Costa Mesa, California 92626

Facsimile: 714-966-8802

Attention: Randolph Katz, Esq.

and

 

Roberts & Olivia, LLC
2060 Broadway, Suite 250
Boulder, Colorado 80302
Facsimile No.: 720-210-5447
Attention: Bill Roberts, Esq.

 

If to the Trustee:

U.S. Bank National Association
5555 San Felipe Street, 11th Floor
Houston, Texas 77056
Facsimile No.: 713-235-9213
Attention: Corporate Trust Services

 

If to the Collateral Agent:

U.S. Bank National Association
5555 San Felipe Street, 11th Floor
Houston, Texas 77056
Facsimile No.: 713-235-9213
Attention: Corporate Trust Services

 

The Company, any Guarantor, the Trustee or the Collateral Agent, by notice to
the others, may designate additional or different addresses for subsequent
notices or communications.

 

100

 

 

All notices and communications (other than those sent to Holders) will be deemed
to have been duly given: at the time delivered by hand, if personally delivered;
five Business Days after being deposited in the mail, postage prepaid, if
mailed; when receipt acknowledged, if transmitted by electronic image scan or
facsimile; and the next Business Day after timely delivery to the courier, if
sent by overnight air courier guaranteeing next day delivery.

 

Any notice or communication to a Holder will be mailed by first class mail,
certified or registered, return receipt requested, or by overnight air courier
guaranteeing next day delivery to its address shown on the register kept by the
Registrar. Any notice or communication will also be given to any Person
described in TIA §313(c), to the extent required by the TIA. Failure to send a
notice or communication to a Holder or any defect in it will not affect its
sufficiency with respect to other Holders.

 

If a notice or communication is given in the manner provided above within the
time prescribed, it is duly given, whether or not the addressee receives it.

 

If the Company sends a notice or communication to Holders, it will send a copy
to the Trustee and each Agent at the same time.

 

Section 13.03        Communication by Holders of Notes with Other Holders of
Notes.

 

Holders may communicate pursuant to TIA §312(b) with other Holders with respect
to their rights under this Indenture or the Notes. The Company, the Trustee, the
Registrar and anyone else shall have the protection of TIA §312(c).

 

Section 13.04        Certificate and Opinion as to Conditions Precedent.

 

Upon any request or application by the Company to the Trustee or the Collateral
Agent, as applicable, to take any action under this Indenture, the Company shall
furnish to the Trustee or the Collateral Agent, as applicable:

 

(1)         an Officers’ Certificate in form and substance reasonably
satisfactory to the Trustee or the Collateral Agent, as applicable (which must
include the statements set forth in Section 13.05 hereof), stating that, in the
opinion of the signers, all conditions precedent and covenants, if any, provided
for in this Indenture or any Security Document relating to the proposed action
have been satisfied; and

 

(2)         an Opinion of Counsel in form and substance reasonably satisfactory
to the Trustee or the Collateral Agent, as applicable (which must include the
statements set forth in Section 13.05 hereof), stating that, in the opinion of
such counsel, all such conditions precedent and covenants have been satisfied.

 

Section 13.05       Statements Required in Certificate or Opinion.

 

Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA §314(a)(4)) or Security Document must comply with the provisions
of TIA §314(e) and must include:

 

(1)         a statement that the Person making such certificate or opinion has
read such covenant or condition;

 

101

 

 

(2)         a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;

 

(3)         a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him or her to
express an informed opinion as to whether or not such covenant or condition has
been satisfied; and

 

(4)         a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.

 

Section 13.06       Rules by Trustee and Agents.

 

The Trustee may make reasonable rules for action by or at a meeting of Holders.
The Registrar or Paying Agent may make reasonable rules and set reasonable
requirements for its functions.

 

Section 13.07       No Personal Liability of Directors, Officers, Employees and
Stockholders.

 

No director, officer, employee, incorporator or owner of Capital Stock of the
Company or any Guarantor, as such, will have any liability for any obligations
of the Company or the Guarantors under the Notes, this Indenture, the Note
Documents or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. The waiver may not be effective to
waive liabilities under the federal securities laws.

 

Section 13.08       Governing Law.

 

THE INTERNAL LAW OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO CONSTRUE
THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

 

Section 13.09       No Adverse Interpretation of Other Agreements.

 

This Indenture may not be used to interpret any other indenture, loan or debt
agreement of the Company or its Subsidiaries or of any other Person. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.

 

Section 13.10       Successors.

 

All agreements of the Company in this Indenture and the Notes will bind its
successors. All agreements of the Trustee in this Indenture will bind its
successors. All agreements of each Guarantor in this Indenture will bind its
successors, except as otherwise provided in Section 11.05 hereof.

 

Section 13.11       Severability.

 

In case any provision in this Indenture or in the Notes is invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions will not in any way be affected or impaired thereby.

 

102

 

 

Section 13.12       Counterpart Originals.

 

The parties may sign any number of copies of this Indenture. Each signed copy
will be an original, but all of them together represent the same agreement. The
exchange of copies of this Indenture and of signature pages by facsimile or PDF
transmission shall constitute effective execution and delivery of this Indenture
as to the parties hereto and may be used in lieu of the original Indenture for
all purposes. Signatures of the parties hereto transmitted by facsimile or PDF
shall be deemed to be their original signatures for all purposes.

 

Section 13.13       Table of Contents, Headings, etc.

