Document:

Exhibit 10.1

 

 

	
 
    	
December 4,   2012
    

 

Dynegy Roseton, L.L.C.

 

Ladies & Gentlemen:

 

Louis Dreyfus Highbridge Energy LLC or affiliate (the “Buyer”) is pleased to enter into this letter agreement (together with Exhibit A hereto, this “Agreement”) with Dynegy Roseton, L.L.C. (the “Seller”) for the acquisition of the Acquired Assets consistent with the terms set forth in this Agreement. Capitalized terms used but not defined herein have the meanings ascribed to them in the term sheet attached as Exhibit A hereto. The Acquired Assets will be sold in connection with the chapter 11 cases commenced by the Seller under Case No. 11-38111 and related plan of liquidation. We are prepared to move swiftly to bring this transaction to completion and would like to enter into this Agreement with the Seller to transact on the terms set forth in Exhibit A hereto, which Agreement shall be subject to the approval of the Bankruptcy Court in the case of the Seller. The Seller and the Buyer (each a “Party” and together, the “Parties”) hereby agree as follows:

 

1.  Terms of Acquisition.  The acquisition will be structured as an acquisition of the Acquired Assets on the terms set forth in Exhibit A hereto (the “Transaction”), which terms have been reviewed, prepared and negotiated by the Parties in consultation with their respective legal counsel and other advisors. All material terms of the Transaction are set forth in Exhibit A hereto.

 

2.  Definitive Agreements.  Upon execution of this Agreement, the Parties will negotiate in good faith to prepare and enter into definitive agreements consistent with the terms and conditions set forth in Exhibit A hereto (the “Definitive Documentation”).

 

3.  Termination.  Subject to Section 4 hereof and the approval of this Agreement by the Bankruptcy Court, this Agreement shall be binding on the Parties but shall terminate promptly upon the earlier of (a) due execution and delivery of Definitive Documentation by the Parties and (b) failure of the Bankruptcy Court to approve the terms of this Agreement or the Definitive Documentation within 45 days after the date of execution of this Agreement.

 

4.  Due Authorization.  Each of the Parties hereby represents and warrants that it has the requisite limited liability company or corporate (as applicable) power and authority to enter into, execute and deliver this Agreement and perform the transactions contemplated hereby (including entering into the Definitive Documentation) and has taken all necessary limited liability company or corporate (as applicable) action required for the due authorization, execution, delivery and performance by it of this Agreement and the transactions contemplated hereby,

 

 

subject in the case of the Seller to (a) the approval of the Bankruptcy Court, (b) the consent of Seller’s creditors entitled to exercise consent rights in connection with Seller’s bankruptcy proceedings with respect to the Transaction and (c) approval by the member of the Seller and any required consents by parent entities with respect to the transaction. Each of the Parties hereby represents and warrants that this Agreement constitutes the legally valid and binding obligation of it enforceable against it in accordance with its terms, subject in the case of the Seller to the aforementioned conditions.

 

5.  No Consents.  Each of the Parties hereby represents and warrants that as to it, none of the execution, delivery or performance of this Agreement and none of the execution or delivery of the Definitive Documentation will require any consent, approval, license, permit, order or authorization of, registration, notice, declaration or filing with or to any governmental entity or person, subject to the filing of any application to be filed with, and the receipt of any order required to be issued by, the FERC under Section 203 of the Federal Power Act and in the case of the Seller to (a) the approval of the Bankruptcy Court, (b) the consent of Seller’s creditors entitled to exercise consent rights in connection with Seller’s bankruptcy proceedings with respect to the Transaction and (c) approval by the member of the Seller and any required consents by parent entities with respect to the transaction.

 

6.  Expenses.  Each Party will pay its own expenses incident to this Agreement and the transactions contemplated hereby (whether or not such transactions are consummated), including but not limited to counsel fees, accounting fees, brokers’ fees and investment banking fees.

 

7.  Entire Agreement.  This Agreement together with all exhibits hereto and with the Confidentiality Agreement dated September 27, 2012 constitute the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior agreements and understandings between the Parties with respect to the subject matter hereof.

 

8.  Governing Law; Remedies.  The Parties agree that this Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to any provision thereof that would require the application of the substantive laws of any other jurisdiction, except to the extent that such laws are superseded by chapter 11 of title 11 of the United States Code (including with respect to the fiduciary duties applicable to debtors and debtors in possession).  The Parties acknowledge that remedies at law may be inadequate to protect the Parties against any actual or threatened breach of this Agreement and, without limiting any other rights or remedies that may be available to the Parties, agree to the granting of injunctive relief without proof of actual damages in connection with any actual or threatened breach.  The Parties hereto irrevocably waive any right to trial by jury in any proceeding relating to this Agreement.  Each Party agrees that no failure or delay by the other Party in exercising any right, power or privilege hereunder shall act as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.

 

9.  Counterparts.  This Agreement may be executed in multiple counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. Counterparts to this Agreement may be delivered via facsimile or electronic mail.

 

 

If this Agreement correctly sets forth our understanding, please so indicate by signing a copy of this Agreement in the space provided below and returning a copy to us no later than the close of business on December 10, 2012.

 

[Signatures Follow]

 

 

	
 
    	
Very   truly yours,
    
	
 
    	
 
    
	
 
    	
Louis   Dreyfus Highbridge Energy LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   William C. Reed II
    
	
 
    	
 
    	
Name:   William C. Reed II
    
	
 
    	
 
    	
Title:   President and CEO
    
	
 
    	
 
    
	
Accepted   and agreed to as
    	
 
    
	
of   the date first above written:
    	
 
    
	
 
    	
 
    
	
DYNEGY   ROSETON, L.L.C.
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Robert C. Flexon
    	
 
    	
 
    
	
 
    	
Name:   Robert C. Flexon
    	
 
    
	
 
    	
Title:   President and CEO
    	
 
    
					

 

 

Exhibit A

 

Roseton Sale Transaction

Summary Term Sheet

 

Following is a summary term sheet related to an acquisition of the Roseton power generation facility (the “Term Sheet”). The Term Sheet supersedes any other term sheet and the form of equity purchase agreement previously delivered to potential bidders.

 

The terms and conditions described herein are preliminary and are subject to change and do not purport to summarize all of the conditions, terms, covenants, representations, warranties and other provisions which would be contained in definitive legal documentation for the transactions contemplated hereby. No agreements provided for herein shall be effective unless and until definitive agreements are entered into by the applicable parties and such definitive agreements become effective in accordance with their terms.

 

	
Parties
    	
 
    	
Dynegy   Roseton, L.L.C. as “Seller”

 

Louis   Dreyfus Highbridge Energy LLC or affiliate, as “Buyer”
    
	
 
    	
 
    	
 
    
	
Structure
    	
 
    	
Sale   of assets (Roseton facility only)
    
	
 
    	
 
    	
 
    
	
Purchase   Price
    	
 
    	
·      $19.5 million cash

 

·      No net working capital adjustments, as an asset deal

 

·      Purchase price to be adjusted at close:

 

·      Upwards in an amount equal to any net cash loss of the   business between 1/1/13 and closing; or

 

·      Downwards in an amount equal to any net cash gain of the   business between 1/1/13 and closing, but only to the extent such gain has not   been paid to reduce property taxes (per agreement with taxing authorities)

 

·      No other purchase price adjustments

 

·      No holdbacks or escrows

 

·      Seller to provide allocation of Purchase Price among the   Acquired Assets for tax purposes
    
	
 
    	
 
    	
 
    
	
Acquired   Assets
    	
 
    	
All   properties and assets (1) owned by Seller (including those to be   conveyed by PSEG upon termination of the sale/leaseback structure),   (2) used or held in connection with the ownership, lease, use or   operation of the Roseton facility and (3) located at the Roseton   facility site, including, as limited by the foregoing limitations:

 

·      Real property
    

 

 

	
 
    	
 
    	
·      Machinery and equipment

 

·      Inventory of spare parts, coal and fuel oil, except to the   extent used in the ordinary course

 

·      IT assets on-site

 

·      Assumption of Central Hudson Agreement  and   other Assumed Contracts determined by Buyer, to the extent assignable

 

·      Pre-closing insurance proceeds (if any) related to the   Roseton facility

 

·      Transferable permits

 

·      Books and records relating to the Roseton facility

 

·      Emissions allowances currently allocated to the Roseton   facility
    
	
 
    	
 
    	
 
    
	
Excluded   Assets
    	
 
    	
Anything   that is not an Acquired Asset, including:

 

·      Cash, cash equivalents, accounts receivable,   deposits, etc.

 

·      Tax refunds for periods prior to closing, excluding property   tax refunds

 

·      Seller’s trademarks and logos

 

·      Assets held by Seller off-site, such as IT equipment

 

·      Software (except to the extent on-site and transferable)

 

·      Transmission facilities and related assets owned by Central   Hudson or other third parties unaffiliated with Seller

 

·      Contracts other than Assumed Contracts
    
	
 
    	
 
    	
 
    
	
Buyer   Assumed Liabilities
    	
 
    	
·      All real property tax liabilities associated with the Roseton   facility (including both accrued and unpaid real property taxes for 2012 and   any 2013 taxes)

 

·      All on-site environmental liabilities associated with the   Roseton facility

 

·      Transfer tax liabilities arising from this transaction, if   any (Seller expects this transaction to be exempt from transfer taxes under   section 1146(a) of the Bankruptcy Code)

 

·      Sales and use tax liabilities arising from this transaction,   if any (Seller expects substantially all of the assets included in this   transaction to be exempt from sales and use taxes under section   1146(a) of the Bankruptcy Code)

 

·      OPEB liabilities related to both the Roseton and Danskammer   facilities

 

·      Severance obligations, if any, related to the Roseton   employees (whether due to termination, change in terms of employment, or   otherwise) not hired by Buyer

 

·      All cure costs and other post-closing obligations under any   Assumed 
    

 

2

 

	
 
    	
 
    	
Contracts

 

·      Post-closing liabilities attributable to the Acquired Assets
    
	
 
    	
 
    	
 
    
	
Seller   Retained Liabilities
    	
 
    	
·      Indebtedness for borrowed money of Seller

 

·      Seller incurred transaction costs

 

·      Liabilities of Seller under transaction documents

 

·      Pre-closing trade and vendor accounts payable (subject to   adjustment depending on Assumed Contracts)

 

·      Pre-closing corporate taxes and related fees payable

 

·      Severance obligations for Danskammer employees

 

·      Pension liabilities

 

·      Any liabilities that are not “Buyer Assumed Liabilities”
    
	
 
    	
 
    	
 
    
	
Seller   Closing Deliverables
    	
 
    	
·      Deed

 

·      Bill of sale

 

·      Assignment and assumption agreement for Assumed Contracts

 

·      FIRPTA certificates

 

·      New York State Combined Real Estate Transfer Tax Return and   Credit Line Mortgage Certificate, and Certificate of Exemption from the   Payment of Estimated Personal Income Tax

 

·      New York State Board of Real Property Services Real Property   Transfer Report

 

·      Required governmental and third party consents, other than   immaterial consents or those typically obtained post-closing

 

·      Operating records

 

·      Personnel records, to the extent permitted by law

 

·      Seller Bringdown Certificate

 

·      Seller’s/Owners’ Affidavit (as the Title Company may   reasonably require to provide the Owner’s Title Policy)

 

·      Resolutions authorizing sale
    
	
 
    	
 
    	
 
    
	
Buyer   Closing Deliverables
    	
 
    	
·      Purchase Price

 

·      Assignment and assumption agreement for Assumed Contracts

 

·      New York State Combined Real Estate Transfer Tax Return and   Credit Line Mortgage Certificate, and Certificate of Exemption from the   Payment of Estimated Personal Income Tax

 

·      New York State Board of Real Property Services Real Property   Transfer 
    

 

3

 

	
 
    	
 
    	
Report

 

·      Required governmental and third party consents, other than   immaterial consents typically obtained post-closing

 

·      Buyer Bringdown Certificate

 

·      Resolutions authorizing purchase
    
	
 
    	
 
    	
 
    
	
Seller   Representations and Warranties(1)
    	
 
    	
·      Organization

 

·      Due authorization and enforceability

 

·      Consents

 

·      No conflicts

 

·      Litigation

 

·      Title to Acquired Assets, subject to permitted liens(2)

 

·      Operations and Maintenance (i.e. no knowledge of needed   material repairs/replacements other than those scheduled)

 

·      Owned real property

 

·      Assumed contracts

 

·      Labor and ERISA matters

 

·      Environmental

 

·      Taxes

 

·      Compliance with laws; permits

 

·      Books and records

 

·      Financial advisors; brokers
    
	
 
    	
 
    	
 
    
	
Buyer   Representations and Warranties
    	
 
    	
·      Organization

 

·      Due authorization and enforceability

 

·      Consents

 

·      No conflicts
    

 

(1)  Reps will be typical of an “as is, where is” asset deal and not of an equity deal (i.e. reps will speak to the assets and not the owner), will be subject to materiality and where qualified by knowledge, knowledge will be defined as actual knowledge of specified individuals.

 

(2)  Permitted liens will include standard exceptions, including customary and reasonable items disclosed in title policies, statutory liens not yet due and payable, M&M liens not yet due and payable or contested in good faith (no requirement to bond or reserve), environmental liens imposed by governmental entities, title of lessors under leases to be terminated at closing, terms of assumed contracts, liens in real property records that do not materially interfere, liens due to zoning and other laws that do not materially impair use and liens attributable to buyer.

 

4

 

	
 
    	
 
    	
·      Litigation

 

·      Financial capability

 

·      Market concentration

 

·      Opportunity for independent investigation

 

·      Financial advisors; brokers

 

·      No other representations made by Seller

 

·      As-Is Transaction
    
	
 
    	
 
    	
 
    
	
Covenants
    	
 
    	
·      Prior to closing Seller shall operate in the ordinary   course(3) and shall not:

 

·      sell, lease, license or otherwise dispose of Acquired Assets

·      terminate, modify or amend any Assumed Contract in a manner   adverse to Seller or Buyer

·      abandon any material rights under any Assumed Contract or fail   to honor or perform any Assumed Contract in a manner materially adverse to   Seller or Buyer

·      enter into any new material contracts w/o consultation with   Buyer

·      fail to maintain Operating Records in ordinary course

·      institute, settle or agree to settle any material proceeding   before any governmental entity relating to the Acquired Assets

·      fail to maintain in full force and effect Seller’s insurance   policies related to the Roseton facility, consistent with past practice

 

·      Access

 

·      Seller will grant Buyer reasonable pre-closing access to   Acquired Assets

 

·      Public announcements shall require mutual consent, subject to   standard exceptions

 

·      Tax matters

 

·      Parties will cooperate to file any tax returns relating to   transfer taxes

·      Parties shall provide each other with information reasonably   required to file tax returns relating to the Acquired Assets for tax periods   occurring prior to the Closing

 

·      Regulatory approvals

 

·      Parties will cooperate to provide notices and obtain the   appropriate regulatory approvals (including FERC, FCC, NYPSC, NERC, NYDEC)
    

 

(3)  Exceptions for bankruptcy process, collective bargaining agreement and as otherwise expressly provided.

 

5

 

	
 
    	
 
    	
·      Employee matters

 

·      Buyer may negotiate with the union to enter into   modifications to the expired collective bargaining agreement reflecting terms   substantially similar to the Last Best and Final Company Offer (“LBFO”)   proposed by Seller

·      Buyer to offer employment to all represented employees at the   Roseton facility on terms of the expired collective bargaining agreement, as   modified by the LBFO proposed by Seller to the extent such terms have been   lawfully implemented by Seller, including, but not limited to, immediately   providing the same wages, benefit plans, level of benefits and all terms and   conditions of employment to which such employees were entitled as employees   of Seller except as such wages, benefits, benefits levels and other terms and   conditions have or may be modified by the LBFO.(4)

·      Buyer to offer non-represented employees at the Roseton   facility substantially similar compensation and benefits, in the aggregate,   to the Buyer’s current, similarly situated employees

·      Buyer responsible for any Roseton employee severance   obligations (whether due to termination, change in terms of employment, or   otherwise) with respect to those employees not hired by Buyer

·      Buyer will administer COBRA coverage for any Roseton   employees not hired by Buyer and pay for the COBRA premium subsidies to be   paid pursuant to the Seller’s severance plans

 

·      Confidentiality

 

·      Buyer to maintain confidentiality for two years after Closing   of all information obtained from Seller other than information related to the   Acquired Assets

 

·      Further assurances

 

·      Bankruptcy court filings

 

·      Buyer’s acknowledgements; nature of representations

 

·      Buyer may not rely on any information provided by Seller   other than the explicit representations and warranties made in the asset   purchase agreement

 

·      Replacement or termination of credit support obligations

 

·      Buyer shall replace or terminate, as applicable, all credit   support at its expense (Seller to receive and retain 
    

 

(4)  Under the terms of the implmented LBFO, the Seller (and the Buyer as part of its offer) “may change carriers or administrators for any benefits covered in this Article in its sole discretion, provided that the Company provides same level of benefits.”

 

6

 

	
 
    	
 
    	
deposits/returned credit support)

 

·      Insurance

 

·      Seller’s insurance policies to terminate at Closing and Buyer   solely responsible for insurance post-Closing

·      Any insurance proceeds attributable to Acquired Assets will   be for Buyer’s account

 

·      Danskammer

 

·      Definitive transaction documents for the sale of Danskammer   shall include a provision prohibiting the new owner of the Danskammer site,   to the extent permitted by applicable law, from constructing, or allowing any   third party to construct, a power generation facility on the land, and from   repowering, or allowing any third party to repower, the existing Danskammer   facility; provided, however, that Seller shall have no duty to defend any   challenge to, or to seek to enforce, this prohibition. Seller shall use   commercially reasonable efforts to facilitate discussions regarding a direct   agreement between Buyer and the buyer of Danskammer regarding such provision

 

·      Post-closing filings

 

·      Buyer to make scheduled post-Closing filings

 

·      Seller trademarks and logos

 

·      Buyer to remove all trademarks and logos of Seller from the   Acquired Assets within 30 days of Closing

 

·      Title insurance and survey

 

·      Buyer may obtain title insurance and surveys at its expense;   no termination or other rights based on exceptions identified by title   company other than rights under the APA for breach by Seller of title reps

 

·      Replacement of shared contracts

 

·      Seller and Buyer shall cooperate to separate certain   specified contracts that are material for Roseton but currently relate to   both Roseton and Danskammer into separate agreements. Otherwise Buyer is   solely responsible for arranging for stand-alone master purchase agreements   and other ancillary contracts, if desired

 

·      Back-up bidder

 

·      Seller may sign a purchase agreement with a back-up bidder,   pursuant to the bidding procedures.
    