 

The Table of Contents, Cross-Reference Table and Headings of the Articles and
Sections of this Indenture have been inserted for convenience of reference only,
are not to be considered a part of this Indenture and will in no way modify or
restrict any of the terms or provisions hereof.

 

[Signatures on following page]

 

103

 

 

SIGNATURES

 

Dated as of August 27, 2014

 

  Issuer:       American Eagle Energy Corporation         By: /s/ Brad Colby    
Name:  Brad Colby     Title:  President         Guarantor:       AMZG, Inc.    
    By: /s/ Brad Colby     Name:  Brad Colby     Title:  President        
Trustee:       U.S. Bank National Association         By: /s/ Mauri Cowen    
Name:  Mauri Cowen     Title:  Vice President         Collateral Agent:      
U.S. Bank National Association         By: /s/ Mauri Cowen     Name:  Mauri
Cowen     Title:  Vice President

 

Indenture

 

 

 

 

[Face of Note]

 

CUSIP/CINS ____________

 

11.0% Senior Secured Notes due 2019

 

No. ___ $____________

 

AMERICAN EAGLE ENERGY CORPORATION

 

promises to pay to                or registered assigns,

 

the principal sum of __________________________________________________________
DOLLARS on September 1, 2019.

 

Interest Payment Dates: March 1 and September 1

 

Record Dates: February 15 and August 15

 

Dated: _______________

 

  AMERICAN EAGLE ENERGY CORPORATION         By:       Name:       Title:

 

This is one of the Notes referred to
in the within-mentioned Indenture:

U.S. BANK NATIONAL ASSOCIATION, as Trustee

 

By:       Authorized Signatory  

 

A-1

 

 

[Back of Note]

11.0% Senior Secured Notes due 2019

 

[Insert the Global Note Legend, if applicable pursuant to the provisions of the
Indenture]

 

[Insert the Private Placement Legend, if applicable pursuant to the provisions
of the Indenture]

 

Capitalized terms used herein have the meanings assigned to them in the
Indenture referred to below unless otherwise indicated. All references to
“interest” herein are deemed to include any Special Interest that may be payable
on the Notes pursuant to the Registration Rights Agreement.

 

(1)         Interest. American Eagle Energy Corporation, a Nevada corporation
(the “Company”), promises to pay or cause to be paid interest on the principal
amount of this Note at 11.0% per annum from ________________, ___ until maturity
and shall pay the Special Interest, if any, payable pursuant to the Registration
Rights Agreement referred to below. The Company will pay interest semi-annually
in arrears on March 1 and September 1 of each year, or if any such day is not a
Business Day, on the next succeeding Business Day (each, an “Interest Payment
Date”). Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
issuance; provided that, if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date; provided
further that the first Interest Payment Date shall be _____________, _____. The
Company will pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal at a rate that is 1% higher than
the then applicable interest rate on the Notes to the extent lawful; it will pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest, if any (without regard to
any applicable grace period), at the same rate to the extent lawful.

 

Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.

 

(2)         Method of Payment. The Company will pay interest on the Notes
(except defaulted interest), if any, to the Persons who are registered Holders
of Notes at the close of business on the February 15 or August 15 next preceding
the Interest Payment Date, even if such Notes are canceled after such record
date and on or before such Interest Payment Date, except as provided in Section
2.12 of the Indenture with respect to defaulted interest. The Notes will be
payable as to principal, premium, if any, and interest at the office or agency
of the Paying Agent and Registrar within the City and State of New York, or, at
the option of the Company, payment of interest may be made by check mailed to
the Holders at their addresses set forth in the register of Holders; provided
that payment by wire transfer of immediately available funds will be required
with respect to principal of, premium, if any, on, and interest on all Global
Notes and all other Notes the Holders of which will have provided wire transfer
instructions to the Company or the Paying Agent. Such payment will be in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.

 

(3)         Paying Agent and Registrar. Initially, U.S. Bank National
Association, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change the Paying Agent or Registrar without prior
notice to the Holders of the Notes. The Company or any of its Subsidiaries may
act as Paying Agent or Registrar.

 

A-2

 

 

(4)         Indenture and Security Documents. The Company issued the Notes under
an Indenture dated as of August 27, 2014 (the “Indenture”) among the Company,
the Guarantors, the Trustee and the Collateral Agent. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the TIA. The Notes are subject to all such terms, and Holders are
referred to the Indenture and the TIA for a statement of such terms. To the
extent any provision of this Note conflicts with the express provisions of the
Indenture, the provisions of the Indenture shall govern and be controlling. The
Notes are secured obligations of the Company. The Notes are secured by a pledge
of a first-priority Lien in and on all Collateral (subject to certain Permitted
Liens) pursuant to the Security Documents referred to in the Indenture. The
Indenture does not limit the aggregate principal amount of Notes that may be
issued thereunder.

 

(5)         Optional Redemption.

 

(a)           At any time prior to September 1, 2016, the Company may, on any
one or more occasions, redeem up to 35% of the aggregate principal amount of
Notes issued under the Indenture, upon notice as provided in Section 3.03 of the
Indenture, at a redemption price equal to 111.000% of the principal amount of
the Notes redeemed, plus accrued and unpaid interest, if any, to the date of
redemption (subject to the rights of Holders of Notes on the relevant record
date to receive interest on the relevant Interest Payment Date), with an amount
of cash not greater than the net cash proceeds of an Equity Offering by the
Company; provided that:

 

(i)          at least 65% of the aggregate principal amount of Notes originally
issued under the Indenture (excluding Notes held by the Company and its
Subsidiaries) remains outstanding immediately after the occurrence of such
redemption; and

 

(ii)         the redemption occurs within 90 days of the date of the closing of
such Equity Offering.

 

(b)           At any time prior to September 1, 2016, the Company may, on any
one or more occasions, redeem all or a part of the Notes, upon notice as
provided in Section 3.03 of the Indenture, at a redemption price equal to 100%
of the principal amount of the Notes redeemed, plus the Applicable Premium as
of, and accrued and unpaid interest, if any, to the date of redemption, subject
to the rights of Holders on the relevant record date to receive interest due on
the relevant Interest Payment Date.

 

(c)           Except pursuant to the preceding paragraphs and Section 4.15(e) of
the Indenture, the Notes will not be redeemable at the Company’s option prior to
September 1, 2016.

 

(d)           On or after September 1, 2016, the Company may on any one or more
occasions redeem all or a part of the Notes, upon notice as provided in Section
3.03 of the Indenture, at the redemption prices (expressed as percentages of
principal amount) set forth below, plus accrued and unpaid interest, if any, on
the Notes redeemed, to the applicable date of redemption, if redeemed during the
twelve-month period beginning on September 1 of the years indicated below,
subject to the rights of Holders of Notes on the relevant record date to receive
interest on the relevant Interest Payment Date:

  

Year  Percentage  2016   108.250% 2017   105.500%

 

A-3

 

 

Year  Percentage  2018 and thereafter   100.000%

 

Unless the Company defaults in the payment of the redemption price, interest
will cease to accrue on the Notes or portions thereof called for redemption on
the applicable redemption date.

 

(6)         Mandatory Redemption. The Company is not required to make mandatory
redemption or sinking fund payments with respect to the Notes.

 

(7)         Repurchase at the Option of Holder.

 

(a)          Upon the occurrence of a Change of Control, the Company will make
an offer (a “Change of Control Offer”) to each Holder to repurchase all or any
part (equal to $2,000 or an integral multiple of $1,000 in excess thereof) of
that Holder’s Notes pursuant to a Change of Control Offer on the terms set forth
in the Indenture (including, but not limited to, Section 4.15 and Article 3
thereof). In the Change of Control Offer, the Company will offer to make a cash
payment (a “Change of Control Payment”) equal to 101% of the aggregate principal
amount of Notes repurchased, plus accrued and unpaid interest, if any, on the
Notes repurchased to the date of purchase (the “Change of Control Payment”),
subject to the rights of Holders of Notes on the relevant record date to receive
interest due on the relevant interest payment date. Within ten days following
any Change of Control, the Company will mail a notice to each Holder setting
forth the procedures governing the Change of Control Offer as required by the
Indenture.

 

(b)          If the Company or a Restricted Subsidiary of the Company
consummates any Asset Sales, within five days of each date on which the
aggregate amount of Excess Proceeds exceeds $20.0 million, the Company will make
an Asset Sale Offer to all Holders of Notes and all holders of other
Indebtedness that is pari passu with the Notes containing provisions similar to
those set forth in the Indenture with respect to offers to purchase, prepay or
redeem with the proceeds of sales of assets in accordance with the Indenture to
purchase, prepay or redeem the maximum principal amount of Notes and such other
pari passu Indebtedness (plus all accrued interest on the Indebtedness and the
amount of all fees and expenses, including premiums, incurred in connection
therewith) that may be purchased, prepaid or redeemed out of the Excess
Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of the
principal amount, plus accrued and unpaid interest, if any, to the date of
purchase, prepayment or redemption, subject to the rights of Holders of Notes on
the relevant record date to receive interest due on the relevant interest
payment date, and will be payable in cash. If any Excess Proceeds remain after
consummation of an Asset Sale Offer, the Company or any of its Restricted
Subsidiaries may use those Excess Proceeds for any purpose not otherwise
prohibited by the Indenture. If the aggregate principal amount of Notes tendered
in such Asset Sale Offer exceeds the amount of Excess Proceeds allocated to the
purchase of the Notes, the Trustee will select the Notes to be purchased on a
pro rata basis (except that any Notes represented by a Note in global form will
be selected by such method as DTC or its nominee or successor may require or,
where such nominee or successor is the Trustee, a method that most nearly
approximates pro rata selection as the Trustee deems fair and appropriate unless
otherwise required by law), based on the amounts tendered or required to be
prepaid or redeemed. Upon completion of each Asset Sale Offer, the amount of
Excess Proceeds will be reset at zero. Holders of Notes that are the subject of
an offer to purchase will receive an Asset Sale Offer from the Company prior to
any related purchase date and may elect to have such Notes purchased by
completing the form entitled “Option of Holder to Elect Purchase” attached to
the Notes.

 

A-4

 

 

(8)         Notice of Redemption. At least 30 days but not more than 60 days
before a redemption date, the Company will mail or cause to be mailed, by first
class mail, a notice of redemption to each Holder whose Notes are to be redeemed
at its registered address, except that redemption notices may be mailed more
than 60 days prior to a redemption date if the notice is issued in connection
with a defeasance of the Notes or a satisfaction and discharge of the Indenture
pursuant to Articles 8 or 12 thereof. Notes and portions of Notes selected will
be in amounts of $2,000 or whole multiples of $1,000 in excess thereof; except
that if all of the Notes of a Holder are to be redeemed or purchased, the entire
outstanding amount of Notes held by such Holder shall be redeemed or purchased.