	
 
    	
 
    	
 
    
	
Buyer   Closing Conditions
    	
 
    	
·      Material accuracy of representations and warranties

 

·      Material performance of covenants

 

·      Bring-down certificate
    

 

7

 

	
 
    	
 
    	
·      Receipt of agreed upon material governmental approvals

 

·      Receipt of agreed upon material third party consents

 

·      Bankruptcy court order approving sale to successful bidder,   subject to satisfaction or waiver of all conditions

 

·      Closing of PSEG Transfer Agreement

 

·      Property tax authorities shall have agreed to reduce the   aggregate tax assessment on Roseton (which reduction may be implemented over   a multiyear period) by not less than 50% of the 2012 assessment on a per   annum equivalent basis
    
	
 
    	
 
    	
 
    
	
Seller   Closing Conditions
    	
 
    	
·      Material accuracy of representations and warranties

 

·      Material performance of covenants

 

·      Bring-down certificate

 

·      Receipt of material governmental approvals

 

·      Receipt of material third party consents

 

·      Bankruptcy court order approving sale to successful bidder,   subject to satisfaction or waiver of all conditions including entry of order   confirming plan or plans of liquidation for Seller

 

·      Closing of PSEG Transfer Agreement

 

·      Replacement or termination, as applicable, of all credit   support

 

·      Bankruptcy settlement agreement consents
    
	
 
    	
 
    	
 
    
	
Termination   Rights
    	
 
    	
APA would terminate upon any of the following:

 

·      Mutual agreement of Buyer and Seller

 

·      If a Sale Order is not entered within 45 days of the   conclusion of the auction

 

·      If the Closing does not occur within 120 days from entry of   the Sale Order

 

·      Conversion to chapter 7 or dismissal of Seller’s bankruptcy   cases

 

·      If the sale is prohibited by law
    
	
 
    	
 
    	
 
    
	
Miscellaneous
    	
 
    	
·      Representations, warranties and covenants (except those that   by their terms are to be performed after Closing) expire at Closing; no   post-closing indemnification

 

·      No assignment without consent

 

·      Parties entitled to specific performance

 

·      New York governing law (except as superseded by bankruptcy   law)

 

·      Forum to be US Bankruptcy Court for the Southern District of   NY, 
    

 

8

 

	
 
    	
 
    	
Poughkeepsie   Division, or to the extent not applicable, federal court in Southern District   of NY

 

·      Waiver of jury trial

 

·      No consequential damages
    

 

9Exhibit 4.1

 

EXECUTION COPY

 

 

 

 

LEGACY RESERVES LP,

 

LEGACY RESERVES FINANCE CORPORATION

 

and

 

THE GUARANTORS PARTY HERETO

 

 

  8% SENIOR NOTES DUE 2020

 

 

 

INDENTURE

 

Dated as of December 4, 2012

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,

 

As Trustee

 

 

 

 

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)
    	
 
    	
11.03
    
	
(c)
    	
 
    	
11.03
    
	
313(a)
    	
 
    	
7.06
    
	
(b)(1)
    	
 
    	
7.06
    
	
(b)(2)
    	
 
    	
7.06, 7.07
    
	
(c)
    	
 
    	
7.06, 11.02
    
	
(d)
    	
 
    	
7.06
    
	
314(a)
    	
 
    	
4.03, 4.04, 11.02
    
	
(b)
    	
 
    	
N/A
    
	
(c)(1)
    	
 
    	
11.04
    
	
(c)(2)
    	
 
    	
11.04
    
	
(c)(3)
    	
 
    	
N/A
    
	
(d)
    	
 
    	
N/A
    
	
(e)
    	
 
    	
11.05
    
	
(f)
    	
 
    	
N/A
    
	
315(a)
    	
 
    	
7.01
    
	
(b)
    	
 
    	
7.05, 11.02
    
	
(c)
    	
 
    	
7.01
    
	
(d)
    	
 
    	
7.01
    
	
(e)
    	
 
    	
6.11
    
	
316(a)(last   sentence)
    	
 
    	
2.08
    
	
(a)(1)(A)
    	
 
    	
6.05
    
	
(a)(1)(B)
    	
 
    	
6.04
    
	
(a)(2)
    	
 
    	
N/A
    
	
(b)
    	
 
    	
6.07
    
	
(c)
    	
 
    	
9.04
    
	
317(a)(1)
    	
 
    	
6.08
    
	
(a)(2)
    	
 
    	
6.09
    
	
(b)
    	
 
    	
2.04
    
	
318(a)
    	
 
    	
11.01
    
	
(b)
    	
 
    	
N/A
    
	
(c)
    	
 
    	
11.01
    

 

N/A means not applicable.

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

 

i

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    
	
ARTICLE 1   DEFINITIONS AND INCORPORATION BY REFERENCE
    	
1
    
	
Section 1.01.
    	
Definitions
    	
1
    
	
Section 1.02.
    	
Other Definitions
    	
30
    
	
Section 1.03.
    	
Incorporation by Reference of Trust Indenture Act
    	
31
    
	
Section 1.04.
    	
Rules of Construction
    	
31
    
	
 
    	
 
    	
 
    
	
ARTICLE 2   THE NOTES
    	
31
    
	
Section 2.01.
    	
Form and Dating
    	
31
    
	
Section 2.02.
    	
Execution and Authentication
    	
32
    
	
Section 2.03.
    	
Registrar and Paying Agent
    	
32
    
	
Section 2.04.
    	
Paying Agent to Hold Money in Trust
    	
33
    
	
Section 2.05.
    	
Noteholder Lists
    	
33
    
	
Section 2.06.
    	
Transfer and Exchange
    	
33
    
	
Section 2.07.
    	
Replacement Notes
    	
33
    
	
Section 2.08.
    	
Outstanding Notes
    	
34
    
	
Section 2.09.
    	
Temporary Notes
    	
34
    
	
Section 2.10.
    	
Cancellation
    	
34
    
	
Section 2.11.
    	
Defaulted Interest
    	
35
    
	
Section 2.12.
    	
CUSIP Numbers
    	
35
    
	
Section 2.13.
    	
Issuance of Additional Notes
    	
35
    
	
 
    	
 
    	
 
    
	
ARTICLE 3   REDEMPTION AND PREPAYMENT
    	
36
    
	
Section 3.01.
    	
Notices to Trustee
    	
36
    
	
Section 3.02.
    	
Selection of Notes to be Redeemed
    	
36
    
	
Section 3.03.
    	
Notice of Redemption
    	
36
    
	
Section 3.04.
    	
Effect of Notice of Redemption
    	
37
    
	
Section 3.05.
    	
Deposit of Redemption Price
    	
38
    
	
Section 3.06.
    	
Notes Redeemed in Part
    	
38
    
	
Section 3.07.
    	
Optional Redemption
    	
38
    
	
Section 3.08.
    	
Mandatory Redemption
    	
39
    
	
Section 3.09.
    	
Offer to Purchase by Application of Excess Proceeds
    	
40
    
	
 
    	
 
    	
 
    
	
ARTICLE 4   COVENANTS
    	
42
    
	
Section 4.01.
    	
Payment of Notes
    	
42
    
	
Section 4.02.
    	
Maintenance of Office or Agency
    	
42
    
	
Section 4.03.
    	
Reports
    	
43
    
	
Section 4.04.
    	
Compliance Certificate
    	
44
    
	
Section 4.05.
    	
Taxes
    	
45
    
	
Section 4.06.
    	
Stay, Extension and Usury Laws
    	
45
    
	
Section 4.07.
    	
Restricted Payments
    	
45
    
	
Section 4.08.
    	
Dividend and Other Payment Restrictions Affecting   Restricted Subsidiaries
    	
49
    
	
Section 4.09.
    	
Incurrence of Indebtedness and Issuance of Preferred Stock
    	
51
    
	
Section 4.10.
    	
Asset Sales
    	
55
    

 

ii

 

	
Section 4.11.
    	
Transactions with Affiliates
    	
57
    
	
Section 4.12.
    	
Limitation on Liens
    	
59
    
	
Section 4.13.
    	
Additional Subsidiary Guarantees
    	
59
    
	
Section 4.14.
    	
Organizational Existence
    	
59
    
	
Section 4.15.
    	
Offer to Repurchase Upon Change of Control
    	
60
    
	
Section 4.16.
    	
No Inducements
    	
61
    
	
Section 4.17.
    	
Permitted Business Activities
    	
62
    
	
Section 4.18.
    	
Covenant Termination
    	
62
    
	
Section 4.19.
    	
Designation of Restricted and Unrestricted Subsidiaries
    	
62
    
	
 
    	
 
    	
 
    
	
ARTICLE 5   SUCCESSORS
    	
63
    
	
Section 5.01.
    	
Merger, Consolidation, or Sale of Assets
    	
63
    
	
Section 5.02.
    	
Successor Substituted
    	
65
    
	
 
    	
 
    	
 
    
	
ARTICLE 6   DEFAULTS AND REMEDIES
    	
65
    
	
Section 6.01.
    	
Events of Default
    	
65
    
	
Section 6.02.
    	
Acceleration
    	
67
    
	
Section 6.03.
    	
Other Remedies
    	
68
    
	
Section 6.04.
    	
Waiver of Past Defaults
    	
68
    
	
Section 6.05.
    	
Control by Majority
    	
68
    
	
Section 6.06.
    	
Limitation on Suits
    	
68
    
	
Section 6.07.
    	
Rights of Holders of Notes to Receive Payment
    	
69
    
	
Section 6.08.
    	
Collection Suit by Trustee
    	
69
    
	
Section 6.09.
    	
Trustee May File Proofs of Claim
    	
69
    
	
Section 6.10.
    	
Priorities
    	
70
    
	
Section 6.11.
    	
Undertaking for Costs
    	
70
    
	
 
    	
 
    	
 
    
	
ARTICLE 7   TRUSTEE
    	
70
    
	
Section 7.01.
    	
Duties of Trustee
    	
70
    
	
Section 7.02.
    	
Rights of Trustee
    	
71
    
	
Section 7.03.
    	
Individual Rights of Trustee
    	
72
    
	
Section 7.04.
    	
Trustee’s Disclaimer
    	
72
    
	
Section 7.05.
    	
Notice of Defaults
    	
73
    
	
Section 7.06.
    	
Reports by Trustee to Holders of the Notes
    	
73
    
	
Section 7.07.
    	
Compensation and Indemnity
    	
73
    
	
Section 7.08.
    	
Replacement of Trustee
    	
74
    
	
Section 7.09.
    	
Successor Trustee by Merger, etc.
    	
75
    
	
Section 7.10.
    	
Eligibility; Disqualification
    	
75
    
	
Section 7.11.
    	
Preferential Collection of Claims Against Issuers
    	
76
    
	
 
    	
 
    	
 
    
	
ARTICLE 8   LEGAL DEFEASANCE AND COVENANT DEFEASANCE
    	
76
    
	
Section 8.01.
    	
Option to Effect Legal Defeasance or Covenant Defeasance
    	
76
    
	
Section 8.02.
    	
Legal Defeasance and Discharge
    	
76
    
	
Section 8.03.
    	
Covenant Defeasance
    	
77
    
	
Section 8.04.
    	
Conditions to Legal or Covenant Defeasance
    	
77
    
	
Section 8.05.
    	
Deposited Money and Government Securities to be Held in   Trust; Other Miscellaneous Provisions
    	
79
    
	
Section 8.06.
    	
Repayment to Issuers
    	
79
    
	
Section 8.07.
    	
Reinstatement
    	
80
    

 

iii

 

	
Section 8.08.
    	
Discharge
    	
80
    
	
 
    	
 
    	
 
    
	
ARTICLE 9   AMENDMENT, SUPPLEMENT AND WAIVER
    	
81
    
	
Section 9.01.
    	
Without Consent of Holders of Notes
    	
81
    
	
Section 9.02.
    	
With Consent of Holders of Notes
    	
82
    
	
Section 9.03.
    	
Compliance with Trust Indenture Act
    	
83
    
	
Section 9.04.
    	
Effect of Consents
    	
83
    
	
Section 9.05.
    	
Notation on or Exchange of Notes
    	
84
    
	
Section 9.06.
    	
Trustee to Sign Amendments, etc.
    	
84
    
	
 
    	
 
    	
 
    
	
ARTICLE 10   GUARANTEES OF NOTES
    	
84
    
	
Section 10.01.
    	
Subsidiary Guarantees
    	
84
    
	
Section 10.02.
    	
[Reserved]
    	
85
    
	
Section 10.03.
    	
Guarantors May Consolidate, etc., on Certain   Terms
    	
85
    
	
Section 10.04.
    	
Releases of Subsidiary Guarantees
    	
86
    
	
Section 10.05.
    	
[Reserved]
    	
86
    
	
Section 10.06.
    	
Limitation on Guarantor Liability
    	
86
    
	
 
    	
 
    	
 
    
	
ARTICLE 11   MISCELLANEOUS
    	
87
    
	
Section 11.01.
    	
Trust Indenture Act Controls
    	
87
    
	
Section 11.02.
    	
Notices
    	
87
    
	
Section 11.03.
    	
Communication by Holders of Notes with Other Holders of   Notes
    	
88
    
	
Section 11.04.
    	
Certificate and Opinion as to Conditions Precedent
    	
88
    
	
Section 11.05.
    	
Statements Required in Certificate or Opinion
    	
88
    
	
Section 11.06.
    	
Rules by Trustee and Agents
    	
89
    
	
Section 11.07.
    	
No Personal Liability of Directors, Officers, Employees and   Unitholders
    	
89
    
	
Section 11.08.
    	
Governing Law
    	
89
    
	
Section 11.09.
    	
No Adverse Interpretation of Other Agreements
    	
89
    
	
Section 11.10.
    	
Successors
    	
89
    
	
Section 11.11.
    	
Severability
    	
89
    
	
Section 11.12.
    	
Table of Contents, Headings, etc.
    	
90
    
	
Section 11.13.
    	
Counterparts
    	
90
    
	
Section 11.14.
    	
Acts of Holders
    	
90
    
	
Section 11.15.
    	
Patriot Act
    	
91
    

 

APPENDIX, SCHEDULE AND ANNEX

 

	
RULE 144A/REGULATION S APPENDIX
    	
App. - 1
    
	
 
    	
 
    	
 
    
	
EXHIBIT 1
    	
Form of   Initial Note
    	
 
    
	
EXHIBIT A
    	
Form of   Exchange Note
    	
 
    
	
 
    	
 
    
	
SCHEDULE   I
    	
Agreements   with Affiliates
    	
S - 1
    
	
 
    	
 
    	
 
    
	
ANNEX   A
    	
Form of   Supplemental Indenture
    	
A - 1
    
				

 

iv

 

 

This Indenture, dated as of December 4, 2012, is among Legacy Reserves LP, a Delaware limited partnership (the “Company”), Legacy Reserves Finance Corporation, a Delaware corporation (“Finance Corp.” and, together with the Company, the “Issuers”), the guarantors party hereto (each, a “Guarantor” and, collectively, the “Guarantors”) and Wells Fargo Bank, National Association, a national banking association, as trustee (the “Trustee”).

 

The Issuers, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the Issuers’ Initial Notes, Exchange Notes and any Additional Notes:

 

ARTICLE 1
 DEFINITIONS AND INCORPORATION 
 BY REFERENCE

 

Section 1.01.         Definitions.

 

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

 

(1)           Indebtedness of any other Person existing at the time such other Person was 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 Subsidiary of, such specified Person, but excluding Indebtedness which is extinguished, retired or repaid in connection with such Person merging with or into or becoming a Subsidiary of such specified Person; and

 

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

 

“Additional Assets” means:

 

(1)           any assets used or useful in the Oil and Gas Business, other than Indebtedness or Capital Stock;

 

(2)           the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or any of its Restricted Subsidiaries; or

 

(3)           Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary;

 

provided, however, that any such Restricted Subsidiary described in clause (2) or (3) is primarily engaged in the Oil and Gas Business.

 

“Additional Interest” means all Additional Interest then owing pursuant to Section 5 of the Registration Rights Agreement referred to in clause (1) of the definition of “Registration Rights Agreement” in the Appendix.  Unless the context indicates otherwise, all references to “interest” in this Indenture or the Notes shall be deemed to include any Additional Interest.

 

1

 

“Additional Notes” means, subject to the Company’s compliance with Section 4.09, 8% Senior Notes due 2020 issued from time to time after the Initial Issuance Date under the terms of this Indenture (other than pursuant to Section 2.06, 2.07, 2.09 or 3.06 of this Indenture and other than Exchange Notes issued pursuant to a Registered Exchange Offer for other Notes outstanding under this Indenture).

 

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

 

(1)           the sum of:

 

(a)           the discounted future net revenues from proved oil and natural gas 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, as increased by, as of the date of determination, the estimated discounted future net revenues from:

 

(i)            estimated proved oil and natural gas reserves of the Company and its Restricted Subsidiaries acquired since the date of such year-end reserve report; and

 

(ii)           estimated proved oil and natural gas reserves of the Company and its Restricted Subsidiaries attributable to extensions, discoveries and other additions and upward revisions of estimates of proved oil and natural gas 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 that would, in accordance with standard industry practice, cause such revisions;

 

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

 

(iii)          estimated proved oil and natural gas reserves of the Company and its Restricted Subsidiaries reflected in such reserve report produced or disposed of since the date of such year-end reserve report; and

 

(iv)          reductions in estimated proved oil and natural gas reserves of the Company and its Restricted Subsidiaries reflected in such reserve report attributable to downward revisions of estimates of proved oil and natural gas reserves since such year-end due to changes in geological conditions or other factors that 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 the Company’s

 

2

 

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 natural gas properties of the Company and its Restricted Subsidiaries to which no proved oil and natural gas 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:

 

(i)            the net book value; and

 

(ii)           the appraised value, as estimated by independent appraisers, of other tangible assets (including 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 (d)(i) of this definition shall apply;

 

minus, to the extent not otherwise taken into account in the immediately preceding clause (1);

 

(2)           the sum of:

 

(a)           minority interests;

 

(b)           any net natural 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

 

3

 

(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 clause (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.

 

“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; provided, however, that beneficial ownership of 10% or more of the Voting Stock of a Person will be deemed to be control by the other Person; and further, that any third Person which also beneficially owns 10% or more of the Voting Stock of a specified Person shall not be deemed to be an Affiliate of either the specified Person or the other Person merely because of such common ownership in such specified Person.  For purposes of this definition, the terms “controlling,” “controlled by” and “under common control with” have correlative meanings.

 

“Agent” means the Escrow Agent and any Registrar or Paying Agent.

 

“Agent Members” has the meaning provided in the Appendix.

 

“Applicable Law,” except as the context may otherwise require, means all applicable laws, rules, regulations, ordinances, judgments, decrees, injunctions, writs and orders of any court or governmental or congressional agency or authority and rules, regulations, orders, licenses and permits of any United States federal, state, municipal, regional, or other governmental body, instrumentality, agency or authority.

 

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

 

“Asset Sale” means:

 

(1)           the sale, lease, conveyance or other disposition of any properties or assets (including by way of a Production Payment or a sale and leaseback transaction); provided, however, that the 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 the provisions of Section 4.15 and/or the provisions of Section 5.01 and not by the provisions of Section 4.10; and

 

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

 

4

 

Notwithstanding the preceding, the following items will not be deemed to be Asset Sales:

 

(1)           any single transaction or series of related transactions that involves properties or assets having a fair market value of less than $10.0 million;

 

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

 

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

 

(4)           the sale, lease or other disposition of equipment, inventory, products, accounts receivable or other properties or assets in the ordinary course of business;

 

(5)           the sale or other disposition of cash or Cash Equivalents, Hedging Contracts or other financial instruments in the ordinary course of business;

 

(6)           a disposition of properties or assets that constitutes (or results in by virtue of the consideration received for such disposition) either a Restricted Payment that is permitted by Section 4.07 or a Permitted Investment;

 

(7)           a disposition of Hydrocarbons or mineral products inventory in the ordinary course of business;

 

(8)           the sale or transfer (whether or not in the ordinary course of business) of crude oil and natural gas properties or direct or indirect interests in real property; provided that at the time of such a sale or transfer such properties do not have associated with them any proved reserves;

 

(9)           the farm-out, lease or sublease of developed or undeveloped crude oil or natural gas properties owned or held by the Company or any Restricted Subsidiary of the Company in exchange for crude oil and natural gas properties owned or held by another Person;

 

(10)         the creation or perfection of a Lien that is not prohibited by Section 4.12;

 

(11)         dispositions in connection with Permitted Liens;

 

(12)         surrender or waiver of contract rights or the settlement, release or surrender of contract, tort or other claims of any kind;

 

(13)         the grant in the ordinary course of business of any non-exclusive license of patents, trademarks, registrations therefor and other similar intellectual property;

 

(14)         an Asset Swap; and

 

(15)         any Production Payments and Reserve Sales; provided that any such Production Payments and Reserve Sales, other than incentive compensation programs on

 

5

 

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 of the Company, 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 any cash received must be applied in accordance with Section 4.10 as if the Asset Swap were an Asset Sale.

 

“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.  As used in the preceding sentence, the “net rental payments” under any lease for any such period shall mean the sum of rental and other payments required to be paid with respect to such period by the lessee thereunder, excluding any amounts required to be paid by such lessee on account of maintenance and repairs, insurance, taxes, assessments, water rates or similar charges.  In the case of any lease that is terminable by the lessee upon payment of penalty, such net rental payment shall also include the amount of such penalty, but no rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated.

 

“Available Cash” has the meaning assigned to such term in the Partnership Agreement, as in effect on the date of this Indenture.

 

“Bankruptcy Law” means Title 11, United States Code, as may be amended from time to time, or any similar federal or state law for the relief of debtors.

 

“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 upon the occurrence of a subsequent condition.  The terms “Beneficially Owns” and “Beneficially Owned” have correlative meanings.

 

“Board of Directors” means:

 

(1)           with respect to Finance Corp., the board of directors of Finance Corp.;

 

(2)           with respect to the Company, the board of directors of the General Partner or any authorized committee thereof; and

 

6

 

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

 

“Board Resolution” means a copy of a resolution certified by the Secretary or an Assistant Secretary of the applicable Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee.

 

“Business Day” means each day that is not a Saturday, Sunday or other day on which banking institutions in New York, New York or another place of payment are authorized or required by law to close.

 

“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 in accordance with GAAP.

 

“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.