 

Any such redemption may, at the Company’s discretion, be subject to one or more
conditions precedent, including any related Equity Offering or a Change of
Control. In addition, if such redemption is subject to the satisfaction of one
or more conditions precedent, the related notice shall describe each such
condition, and if applicable, shall state that, in the Company’s discretion, the
date of redemption may be delayed until such time as any or all such conditions
shall be satisfied or waived (provided that in no event shall such date of
redemption be delayed to a date later than 60 days after the date on which such
notice was mailed), or such redemption or purchase may not occur and such notice
may be rescinded in the event that any or all such conditions shall not have
been satisfied or waived by the date of redemption, or by the date of redemption
as so delayed.

 

(9)         Denominations, Transfer, Exchange. The Notes are in registered form
in denominations of $2,000 and integral multiples of $1,000 in excess thereof.
The transfer of Notes may be registered and Notes may be exchanged as provided
in the Indenture. The Registrar and the Trustee may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the next succeeding Interest Payment Date.

 

(10)        Persons Deemed Owners. The registered Holder of a Note may be
treated as the owner of it for all purposes. Only registered Holders have rights
under the Indenture.

 

(11)        Amendment, Supplement and Waiver. Subject to certain exceptions, the
Indenture, the Notes or the Note Guarantees may be amended or supplemented with
the consent of the Holders of at least a majority in aggregate principal amount
of the then outstanding Notes including Additional Notes, if any, voting as a
single class, and any existing Default or Event of Default or compliance with
any provision of the Indenture or the Notes or the Note Guarantees may be waived
with the consent of the Holders of a majority in aggregate principal amount of
the then outstanding Notes including Additional Notes, if any, voting as a
single class. Without the consent of any Holder of Notes, the Indenture, the
Notes or the Note Guarantees may be amended or supplemented to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for the assumption of
the Company’s or a Guarantor’s obligations to Holders of the Notes and Note
Guarantees by a successor to the Company or such Guarantor pursuant to the
Indenture, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any Holder (including, without limitation, to
comply with requirements of the SEC or DTC in order to maintain the
transferability of the Notes pursuant to Rule 144A or Regulation S), to comply
with the requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the TIA, to conform the text of the
Indenture, the Notes, or the Note Guarantees to any provision of the
“Description of Notes” section of the Company’s Offering Memorandum dated August
13, 2014, relating to the initial offering of the Notes, to secure the Notes or
the Note Guarantees pursuant to the requirements of the Indenture, to make,
complete or confirm any grant of Collateral permitted or required by the
Indenture or any of the Security Documents or any release of Collateral that
becomes effective as set forth therein, to add any additional Guarantor or to
evidence the release of any Guarantor from its Note Guarantee, or to evidence or
provide for the acceptance of appointment under the Indenture of a successor
Trustee.

 

A-5

 

 

(12)        Defaults and Remedies. Events of Default include: (i) default for 30
days in the payment when due of interest on the Notes; (ii) default in the
payment when due (at Stated Maturity, upon redemption or otherwise) of the
principal of, or premium, if any, on, the Notes, (iii) failure by the Company or
any of its Restricted Subsidiaries to comply with the provisions of Sections
4.07, 4.09, 4.10, 4.15 or 5.01 of the Indenture; (iv) failure by the Company for
180 days after notice from the Trustee or Holders of at least 25% in aggregate
principal amount of the Notes then outstanding to comply with Section 4.03 of
the Indenture; (v) failure by the Company for 60 days after notice to the
Company by the Trustee or the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding to comply with any of its other agreements
in the Indenture; (vi) default under certain other agreements relating to
Indebtedness of the Company which default is a Payment Default or results in the
acceleration of such Indebtedness prior to its express maturity; (vii) failure
by the Company or any of its Restricted Subsidiaries to pay certain final
judgments, which judgments are not paid, discharged or stayed, for a period of
60 days; (viii) subject to certain exceptions and except as permitted by the
Indenture, (A) any Security Document ceases for any reason to be fully
enforceable; (B) any Note Lien purported to be granted under any Security
Document on Collateral, individually or in the aggregate, having a Fair Market
Value in excess of $25.0 million ceases to be an enforceable and perfected
first-priority Lien; or (C) the Company or any other Pledgor, or any Person
acting on behalf of any of them, denies or disaffirms, in writing, any
obligation of the Company or any other Pledgor set forth in or arising under any
Security Document; (ix) except as permitted by the Indenture, any Note Guarantee
is held in any judicial proceeding to be unenforceable or invalid or ceases for
any reason to be in full force and effect, or any Guarantor, or any Person
acting on behalf of any Guarantor, denies or disaffirms its obligations under
its Note Guarantee, and (x) certain events of bankruptcy or insolvency with
respect to the Company or any of its Restricted Subsidiaries that is a
Significant Subsidiary or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary.

 

(13)        In the case of an Event of Default arising from certain events of
bankruptcy or insolvency with respect to the Company, any Restricted Subsidiary
of the Company that is a Significant Subsidiary or any group of Restricted
Subsidiaries of the Company that, taken together, would constitute a Significant
Subsidiary, all outstanding Notes will become due and payable immediately
without further action or notice. If any other Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of the then outstanding Notes may declare all the Notes to be due and
payable immediately. Holders may not enforce the Indenture or the Notes except
as provided in the Indenture. Subject to certain limitations, Holders of a
majority in aggregate principal amount of the then outstanding Notes may direct
the time, method and place of conducting any proceeding for exercising any
remedy available to the Trustee or exercising any trust or power conferred on
it. The Trustee may withhold from Holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal, premium, if any, or interest) if it determines that
withholding notice is in their interest. The Holders of a majority in aggregate
principal amount of the then outstanding Notes by notice to the Trustee may, on
behalf of all the Holders of Notes, rescind an acceleration or waive an existing
Default or Event of Default and its respective consequences under the Indenture
except a continuing Default or Event of Default in the payment of principal of,
premium, if any, on, or interest on the Notes (including in connection with an
offer to purchase). The Company is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and the Company is required,
upon becoming aware of any Default or Event of Default, to deliver to the
Trustee a statement specifying such Default or Event of Default.

 

A-6

 

 

(14)        Trustee Dealings with Company. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not the Trustee.

 

(15)        No Recourse Against Others. No director, officer, employee,
incorporator or stockholder of the Company or any Guarantor, as such, will have
any liability for any obligations of the Company or the Guarantors under the
Notes, the Indenture, the Note Guarantees, the Registration Rights Agreement or
the Security Documents or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each Holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. The waiver may not be effective to
waive liabilities under the federal securities laws.

 

(16)        Authentication. This Note will not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.

 

(17)        Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).

 

(18)        Additional Rights of Holders of Restricted Global Notes and
Restricted Definitive Notes. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes will have all the rights set forth in the Registration Rights
Agreement dated as of August [27], 2014, among the Company, the Guarantors and
the other parties named on the signature pages thereof or, in the case of
Additional Notes, Holders of Restricted Global Notes and Restricted Definitive
Notes will have the rights set forth in one or more registration rights
agreements, if any, among the Company, the Guarantors and the other parties
thereto, relating to rights given by the Company and the Guarantors to the
purchasers of any Additional Notes (collectively, the “Registration Rights
Agreement”).

 

(19)        CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes, and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption, and reliance may be placed only on the
other identification numbers placed thereon.

 

A-7

 

 

(20)        GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK WILL GOVERN
AND BE USED TO CONSTRUE THE INDENTURE, THIS NOTE AND THE NOTE GUARANTEES WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

 

The Company will furnish to any Holder upon written request and without charge a
copy of the Indenture and/or the Registration Rights Agreement. Requests may be
made to:

 

American Eagle Energy Corporation
2549 W. Main Street, Suite 202
Littleton, Colorado 80120
Facsimile No.: 303-798-5767
Attention: Marty Beskow

 

A-8

 

 

Assignment Form

 

To assign this Note, fill in the form below:

 

(I) or (we) assign and transfer this Note to:     (Insert assignee’s legal name)

 

  (Insert assignee’s soc. sec. or tax I.D. no.)           (Print or type
assignee’s name, address and zip code)

 

and irrevocably appoint
_________________________________________________________to transfer this Note
on the books of the Company. The agent may substitute another to act for him.

 

Date: _______________

 

Your Signature:      (Sign exactly as your name appears on the face of this
Note)

 

Signature Guarantee*: _________________________

 

*             Participant in a recognized Signature Guarantee Medallion Program
(or other signature guarantor acceptable to the Trustee).

 

A-9

 

 

Option of Holder to Elect Purchase

 

If you want to elect to have this Note purchased by the Company pursuant to
Section 4.10 or 4.15 of the Indenture, check the appropriate box below:

 

¨ Section 4.10 ¨ Section 4.15

 

If you want to elect to have only part of the Note purchased by the Company
pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you
elect to have purchased:

 

$_______________

 

Date: _______________

 

Your Signature:      (Sign exactly as your name appears on the face of this
Note)

 

Tax Identification No.:     

 

Signature Guarantee*: _________________________

 

*              Participant in a recognized Signature Guarantee Medallion Program
(or other signature guarantor acceptable to the Trustee).

 

A-10

 

 

Schedule of Exchanges of Interests in the Global Note *

 

The following exchanges of a part of this Global Note for an interest in another
Global Note or for a Definitive Note, or exchanges of a part of another Global
Note or Definitive Note for an interest in this Global Note, have been made:

 

Date of Exchange   Amount of
decrease in
Principal Amount 
of 
this Global Note   Amount of
increase in
Principal Amount 
of 
this Global Note   Principal Amount 
of this Global Note
following such
decrease 
(or increase)   Signature of
authorized officer
of Trustee or
Custodian                                                                      
                                                       

 

*This schedule should be included only if the Note is issued in global form.

 

A-11

 

 

EXHIBIT B

 

FORM OF CERTIFICATE OF TRANSFER

 

American Eagle Energy Corporation

2549 W. Main Street, Suite 202

Littleton, Colorado 80120

Facsimile No.: 303-798-5767

Attention: Marty Beskow

 

U.S. Bank National Association
5555 San Felipe Street, 11th Floor

Houston, Texas 77056

Facsimile No.: 713-235-9213

Attention: Corporate Trust Services

 

Re: 11.0% Senior Secured Notes Due 2019

 

Reference is hereby made to the Indenture, dated as of August 27, 2014 (the
“Indenture”), among American Eagle Energy Corporation, as issuer (the
“Company”), the Guarantors party thereto, U.S. Bank National Association, as
trustee, and U.S. Bank National Association, as collateral agent. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.