 

“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 six months from the date of acquisition;

 

(3)           marketable general obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition thereof, having a credit rating of “A” or better from either S&P or Moody’s;

 

(4)           certificates of deposit, demand deposits 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

 

7

 

lender party to the Credit Agreement or with any domestic commercial bank having capital and surplus in excess of $500.0 million and a Thomson Bank Watch Rating of “B” or better;

 

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

 

(6)           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

 

(7)           money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (6) 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 (including Capital Stock of the Restricted Subsidiaries of the Company) of the Company and its Restricted Subsidiaries taken as a whole, to 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 or removal of the General Partner by the limited partners 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 that term is used in Section 13(d)(3) of the Exchange Act), excluding the Qualifying Owners, becomes the Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock of the General Partner, measured by voting power rather than number of shares, units or the like;

 

(4)           the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any “person” (as that term is used in Section 13(d)(3) of the Exchange Act) 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

 

(5)           the first day on which a majority of the members of the Board of Directors of the General Partner are not Continuing Directors.

 

Notwithstanding the preceding, a conversion of the Company or any of its Restricted Subsidiaries from a limited partnership, corporation, limited liability company or other form of entity to a limited liability company, corporation, limited partnership or other form of entity or an exchange of all of the outstanding Equity Interests in one form of entity for Equity Interests in another form of entity shall not constitute a Change of Control, so long as following such

 

8

 

conversion or exchange the “persons” (as that term is used in Section 13(d)(3) of the Exchange Act) who Beneficially Owned the Capital Stock of the Company immediately prior to such transactions continue to Beneficially Own in the aggregate more than 50% of the Voting Stock of such entity or its general partner, as applicable, or continue to Beneficially Own sufficient Equity Interests in such entity to elect a majority of its directors, managers, trustees or other persons serving in a similar capacity for such entity or its general partner, as applicable, and, in either case no “person” Beneficially Owns more than 50% of the Voting Stock of such entity or its general partner, as applicable.

 

“Clearstream” means Clearstream Banking, société anonyme, or any successor securities clearing agency.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute.

 

“Commission”  or “SEC” means the Securities and Exchange Commission.

 

“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 expenses or 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 expenses or losses were deducted in computing such Consolidated Net Income; plus

 

(2)           provision for taxes based on income or profits (including state franchise taxes accounted for as income taxes in accordance with GAAP) 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)           Fixed Charges of such Person and its Restricted Subsidiaries for such period, to the extent that any such Fixed Charge was 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, non-cash equity based compensation expense 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 that were deducted in computing such Consolidated Net Income; plus

 

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

 

9

 

(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

 

(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 dividends or distributions on preferred securities, provided that:

 

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

 

(2)           the net income of any Restricted Subsidiary of such Person 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 judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, partners or members;

 

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

 

(4)           any gain (loss) realized upon the sale or other disposition of any property, plant or equipment of such Person or its consolidated Restricted Subsidiaries (including pursuant to any sale and leaseback transaction) which is not sold or otherwise disposed of in the ordinary course of business and any gain (loss) realized upon the sale or other disposition of any Capital Stock of any Person will be excluded;

 

(5)           to the extent deducted in the calculation of Consolidated Net Income, any non-cash or other charges relating to any premium or penalty paid, write off of deferred financing costs or other financial recapitalization charges in connection with redeeming or retiring any Indebtedness prior to its Stated Maturity will be excluded;

 

(6)           any “ceiling limitation” on oil and gas properties or other asset impairment writedowns on oil and gas properties under GAAP or SEC guidelines will be excluded; and

 

10

 

(7)           any unrealized non-cash gains or losses or charges in respect of Hedging Contracts (including those resulting from the application of FASB ASC Topic No. 815, Derivatives and Hedging).

 

“Consolidated Net Working Capital” means (a) all current assets of the Company and its Restricted Subsidiaries except current assets from 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 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 Topic No. 815, Derivatives and Hedging).

 

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

 

“Continuing Directors” means, as of any date of determination, any member of the Board of Directors of the General Partner 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 at the time of such nomination or election.

 

“Corporate Trust Office of the Trustee” means the office of the Trustee in the City of New York at which at any time its corporate trust business shall be administered, which office at the date hereof is located at 45 Broadway, 14th Floor, New York, New York, 10006, Attn: Corporate Trust Administration, or such other address in the City of New York as the Trustee may designate from time to time by notice to the Holders and the Issuers, or the principal corporate trust office in the City of New York of any successor Trustee (or such other address as a successor Trustee may designate from time to time by notice to the Holders and the Issuers).

 

“Credit Agreement” means that certain Second Amended and Restated Credit Agreement, dated as of March 10, 2011, by and among the Company, as borrower, Wells Fargo Bank, National Association, as administrative agent, and the other lenders from time to time party thereto, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, restated, modified, renewed, refunded, replaced or refinanced from time to time.

 

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

 

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“Custodian” means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law.

 

“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.

 

“De Minimis Guaranteed Amount” means a principal amount of Indebtedness that does not exceed $5.0 million.

 

“Depository” has the meaning provided in the Appendix.

 

“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.

 

“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 the Company that was formed under the laws of the United States or any state of the United States or the District of Columbia and all of whose outstanding Capital Stock is Beneficially Owned by the Company.

 

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

 

“Equity Offering” means any public or private sale of Capital Stock (other than Disqualified Stock) made for cash on a primary basis by the Company after the date of this Indenture, provided that at any time on or after a Change of Control, any sale of Capital Stock to an Affiliate of the Company shall not be deemed an Equity Offering.

 

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“Escrow Agent” means Wells Fargo Bank, National Association, in its capacity as escrow agent under the Escrow Agreement, or any successor.

 

“Escrow Agreement” means the Escrow Agreement dated as of the Initial Issuance Date among Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representative of the several initial purchasers of the Notes, the Trustee and the Escrow Agent.

 

“Euroclear” means the Euroclear System or any successor securities clearing agency.

 

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

 

“Exchange Notes” has the meaning specified in the Appendix.

 

“Existing Indebtedness” means the aggregate principal amount of Indebtedness of the Company and its Restricted Subsidiaries (other than Indebtedness under the Credit Agreement which is considered incurred under the first paragraph of Section 4.09 and other than intercompany indebtedness) 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 $20.0 million or more and otherwise by an officer of the General Partner.

 

“Fixed Charge Coverage Ratio” means with respect to any specified Person for any four-quarter reference 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 securities subsequent to the commencement of the applicable four-quarter reference period 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 securities, and the use of the proceeds therefrom as if the same had occurred at the beginning of such period.  If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness will be calculated as if the average rate in effect from the beginning of such period to the Calculation Date had been the applicable rate for the entire period (taking into account any interest Hedging Contract applicable to such Indebtedness, but if the remaining term of such interest Hedging Contract is less than 12 months, then such interest Hedging Contract shall only be taken into account for that portion of the period equal to the remaining term thereof).  If any Indebtedness that is being given pro forma effect bears an interest rate at the option of such Person, the interest rate shall be calculated by applying such optional rate chosen by such Person. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered 

 

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rate, or other rate, shall be deemed to have been based upon the rate actually chosen, or, if none, then based upon such optional rate chosen as such Person may designate.

 

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 through mergers, consolidations or otherwise (including acquisitions of assets used or useful in the Oil and Gas Business), or any Person or any of its Restricted Subsidiaries acquired by the specified Person or any of its Restricted Subsidiaries, and including, in each case, any related financing transactions (including repayment of Indebtedness) 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 as if they had occurred on the first day of the four-quarter reference period, including any Consolidated Cash Flow and any pro forma expense and cost reductions that have occurred or are reasonably expected to occur within the next 12 months, in the reasonable judgment of the chief financial or accounting officer of the General Partner (regardless of whether those cost savings or operating improvements could then be reflected in pro forma financial statements in accordance with Regulation S-X promulgated under the Securities Act or any other regulation or policy of the Commission related thereto);

 

(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 of the specified Person on the Calculation Date will be deemed to have been a Restricted Subsidiary of the specified Person at all times during such four-quarter period;

 

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

 

(6)                                 interest income reasonably anticipated by such Person to be received during the applicable four-quarter period from cash or Cash Equivalents held by such Person or any Restricted Subsidiary of such Person, which cash or Cash Equivalents exist on the Calculation Date or will exist as a result of the transaction giving rise to the need to calculate the Fixed Charge Coverage Ratio, will be included.

 

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

 

(1)                                 the consolidated interest expense (less interest income) 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 interest rate Hedging Contracts; 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, whether paid or accrued and whether or not in cash, on any series of Disqualified Stock of such Person or on any series of preferred securities of its Restricted Subsidiaries, other than dividends payable solely in Equity Interests of the payor (other than Disqualified Stock) or to such Person or a Restricted Subsidiary of such Person,

 

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

 

“Foreign Subsidiary” means any Restricted Subsidiary of the Company that (a) is not a Domestic Subsidiary and (b) has 50% or more of its consolidated assets located outside the United States or any territory thereof.

 

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

 

“General Partner” means Legacy Reserves GP, LLC, a Delaware limited liability company, and its successors and permitted assigns under the Partnership Agreement as general partner of the Company or as the business entity with the ultimate authority to manage the business and operations of the Company.

 

“Global Notes” has the meaning provided in the Appendix.

 

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

 

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“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, acting as co-obligor or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness.  When used as a verb, “guarantee” has a correlative meaning.

 

“Guarantors” means each of (a) the Subsidiaries of the Company, other than Finance Corp., executing this Indenture as initial Guarantors, (b) any other Restricted Subsidiary of the Company that executes a supplement to this Indenture in accordance with Section 4.13 or 10.03 hereof and (c) the respective successors and assigns of such Restricted Subsidiaries, as required under Article 10 hereof, in each case until such time as the Subsidiary Guarantee of such Person shall be released pursuant to Section 8.02, 8.03 or 10.04 hereof.

 

“Hedging Contracts” means, with respect to any specified Person:

 

(1)                                 interest rate swap agreements, interest rate cap agreements and interest rate collar agreements entered into with one or more financial institutions and designed to protect the Person or any of its Restricted Subsidiaries entering into the agreement against fluctuations in interest rates with respect to Indebtedness incurred;

 

(2)                                 foreign exchange contracts and currency protection agreements entered into with one or more financial institutions and designed to protect the Person or any of its Restricted Subsidiaries entering into the agreement against fluctuations in currency exchanges rates with respect to Indebtedness incurred;

 

(3)                                 any commodity futures contract, commodity option or other similar agreement or arrangement designed to protect against fluctuations in the price of Hydrocarbons used, produced, processed or sold by that Person or any of its Restricted Subsidiaries at the time; and

 

(4)                                 other agreements or arrangements designed to protect such Person or any of its Restricted Subsidiaries against fluctuations in interest rates, commodity prices or currency exchange rates,

 

and in each case are entered into only in the normal course of business and not for speculative purposes.

 

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

 

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

 

“Indebtedness” means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent:

 

(1)                                 in respect of borrowed money;

 

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(2)                                 evidenced by bonds, notes, debentures or similar instruments;

 

(3)                                 in respect of all outstanding letters of credit issued for the account of such Person that support obligations that constitute Indebtedness (provided that the amount of such letters of credit included in Indebtedness shall not exceed the amount of the Indebtedness being supported) and, without duplication, the unreimbursed amount of all drafts drawn under letters of credit issued for the account of such Person;

 

(4)                                 in respect of bankers’ acceptances;

 

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

 

(6)                                 representing the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable; or

 

(7)                                 representing any obligations under Hedging Contracts,

 

if and to the extent any of the preceding items (other than letters of credit and obligations under Hedging Contracts) 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 other Persons 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 (including, with respect to any Production Payment, any warranties or guarantees of production or payment by such Person with respect to such Production Payment, but excluding other contractual obligations of such Person with respect to such Production Payment).

 

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

 

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

 

(2)                                 in the case of obligations under any Hedging Contracts, the termination value of the agreement or arrangement giving rise to such obligations that would be payable by such Person at such date; and

 

(3)                                 the principal amount of the Indebtedness, together with any interest on the Indebtedness that is more than 30 days past due, in the case of any other Indebtedness.

 

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

 

“Initial Issuance Date” means December 4, 2012.

 

“Initial Notes” has the meaning provided in the Appendix.

 

“Initial Purchasers” has the meaning provided in the Appendix.

 

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“Investments” means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including guarantees or other obligations), advances or capital contributions (excluding (1) commission, travel and similar advances to officers and employees made in the ordinary course of business and (2) advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of the lender), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, 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 in an amount equal to the fair market value of the Equity Interests of such Restricted Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of Section 4.07.  The acquisition by the Company or any Subsidiary of the Company of a Person that holds an Investment in a third Person will be deemed to be an Investment made by the Company or such Subsidiary in such third Person in an amount equal to the fair market value of the Investment held by the acquired Person in such third Person on the date of any such acquisition in an amount determined as provided in the final paragraph of Section 4.07.

 

“Joint Venture” means any Person that is not a direct or indirect Subsidiary of the Company in which the Company or any of its Restricted Subsidiaries makes any Investment.

 

“Legal Holiday” means any calendar day other than a Business Day.  If a payment date is a Legal Holiday, payment may be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period.

 

“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 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 other than a precautionary financing statement respecting a lease not intended as a security agreement.

 

“Make Whole Premium” means, with respect to a Note at any time, the excess, if any, of (a) the present value at such time of (i) the redemption price of such Note at December 1, 2016 pursuant to Section 3.07(a) plus (ii) any required interest payments due on such Note through December 1, 2016 (except for currently accrued and unpaid interest), computed using a discount rate equal to the Treasury Rate 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 such Note.

 

“Moody’s” means Moody’s Investors Service, Inc. or any successor to the rating agency business thereof.

 

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“Net Proceeds” means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of:

 

(1)                                 the direct costs relating to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, severance costs and any relocation expenses incurred as a result of the Asset Sale,

 

(2)                                 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,

 

(3)                                 amounts required to be applied to the repayment of Indebtedness secured by a Lien on the properties or assets that were the subject of such Asset Sale, and

 

(4)                                 any amounts to be set aside in any reserve established in accordance with GAAP or any amount placed in escrow, in either case for adjustment in respect of the sale price of such properties or assets or for liabilities associated with such Asset Sale and retained by the Company or any of its Restricted Subsidiaries until such time as such reserve is reversed or such escrow arrangement is terminated, in which case Net Proceeds shall include only the amount of the reserve so reversed or the amount returned to the Company or its Restricted Subsidiaries from such escrow arrangement, as the case may be.

 

“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), (b) is directly or indirectly liable as a guarantor or otherwise, except for Customary Recourse Exceptions, or (c) is the lender;

 

(2)                                 no default with respect to which (including any rights that the holders of the Indebtedness may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness (other than the Notes) of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment of the Indebtedness to be accelerated or payable prior to its Stated Maturity; and

 

(3)                                 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 except as contemplated by clause (9) of the definition of Permitted Liens or for Customary Recourse Exceptions.

 

For purposes of determining compliance with Section 4.09, in the event that any Non-Recourse Debt of any of the Unrestricted Subsidiaries ceases to be Non-Recourse Debt of such Unrestricted Subsidiary, such event will be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Company.

 

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“Notes” has the meaning specified in the Appendix.

 

“Notes Custodian” has the meaning specified in the Appendix.

 

“Obligations” means any principal, premium, if any, interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization, whether or not a claim for post-filing interest is allowed in such proceeding), penalties, fees, charges, expenses, indemnifications, reimbursement obligations, damages, guarantees, and other liabilities or amounts payable under the documentation governing any Indebtedness or in respect thereto.

 

“Offering Memorandum” means the offering memorandum of the Issuers dated November 19, 2012 relating to the offering of the Initial Notes.

 

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

 

“Officers’ Certificate” means a certificate signed on behalf of each of the Company and Finance Corp. by two of its Officers, one of whom, in the case of any Officers’ Certificate delivered pursuant to Section 4.04, must be the principal executive officer, the principal financial officer, or the principal accounting officer of the Company or Finance Corp., as the case may be, that, in each case, meets the requirements of Section 11.05 hereof.

 

“Oil and Gas Business” means:

 

(1)                                 the acquisition, exploration, development, production, operation and disposition of interests in oil, gas and other Hydrocarbon properties;

 

(2)                                 the gathering, marketing, treating, processing (but not refining), storing, distributing, selling and transporting of any production from such interests or properties;

 

(3)                                 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;

 

(4)                                 any other business that generates gross income that constitutes “qualifying income” under Section 7704(d) of the Code; and

 

(5)                                 any activity that is ancillary, complementary or incidental to or necessary or appropriate for the activities described in clauses (1) through (4) of this definition.

 

“Opinion of Counsel” means a written opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 11.05 hereof.  The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee.

 

“Pari Passu Indebtedness” means, with respect to any Excess Proceeds from Asset Sales, Indebtedness of an Issuer or any Guarantor that ranks equally in right of payment with the Notes 

 

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or the Subsidiary Guarantees, as the case may be, and the terms of which require the Company or any of its Restricted Subsidiaries to apply such Excess Proceeds to offer to repurchase such Indebtedness.

 

“Partnership Agreement” means the First Amended and Restated Agreement of Limited Partnership of the Company, as amended and in effect on the date of this Indenture and as such may be further amended, modified or supplemented from time to time.

 

“Pending Permian Basin Acquisition” means the acquisition of certain oil and natural gas properties in the Permian Basin pursuant to the Pending Permian Basin Acquisition Agreement.

 

“Pending Permian Basin Acquisition Agreement” means the Purchase and Sale Agreement, dated as of November 5, 2012, among Legacy Reserves Operating LP, COG Operating LLC and Concho Oil & Gas LLC, as amended, supplemented or otherwise modified from time to time.

 

“Permitted Acquisition Indebtedness” means Indebtedness or Disqualified Stock of the Company or any of its Restricted Subsidiaries to the extent such Indebtedness or Disqualified Stock was Indebtedness or Disqualified Stock of any other Person existing at the time (a) such Person became a Restricted Subsidiary of the Company or (b) such Person was merged or consolidated with or into the Company or any of its Restricted Subsidiaries, provided that on the date such Person became a Restricted Subsidiary of the Company or the date such 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 on a pro forma basis as if the same had occurred at the beginning of the applicable four-quarter period, the Company or such Restricted Subsidiary, as applicable, would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09, or

 

(2)                                 immediately after giving effect to such 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 would be equal to or greater than the Fixed Charge Coverage Ratio of the Company immediately prior to such transaction.

 

“Permitted Business Investments” means Investments made in the ordinary course of, and of a nature that is or shall have become customary in, the Oil and Gas Business, including investments or expenditures for actively exploring for, acquiring, developing, producing, processing, gathering, marketing or transporting Hydrocarbons through agreements, transactions, interests or arrangements that permit one to share risk or costs, comply with regulatory requirements regarding local ownership or satisfy other objectives customarily achieved through the conduct of the Oil and Gas Business jointly with third parties, including without limitation:

 

(1)                                 direct or indirect ownership of crude oil, natural gas, other Hydrocarbon properties or any interest therein, gathering, transportation, processing, storage or related systems, or ancillary real property interests and interests therein; and

 

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(2)                                 the entry into operating agreements, joint ventures, processing agreements, working interests, royalty interests, mineral leases, farm-in agreements, farm-out agreements, development agreements, production sharing agreements, area of mutual interest agreements, contracts for the sale, transportation or exchange of crude oil and natural gas and related Hydrocarbons and minerals, unitization agreements, pooling arrangements, joint bidding agreements, service contracts, partnership agreements (whether general or limited), or other similar or customary agreements, transactions, properties, interests or arrangements, and Investments and expenditures in connection therewith or pursuant thereto, in each case made or entered into in the ordinary course of the Oil and Gas Business, excluding, however, Investments in corporations and publicly traded limited partnerships.

 

“Permitted Investments” means:

 

(1)                                 any Investment in the Company (including, without limitation, through purchases of Notes) 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, including pursuant to clause (9) or (14) of the items deemed not to be Asset Sales under the definition of “Asset Sale;”

 

(5)                                 any Investment in any Person solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company;

 

(6)                                 any Investments received in compromise of obligations of trade creditors or customers that were incurred in the ordinary course of business, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer, or as a result of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to any secured Investment in default;

 

(7)                                 Hedging Contracts;

 

(8)                                 Permitted Business Investments; and

 

(9)                                 other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to 

 

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subsequent changes in value), when taken together with all other Investments made pursuant to this clause (9) that are at the time outstanding, do not exceed the greater of $50.0 million or 5.0% of the Company’s Adjusted Consolidated Net Tangible Assets provided, however, that if any Investment pursuant to this clause (9) is made in any Person that is not a Restricted Subsidiary of the Company at the date of the making of such Investment and such Person becomes a Restricted Subsidiary of the Company 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 (9) for so long as such Person continues to be a Restricted Subsidiary of the Company.