 

___________________, (the “Transferor”) owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the “Transfer”),
to ___________________________ (the “Transferee”), as further specified in Annex
A hereto. In connection with the Transfer, the Transferor hereby certifies that:

 

[CHECK ALL THAT APPLY]

 

1. ¨ Check if Transferee will take delivery of a beneficial interest in the 144A
Global Note or a Restricted Definitive Note pursuant to Rule 144A. The Transfer
is being effected pursuant to and in accordance with Rule 144A under the
Securities Act of 1933, as amended (the “Securities Act”), and, accordingly, the
Transferor hereby further certifies that the beneficial interest or Definitive
Note is being transferred to a Person that the Transferor reasonably believes is
purchasing the beneficial interest or Definitive Note for its own account, or
for one or more accounts with respect to which such Person exercises sole
investment discretion, and such Person and each such account is a “qualified
institutional buyer” within the meaning of Rule 144A in a transaction meeting
the requirements of Rule 144A, and such Transfer is in compliance with any
applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the 144A Global Note and/or the Restricted Definitive Note and
in the Indenture and the Securities Act.

 

2. ¨ Check if Transferee will take delivery of a beneficial interest in the
Regulation S Global Note or a Restricted Definitive Note pursuant to Regulation
S. The Transfer is being effected pursuant to and in accordance with Rule 903 or
Rule 904 under the Securities Act and, accordingly, the Transferor hereby
further certifies that (i) the Transfer is not being made to a Person in the
United States and (x) at the time the buy order was originated, the Transferee
was outside the United States or such Transferor and any Person acting on its
behalf reasonably believed and believes that the Transferee was outside the
United States or (y) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither such
Transferor nor any Person acting on its behalf knows that the transaction was
prearranged with a buyer in the United States, (ii) no directed selling efforts
have been made in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S under the Securities Act, (iii) the transaction is not
part of a plan or scheme to evade the registration requirements of the
Securities Act and (iv) if the proposed transfer is being made prior to the
expiration of the Restricted Period, the transfer is not being made to a U.S.
Person or for the account or benefit of a U.S. Person (other than an Initial
Purchaser). Upon consummation of the proposed transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on Transfer enumerated in the Private
Placement Legend printed on the Regulation S Global Note and/or the Restricted
Definitive Note and in the Indenture and the Securities Act.

 

B-1

 

 

3. ¨ Check and complete if Transferee will take delivery of a beneficial
interest in the IAI Global Note or a Restricted Definitive Note pursuant to any
provision of the Securities Act other than Rule 144A or Regulation S. The
Transfer is being effected in compliance with the transfer restrictions
applicable to beneficial interests in Restricted Global Notes and Restricted
Definitive Notes and pursuant to and in accordance with the Securities Act and
any applicable blue sky securities laws of any state of the United States, and
accordingly the Transferor hereby further certifies that (check one):

 

(a)          ¨ such Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;

 

or

 

(b)          ¨ such Transfer is being effected to the Company or a subsidiary
thereof;

 

or

 

(c)          ¨ such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;

 

or

 

(d)          ¨ such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 144A, Rule 144, Rule 903 or Rule 904, and the
Transferor hereby further certifies that it has not engaged in any general
solicitation within the meaning of Regulation D under the Securities Act and the
Transfer complies with the transfer restrictions applicable to beneficial
interests in a Restricted Global Note or Restricted Definitive Notes and the
requirements of the exemption claimed, which certification is supported by (1) a
certificate executed by the Transferee in the form of Exhibit D to the Indenture
and (2) an Opinion of Counsel provided by the Transferor or the Transferee (a
copy of which the Transferor has attached to this certification), to the effect
that such Transfer is in compliance with the Securities Act. Upon consummation
of the proposed transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the IAI Global Note and/or the Restricted Definitive Notes and in the Indenture
and the Securities Act.

 

4. ¨ Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Note or of an Unrestricted Definitive Note.

 

B-2

 

 

(a) ¨ Check if Transfer is pursuant to Rule 144. (i) The Transfer is being
effected pursuant to and in accordance with Rule 144 under the Securities Act
and in compliance with the transfer restrictions contained in the Indenture and
any applicable blue sky securities laws of any state of the United States and
(ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will no longer be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Indenture.

 

(b) ¨ Check if Transfer is Pursuant to Regulation S. (i) The Transfer is being
effected pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.

 

(c) ¨ Check if Transfer is Pursuant to Other Exemption. (i) The Transfer is
being effected pursuant to and in compliance with an exemption from the
registration requirements of the Securities Act other than Rule 144, Rule 903 or
Rule 904 and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any State of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will not be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Global Notes or
Restricted Definitive Notes and in the Indenture.

 

This certificate and the statements contained herein are made for your benefit
and the benefit of the Company.

 

              [Insert Name of Transferor]                           By:        
  Name:         Title:           Dated:          

 

B-3

 

  

ANNEX A TO CERTIFICATE OF TRANSFER

 

1.          The Transferor owns and proposes to transfer the following:

 

[CHECK ONE OF (a) OR (b)]

 

(a)   ¨ a beneficial interest in the:

 

(i)          ¨ 144A Global Note (CUSIP _________), or

 

(ii)         ¨ Regulation S Global Note (CUSIP _________), or

 

(iii)        ¨ IAI Global Note (CUSIP _________); or

 

(b)   ¨ a Restricted Definitive Note.

 

2.          After the Transfer the Transferee will hold:

 

[CHECK ONE]

 

(a)   ¨ a beneficial interest in the:

 

(i)          ¨ 144A Global Note (CUSIP _________), or

 

(ii)         ¨ Regulation S Global Note (CUSIP _________), or

 

(iii)        ¨ IAI Global Note (CUSIP _________); or

 

(iv)        ¨ Unrestricted Global Note (CUSIP _________); or

 

(b)   ¨ a Restricted Definitive Note; or

 

(c)   ¨ an Unrestricted Definitive Note,

 

in accordance with the terms of the Indenture.