 

“Permitted Liens” means:

 

(1)                                 any Lien with respect to the Credit Agreement or any other Credit Facilities;

 

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

 

(3)                                 Liens on property of a Person existing at the time such Person 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 merger or consolidation and do not extend to any assets (other than improvements thereon, accessions thereto and proceeds thereof) other than those of the Person merged into or consolidated with the Company or the Restricted Subsidiary of the Company;

 

(4)                                 Liens on property existing at the time of acquisition of the property by the Company or any Restricted Subsidiary of the Company, provided that such Liens were in existence prior to the contemplation of such acquisition;

 

(5)                                 any interest or title of a lessor to the property subject to a Capital Lease Obligation;

 

(6)                                 Liens for the purpose of securing the payment of all or a part of the purchase price of, or Capital Lease Obligations, purchase money obligations or other payments incurred to finance the acquisition, lease, improvement or construction of or repairs or additions to, assets or property acquired or constructed in the ordinary course of business; provided that:

 

(a)                                 the aggregate principal amount of Indebtedness secured by such Liens is otherwise permitted to be incurred under this Indenture and does not exceed the cost of the assets or property so acquired or constructed; and

 

(b)                                 such Liens are created within 180 days of the later of the acquisition, lease, completion of improvements, construction, repairs or additions or commencement of full operation of the assets or property subject to such Lien and do not encumber any other assets or property of the Company or any Restricted Subsidiary of the Company other than such assets or property and assets affixed or appurtenant thereto;

 

23

 

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

 

(8)                                 Liens to secure the performance of tenders, bids, statutory obligations, surety or appeal bonds, trade contracts, government contracts, operating leases, performance bonds or other obligations of a like nature incurred in the ordinary course of business;

 

(9)                                 Liens on and pledges of the Equity Interests of any Unrestricted Subsidiary or any Joint Venture owned by the Company or any Restricted Subsidiary of the Company to the extent securing Non-Recourse Debt or other Indebtedness of such Unrestricted Subsidiary or Joint Venture;

 

(10)                          Liens in respect of Production Payments and Reserve Sales, which Liens shall be limited to the property that is the subject of such Production Payments and Reserve Sales;

 

(11)                          Liens on pipelines or pipeline facilities that arise by operation of law;

 

(12)                          Liens arising under operating agreements, joint venture agreements, partnership agreements, oil and gas leases, farm-out agreements, farm-in agreements, division orders, contracts for the sale, transportation or exchange of crude oil and natural gas and related Hydrocarbons and minerals, unitization and pooling declarations and agreements, area of mutual interest agreements and other agreements arising in the ordinary course of business of the Company and its Restricted Subsidiaries that are customary in the Oil and Gas Business;

 

(13)                          Liens reserved in oil and gas mineral leases for bonus or rental payments and for compliance with the terms of such leases;

 

(14)                          Liens upon specific items of inventory, receivables or other goods or proceeds of the Company or any of its Restricted Subsidiaries securing such Person’s obligations in respect of bankers’ acceptances or receivables securitizations issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory, receivables or other goods or proceeds and permitted by Section 4.09;

 

(15)                          Liens securing Obligations of the Issuers or any Guarantor under the Notes or the Subsidiary Guarantees, as the case may be;

 

(16)                          Liens securing any Indebtedness equally and ratably with all Obligations due under the Notes or any Subsidiary Guarantee pursuant to a contractual covenant that limits Liens in a manner substantially similar to Section 4.12;

 

(17)                          Liens to secure performance of Hedging Contracts of the Company or any of its Restricted Subsidiaries;

 

(18)                          Liens securing any insurance premium financing under customary terms and conditions, provided that no such Lien may extend to or cover any assets or property 

 

24

 

other than the insurance being acquired with such financing, the proceeds thereof and any unearned or refunded insurance premiums related thereto;

 

(19)                          Liens arising from royalties, overriding royalties, revenue interests, net revenue interests, net profit interests, reversionary interests, production payments, preferential rights of purchase, working interests and other similar interests, all as ordinarily exist with respect to properties and assets of the Company and its Restricted Subsidiaries or otherwise as are customary in the Oil and Gas Business;

 

(20)                          other Liens incurred by the Company or any Restricted Subsidiary of the Company, provided that, after giving effect to any such incurrence, the aggregate principal amount of all Indebtedness then outstanding and secured by any Liens incurred pursuant to this clause (20) does not exceed the greater of $25.0 million or 2.5% of the Company’s Adjusted Consolidated Net Tangible Assets; and

 

(21)                          any Lien renewing, extending, refinancing or refunding a Lien permitted by clauses (1) through (19) 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 encumbered by any such Lien other than the assets permitted to be encumbered immediately prior to such renewal, extension, refinance or refund are encumbered thereby (other than improvements thereon, accessions thereto and proceeds thereof).

 

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

 

(1)                                 the principal amount of such Permitted Refinancing Indebtedness does not exceed the principal amount of the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest on the Indebtedness and the amount of all expenses and premiums incurred in connection therewith);

 

(2)                                 such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded;

 

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

 

25

 

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

 

Notwithstanding the preceding, any Indebtedness incurred under Credit Facilities pursuant to Section 4.09 shall be subject only to the refinancing provision in the definition of Credit Facilities and not pursuant to the requirements set forth in the definition of Permitted Refinancing Indebtedness.

 

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

 

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

 

“Production Payments and Reserve Sales” means the grant or transfer by the Company or a Restricted Subsidiary of the Company to any Person of a royalty, overriding royalty, net profits interest, production payment (whether volumetric or dollar denominated), 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, 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 and other providers of technical services to the Company or a Subsidiary of the Company.

 

“Purchase Agreement” has the meaning provided in the Appendix.

 

“QIB” means a “qualified institutional buyer” as defined in Rule 144A under the Securities Act.

 

“Qualifying Owners” means, collectively, the Company and Restricted Subsidiaries.

 

“Registered Exchange Offer” has the meaning provided in the Appendix.

 

“Registration Rights Agreement” has the meaning provided in the Appendix.

 

“Regulation S” has the meaning provided in the Appendix.

 

“Reporting Default” means a Default described in Section 6.01(d).

 

“Responsible Officer,” when used with respect to the Trustee, means any officer within the corporate trust department of the Trustee having direct responsibility for the administration of this Indenture.

 

“Restricted Global Note” has the meaning provided in the Appendix.

 

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

 

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“Restricted Subsidiary” of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary.  Notwithstanding anything in this Indenture to the contrary, Finance Corp. shall be a Restricted Subsidiary of the Company.

 

“Rule 144A” has the meaning provided in the Appendix.

 

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., or any successor to the rating agency business thereof.

 

“SEC” or “Commission” means the Securities and Exchange Commission.

 

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

 

“Senior Debt” means

 

(1)                                 all Indebtedness of the Company or any of its Restricted Subsidiaries outstanding under Credit Facilities and all obligations under Hedging Contracts with respect thereto;

 

(2)                                 any other Indebtedness of the Company or any of its Restricted Subsidiaries permitted to be incurred under the terms of this Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is subordinated in right of payment to the Notes or any Subsidiary Guarantee; and

 

(3)                                 all Obligations with respect to the items listed in the preceding clauses (1) and (2).

 

Notwithstanding anything to the contrary in the preceding sentence, Senior Debt will not include:

 

(a)                                 any intercompany Indebtedness of the Company or any of its Restricted Subsidiaries to the Company or any of its Affiliates; or

 

(b)                                 any Indebtedness that is incurred in violation of this Indenture.

 

For the avoidance of doubt, “Senior Debt” will not include any trade payables or taxes owed or owing by the Company or any of its Restricted Subsidiaries.

 

“Shelf Registration Statement” has the meaning provided in the Appendix.

 

“Significant Subsidiary” means any 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 Mandatory Redemption Trigger Event” means the earlier to occur of the following two events:

 

(1)                                 January 31, 2013 if the Pending Permian Basin Acquisition has not been consummated on or before such date; or

 

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(2)                                 the termination of the Pending Permian Basin Acquisition Agreement prior to the consummation of the Pending Permian Basin Acquisition.

 

“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 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

 

(2)                                 any partnership (whether general or limited) or limited liability company (a) the sole general partner or member of which is such Person or a Subsidiary of such Person, or (b) if there is more than a single general partner or member, either (x) the only managing general partners or managing members of which are such Person or one or more Subsidiaries of such Person (or any combination thereof) or (y) such Person owns or controls, directly or indirectly, a majority of the outstanding general partner interests, member interests or other Voting Stock of such partnership or limited liability company, respectively.

 

“Subsidiary Guarantee” means any guarantee by a Guarantor of the Issuers’ Obligations under this Indenture and the Notes pursuant to Article 10 hereof.

 

“TIA” means the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) and the rules and regulations thereunder, as in effect on the date on which this Indenture is qualified under the TIA (except as provided in Section 9.01(i) and 9.03 hereof).

 

“Transfer Restricted Securities” has the meaning provided in the Appendix.

 

“Treasury Rate” means the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15(519) which has become publicly available at least two Business Days prior to the date fixed for redemption (or, 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 December 1, 2016; provided, however, that if such period is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Company shall obtain the Treasury Rate by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the period from the redemption date to December 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 shall be used.  The Company will (a) calculate the Treasury Rate on the second Business Day preceding the 

 

28

 

applicable redemption date and (b) prior to such redemption date file with the Trustee an Officers’ Certificate setting forth the Make Whole Premium and the Treasury Rate and showing the calculation of each in reasonable detail.

 

“Trustee” means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder.

 

“Uniform Commercial Code” means the New York Uniform Commercial Code as in effect from time to time.

 

“Unrestricted Subsidiary” means any Subsidiary of the Company (other than Finance Corp.) that is designated by the Board of Directors of the Company as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent that such Subsidiary:

 

(1)                                 has no Indebtedness other than Non-Recourse Debt owing to any Person other than the Company or any of its Restricted Subsidiaries;

 

(2)                                 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;

 

(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.

 

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

 

Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary will be evidenced to the Trustee by filing with the Trustee a Board Resolution 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.  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, the Company will be in default of such covenant.

 

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

 

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“Voting Stock” of any Person as of any date means the Capital Stock of such Person that is at the time entitled (without regard to the occurrence of any contingency) to vote in the election of the Board of Directors of such Person.

 

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

 

(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, in respect of the Indebtedness, 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 principal amount of such Indebtedness.

 

Section 1.02.                          Other Definitions.

 

	
Term
    	
 
    	
Defined in Section
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
“Act” 
    	
 
    	
11.14
    	
 
    
	
“Affiliate Transaction”   
    	
 
    	
4.11
    	
 
    
	
“Appendix” 
    	
 
    	
2.01
    	
 
    
	
“Asset Sale Offer”   
    	
 
    	
3.09
    	
 
    
	
“Change of Control Offer”   
    	
 
    	
4.15
    	
 
    
	
“Change of Control   Payment” 
    	
 
    	
4.15
    	
 
    
	
“Change of Control   Purchase Date” 
    	
 
    	
4.15
    	
 
    
	
“Covenant Defeasance”   
    	
 
    	
8.03
    	
 
    
	
“Discharge” 
    	
 
    	
8.08
    	
 
    
	
“Event of Default”   
    	
 
    	
6.01
    	
 
    
	
“Excess Proceeds”   
    	
 
    	
4.10
    	
 
    
	
“Incremental Funds”   
    	
 
    	
4.07
    	
 
    
	
“incur” 
    	
 
    	
4.09
    	
 
    
	
“Legal Defeasance”   
    	
 
    	
8.02
    	
 
    
	
“Offer Amount”   
    	
 
    	
3.09
    	
 
    
	
“Offer Period”   
    	
 
    	
3.09
    	
 
    
	
“Paying Agent”   
    	
 
    	
2.03
    	
 
    
	
“Payment Default”   
    	
 
    	
6.01
    	
 
    
	
“Permitted Debt”   
    	
 
    	
4.09
    	
 
    
	
“Purchase Date”   
    	
 
    	
3.09
    	
 
    
	
“Registrar” 
    	
 
    	
2.03
    	
 
    
	
“Restricted Payments”   
    	
 
    	
4.07
    	
 
    
	
“Termination Date”   
    	
 
    	
3.09
    	
 
    
	
“Trailing Four Quarters”   
    	
 
    	
4.07
    	
 
    

 

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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, whether or not this Indenture is then qualified under the TIA.  Any terms incorporated 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)                                 words in the singular include the plural, and in the plural include the singular;

 

(5)                                 the meanings of the words “will” and “shall” are the same when used to express an obligation;

 

(6)                                 references to sections of or rules under the Securities Act or the Exchange Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the SEC from time to time; and

 

(7)                                 “herein,” “hereof” and other words of similar import refer to this Indenture as a whole (as amended or supplemented from time to time) and not to any particular Article, Section or other subdivision.

 

ARTICLE 2
 THE NOTES

 

Section 2.01.                          Form and Dating.

 

Provisions relating to the Initial Notes and the Exchange Notes are set forth in the Rule 144A/Regulation S Appendix attached hereto (the “Appendix”) which is hereby incorporated in and expressly made part of this Indenture. The Initial Notes and the Trustee’s certificate of authentication therefor shall be substantially in the form of Exhibit 1 to the Appendix which is hereby incorporated in and expressly made a part of this Indenture.  The Exchange Notes and the Trustee’s certificate of authentication therefor shall be substantially in the form of Exhibit A to the Appendix, which is hereby incorporated in and expressly made a part of this Indenture.  The Notes may have notations, legends or endorsements required by law, stock exchange rule, agreements to which an Issuer is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company).  Each Note shall be dated the 

 

31

 

date of its authentication.  The terms of the Notes set forth in the Appendix are part of the terms of this Indenture.

 

Section 2.02.                          Execution and Authentication.

 

An Officer shall sign the Notes on behalf of each Issuer by manual or facsimile signature.

 

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

 

A Note shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Note.  The signature shall be conclusive evidence that the Note has been authenticated under this Indenture.

 

On the Initial Issuance Date, the Trustee shall authenticate and deliver $300.0 million of 8% Senior Notes due 2020 and, at any time and from time to time thereafter, the Trustee shall authenticate and deliver Notes for original issue in an aggregate principal amount specified in such order, in each case upon a written order of the Issuers.  Such order shall specify the amount of the Notes to be authenticated, the date on which the original issue of Notes is to be authenticated and to whom the Notes shall be registered and delivered and, in the case of an issuance of Additional Notes pursuant to Section 2.13 after the Initial Issuance Date, shall certify that such issuance is in compliance with Section 4.09.

 

The Trustee may appoint an authenticating agent reasonably acceptable to the Issuers to authenticate the Notes.  Unless limited by the terms of such appointment, an authenticating agent may authenticate Notes whenever the Trustee may do so.  Each reference in this Indenture to authentication by the Trustee includes authentication by such agent.  An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands.

 

Section 2.03.                          Registrar and Paying Agent.

 

The Issuers shall maintain an office or agency in the United States where Notes may be presented for registration of transfer or for exchange (the “Registrar”) and an office or agency in New York, New York where Notes may be presented for payment (the “Paying Agent”).  The Registrar shall keep a register of the Notes and of their transfer and exchange.  The Issuers may have 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 Issuers shall enter into an appropriate agency agreement with any Registrar or Paying Agent not a party to this Indenture, which shall incorporate the terms of the TIA.  The agreement shall implement the provisions of this Indenture that relate to such agent.  The Issuers shall notify the Trustee of the name and address of any such agent.  If the Issuers fail to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07.  The Company or any Subsidiary may act as Paying Agent or Registrar.

 

The Issuers initially appoint the Trustee as Registrar and Paying Agent in connection with the Notes at the Corporate Trust Office of the Trustee.  If the Trustee is no longer the 

 

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Registrar and Paying Agent, the Issuers shall provide the Trustee with access to inspect the Note register at all times and with copies of the Note register.

 

Section 2.04.                          Paying Agent to Hold Money in Trust.

 

Prior to 11:00 a.m. New York City time, on each due date of the principal and interest on any Note, an Issuer shall deposit with the Paying Agent a sum sufficient to pay such principal and interest when so becoming due.  The Issuers shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Noteholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Notes and shall notify the Trustee of any default by the Issuers in making any such payment.  If the Company or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund.  The Issuers at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent.  Upon complying with this Section, the Paying Agent shall have no further liability for the money delivered to the Trustee.

 

Section 2.05.                          Noteholder Lists.

 

The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Noteholders.  If the Trustee is not the Registrar, the Issuers shall furnish to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Noteholders and the principal amounts and number of Notes.

 

Section 2.06.                          Transfer and Exchange.

 

The Notes shall be issued in registered form and shall be transferable only upon the surrender of a Note for registration of transfer.  When a Note is presented to the Registrar or a co-registrar with a request to register a transfer, the Registrar shall register the transfer as requested if the requirements of this Indenture and Section 8-401(a) of the Uniform Commercial Code are met.  When Notes are presented to the Registrar with a request to exchange them for an equal principal amount of Notes of other denominations, the Registrar shall make the exchange as requested if the same requirements are met.  The Issuers may require payment of a sum sufficient to cover any taxes, assessments or other governmental charges in connection with any transfer or exchange pursuant to this Section (other than any such transfer taxes, assessments or similar governmental charge payable upon exchange or transfer pursuant to Section 3.06, 4.10, 4.15 or 9.05).

 

Section 2.07.                          Replacement Notes.

 

If a mutilated Note is surrendered to the Registrar or if the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken, the Issuers shall issue and the Trustee shall authenticate a replacement Note if the requirements of Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies any other reasonable requirements of the Trustee.  If required by the Trustee or the Issuers, such Holder shall furnish an indemnity bond sufficient in the judgment of the Issuers and the Trustee to protect the Issuers, the Trustee, the 

 

33

 

Paying Agent and the Registrar from any loss which any of them may suffer if a Note is replaced.  The Issuers and the Trustee may charge the Holder for their expenses in replacing a Note.  In the event any such Note shall have matured, instead of issuing a new Note, the Issuers may direct the Trustee to pay the same without surrender thereof upon the Holder furnishing the Issuers and the Trustee with indemnity satisfactory to them and complying with such other reasonable regulations as the Issuers may prescribe and paying such reasonable expenses as the Issuer and the Trustee may incur in connection therewith.

 

Every replacement Note is an additional obligation of the Issuers.

 

Section 2.08.                          Outstanding Notes.

 

Notes outstanding at any time are all Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation and those described in this Section as not outstanding.  Except as otherwise provided in TIA §316(a), 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, it ceases to be outstanding unless the Trustee, any provider of an indemnity bond and the Issuers receive proof satisfactory to them that the replaced Note is held by a bona fide purchaser.

 

If the Paying Agent segregates and holds in trust, in accordance with this Indenture, by 11:00 a.m. New York time, on a redemption date or other maturity date money sufficient to pay all principal, premium, if any, interest and Additional Interest, if any, payable on that date with respect to the Notes (or portions thereof) to be redeemed or maturing, as the case may be, then on and after that date such Notes (or portions thereof) cease to be outstanding and interest and Additional Interest, if any, on them cease to accrue.

 

Section 2.09.                          Temporary Notes.

 

Until definitive Notes are ready for delivery, the Issuers may prepare and the Trustee shall authenticate temporary Notes.  Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Issuers consider appropriate for temporary Notes.  Without unreasonable delay, the Issuers shall prepare and the Trustee shall authenticate definitive Notes and deliver them in exchange for temporary Notes.

 

Section 2.10.                          Cancellation.

 

An Issuer at any time may deliver Notes to the Trustee for cancellation.  The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment.  The Trustee and no one else shall cancel (subject to the record retention requirements of the Exchange Act) all Notes surrendered for registration of transfer, exchange, payment or cancellation.  Upon written request, the Trustee will deliver a certificate of such cancellation to the Issuers unless the Issuers direct the Trustee to deliver canceled Notes to the Issuers instead.  The Issuers may not issue new Notes to replace Notes they have redeemed, paid or delivered to the Trustee for cancellation.

 

34

 

Section 2.11.                          Defaulted Interest.

 

If the Issuers default in a payment of interest on the Notes, the Issuers shall pay defaulted interest (plus interest on such defaulted interest to the extent lawful) in any lawful manner.  The Issuers may pay the defaulted interest to the Persons who are Noteholders on a subsequent special record date.  The Issuers shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly send to each Noteholder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid.

 

Section 2.12.                          CUSIP Numbers.

 

The Issuers in issuing the Notes may use “CUSIP” numbers and corresponding “ISINs” (if then generally in use) and, if so, the Trustee shall use “CUSIP” numbers and corresponding “ISINs” in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers.