 

B-4

 

 

EXHIBIT C

 

FORM OF CERTIFICATE OF EXCHANGE

 

American Eagle Energy Corporation
2549 W. Main Street, Suite 202
Littleton, Colorado 80120
Facsimile No.: 303-798-5767
Attention: Marty Beskow

 

U.S. Bank National Association
5555 San Felipe Street, 11th Floor
Houston, Texas 77056
Facsimile No.: 713-235-9213
Attention: Corporate Trust Services

 

Re: 11.0% Senior Secured Notes Due 2019

 

(CUSIP ___________)

 

Reference is hereby made to the Indenture, dated as of August 27, 2014 (the
“Indenture”), among American Eagle Energy Corporation, as issuer (the
“Company”), the Guarantors party thereto, U.S. Bank National Association, as
trustee, and U.S. Bank National Association, as collateral agent. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.

 

__________________________, (the “Owner”) owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the “Exchange”). In connection with
the Exchange, the Owner hereby certifies that:

 

1.          Exchange of Restricted Definitive Notes or Beneficial Interests in a
Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests
in an Unrestricted Global Note

 

(a) ¨ Check if Exchange is from beneficial interest in a Restricted Global Note
to beneficial interest in an Unrestricted Global Note. In connection with the
Exchange of the Owner’s beneficial interest in a Restricted Global Note for a
beneficial interest in an Unrestricted Global Note in an equal principal amount,
the Owner hereby certifies (i) the beneficial interest is being acquired for the
Owner’s own account without transfer, (ii) such Exchange has been effected in
compliance with the transfer restrictions applicable to the Global Notes and
pursuant to and in accordance with the Securities Act of 1933, as amended (the
“Securities Act”), (iii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest in an
Unrestricted Global Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.

 

(b) ¨ Check if Exchange is from beneficial interest in a Restricted Global Note
to Unrestricted Definitive Note. In connection with the Exchange of the Owner’s
beneficial interest in a Restricted Global Note for an Unrestricted Definitive
Note, the Owner hereby certifies (i) the Definitive Note is being acquired for
the Owner’s own account without transfer, (ii) such Exchange has been effected
in compliance with the transfer restrictions applicable to the Restricted Global
Notes and pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities Act
and (iv) the Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.

 

C-1

 

 

(c) ¨ Check if Exchange is from Restricted Definitive Note to beneficial
interest in an Unrestricted Global Note. In connection with the Owner’s Exchange
of a Restricted Definitive Note for a beneficial interest in an Unrestricted
Global Note, the Owner hereby certifies (i) the beneficial interest is being
acquired for the Owner’s own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to
Restricted Definitive Notes and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.

 

(d) ¨ Check if Exchange is from Restricted Definitive Note to Unrestricted
Definitive Note. In connection with the Owner’s Exchange of a Restricted
Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies
(i) the Unrestricted Definitive Note is being acquired for the Owner’s own
account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.

 

2.          Exchange of Restricted Definitive Notes or Beneficial Interests in
Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests
in Restricted Global Notes

 

(a) ¨ Check if Exchange is from beneficial interest in a Restricted Global Note
to Restricted Definitive Note. In connection with the Exchange of the Owner’s
beneficial interest in a Restricted Global Note for a Restricted Definitive Note
with an equal principal amount, the Owner hereby certifies that the Restricted
Definitive Note is being acquired for the Owner’s own account without transfer.
Upon consummation of the proposed Exchange in accordance with the terms of the
Indenture, the Restricted Definitive Note issued will continue to be subject to
the restrictions on transfer enumerated in the Private Placement Legend printed
on the Restricted Definitive Note and in the Indenture and the Securities Act.

 

(b) ¨ Check if Exchange is from Restricted Definitive Note to beneficial
interest in a Restricted Global Note. In connection with the Exchange of the
Owner’s Restricted Definitive Note for a beneficial interest in the [CHECK ONE]
¨ 144A Global Note, ¨ Regulation S Global Note, ¨ IAI Global Note with an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner’s own account without transfer and (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, and in compliance with any applicable blue sky securities
laws of any state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note and in the
Indenture and the Securities Act.

 

This certificate and the statements contained herein are made for your benefit
and the benefit of the Company.

 

              [Insert Name of Transferor]                           By:        
  Name:         Title:           Dated:          

 

C-2

 

 

EXHIBIT D

 

FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR

 

American Eagle Energy Corporation
2549 W. Main Street, Suite 202
Littleton, Colorado 80120
Facsimile No.: 303-798-5767
Attention: Marty Beskow

 

U.S. Bank National Association
5555 San Felipe Street, 11th Floor
Houston, Texas 77056
Facsimile No.: 713-235-9213
Attention: Corporate Trust Services

 

Re: 11.0% Senior Secured Notes Due 2019

 

Reference is hereby made to the Indenture, dated as of August 27, 2014 (the
“Indenture”), among American Eagle Energy Corporation, as issuer (the
“Company”), the Guarantors party thereto, U.S. Bank National Association, as
trustee, and U.S. Bank National Association, as collateral agent. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.

 

In connection with our proposed purchase of $____________ aggregate principal
amount of:

 

(a) ¨ a beneficial interest in a Global Note, or

 

(b) ¨ a Definitive Note,

 

we confirm that:

 

1.          We understand that any subsequent transfer of the Notes or any
interest therein is subject to certain restrictions and conditions set forth in
the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the Securities Act of
1933, as amended (the “Securities Act”).