 

Section 2.13.                          Issuance of Additional Notes.

 

The Issuers shall be entitled, subject to their compliance with Section 4.09, to issue Additional Notes under this Indenture which shall have identical terms as the Initial Notes issued on the Initial Issuance Date, other than with respect to the date of issuance, issue price and the date from which interest begins to accrue.  The Initial Notes issued on the Initial Issuance Date, any Additional Notes and all Exchange Notes issued in exchange therefor shall be treated as a single class for all purposes under this Indenture, including, without limitation, waivers, consents, directions, declarations, amendments, redemptions and offers to purchase.

 

With respect to any Additional Notes, the Issuers shall set forth in an Officers’ Certificate, which shall be delivered to the Trustee, the following information:

 

(1)                                 the aggregate principal amount of such Additional Notes to be authenticated and delivered pursuant to this Indenture;

 

(2)                                 the issue price, the issue date and the CUSIP number and any corresponding ISIN of such Additional Notes; and

 

(3)                                 whether such Additional Notes shall be Transfer Restricted Securities and issued in the form of Initial Notes as set forth in Exhibit 1 to the Appendix to this Indenture or shall be issued in the form of Exchange Notes as set forth in Exhibit A to the Appendix.

 

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ARTICLE 3
 REDEMPTION AND PREPAYMENT

 

Section 3.01.                          Notices to Trustee.

 

If the Issuers elect to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, they shall furnish to the Trustee, at least five Business Days (unless a shorter period shall be agreeable to the Trustee) before the date of giving notice of the redemption pursuant to Section 3.03, an Officers’ Certificate setting forth (i) the clause of Section 3.07 pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed, (iv) the redemption price, and (v) whether it requests the Trustee to give notice of such redemption.  Any such notice may be cancelled at any time prior to the giving of notice of such redemption to any Holder and shall thereby be void and of no effect.

 

Section 3.02.                          Selection of Notes to be Redeemed.

 

If less than all of the Notes are to be redeemed at any time, the Trustee shall select the Notes to be redeemed among the Holders of the Notes as follows:  (1) if the Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Notes are listed; or (2) if the Notes are not listed on any national securities exchange, on a pro rata basis (or, in the case of Global Notes, based on such method as the Depository may require).  In the event of partial redemption other than on a pro rata basis, the particular Notes to be redeemed shall be selected, not less than three (3) Business Days (unless a shorter period shall be agreeable to the Trustee) prior to the giving of notice of the redemption pursuant to Section 3.03, by the Trustee from the outstanding Notes not previously called for redemption.

 

The Trustee shall promptly notify the Issuers in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed.  Notes and portions of Notes selected shall be in amounts of $2,000 or integral multiples of $1,000 in excess of $2,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not $2,000 or a multiple of $1,000, shall be redeemed.  Provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption.

 

The provisions of the two preceding paragraphs of this Section 3.02 shall not apply with respect to any redemption affecting only a Global Note, whether such Global Note is to be redeemed in whole or in part.  In case of any such redemption in part, the unredeemed portion of the principal amount of the Global Note shall be in an authorized denomination.

 

Section 3.03.                          Notice of Redemption.

 

At least 30 days but not more than 60 days before an optional redemption date, the Issuers shall send, or cause to be sent, in the manner provided in Section 11.02, a notice of redemption to each Holder whose Notes are to be redeemed, except that redemption notices may be sent more than 60 days prior to a redemption date if the notice is issued in connection with a Legal Defeasance, Covenant Defeasance or Discharge.

 

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

 

(a)                                 the redemption date;

 

(b)                                 the redemption price or, if the redemption price is not then determinable, the manner in which it is to be determined;

 

(c)                                  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 a principal amount equal to the unredeemed portion shall be issued in the name of the Holder upon cancellation of the original Note;

 

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

 

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

 

(f)                                   that, unless the Issuers default in making such redemption payment, interest and Additional Interest, if any, on Notes called for redemption cease to accrue on and after the redemption date and the only remaining right of the Holders of such Notes is to receive payment of the redemption price upon surrender to the Paying Agent of the Notes redeemed;

 

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

 

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

 

If any of the Notes to be redeemed is in the form of a Global Note, then the Issuers shall modify such notice to the extent necessary to accord with the procedures of the Depository applicable to redemption.

 

At the Issuers’ request, the Trustee shall give the notice of optional redemption in the Issuers’ names and at their expense; provided, however, that the Issuers shall have delivered to the Trustee, as provided in Section 3.01, 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 second preceding paragraph.

 

Section 3.04.                          Effect of Notice of Redemption.

 

Once notice of redemption is given in accordance with Section 3.03 hereof, Notes called for redemption become, except as provided in the next succeeding sentence, irrevocably due and payable on the redemption date, at the redemption price.  A notice of redemption may not be conditional, except that any redemption pursuant to Section 3.07(b) may, at the Issuers’ discretion, be subject to the completion of the related Equity Offering.  If given in the manner provided for in Section 3.03, the notice of redemption shall be conclusively presumed to have 

 

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been given whether or not a Holder receives such notice.  Failure to give timely notice or any defect in the notice shall not affect the validity of the redemption.

 

Section 3.05.                          Deposit of Redemption Price.

 

Prior to 11:00 a.m., New York City time, on the redemption date, the Issuers shall deposit with the Paying Agent (or, if the Company or a Subsidiary thereof is acting as its own Paying Agent, segregate and hold in trust as provided in Section 2.04 hereof) money sufficient in same day funds to pay the redemption price of and accrued interest and Additional Interest, if any, on all Notes to be redeemed on that date, it being understood that the amount of money to be deposited by the Company in relation to a mandatory redemption pursuant to Section 3.08 shall take into consideration the amount of money deposited by the Escrow Agent with the Trustee or a Paying Agent to fund such redemption.  The Paying Agent shall promptly return to the Issuers any money deposited with the Paying Agent by an Issuer in excess of the amounts necessary to pay the redemption price of and accrued interest and Additional Interest, if any, on all Notes to be redeemed.

 

If the Issuers comply with the provisions of the preceding paragraph, on and after the redemption date, interest and Additional Interest, if any, shall cease to accrue on the Notes or the portions of Notes called for redemption whether or not such Notes are presented for payment, and the only remaining right of the Holders of such Notes shall be to receive payment of the redemption price upon surrender to the Paying Agent of the Notes redeemed.  If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of an Issuer to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful, on any interest and Additional Interest, if any, 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 in Part.

 

Upon surrender of a Note that is redeemed in part, the Issuers shall issue in the name of the Holder and the Trustee shall authenticate for the Holder at the expense of the Issuers a new Note equal in principal amount to the unredeemed portion of the Note surrendered.

 

Section 3.07.                          Optional Redemption.

 

(a)                                 Except as set forth in clauses (b), (c) and (d) of this Section 3.07, the Issuers shall not have the option to redeem the Notes pursuant to this Section 3.07 prior to December 1, 2016. On or after December 1, 2016, the Issuers shall have the option to redeem the Notes, in whole or in part at any time, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest and Additional Interest, if any, to the applicable redemption date (subject to the right of Holders on the relevant record date to receive interest due on an interest payment date that is on or prior to the redemption date), if redeemed during the twelve-month period beginning on December 1 of the years indicated below:

 

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YEAR
    	
 
    	
PERCENTAGE
    	
 
    
	
2016 
    	
 
    	
104.000
    	
%
    
	
2017 
    	
 
    	
102.000
    	
%
    
	
2018 and thereafter 
    	
 
    	
100.000
    	
%
    

 

(b)           Notwithstanding the provisions of clause (a) of this Section 3.07, at any time  prior to December 1, 2015, the Issuers may on one or more occasions redeem up to 35% of the aggregate principal amount of Notes (including any Additional Notes) issued under this Indenture at a redemption price of 108.0% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the redemption date (subject to the right of Holders on the relevant record date to receive interest due on an interest payment date that is on or prior to the redemption date), with the net cash proceeds of one or more Equity Offerings, provided that:

 

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

 

(2)           each such redemption occurs within 180 days of the date of the closing of each such Equity Offering.

 

(c)           Prior to December 1, 2016, the Issuers may redeem all or part of the Notes at a redemption price equal to the sum of:

 

(1)           100% of the principal amount thereof, plus

 

(2)           accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders on the relevant record date to receive interest due on an interest payment date that is on or prior to the redemption date), plus

 

(3)           the Make Whole Premium at the redemption date.

 

(d)           The Notes may also be redeemed, as a whole, following certain Change of Control Offers, at the redemption price and subject to the conditions set forth in Section 4.15(f).

 

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

 

Section 3.08.         Mandatory Redemption.

 

(a)           The Trustee is hereby authorized and directed to enter into and perform its obligations under the Escrow Agreement on the Initial Issuance Date and any amendment to the Escrow Agreement authorized under the terms thereof.  After the Initial Purchasers have deposited the net proceeds of the Initial Notes with the Escrow Agent on the Initial Issuance Date as provided in the Escrow Agreement, the Escrow Agent shall hold and invest such funds as provided in the Escrow Agreement, and, subject to and in accordance with the conditions and requirements set forth in the Escrow Agreement, it shall either disburse such funds to or for the 

 

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account of the Company or disburse them to the Trustee or the Paying Agent for application to the mandatory redemption of the Initial Notes pursuant to this Section 3.08.

 

(b)           Following the occurrence of the Special Mandatory Redemption Trigger Event, the Issuers shall redeem the Initial Notes as a whole, upon notice as provided in this Section 3.08, at a redemption price equal to 97.848% of the principal amount thereof plus accrued and unpaid interest to the redemption date.  Notwithstanding the provisions of Section 3.03, notice of such mandatory redemption shall be given (in the manner provided in Section 11.02) within ten days of the date of the Special Mandatory Redemption Trigger Event, and not less than 15 nor more than 30 days prior to the redemption date, to the Escrow Agent, to the Trustee and to each Holder, and such notice shall state, in addition to the matters specified in clauses (a)-(h) of Section 3.03, that the Special Mandatory Redemption Trigger Event has occurred and that all of the Initial Notes shall be redeemed on the redemption date set forth in the notice.

 

(c)           Any redemption pursuant to this Section 3.08 shall be made pursuant to the provisions of Sections 3.03 through 3.05 hereof.

 

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 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 five 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.

 

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 and Additional 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, in the manner provided in Section 11.02, a notice to the Trustee and each of the Holders.  The notice will contain all instructions and materials necessary to enable such Holders to tender Notes pursuant

 

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to the Asset Sale Offer.  The notice, which will govern the terms of the Asset Sale Offer, will state:

 

(a)           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;

 

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

 

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

 

(d)           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 on and after the Purchase Date;

 

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

 

(f)            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;

 

(g)           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 image scan, 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;

 

(h)           that, if the aggregate principal amount of Notes surrendered by Holders thereof exceeds the Offer Amount allocated to the purchase of Notes in the Asset Sale Offer, the Trustee will select the Notes to be purchased on a pro rata basis (except that any Notes represented by a Global Note shall be selected by such method as the Depository may require) based on the principal amount of Notes 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

 

(i)            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).

 

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 (and, in accordance with Applicable Procedures when Notes are represented by Global Notes), the Notes or portions thereof tendered

 

41

 

pursuant to the Asset Sale Offer and required to be purchased pursuant to this Section 3.09 and Section 4.10 hereof, or if Notes in an aggregate principal amount less than the Offer Amount allocated to the purchase of Notes in the Asset Sale Offer have 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 for the Asset Sale Offer 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 otherwise 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 Issuers will promptly issue a new Note, and the Trustee, upon written request from the Company, will authenticate and mail or otherwise 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 otherwise delivered by the Company to the Holder thereof.  The Company will publicly announce the results of the Asset Sale Offer on the Purchase Date.

 

ARTICLE 4
 COVENANTS

 

Section 4.01.         Payment of Notes.

 

The Issuers shall pay or cause to be paid the principal of, premium, if any, interest and Additional Interest, if any, on the Notes on the dates and in the manner provided in the Notes.  Principal, premium, if any, interest and Additional Interest, if any, shall be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 11:00 a.m., New York City time, on the due date money deposited by or on behalf of an Issuer or a Guarantor in immediately available funds and designated for and sufficient to pay all principal, premium, if any, interest and Additional Interest, if any, then due.

 

The Issuers shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to the interest rate on the Notes to the extent lawful; and they shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Interest, if any (without regard to any applicable grace period), at the same rate to the extent lawful.

 

The Issuers shall notify the Trustee of the amounts and payment dates of any Additional Interest that may become payable under any Registration Rights Agreement.

 

Section 4.02.         Maintenance of Office or Agency.

 

The Issuers shall maintain an office or agency (which may be an office of the Trustee or an affiliate of the Trustee) in New York, New York where Notes may be presented or surrendered for payment and they shall maintain an office or agency in the United States (which may be an office of the Trustee or an affiliate of the Trustee) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Issuers in respect of the Notes and this Indenture may be served.  The Issuers shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency.  If

 

42

 

at any time the Issuers shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee.

 

The Issuers 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.  Further, if at any time there shall be no such office or agency in the City of New York where the Notes may be presented or surrendered for payment, the Issuers shall forthwith designate and maintain such an office or agency in the City of New York, in order that the Notes shall at all times be payable in the City of New York.  The Issuers shall 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.

 

The Issuers hereby designate the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03.  In addition, Notes may be presented or surrendered for registration of transfer or for exchange, and notices and demands to or upon the Issuers in respect of the Notes and this Indenture may be served, at the corporate trust office of the Trustee set forth in Section 11.02.

 

Section 4.03.         Reports.

 

(a)           Whether or not required by the rules and regulations of the Commission, so long as any Notes are outstanding, the Company will file with the SEC for public availability within the time periods specified in the SEC’s rules and regulations (unless the SEC will not accept such a filing), and the Company will furnish to the Trustee and, upon its prior request, to any of the Holders or Beneficial Owners of Notes, within five Business Days of filing, or attempting to file, the same with the SEC:

 

(1)           all quarterly and annual reports that would be required to be filed with the Commission 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 report only, a report on the Company’s annual financial statements by the Company’s certified independent accountants; and

 

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

 

The availability of the foregoing reports on the SEC’s EDGAR filing system will be deemed to satisfy the foregoing delivery requirements. All such reports will be prepared in all material respects in accordance with all of the rules and regulations applicable to such reports.  The Company will at all times comply with TIA §314(a).

 

(b)           If the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries, then, to the extent material, the quarterly and annual financial information required by Section 4.03(a) 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 

 

43

 

operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries.

 

(c)           Any and all Defaults or Events of Default arising from a failure to furnish or file in a timely manner a report or other information required by this Section 4.03 shall be deemed cured (and the Company shall be deemed to be in compliance with this Section 4.03) upon furnishing or filing such report or other information as contemplated by this Section 4.03 (but without regard to the date on which such report or other information is so furnished or filed); provided that such cure shall not otherwise affect the rights of the Holders or the Trustee under Article 6 hereof if the principal, premium, if any, and interest have been accelerated in accordance with the terms of this Indenture and such acceleration has not been rescinded or cancelled prior to such cure.

 

(d)           For so long as any Notes remain outstanding, the Company and the Guarantors will furnish to the Holders and Beneficial Owners of the Notes and to securities analysts and prospective investors in the Notes, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

 

(e)           Delivery of the foregoing information, reports or certificates or any annual reports, information, documents and other reports to the Trustee is for informational purposes only, and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers’ Certificates).

 

Section 4.04.         Compliance Certificate.

 

(a)           The Issuers and each Guarantor (to the extent that such Guarantor is so required under the TIA) shall deliver to the Trustee, within 90 days after the end of each fiscal year, beginning with the fiscal year ending December 31, 2013, 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 Issuers have kept, observed, performed and fulfilled their obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Issuers have kept, observed, performed and fulfilled each and every covenant contained in this Indenture and are not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (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 Issuers are taking or propose to take with respect thereto).

 

(b)           So long as any of the Notes are outstanding, the Issuers will deliver to the Trustee, forthwith upon any Officer of the General Partner or Finance Corp. becoming aware of any Default or Event of Default, a written statement specifying such Default or Event of Default and what action the Issuers are taking or propose to take with respect thereto.

 

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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.

 

Each of the Issuers 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 each of the Issuers 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.

 

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 or payable to the Company or a Restricted Subsidiary of the Company);

 

(2)           purchase, 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 purchase, redeem, defease or otherwise acquire or retire for value, any Indebtedness that is subordinated to the Notes or the Subsidiary Guarantees (excluding (a) any intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries and (b) the purchase or other acquisition or retirement for value of any such Indebtedness in anticipation of satisfying a sinking fund or other payment obligation due within one year of the date of such purchase or other acquisition or retirement for value), except a payment of interest or principal at the Stated Maturity thereof; or

 

45

 

(4)           make any Restricted Investment (all such payments and other actions set forth in these clauses 4.07(a)(1) through (4) being collectively referred to as “Restricted Payments”),

 

unless, at the time of and after giving effect to such Restricted Payment, no Default (except a Reporting Default) or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment and either:

 

(A)          if the Fixed Charge Coverage Ratio for the Company’s most recently ended four full fiscal quarters for which internal financial statements are available at the time of such Restricted Payment (the “Trailing Four Quarters”) is not less than 2.25 to 1.0, such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries (excluding Restricted Payments permitted by clauses (2) through (10) of the next succeeding paragraph) with respect to the fiscal quarter for which such Restricted Payment is made, is less than the sum, without duplication, of:

 

(i)            Available Cash with respect to the Company’s preceding fiscal quarter; plus

 

(ii)           100% of the aggregate net proceeds received by the Company (including the fair market value of any Capital Stock of Persons engaged primarily in the Oil and Gas Business or long-term assets that are used or useful in the Oil and Gas Business, in each case, to the extent acquired in consideration of Equity Interests of the Company (other than Disqualified Stock)) after 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 Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities that have been converted into or exchanged for such Equity Interests (other than Equity Interests (or Disqualified Stock or debt securities) sold to a Subsidiary of the Company); plus

 

(iii)          to the extent that any Restricted Investment that was made after the date of this Indenture is sold for cash or Cash Equivalents or otherwise liquidated or repaid for cash or Cash Equivalents, the return of capital with respect to such Restricted Investment (less the cost of disposition, if any); plus

 

(iv)          the net reduction in Restricted Investments resulting from dividends, repayments of loans or advances, or other transfers of assets in each case to the Company or any of its Restricted Subsidiaries from any Person (including, without limitation, Unrestricted Subsidiaries) or from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries, to the extent such amounts have not been included in Available Cash for any period commencing on or after the date of this Indenture (items (b), (c) and (d) being referred to as “Incremental Funds”); minus

 

46

 

(v)           the aggregate amount of Incremental Funds previously expended pursuant to this clause (A) and clause (B) below; or

 

(B)          if the Fixed Charge Coverage Ratio for the Trailing Four Quarters is less than 2.25 to 1.0, such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries (excluding Restricted Payments permitted by clauses (2) through (10) of the next succeeding paragraph) with respect to the fiscal quarter for which such Restricted Payment is made (such Restricted Payments for purposes of this clause (B) meaning only distributions on common units of the Company, plus the related distribution to the General Partner), is less than the sum, without duplication, of:

 

(i)            $125.0 million, less the aggregate amount of all prior Restricted Payments made by the Company and its Restricted Subsidiaries pursuant to this clause (B)(i) since the date of this Indenture; plus

 

(ii)           Incremental Funds to the extent not previously expended pursuant to this clause (B) or the immediately preceding clause (A) of this paragraph.

 

(b)           The provisions of Section 4.07(a) 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 giving of the redemption notice, as the case may be, if at the date of declaration or notice, the dividend or redemption payment would have complied with the provisions of this Indenture;

 

(2)           the purchase, redemption, defeasance or other acquisition or retirement of any subordinated Indebtedness of the Company or any Guarantor or of any Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent (a) contribution (other than from a Restricted Subsidiary of the Company) to the equity capital of the Company or (b) sale (other than to a Restricted Subsidiary of the Company) of, Equity Interests of the Company (other than Disqualified Stock), with a sale being deemed substantially concurrent if such purchase, redemption, defeasance or other acquisition or retirement occurs not more than 120 days after such sale; provided, however, that the amount of any such net cash proceeds that are utilized for any such purchase, redemption, defeasance or other acquisition or retirement will be excluded (or deducted, if included) from the calculation of Available Cash and Incremental Funds;

 

(3)           the purchase, redemption, defeasance or other acquisition or retirement of subordinated Indebtedness of the Company or any Guarantor with the net cash proceeds from an incurrence of, or in exchange for, Permitted Refinancing Indebtedness;

 

(4)           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;

 

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(5)           so long as no Default (other than a Reporting Default) or Event of Default has occurred and is continuing or would be caused thereby, the purchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Restricted Subsidiary of the Company pursuant to any director or employee equity subscription agreement, equity option agreement, unitholders’ agreement, other employee benefit plan or to satisfy obligations under any Equity Interests appreciation rights or option plan or similar arrangement; provided, however, that the aggregate price paid for all such purchased, redeemed, acquired or retired Equity Interests may not exceed $5.0 million in any calendar year (with any portion of such $5.0 million amount that is unused in any calendar year to be carried forward to successive calendar years and added to such amount) plus, to the extent not previously applied or included, (a) the cash proceeds received by the Company or any of its Restricted Subsidiaries from sales of Equity Interests of the Company to employees or directors of the Company or its Affiliates that occur after the date of the indenture (to the extent the cash proceeds from the sale of such Equity Interests have not otherwise been applied to the payment of Restricted Payments by virtue of clause (A)(ii) or (B)(ii) of Section 4.07(a)) and (b) the cash proceeds of key man life insurance policies received by the Company or any of its Restricted Subsidiaries after the date of the indenture;

 

(6)           the purchase, repurchase, redemption or other acquisition or retirement for value of Equity Interests deemed to occur upon the exercise of unit options, warrants, incentives, rights to acquire Equity Interests or other convertible securities if such Equity Interests represent a portion of the exercise or exchange price thereof, and any purchase, repurchase, redemption or other acquisition or retirement for value of Equity Interests made in lieu of withholding taxes in connection with any exercise or exchange of unit options, warrants, incentives or rights to acquire Equity Interests;

 

(7)           the purchase, redemption or other acquisition or retirement for value of Equity Interests of the Company or any Restricted Subsidiary of the Company representing fractional units of such Equity Interests in connection with a merger or consolidation involving the Company or such Restricted Subsidiary or any other transaction permitted by this Indenture;

 

(8)           any payments in connection with a consolidation, merger or transfer of assets in connection with a transaction that is not prohibited by this Indenture not to exceed $5.0 million in the aggregate after the date of this Indenture;

 

(9)           so long as no Default (other than a Reporting Default) or Event of Default has occurred and is continuing or would be caused thereby, the declaration and payment of regularly scheduled or accrued dividends to holders of any class or series of Disqualified Stock of the Company or any preferred securities of any Restricted Subsidiary of the Company issued on or after the date of this Indenture in accordance with Section 4.09; and

 

(10)         so long as no Default (other than a Reporting Default) or Event of Default has occurred and is continuing or would be caused thereby, other Restricted Payments in an aggregate amount not to exceed $5.0 million since the date of this Indenture.

 

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The amount of all Restricted Payments (other than cash) will be the fair market value, on the date of the Restricted Payment, of the Restricted Investment proposed to be made or the asset(s) or securities proposed to be transferred or issued by the Company or any of its Restricted Subsidiaries, as the case may be, pursuant to the Restricted Payment, except that the fair market value of any non-cash dividend or distribution paid within 60 days after the date of its declaration shall be determined as of such date.  The fair market value of any Restricted Investment, assets or securities that are required to be valued by this Section 4.07 will be determined in accordance with the definition of that term.  For purposes of determining compliance with this Section 4.07, (x) in the event that a Restricted Payment meets the criteria of more than one of the categories of Restricted Payments described in the preceding clauses (1) through (10) of Section 4.07(b), or is permitted pursuant to Section 4.07(a), the Company will be permitted to classify (or later classify or reclassify in whole or in part in its sole discretion) such Restricted Payment (or portion thereof) on the date made or later reclassify such Restricted Payment (or portion thereof) in any manner that complies with this Section 4.07; and (y) in the event a Restricted Payment is made pursuant to clause (A) or (B) of Section 4.07(a), the Company will be permitted to classify whether all or any portion thereof is being (and in the absence of such classification shall be deemed to have classified the minimum amount possible as having been) made with Incremental Funds.

 

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 pay any Indebtedness or other obligations owed to the Company or any of its Restricted Subsidiaries;

 

(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)           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:

 

(1)           agreements as in effect on the date of this Indenture and any amendments, restatements, modifications, renewals, increases, supplements, refundings, replacements or refinancings of those agreements or the Indebtedness to which they relate; provided that the amendments, restatements, modifications, renewals, increases, supplements, refundings, replacements or refinancings are not materially more restrictive, taken as a

 

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whole, with respect to such dividend, distribution and other payment restrictions than those contained in those agreements on the date of this Indenture;

 

(2)           this Indenture, the Notes and the Subsidiary Guarantees;

 

(3)           applicable law, rule, regulation, order, approval, license, permit or similar restriction;

 

(4)           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; provided that, in the case of Indebtedness, such Indebtedness was otherwise permitted by the terms of this Indenture to be incurred;

 

(5)           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;

 

(6)           Capital Lease Obligations, mortgage financings or purchase money obligations, in each case for property acquired in the ordinary course of business that impose restrictions on that property of the nature described in clause (3) of Section 4.08(a);

 

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

 

(8)           Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are not materially more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced;

 

(9)           Liens securing Indebtedness otherwise permitted to be incurred under the provisions of Section 4.12 that limit the right of the debtor to dispose of the assets subject to such Liens;

 

(10)         provisions with respect to the disposition or distribution of assets or property in joint venture agreements, asset sale agreements, sale-leaseback agreements, stock sale agreements and other agreements described in the definition of “Permitted Business Investments,” entered into in the ordinary course of business;

 

(11)         any agreement or instrument relating to any property or assets acquired after the date of this Indenture, so long as such encumbrance or restriction relates only to the property or assets so acquired and is not and was not created in anticipation of such acquisitions;

 

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

 

(13)         the issuance of preferred securities by a Restricted Subsidiary of the Company or the payment of dividends thereon in accordance with the terms thereof; provided that issuance of such preferred securities is permitted pursuant to Section 4.09 and the terms of such preferred securities do not expressly restrict the ability of such Restricted Subsidiary to pay dividends or make any other distributions on its Capital Stock (other than requirements to pay dividends or liquidation preferences on such preferred securities prior to paying any dividends or making any other distributions on such other Capital Stock);

 

(14)         in the case of any Foreign Subsidiary, any encumbrance or restriction contained in the terms of any Indebtedness or any agreement pursuant to which such Indebtedness was incurred if either (a) the encumbrance or restriction applies only in the event of a payment default or a default with respect to a financial covenant in such Indebtedness or agreement or (b) the Company determines that any such encumbrance or restriction will not materially affect the Company’s ability to make principal or interest payments on the Notes, as determined in good faith by the Board of Directors of the Company, whose determination shall be conclusive; and

 

(15)         agreements governing other Indebtedness permitted to be incurred under Section 4.09 and any amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings of those agreements; provided that the restrictions therein are not materially more restrictive, taken as a whole, than those contained in this Indenture, the Notes and the Subsidiary Guarantees or the Credit Agreement as in effect on the date of this Indenture.

 

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); the Company will not, and will not permit any of its Restricted Subsidiaries to, issue any Disqualified Stock; and the Company will not permit any of its Restricted Subsidiaries to issue any other preferred securities; provided, however, that the Company and any of its Restricted Subsidiaries may incur Indebtedness (including Acquired Debt) or issue Disqualified Stock, and any of the Company’s Restricted Subsidiaries may issue other preferred securities, if, 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 other preferred securities are issued, the Fixed Charge Coverage Ratio 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 Disqualified Stock or other preferred securities had been issued, as the case may be, at the beginning of such four-quarter period.

 

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(b)           Section 4.09(a) will not prohibit the incurrence of any of the following items of Indebtedness or the issuance of any Disqualified Stock described in clause (15) below (collectively, “Permitted Debt”) or the issuance of any preferred securities described in clause (11) below:

 

(1)           the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness under one or more Credit Facilities, provided that, after giving effect to any such incurrence, the aggregate principal amount of all Indebtedness incurred 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 Subsidiaries thereunder) and then outstanding does not exceed the greater of (a) $1,000.0 million or (b) $475.0 million plus 35.0% of the Company’s Adjusted Consolidated Net Tangible Assets;

 

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

 

(3)           the incurrence by the Issuers and the Guarantors of Indebtedness represented by (a) the Initial Notes and the related Subsidiary Guarantees issued on the date of this Indenture and (b) the Exchange Notes and the related Subsidiary Guarantees issued pursuant to any Registration Rights Agreement;

 

(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 such Restricted Subsidiary, including all Permitted Refinancing Indebtedness incurred to extend, refinance, renew, replace, defease, refund or discharge any Indebtedness incurred pursuant to this clause (4), provided that after giving effect to any such incurrence, the principal amount of all Indebtedness incurred pursuant to this clause (4) and then outstanding does not exceed the greater of (a) $25.0 million or (b) 2.5% of the Company’s Adjusted Consolidated Net Tangible Assets at such time;

 

(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 extend, refinance, renew, replace, defease, refund or discharge any Indebtedness (other than intercompany Indebtedness) that was permitted by this Indenture to be incurred under Section 4.09(a) or clause (2), (3), (4), (5), (15) or (16) of this Section 4.09(b);

 

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

 

(A)  if the Company is the obligor on such Indebtedness and a Guarantor is not the obligee, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the notes, or if a 

 

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Guarantor is the obligor on such Indebtedness and neither the Company nor another Guarantor is the obligee, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Subsidiary Guarantee of such 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 Restricted Subsidiary of the Company and (ii) any sale or other transfer of any such Indebtedness to a Person that is neither the Company nor a Restricted Subsidiary of the Company, will be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (6);

 

(7)           the incurrence by the Company or any of its Restricted Subsidiaries of obligations under Hedging Contracts;

 

(8)           the guarantee by the Company or any of its Restricted Subsidiaries of Indebtedness of the Company or any of its Restricted Subsidiaries that was permitted to be incurred by another provision of this Section 4.09;

 

(9)           the incurrence by the Company or any of its Restricted Subsidiaries of obligations relating to net Hydrocarbon balancing positions arising in the ordinary course of business;

 

(10)         the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness in respect of self-insurance obligations or bid, plugging and abandonment, appeal, reimbursement, performance, surety and similar bonds and completion guarantees issued or provided for the account of the Company and any of its Restricted Subsidiaries in the ordinary course of business, including guarantees and obligations of the Company or any of its Restricted Subsidiaries with respect to letters of credit supporting such obligations (in each case other than an obligation for money borrowed);

 

(11)         the issuance by any of the Company’s Restricted Subsidiaries to the Company or to any of its Restricted Subsidiaries of any preferred securities; provided, however, that:

 

(a)           any subsequent issuance or transfer of Equity Interests that results in any such preferred securities 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 securities to a Person that is neither the Company nor a Restricted Subsidiary of the Company,

 

will be deemed, in each case, to constitute an issuance of such preferred securities by such Restricted Subsidiary that was not permitted by this clause (11);

 

(12)         the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness arising from the honoring by a bank or other financial institution of a check, 

 

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draft or similar instrument inadvertently drawn against insufficient funds, so long as such Indebtedness is covered within five Business Days;

 

(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 of the Company in a transaction permitted by this Indenture, provided such obligation is not reflected on the face of the balance sheet of the Company or any Restricted Subsidiary of the Company;

 

(14)         the incurrence by the Company or any of its Restricted Subsidiaries of liability in respect of the Indebtedness of any Unrestricted Subsidiary or any Joint Venture but only to the extent that such liability is the result of the Company’s or any such Restricted Subsidiary’s being a general partner or member of, or owner of an Equity Interest in, such Unrestricted Subsidiary or Joint Venture and not as guarantor of such Indebtedness and provided that after giving effect to any such incurrence, the aggregate principal amount of all Indebtedness incurred under this clause (14) and then outstanding does not exceed $25.0 million;

 

(15)         Permitted Acquisition Indebtedness; and

 

(16)         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, 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 (16), not to exceed the greater of (i) $50.0 million and (ii) 5.0% of the Company’s Adjusted Consolidated Net Tangible Assets.

 

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 Subsidiary 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.

 

For purposes of determining compliance with this Section 4.09, in the event that an item of Indebtedness (including Acquired Debt) meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (16) above, or is entitled to be incurred pursuant to Section 4.09(a), the Company will be permitted to divide, classify, redivide and reclassify such item of Indebtedness on the date of its incurrence, or later divide, classify, redivide or reclassify all or a portion of such item of Indebtedness, in any manner that complies with this Section 4.09.  Any Indebtedness outstanding under Credit Facilities on the date of this Indenture will initially be deemed to have been incurred on such date under Section 4.09(a).

 

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The accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Stock in the form of additional securities of the same class of Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this Section 4.09; provided, in each such case, that the amount thereof is included in Fixed Charges of the Company as accrued. Further, the accounting reclassification of any obligation of the Company or any of its Restricted Subsidiaries as Indebtedness will not be deemed an incurrence of Indebtedness for purposes of this Section 4.09.

 

Section 4.10.         Asset Sales.

 

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

 

(a)           the Company (or a Restricted Subsidiary of the Company, 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

 

(b)           at least 75% of the aggregate consideration received by the Company and its Restricted Subsidiaries in the Asset Sale and all other Asset Sales since the date of this Indenture is in the form of cash or Cash Equivalents.  For purposes of this provision, each of the following will be deemed to be cash:

 

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

 

(2)           with respect to any Asset Sale of oil and gas properties by the Company or any of its Restricted Subsidiaries, any agreement by the transferee (or an Affiliate thereof) to pay all or a portion of the costs and expenses related to the exploration, development, completion or production of such properties and activities related thereto; and

 

(3)           any securities, notes or other obligations received by the Company or any of its Restricted Subsidiaries from such transferee that are, within 120 days after the Asset Sale, converted by the Company or such Subsidiary into cash, to the extent of the cash received in that conversion.

 

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

 

(1)           to repay, redeem or repurchase any Senior Debt;

 

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(2)           to invest in or acquire Additional Assets; or

 

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

 

(d)           The requirement of clause (2) or (3) of the preceding paragraph (c) 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 Restricted Subsidiary of the Company) with a Person other than an Affiliate of the Company within the time period specified in the preceding paragraph and such Net Proceeds are subsequently applied in accordance with such contract within the later of six months following the date such contract is entered into and 360 days after the receipt of any Net Proceeds from such Asset Sale.

 

(e)           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.

 

(f)            Any Net Proceeds from Asset Sales that are not applied or invested as provided in Section 4.10(c) or (d) will constitute “Excess Proceeds.”  When the aggregate amount of Excess Proceeds exceeds $20.0 million, within ten Business Days thereof, the Company will make an Asset Sale Offer 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 or redeem with the proceeds of sales of assets, offering to purchase or redeem, on a pro rata basis, the maximum principal amount of Notes and such other pari passu Indebtedness that may be purchased 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 and Additional Interest, if any, to the date of purchase or redemption, subject to the rights of Holders on the relevant record date to receive interest due on an interest payment date that is on or prior to the date of purchase, and will be payable in cash.  If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company or any Restricted Subsidiary of the Company may use those Excess Proceeds for any purpose not otherwise prohibited by this Indenture.  If the aggregate principal amount of Notes accepted for payment in such Asset Sale Offer exceeds the amount of Excess Proceeds allocated to the purchase of 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 the Depository may require).  Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero.

 

(g)           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 Section 3.09 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 or this Section 4.10 by virtue of such compliance.

 

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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”), unless:

 

(1)           the Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary of the Company 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 Company’s Board of Directors, 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 of the Company 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 $25.0 million but less than or equal to $50.0 million, an Officers’ Certificate certifying that such Affiliate Transaction or series of related Affiliate Transactions complies with this Section 4.11; or

 

(B)  with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $50.0 million, 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 either the Conflicts Committee of the Board of Directors of the Company (so long as the members of the Conflicts Committee approving the Affiliate Transaction or series of related Affiliate Transactions are disinterested) or a majority of the disinterested members of the Board of Directors of the Company pursuant to a resolution set forth in such Officers’ Certificates.

 

(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, employee benefit plan, equity award, equity options, equity appreciation, officer or director indemnification agreement or any similar plan or 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 any of the Company and its Restricted Subsidiaries;

 

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(3)           transactions with a Person (other than an Unrestricted Subsidiary) that is an Affiliate of the Company solely because the Company owns an Equity Interest in, or controls, such Person;

 

(4)           transactions effected in accordance with the terms of agreements that are identified in Schedule I to this Indenture, in each case 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;

 

(5)           customary compensation, indemnification and other benefits made available to officers, directors, employees or consultants of the Company or a Restricted Subsidiary or Affiliate of the Company, including reimbursement or advancement of out-of-pocket expenses and provisions of officers’ and directors’ liability insurance;

 

(6)           sales of Equity Interests (other than Disqualified Stock) to, or receipt of capital contributions from, Affiliates of the Company;

 

(7)           any Permitted Investments or Restricted Payments that are permitted by Section 4.07;

 

(8)           any transaction in which the Company or any of its Restricted Subsidiaries, as the case may be, delivers to the Trustee a letter from an accounting, appraisal, advisory or investment banking firm of national standing stating that such transaction is fair to the Company or such Restricted Subsidiary from a financial point of view;

 

(9)           (a) guarantees by the Company or any of its Restricted Subsidiaries of performance of obligations of the Unrestricted Subsidiaries in the ordinary course of business, except for guarantees of Indebtedness in respect of borrowed money, and (b) pledges by the Company or any Restricted Subsidiary of the Company of Equity Interests in Unrestricted Subsidiaries for the benefit of lenders or other creditors of the Unrestricted Subsidiaries;

 

(10)         any Affiliate Transaction with a Person in its capacity as a holder of Indebtedness or Capital Stock of the Company or any Restricted Subsidiary of the Company if such Person is treated no more favorably than the other holders of Indebtedness or Capital Stock of the Company or such Restricted Subsidiary;

 

(11)         transactions with Unrestricted Subsidiaries, customers, clients, suppliers or purchasers or sellers of goods or services, or lessors or lessees of property, in each case in the ordinary course of business and otherwise in compliance with the terms of this Indenture which are, in the aggregate (taking into account all the costs and benefits associated with such transactions), not materially less favorable to the Company and its Restricted Subsidiaries than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated person, in the good faith determination of the Company’s Board of Directors or any officer of the Company involved in or otherwise familiar with such transaction, or are on terms at least

 

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as favorable as might reasonably have been obtained at such time from an unaffiliated party; and

 

(12)         transactions between the Company or any of its Restricted Subsidiaries and any Person that would not otherwise constitute an Affiliate Transaction except for the fact that one director of such other Person is also a director of the Company or such Restricted Subsidiary, as applicable; provided that such director abstains from voting as a director of the Company or such Restricted Subsidiary, as applicable, on any matter involving such other Person.

 

Section 4.12.         Limitation on Liens.

 

The Company will not, and will not permit any of its Restricted Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or become effective any Lien of any kind (other than Permitted Liens) securing Indebtedness or Attributable Debt upon any of their property or assets, now owned or hereafter acquired, unless the Notes or any Subsidiary Guarantee of such Restricted Subsidiary, as applicable, is secured on an equal and ratable basis with (or on a senior basis to, in the case of obligations subordinated in right of payment to the Notes or such Subsidiary Guarantee, as the case may be) the obligations so secured until such time as such obligations are no longer secured by a Lien.

 

Section 4.13.         Additional Subsidiary Guarantees.

 

If, after the date of this Indenture, any Restricted Subsidiary of the Company that is not already a Guarantor guarantees any other Indebtedness of either of the Issuers or any Guarantor in excess of a De Minimis Guaranteed Amount, or any Domestic Subsidiary, if not then a Guarantor, incurs any Indebtedness under any Credit Facility, then in either case that Subsidiary will become a Guarantor by executing a supplemental indenture substantially in the form of Annex A hereto and delivering it to the Trustee within 20 Business Days of the date on which it guaranteed or incurred such Indebtedness, as the case may be, together with any Officers’ Certificate or Opinion of Counsel required by Section 9.06; provided, however, that the preceding shall not apply to Subsidiaries of the Company that have properly been designated as Unrestricted Subsidiaries in accordance with this Indenture for so long as they continue to constitute Unrestricted Subsidiaries.  Notwithstanding the preceding, any Subsidiary Guarantee of a Restricted Subsidiary of the Company that was incurred pursuant to this Section 4.13 will be released at such time as such Guarantor ceases both (x) to guarantee any other Indebtedness of either of the Issuers and any other Guarantor in excess of a De Minimis Guaranteed Amount and (y) to be an obligor with respect to any Indebtedness under any Credit Facility.

 

Section 4.14.         Organizational Existence.