 

2.          We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any interest therein
may not be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell the Notes or any interest therein,
we will do so only (A) to the Company or any subsidiary thereof, (B) in
accordance with Rule 144A under the Securities Act to a “qualified institutional
buyer” (as defined therein), (C) to an institutional “accredited investor” (as
defined below) that, prior to such transfer, furnishes (or has furnished on its
behalf by a U.S. broker-dealer) to you and to the Company a signed letter
substantially in the form of this letter and an Opinion of Counsel in form
reasonably acceptable to the Company to the effect that such transfer is in
compliance with the Securities Act, (D) outside the United States in accordance
with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the
provisions of Rule 144 under the Securities Act or (F) pursuant to an effective
registration statement under the Securities Act, and we further agree to provide
to any Person purchasing the Definitive Note or beneficial interest in a Global
Note from us in a transaction meeting the requirements of clauses (A) through
(E) of this paragraph a notice advising such purchaser that resales thereof are
restricted as stated herein.

 

D-1

 

 

3.          We understand that, on any proposed resale of the Notes or
beneficial interest therein, we will be required to furnish to you and the
Company such certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Notes purchased by us
will bear a legend to the foregoing effect.

 

4.          We are an institutional “accredited investor” (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.

 

5.          We are acquiring the Notes or beneficial interest therein purchased
by us for our own account or for one or more accounts (each of which is an
institutional “accredited investor”) as to each of which we exercise sole
investment discretion.

 

You and the Company are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby.

 

              [Insert Name of Accredited Investor]                           By:
          Name:         Title:           Dated:          

 

D-2

 

 

EXHIBIT E

 

FORM OF NOTATION OF GUARANTEE

 

For value received, each Guarantor (which term includes any successor Person
under the Indenture) has, jointly and severally, unconditionally guaranteed, to
the extent set forth in the Indenture and subject to the provisions in the
Indenture dated as of August 27, 2014 (the “Indenture”) among American Eagle
Energy Corporation (the “Company”), the Guarantors party thereto, U.S. Bank
National Association, as trustee (the “Trustee”), and U.S. Bank National
Association, as collateral agent, (a) the due and punctual payment of the
principal of, premium, if any, on, and interest on the Notes, whether at
maturity, by acceleration, redemption or otherwise, the due and punctual payment
of interest on overdue principal of, premium, if any, on, and interest on the
Notes, if any, if lawful, and the due and punctual performance of all other
obligations of the Company to the Holders or the Trustee all in accordance with
the terms of the Indenture and (b) in case of any extension of time of payment
or renewal of any Notes or any of such other obligations, that the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
The obligations of the Guarantors to the Holders of Notes and to the Trustee
pursuant to the Note Guarantee and the Indenture are expressly set forth in
Article 11 of the Indenture and reference is hereby made to the Indenture for
the precise terms of the Note Guarantee.

 

Capitalized terms used but not defined herein have the meanings given to them in
the Indenture.

 

      [Name of Guarantor(s)]                     By:       Name:     Title:

 

E-1

 

 

EXHIBIT F

 

FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS

 

Supplemental Indenture (this “Supplemental Indenture”), dated as of
________________, among __________________ (the “Guaranteeing Subsidiary”), a
subsidiary of American Eagle Energy Corporation (or its permitted successor), a
Nevada corporation (the “Company”), the Company, the other Guarantors (as
defined in the Indenture referred to herein) and U.S. Bank National Association,
as trustee under the Indenture referred to below (the “Trustee”), and U.S. Bank
National Association, as Collateral Agent.

 

WITNESETH

 

WHEREAS, the Company has heretofore executed and delivered to the Trustee an
indenture (the “Indenture”), dated as of August 27, 2014 providing for the
issuance of 11.0% Senior Secured Notes due 2019 (the “Notes”);

 

WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental
indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally
guarantee all of the Company’s Obligations under the Notes and the Indenture on
the terms and conditions set forth herein (the “Note Guarantee”); and

 

WHEREAS, pursuant to Section 11.01 of the Indenture, the Trustee is authorized
to execute and deliver this Supplemental Indenture.

 

NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:

 

1.          Capitalized Terms. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.

 

2.          Agreement to Guarantee. The Guaranteeing Subsidiary hereby agrees to
provide an unconditional Note Guarantee on the terms and subject to the
conditions set forth in the Notes and in the Indenture including but not limited
to Article 11 thereof.

 

4.          No Recourse Against Others. No director, officer, employee,
incorporator or stockholder of the Company or any Guarantor, as such, will have
any liability for any obligations of the Company or the Guarantors under the
Notes, this Indenture, the Note Guarantees, the Security Documents or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes. The waiver may not be effective to waive liabilities under the
federal securities laws.

 

5.          NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE WITHOUT GIVING
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

 

F-1

 

 

6.          Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.

 

7.          Effect of Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.

 

8.          The Trustee. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiary and the Company.

 

F-2

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture
to be duly executed and attested, all as of the date first above written.

 

Dated: _______________,

 

  [Guaranteeing Subsidiary]         By:       Name:     Title:         [Company]
        By:       Name:     Title:         [Existing Guarantors]         By:    
  Name:     Title:         [Trustee],   as Trustee         By:       Authorized
Signatory         [Collateral Agent],   as Collateral Agent         By:      
Authorized Signatory

 

F-3

 

 

EXHIBIT G

 

FORM OF INTERCREDITOR AGREEMENT

 

G-1