 

Subject to Article 5 and Section 10.04 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect:

 

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

 

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(b)                                 the rights (charter and statutory), licenses and franchises of the Company and its Restricted 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 Restricted Subsidiaries, if the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Restricted Subsidiaries, taken as a whole.

 

Section 4.15.                          Offer to Repurchase Upon Change of Control.

 

(a)                                 If a Change of Control occurs, unless the Issuers have previously or concurrently exercised their right to redeem all of the Notes pursuant to Section 3.07 hereof, each Holder will have the right to require the Company 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 cash tender offer (a “Change of Control Offer”) on the terms set forth in this Section 4.15.  In the Change of Control Offer, the Company will offer a payment in cash (“Change of Control Payment”) equal to 101% of the aggregate principal amount of Notes repurchased, plus accrued and unpaid interest and Additional Interest, if any, on the Notes repurchased to the date of purchase (the “Change of Control Purchase Date”), subject to the rights of Holders on the relevant record date to receive interest due on an interest payment date that is on or prior to the Change of Control Purchase Date.

 

Within 30 days following any Change of Control, unless the Issuers have previously or concurrently exercised their right to redeem all of the Notes pursuant to Section 3.07 hereof, the Company will send a notice to each Holder and the Trustee describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes properly tendered prior to the expiration date specified in the notice, which date will be no earlier than 30 days and no later than 60 days from the date such notice is sent, pursuant to the procedures required by this Section 4.15 and described in such notice.  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 of Control.  To the extent that the provisions of any securities laws or regulations conflict with 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 accepted for payment; 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.

 

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The Paying Agent will promptly mail or otherwise deliver 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, it will make such payment through the facilities of the Depository), and the Trustee will promptly authenticate and mail or otherwise deliver (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; provided, however, that each new note will be in a principal amount of $2,000 or an integral multiple of $1,000 in excess of $2,000.  The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Purchase Date.

 

(c)                                  Prior to complying with any of the provisions of this Section 4.15, but in any event no later than the Change of Control Purchase Date, the Company or any Guarantor must either repay all of its other outstanding Senior Debt or obtain the requisite consents, if any, under all agreements governing such Senior Debt to permit the repurchase of Notes required by this Section 4.15.  The provisions described above that require the Company to make a Change of Control Offer following a Change of Control will be applicable whether or not any other provisions of this Indenture are applicable.

 

(d)                                 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 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 applicable to a Change of Control Offer made by the Company and purchases all Notes properly tendered and not withdrawn under the Change of Control Offer.

 

(e)                                  Notwithstanding anything to the contrary contained in this Indenture, a Change of Control Offer may be made in advance of a Change of Control, and conditioned upon the occurrence 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.

 

(f)                                   In the event that the 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 in Section 4.15(d) above) purchases all of the Notes held by such Holders, the Issuers 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 and Additional Interest, if any, on the Notes that remain outstanding, to the date of redemption (subject to the rights of Holders 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.                          No Inducements.

 

The Company will not, and the Company will not permit any of its Subsidiaries, either directly or indirectly, to pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Beneficial Owner or Holder of any Notes for or as an inducement to any 

 

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consent to any waiver, amendment or supplement of any terms or provisions of this Indenture or the Notes, unless such consideration is offered to be paid (or agreed to be paid) to all Beneficial Owners and Holders which so consent in the time frame set forth in the solicitation documents relating to such consent.

 

Section 4.17.                          Permitted 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.

 

Finance Corp. shall not incur Indebtedness unless (1) the Company is a co-obligor or guarantor of such Indebtedness or (2) the net proceeds of such Indebtedness are loaned to the Company or its other Restricted Subsidiaries, used to acquire outstanding debt securities issued by the Company or used to repay Indebtedness of the Company or its other Restricted Subsidiaries as permitted under Section 4.09.  Finance Corp. shall not engage in any business not related directly or indirectly to obtaining money or arranging financing for the Company or its Restricted Subsidiaries.

 

Section 4.18.                          Covenant Termination.

 

If at any time (a) the Notes are rated Baa3 or better by Moody’s and BBB- or better by S&P (or, if either such entity ceases to rate the Notes for reasons outside of the control of the Company, the equivalent investment grade credit rating from any other “nationally recognized statistical rating organization” within the meaning of Section 3(a)(62) of the Exchange Act selected by the Company as a replacement agency), (b) no Default has occurred and is continuing under this Indenture and (c) the Issuers have delivered to the Trustee an Officers’ Certificate certifying to the foregoing provisions of this sentence, the Company and its Restricted Subsidiaries will no longer be subject to the provisions of Sections 3.09, 4.07, 4.08, 4.09,  4.10, 4.11, 4.17, 4.19, and clause (d) of Section 5.01 of this Indenture.  However, the Company and its Restricted Subsidiaries will remain subject to all of the other provisions of this Indenture.

 

Section 4.19.                          Designation of Restricted and Unrestricted Subsidiaries.

 

The Board of Directors of the Company may designate any Restricted Subsidiary of the Company to be an Unrestricted Subsidiary if that designation would not cause a Default.  If a Restricted Subsidiary of the Company 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 properly designated as an Unrestricted Subsidiary 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 the first paragraph of Section 4.07 or represent Permitted Investments, as determined by the Company.  That designation shall only be permitted if the Investment would be permitted at that time and if the Subsidiary of the Company so designated otherwise meets the definition of an Unrestricted Subsidiary.

 

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 

 

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outstanding Indebtedness of such Unrestricted Subsidiary and such designation will only be permitted if (1) such Indebtedness is permitted under Section 4.09, calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period, and (2) no Default or Event of Default would be in existence following such designation.

 

ARTICLE 5
 SUCCESSORS

 

Section 5.01.                          Merger, Consolidation, or Sale of Assets.

 

Neither of the Issuers may, directly or indirectly, (1) consolidate or merge with or into another Person (whether or not such Issuer is the survivor), or (2) sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions to another Person, unless:

 

(a)                                 either (1) such Issuer is the survivor or (2) the Person formed by or surviving any such consolidation or merger (if other than such Issuer ) or to which such sale, assignment, transfer, lease, conveyance or other disposition has been made is a Person organized or existing under the laws of the United States, any state of the United States or the District of Columbia; provided, however, that Finance Corp. may not consolidate or merge with or into any Person other than a corporation satisfying such requirement so long as the Company is not a corporation;

 

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

 

(c)                                  immediately after such transaction no Default or Event of Default exists;

 

(d)                                 in the case of a transaction involving the Company and not Finance Corp., immediately after giving effect to such transaction and any related financing transactions on a pro forma basis as if the same had occurred at the beginning of the applicable four-quarter period, either;

 

(i)                                     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, lease, conveyance 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 the first paragraph of Section 4.09 hereof; or

 

(ii)                                  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, lease, conveyance or other 

 

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disposition has been made, would be equal to or greater than the Fixed Charge Coverage Ratio of the Company immediately before such transactions; and

 

(e)                                  such Issuer has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger or disposition and such supplemental indenture (if any) comply with this Indenture.

 

Notwithstanding the restrictions described in the foregoing clause (d), any Restricted Subsidiary of the Company (other than Finance Corp.) may consolidate with, merge into or dispose of all or part of its properties and assets to the Company without complying with the preceding clause (d) in connection with any such consolidation, merger or disposition.

 

Notwithstanding the second preceding paragraph of this Section 5.01, the Company may reorganize as any other form of entity in accordance with the following procedures provided that:

 

(1)                                 the reorganization involves the conversion (by merger, sale, contribution or exchange of assets or otherwise) of the Company into a form of entity other than a limited partnership formed under Delaware law;

 

(2)                                 the entity so formed by or resulting from such reorganization is an entity organized or existing under the laws of the United States, any state thereof or the District of Columbia;

 

(3)                                 the entity so formed by or resulting from such reorganization assumes all the obligations of the Company under the Notes, this Indenture and the applicable Registration Rights Agreement pursuant to agreements reasonably satisfactory to the Trustee;

 

(4)                                 immediately after such reorganization no Default (other than a Reporting Default) or Event of Default exists; and

 

(5)                                 such reorganization is not materially adverse to the Holders or Beneficial Owners of the Notes (for purposes of this clause (5) a reorganization will not be considered materially adverse to the Holders or Beneficial Owners of the Notes solely because the successor or survivor of such reorganization (a) is subject to federal or state income taxation as an entity or (b) is considered to be an “includible corporation” of an affiliated group of corporations within the meaning of Section 1504(b) of the Code or any similar state or local law).

 

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Section 5.02.                          Successor Substituted.

 

Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the properties or assets of an Issuer in accordance with Section 5.01 hereof, the successor formed by such consolidation or into or with which such Issuer is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and may exercise every right and power of, such Issuer under this Indenture with the same effect as if such successor had been named as such Issuer herein and shall be substituted for such Issuer (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” or “Finance Corp.,” as the case may be, shall refer instead to the successor and not to the Company or Finance Corp., as the case may be); and thereafter (except in the case of a lease of all or substantially all of such Issuer’s properties or assets), such Issuer shall be discharged and released from all obligations and covenants under this Indenture and the Notes.  The Trustee shall enter into a supplemental indenture to evidence the succession and substitution of such successor and such discharge and release of such Issuer.

 

ARTICLE 6
 DEFAULTS AND REMEDIES

 

Section 6.01.                          Events of Default.

 

An “Event of Default” occurs if one of the following shall have occurred and be continuing (whatever the reason for such Event of Default and whether it shall be involuntary or be effected by operation of law):

 

(a)                                 an Issuer defaults in the payment when due of interest or Additional Interest, if any, with respect to, the Notes, and such default continues for a period of 30 days;

 

(b)                                 an Issuer defaults in the payment of the principal of or premium, if any, on the Notes when due at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration or otherwise;

 

(c)                                  the Company fails to comply with the provisions of Section 3.08, 3.09, 4.10, 4.15 or 5.01 hereof;

 

(d)                                 the Company fails to comply with the provisions of Section 4.03 for 180 days after notice to the Company by the Trustee or the Holders of at least 25% in principal amount of the Notes then outstanding of such failure;

 

(e)                                  the Company fails to comply with any other covenant or other agreement in this Indenture or the Notes for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in principal amount of the Notes then outstanding of such failure;

 

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(f)                                   a default occurs 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 such default:

 

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

 

(2)                                 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 $15.0 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 60-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, such 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 or decree;

 

(g)                                  the Company or any of its Restricted Subsidiaries fails to pay final judgments aggregating in excess of $15.0 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;

 

(h)                                 except as permitted by this Indenture, any Subsidiary 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 Subsidiary Guarantee; and

 

(i)                                     the Company, Finance Corp., any of the Company’s Restricted Subsidiaries that is a Significant Subsidiary of the Company or any group of Restricted Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary of the Company pursuant to or within the meaning of Bankruptcy Law:

 

(1)                                 commences a voluntary case,

 

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

 

(3)                                 consents in writing to the appointment of a Custodian of it or for all or substantially all of its property,

 

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

 

(5)                                 admits in writing it generally is not paying its debts as they become due; or

 

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

 

(1)                                 is for relief against the Company, Finance Corp., any of the Company’s Restricted Subsidiaries that is a Significant Subsidiary of the Company or any group of Restricted Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary of the Company in an involuntary case;

 

(2)                                 appoints a Custodian of the Company, Finance Corp., any of the Company’s Restricted Subsidiaries that is a Significant Subsidiary of the Company or any group of Restricted Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary of the Company or for all or substantially all of the property of the Company, Finance Corp., any of the Company’s Restricted Subsidiaries that is a Significant Subsidiary of the Company or any group of Restricted Subsidiaries of the Company, that, taken together, would constitute a Significant Subsidiary of the Company; or

 

(3)                                 orders the liquidation of the Company, Finance Corp., any of the Company’s Restricted Subsidiaries that is a Significant Subsidiary of the Company or any group of Restricted Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary of the Company;

 

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

 

Section 6.02.                          Acceleration.

 

If any Event of Default occurs and is continuing, the Trustee, by notice to the Issuers, or the Holders of at least 25% in principal amount of the then outstanding Notes, by notice to the Issuers and the Trustee, may declare all the Notes to be due and payable immediately.  Upon any such declaration, the Notes shall become due and payable immediately, together with all accrued and unpaid interest, Additional Interest, if any, and premium, if any, thereon.  Notwithstanding the preceding, if an Event of Default specified in clause (i) or (j) of Section 6.01 hereof occurs with respect to the Company, Finance Corp., any of the Company’s Restricted Subsidiaries that is a Significant Subsidiary of the Company or any group of Restricted Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary of the Company, all outstanding Notes shall become due and payable without further action or notice, together with all accrued and unpaid interest, Additional Interest, if any, and premium, if any, thereon.  The Holders of a majority in principal amount of the then outstanding Notes by notice to the Trustee may on behalf of all of the Holders rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except with respect to nonpayment of principal, interest, premium or Additional Interest, if any, that have become due solely because of the acceleration) have been cured or waived.

 

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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 and premium, interest and Additional Interest, if any, 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.

 

Holders of a majority in principal amount of the then outstanding Notes by 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 the principal of or premium, interest or Additional Interest, if any, on the Notes.  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 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.  However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or 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.

 

Section 6.06.                          Limitation on Suits.

 

A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if:

 

(a)                                 the Holder of a Note gives to the Trustee written notice of a continuing Event of Default;

 

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

 

(c)                                  such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity or security satisfactory to the Trustee against any loss, liability or expense;

 

(d)                                 the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and

 

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(e)                                  during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the 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 and premium, interest and Additional Interest, if any, 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.

 

Section 6.08.                          Collection Suit by Trustee.

 

If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Issuers and the Guarantors for the whole amount of principal of, premium, interest and Additional Interest, if any, remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and Additional Interest, if any, and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

 

Section 6.09.                          Trustee May File Proofs of Claim.

 

The Trustee 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 (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Issuers (or any other obligor upon the Notes), their creditors or their 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, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof.  To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee 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 to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization,

 

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arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

 

Section 6.10.                          Priorities.

 

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

 

First:  to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the Trustee’s costs and expenses of collection;

 

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

 

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

 

ARTICLE 7
 TRUSTEE

 

Section 7.01.                          Duties of Trustee.

 

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

 

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

 

(i)                                     the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are

 

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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

 

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

 

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

 

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

 

(ii)                                  the Trustee shall 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;

 

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

 

(iv)                              no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

 

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

 

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 shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers’ Certificate or Opinion of Counsel.  The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in

 

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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 shall not be responsible for the misconduct or negligence of any agent appointed with due care.

 

(d)                                 The Trustee shall not be liable for any action it takes or omits to take in good faith 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 an Issuer shall be sufficient if signed by an Officer of such Issuer.

 

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

 

(g)                                  The Trustee shall have no duty to inquire as to the performance of the Company’s covenants in Article 4 hereof.  In addition, the Trustee shall not be deemed to have knowledge of any Default or Event of Default except: (1) any Event of Default occurring pursuant to Section 6.01(a) or 6.01(b) hereof; or (2) any Default or Event of Default of which a Responsible Officer shall have received written notification or obtained actual knowledge.

 

(h)                                 The permissive right of the Trustee to act hereunder shall not be construed as a duty.

 

(i)                                     The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder and in its capacity as Escrow Agent under the Escrow Agreement.

 

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 Issuers, any Guarantor 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 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 shall 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 either Issuer’s use of the proceeds from the Notes or any money paid to an Issuer or upon either Issuer’s direction under

 

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any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall 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.

 

Section 7.05.                          Notice of Defaults.

 

If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall send to Holders of Notes 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 or premium, if any, interest or Additional Interest, if any, on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice from the Holders is in the interests of the Holders of the Notes.

 

Section 7.06.                          Reports by Trustee to Holders of the Notes.

 

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 shall send 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 shall comply with TIA § 313(b)(2) and § 313(b)(1).  The Trustee shall also transmit all reports as required by TIA § 313(c).

 

A copy of each report at the time it is sent to the Holders of Notes shall be given to the Issuers and filed with the SEC and each stock exchange on which the Notes are listed in accordance with TIA § 313(d).  The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange.

 

Section 7.07.                          Compensation and Indemnity.

 

The Issuers shall pay to the Trustee from time to time such reasonable compensation as the Issuers and the Trustee may agree in writing for the Trustee’s acceptance of this Indenture and services hereunder.  The Trustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust.  The Issuers shall reimburse the Trustee 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 shall include the reasonable compensation, disbursements and expenses of the Trustee’s agents and counsel.

 

The Issuers and the Guarantors shall indemnify the Trustee, jointly and severally, 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 against the Issuers and the Guarantors (including this Section 7.07) and defending itself against any claim (whether asserted by an Issuer, any Guarantor or 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, bad faith or willful misconduct.  The Trustee shall notify the Issuers and the Guarantors promptly of any claim for which it may seek indemnity.  Failure by

 

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the Trustee to so notify the Issuers and the Guarantors shall not relieve the Issuers or the Guarantors of their obligations hereunder.  The Issuers and the Guarantors shall defend the claim and the Trustee shall cooperate in the defense.  The Trustee may have separate counsel and the Issuers and the Guarantors shall pay the reasonable fees and expenses of such counsel; provided that the Issuers and the Guarantors will not be required to pay such fees and expenses if they assume the Trustee’s defense with counsel acceptable to and approved by the Trustee (such approval not to be unreasonably withheld) and there is no conflict of interest between the Issuers and the Trustee in connection with such defense.  The Issuers and the Guarantors need not pay for any settlement made without their consent, which consent shall not be unreasonably withheld.  Neither the Issuers nor the Guarantors need reimburse the Trustee for any expense or indemnity against any liability or loss of the Trustee to the extent such expense, liability or loss is attributable to the negligence, bad faith or willful misconduct of the Trustee.

 

The obligations of the Issuers and the Guarantors under this Section 7.07 shall survive the satisfaction and discharge of this Indenture.

 

To secure the Issuers’ and the Guarantors’ payment obligations in this Section 7.07, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes.  Such Lien shall survive the satisfaction and discharge of this Indenture.

 

When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(i) or (j) 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.

 

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

 

Section 7.08.                          Replacement of Trustee.

 

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

 

The Trustee may resign in writing upon 30 days’ notice at any time and be discharged from the trust hereby created by so notifying the Issuers.  The Holders of Notes of a majority in principal amount of the then outstanding Notes  may remove the Trustee by so notifying the Trustee and the Issuers in writing and may appoint a successor trustee with the consent of the Issuers.  The Issuers may remove the Trustee if:

 

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

 

(b)                                 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;

 

(c)                                  a receiver, Custodian or public officer takes charge of the Trustee or its property; or

 

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(d)                                 the Trustee becomes incapable of acting.

 

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

 

If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Issuers or the Holders of Notes of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee.

 

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

 

A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuers.  Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture.  The successor Trustee shall send a notice of its succession to Holders of the Notes.  The retiring Trustee shall 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 Issuers’ and the Guarantors’ obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee.

 

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 shall be the successor Trustee.  As soon as practicable, the successor Trustee shall send a notice of its succession to the Issuers and the Holders of the Notes.

 

Section 7.10.                          Eligibility; Disqualification.

 

There shall 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 $50 million as set forth in its most recent published annual report of condition.

 

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

 

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Section 7.11.                          Preferential Collection of Claims Against Issuers.

 

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.

 

ARTICLE 8
 LEGAL DEFEASANCE AND COVENANT DEFEASANCE

 

Section 8.01.                          Option to Effect Legal Defeasance or Covenant Defeasance.

 

The Issuers may, at the option of their respective Boards of Directors evidenced by a resolution set forth in an Officers’ Certificate, at any time when the Notes are no longer subject to mandatory redemption under Section 3.08, exercise their rights under either Section 8.02 or 8.03 hereof with respect to all outstanding Notes upon compliance with the conditions set forth below in this Article 8.

 

Section 8.02.                          Legal Defeasance and Discharge.

 

Upon the Issuers’ exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Issuers shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have discharged their obligations with respect to all outstanding Notes, and each Guarantor shall be deemed to have discharged its obligations with respect to its Subsidiary Guarantee, on the date the conditions set forth in Section 8.04 below are satisfied (hereinafter, “Legal Defeasance”).  For this purpose, Legal Defeasance means that the Issuers shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, and each Guarantor shall be deemed to have paid and discharged its Subsidiary Guarantee (which in each case shall 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 (a) and (b) below) and to have satisfied all its other obligations under such Notes or Subsidiary Guarantee and this Indenture (and the Trustee, on demand of and at the expense of the Issuers, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section, payments in respect of the principal of and premium, if any, interest and Additional Interest, if any, on such Notes when such payments are due, (b) the Issuers’ obligations with respect to such Notes under Sections 2.03, 2.04, 2.06, 2.07, 2.09 and 4.02 hereof and the Appendix, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Issuers’ obligations in connection therewith and (d) the Legal Defeasance provisions of this Article 8.  Subject to compliance with this Article 8, the Issuers may exercise their option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof.

 

If the Issuers exercise their Legal Defeasance option, each Guarantor will be released and relieved of any obligations under its Subsidiary Guarantee, and any security for the Notes (other than the trust) will be released.

 

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Section 8.03.                          Covenant Defeasance.

 

Upon the Issuers’ exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Issuers shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from their obligations under the covenants contained in Article 4 (other than those in Sections 4.01, 4.02, 4.06 and 4.14) and in clause (d) of Section 5.01 hereof on and after the date the conditions set forth below are satisfied (hereinafter, “Covenant Defeasance”), and the Notes shall 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 shall continue to be deemed “outstanding” for all other purposes hereunder.  For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Issuers and any Guarantor may omit to comply with and shall 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 shall 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 shall be unaffected thereby.  In addition, upon the Issuers’ exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(f) through 6.01(h) hereof shall not constitute Events of Default.

 

If the Issuers exercise their Covenant Defeasance option, each Guarantor will be released and relieved of any obligations under its Subsidiary Guarantee and any security for the Notes (other than the trust) will be released.

 

Section 8.04.                          Conditions to Legal or Covenant Defeasance.

 

In order to exercise either Legal Defeasance or Covenant Defeasance:

 

(a)                                 the Issuers must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non-callable Government Securities, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of and premium, if any, interest and Additional Interest, if any, on the outstanding Notes on the date of fixed maturity or on the applicable redemption date, as the case may be, and the Issuers must specify whether the Notes are being defeased to the date of fixed maturity or to a particular redemption date;

 

(b)                                 in the case of an election under Section 8.02 hereof, the Issuers shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that:

 

(1)                                 the Issuers have received from, or there has been published by, the Internal Revenue Service a ruling; or

 

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(2)                                 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;

 

(c)                                  in the case of an election under Section 8.03 hereof, the Issuers shall have delivered 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;

 

(d)                                 no Default or Event of Default has 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);

 

(e)                                  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) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound;

 

(f)                                   the Issuers shall have delivered to the Trustee an Officers’ Certificate stating that the deposit was not made by the Issuers with the intent of preferring the Holders over any other creditors of the Issuers or with the intent of defeating, hindering, delaying or defrauding creditors of the Issuers or others; and

 

(g)                                  the Issuers shall have delivered 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.

 

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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 pursuant to Section 8.04 or 8.08 hereof in respect of the outstanding Notes shall 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 or any of its Subsidiaries 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, interest and Additional Interest, if any, but such money need not be segregated from other funds except to the extent required by law.

 

The Issuers shall 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 or 8.08 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.

 

Anything in this Article 8 to the contrary notwithstanding, the Trustee shall deliver or pay to the Issuers from time to time upon the written request of the Issuers any money or non-callable Government Securities held by it as provided in Section 8.04 or 8.08 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(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance, Covenant Defeasance or Discharge, as the case may be.

 

Section 8.06.                          Repayment to Issuers.

 

Subject to applicable escheat and abandoned property laws, any money or non-callable Government Securities deposited with the Trustee or any Paying Agent, or then held by an Issuer, in trust for the payment of the principal of or premium, interest or Additional Interest, if any, on any Note and remaining unclaimed for two years after such principal, premium, interest or Additional Interest, if any, has become due and payable shall be paid to the Issuers on their written request or (if then held by an Issuer) shall be discharged from such trust; and the Holder of such Note shall thereafter, as an unsecured creditor, look only to the Issuers for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money or non-callable Government Securities, and all liability of the Issuers as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, shall at the written direction and expense of the Issuers 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 shall 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 Issuers.

 

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Section 8.07.                          Reinstatement.

 

If the Trustee or Paying Agent is unable to apply any money or non-callable Government Securities in accordance with Section 8.05 hereof, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Issuers’ obligations under this Indenture and the Notes shall 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 8.05 hereof; provided, however, that, if an Issuer makes any payment of principal of or premium, interest, Additional Interest, if any, on any Note following the reinstatement of its obligations, such Issuer shall 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.

 

Section 8.08.                          Discharge.

 

This Indenture shall be satisfied and discharged and shall cease to be of further effect as to all Notes issued hereunder (except for (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in clause (b) of this Section 8.08, and as more fully set forth in such clause (b), payments in respect of the principal of and premium, if any, interest and Additional Interest, if any, on such Notes when such payments are due, (b) the Issuers’ obligations with respect to such Notes under Sections 2.03, 2.04, 2.06, 2.07, 2.09 and 4.02 hereof and the Appendix and (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Issuers’ obligations in connection therewith), 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 Issuers, 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 or will become due and payable within one year by reason of the giving of a notice of redemption or otherwise, and the Issuers 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 of cash in U.S. dollars and non-callable Government Securities, in 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, and accrued interest and Additional Interest, if any, to the date of fixed maturity or redemption;

 

(2)                                 in the case of clause (1)(b), no Default or Event of Default has occurred and is continuing on the date of the deposit or will occur as a result of the deposit (other than a Default or 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

 

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under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound;

 

(3)                                 the Issuers or any Guarantor has paid or caused to be paid all sums payable by it under this Indenture;

 

(4)                                 the Issuers have delivered irrevocable instructions to the Trustee to apply the deposited money toward the payment of the Notes at fixed maturity or on the redemption date, as the case may be; and

 

(5)                                 the Issuers have delivered an Officers’ Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge of this Indenture (“Discharge”) have been satisfied.

 

ARTICLE 9
 AMENDMENT, SUPPLEMENT AND WAIVER

 

Section 9.01.                          Without Consent of Holders of Notes.

 

Notwithstanding Section 9.02 of this Indenture, the Issuers, the Guarantors and the Trustee may amend or supplement this Indenture or the Notes without the consent of any Holder of a Note:

 

(a)                                 to cure any ambiguity, defect or inconsistency;

 

(b)                                 to provide for uncertificated Notes in addition to or in place of certificated Notes;

 

(c)                                  to provide for the assumption of an Issuer’s or Guarantor’s obligations to the Holders of Notes or a Subsidiary Guarantee pursuant to Article 5 hereof;

 

(d)                                 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, provided that any change to conform this Indenture to the Offering Memorandum shall not be deemed to adversely affect the legal rights hereunder of any Holder;

 

(e)                                  to secure the Notes or the Subsidiary Guarantees pursuant to the requirements of Section 4.12 or otherwise;

 

(f)                                   to provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture;

 

(g)                                  to add any additional Guarantor with respect to the Notes or to evidence the release of any Guarantor from its Subsidiary Guarantee in accordance with Article 10 hereof;

 

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(h)                                 to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; or

 

(i)                                     to evidence or provide for the acceptance of appointment under this Indenture of a successor Trustee.

 

Upon the request of the Company authorizing the execution of any such amended or supplemental indenture, and upon receipt by the Trustee of the documents described in Section 9.06 hereof, the Trustee shall join with the Issuers 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 shall 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 above in Section 9.01 and below in this Section 9.02, the Issuers, the Guarantors and the Trustee may amend or supplement this Indenture and the Notes may be amended or supplemented with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default or compliance with any provision of this Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including, without limitation, consents obtained in connection with a purchase of, tender offer or exchange offer for Notes).  However, without the consent of each Holder affected, an amendment, supplement or waiver may not (with respect to any Notes held by a non-consenting Holder):

 

(a)                                 reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver;

 

(b)                                 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 in Sections 3.09, 4.10 and 4.15 hereof);

 

(c)                                  reduce the rate of or change the time for payment of interest on any Note;

 

(d)                                 waive a Default or Event of Default in the payment of principal of or premium, interest or Additional Interest, if any, on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in principal amount of the Notes and a waiver of the payment default that resulted from such acceleration);

 

(e)                                  make any Note payable in currency other than that stated in the Notes;

 

(f)                                   make any change in the provisions of this Indenture relating to waivers of past Defaults or Events of Default or the rights of Holders of Notes to receive payments of principal of or premium, if any, interest or Additional Interest, if any, on the Notes (except as permitted in clause (g) below);

 

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(g)                                  waive a redemption or repurchase payment with respect to any Note (other than a payment required by Sections 3.09, 4.10 and 4.15 hereof);

 

(h)                                 release any Guarantor from any of its obligations under its Subsidiary Guarantee or this Indenture, except in accordance with the terms of this Indenture; or

 

(i)                                     make any change in the preceding amendment, supplement and waiver provisions.

 

Upon the request of the Issuers accompanied by Board Resolutions authorizing their 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 9.06 hereof, the Trustee shall join with the Issuers and the Guarantors in the execution of such amended or supplemental indenture, unless such amended or supplemental indenture affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental indenture.

 

It shall not be 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 shall be sufficient if such consent approves the substance thereof.

 

After an amendment, supplement or waiver under this Section becomes effective, the Company shall send to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver.  Any failure of the Company to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver.

 

Section 9.03.                          Compliance with Trust Indenture Act.

 

Every amendment or supplement to this Indenture or the Notes shall be set forth in an amended or supplemental Indenture that complies with the TIA as then in effect.

 

A consent to any amendment, supplement or waiver under this Indenture by any Holder given in connection with a purchase, tender or exchange of such Holder’s Notes shall not be rendered invalid by such purchase, tender or exchange.

 

Section 9.04.                          Effect of Consents.

 

After an amendment, supplement or waiver becomes effective, it shall bind every Holder, unless it makes a change described in any of clauses (a) through (i) of Section 9.02, in which case, the amendment, supplement or waiver shall bind only each Holder of a Note who has consented to it and every subsequent Holder of a Note or portion of a Note that evidences the same indebtedness as the consenting Holder’s Note.

 

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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 Issuers, in exchange for all Notes, may issue and the Trustee shall authenticate new Notes that reflect the amendment, supplement or waiver.

 

Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver.

 

Section 9.06.                          Trustee to Sign Amendments, etc.

 

The Trustee shall 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.  In executing any amended or supplemental indenture, the Trustee shall be entitled to receive and (subject to Section 7.01) shall be fully protected in relying upon, an Officers’ Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture and that all conditions precedent are satisfied.

 

ARTICLE 10
 GUARANTEES OF NOTES

 

Section 10.01.                   Subsidiary Guarantees.

 

Subject to this Article 10, each of the Guarantors hereby, jointly and severally, unconditionally guarantees, on a senior unsecured basis, to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes held thereby and the Obligations of the Issuers hereunder and thereunder, that: (a) the principal of and premium, if any, interest and Additional Interest, if any, on the Notes will be promptly paid in full when due, subject to any applicable grace period, whether at Stated Maturity, by acceleration, upon repurchase or redemption or otherwise, and interest on the overdue principal of and premium, (to the extent permitted by law) interest and Additional Interest, if any, on the Notes, and all other payment Obligations of the Issuers to the Holders or the Trustee hereunder or thereunder will be promptly paid in full and performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other Obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable grace period, whether at Stated Maturity, by acceleration, upon repurchase or redemption or otherwise.  Failing payment when so due of any amount so guaranteed for whatever reason, the Guarantors will be jointly and severally obligated to pay the same immediately.  An Event of Default under this Indenture or the Notes shall constitute an event of default under the Subsidiary Guarantees, and shall entitle the Holders to accelerate the obligations of the Guarantors hereunder in the same manner and to the same extent as the Obligations of the Issuers.

 

The Guarantors hereby agree that their obligations hereunder shall be 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 with respect to any

 

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provisions hereof or thereof, the recovery of any judgment against an Issuer, any action to enforce the same or any other circumstance (other than complete performance) which might otherwise constitute a legal or equitable discharge or defense of a Guarantor.  Each Guarantor further, to the extent permitted by law, hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of an Issuer, any right to require a proceeding first against an Issuer, protest, notice and all demands whatsoever and covenants that its Subsidiary Guarantee will not be discharged except by complete performance of the Obligations contained in the Notes and this Indenture.

 

If any Holder or the Trustee is required by any court or otherwise to return to an Issuer, the Guarantors, or any Custodian, Trustee or other similar official acting in relation to any of the Issuers or the Guarantors, any amount paid by an Issuer or any Guarantor to the Trustee or such Holder, the Subsidiary Guarantees, to the extent theretofore discharged, shall be reinstated in full force and effect.  Each Guarantor agrees that it shall not be entitled to, and hereby waives, any right of subrogation in relation to the Holders in respect of any Obligations guaranteed hereby.

 

Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (a) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of its Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed thereby, and (b) in the event of any declaration of acceleration of such Obligations as provided in Article 6 hereof, such Obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantor for the purpose of its Subsidiary Guarantee.  The Guarantors shall 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 Subsidiary Guarantees.

 

Section 10.02.                   [Reserved].

 

Section 10.03.                   Guarantors May Consolidate, etc., on Certain Terms.

 

(a)                                 No Guarantor shall sell or otherwise dispose of 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, (i) either (1) the Person acquiring the properties or assets in any such sale or other disposition or the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) unconditionally assumes all the obligations of such Guarantor, pursuant to a supplemental indenture, substantially in the form of Annex A hereto, under the Notes, this Indenture and its Subsidiary Guarantee on terms set forth therein, or (2) such transaction does not violate Section 4.10, and (ii) immediately after giving effect to such transaction, no Default or Event of Default exists.

 

(b)                                 In the case of any such consolidation or merger and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and substantially in the form of Annex A hereto, of the Subsidiary Guarantee and the due and punctual performance of all of the covenants of this Indenture to be performed by the Guarantor,

 

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such successor Person shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor.

 

Section 10.04.                   Releases of Subsidiary Guarantees.

 

The Subsidiary Guarantee of a Guarantor shall be released:  (1) in connection with any sale or other disposition of all or substantially all of the properties or assets of such Guarantor (including by way of merger or consolidation) 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 Section 4.10; (2) in connection with any sale or other disposition of Capital Stock of such 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 Section 4.10 and the Guarantor ceases to be a Restricted Subsidiary of the Company as a result of the sale or other disposition; (3) if the Company designates such Guarantor as an Unrestricted Subsidiary in accordance with Section 4.19 of this Indenture; (4) upon Legal Defeasance or Covenant Defeasance or Discharge in accordance with Article 8; (5) upon the liquidation or dissolution of such Guarantor, provided no Default or Event of Default has occurred that is continuing; (6) at such time as such Guarantor ceases both (x) to guarantee any other Indebtedness of either of the Issuers and any other Guarantor in excess of a De Minimis Guaranteed Amount and (y) to be an obligor with respect to any Indebtedness under any Credit Facility; or (7) upon such Guarantor consolidating with, merging into or transferring all of its properties or assets to the Company or another Guarantor, and as a result of, or in connection with, such transaction such Guarantor dissolves or otherwise ceases to exist.

 

Upon delivery by the Company to the Trustee of an Officers’ Certificate to the effect that any of the conditions described in the foregoing clauses (1) – (6) has occurred, the Trustee shall execute any documents reasonably requested by the Company in order to evidence the release of any Guarantor from its obligations under its Subsidiary Guarantee.  Any Guarantor not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and premium, interest and Additional Interest, if any, on the Notes and for the other obligations of such Guarantor under this Indenture as provided in this Article 10.

 

Section 10.05.                   [Reserved].

 

Section 10.06.                   Limitation on Guarantor Liability.

 

The obligations of each Guarantor under its Subsidiary Guarantee will be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Subsidiary Guarantee or pursuant to its contribution obligations under this Indenture, result in the obligations of such Guarantor under its Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law and not otherwise being void or voidable under any similar laws affecting the rights of creditors generally.

 

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ARTICLE 11
 MISCELLANEOUS

 

Section 11.01.                   Trust Indenture Act Controls.

 

If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA §318(c), such TIA-imposed duties shall control.

 

Section 11.02.                   Notices.

 

Any notice or communication by an Issuer, any Guarantor or the Trustee to the others is duly given if in writing (in the English language) and delivered in person or mailed by first class mail (registered or certified, return receipt requested), or sent by telecopier or overnight air courier guaranteeing next day delivery, to the others’ address:

 

If to any of the Issuers or the Guarantors:

 

Legacy Reserves LP

303 W. Wall Street

Suite 1400

Midland, Texas  79701

Attention: Chief Financial Officer

Telecopier No.:  432- 689-5299

 

with a copy (not constituting notice) to:

 

Andrews Kurth LLP

600 Travis, Suite 4200

Houston, Texas 77002

Attention:  Gislar Donnenberg

Telecopier No.:  713-238-7167

 

If to the Trustee:

 

Wells Fargo Bank, National Association

Corporate, Municipal and Escrow Services
 750 N. Saint Paul Place, Suite 1750
 Dallas, Texas 75201

Telecopier No.: 214-756-7401

 

An Issuer, any of the Guarantors or the Trustee, by notice to the others, may designate additional or different addresses for subsequent notices or communications.

 

All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the U.S. mail, postage prepaid, if mailed; when receipt is acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery in each case to the address shown above.

 

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Any notice or communication to a Holder shall be (i) mailed by first class mail, certified or registered, return receipt requested, to its address shown on the register kept by the Registrar, (ii) sent by overnight air courier guaranteeing next day delivery to such address or (iii) if the Holder is the Depository, sent by such other means as the Depository may specify.  Any notice or communication shall also be sent in the same manner 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 shall not affect its sufficiency with respect to other Holders.

 

If a notice or communication is sent in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it.

 

If either of the Issuers sends a notice or communication to Holders, it shall send a copy to the Trustee and each Agent at the same time.

 

Section 11.03.                   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 Issuers, the Trustee, the Registrar and anyone else shall have the protection of TIA § 312(c).

 

Section 11.04.                   Certificate and Opinion as to Conditions Precedent.

 

Upon any request or application by an Issuer to the Trustee to take any action under this Indenture, such Issuer shall furnish to the Trustee:

 

(a)                                 an Officers’ Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 11.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and

 

(b)                                 an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 11.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied.

 

Section 11.05.                   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)) shall comply with the provisions of TIA § 314(e) and shall include:

 

(a)                                 a statement that the person making such certificate or opinion has read such covenant or condition;

 

(b)                                 a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

 

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(c)           a statement that, in the opinion of such person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and

 

(d)           a statement as to whether or not, in the opinion of such person, such condition or covenant has been satisfied.

 

Section 11.06.      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 11.07.      No Personal Liability of Directors, Officers, Employees and Unitholders.

 

No director, officer, partner, employee, incorporator, manager or unitholder or other owner of Capital Stock of the Issuers or any Guarantor, as such, shall have any liability for any obligations of the Issuers or any Guarantor under the Notes, the Subsidiary Guarantees or this Indenture, 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.

 

Section 11.08.      Governing Law.

 

THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

Section 11.09.      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 11.10.      Successors.

 

All agreements of the Issuers and the Guarantors in this Indenture and the Notes shall bind their respective successors.  All agreements of the Trustee in this Indenture shall bind its successors.

 

Section 11.11.      Severability.

 

In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

 

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Section 11.12.      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 shall in no way modify or restrict any of the terms or provisions hereof.

 

Section 11.13.      Counterparts.

 

The parties may sign any number of copies of this Indenture, and each party hereto may sign any number of separate copies of this Indenture.  Each signed copy shall 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 11.14.      Acts of Holders.

 

(a)           Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by the Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed in writing, and may be given or obtained in connection with a purchase of, or tender offer or exchange offer for, outstanding Notes; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company.  Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of the Holders signing such instrument or instruments.  Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Issuers if made in the manner provided in this Section 11.14.

 

(b)           The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to such witness, notary or officer the execution thereof.  Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of authority.  The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient.

 

(c)           Notwithstanding anything to the contrary contained in this Section 11.14, the principal amount and serial numbers of Notes held by any Holder, and the date of holding the same, shall be proved by the register of the Notes maintained by the Registrar as provided in Section 2.03.

 

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(d)           If the Issuers shall solicit from the Holders of the Notes any request, demand, authorization, direction, notice, consent, waiver or other Act, the Issuers may, at their option, by or pursuant to a resolution of the Board of Directors of the Company, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Issuers shall have no obligation to do so.  Notwithstanding TIA Section 316(c), such record date shall be the record date specified in or pursuant to such Board Resolution, which shall be a date not earlier than the date 30 days prior to the first solicitation of Holders generally in connection therewith or the date of the most recent list of Holders forwarded to the Trustee prior to such solicitation pursuant to Section 2.05 and not later than the date such solicitation is completed.  If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of the then outstanding Notes have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the then outstanding Notes shall be computed as of such record date; provided that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than eleven months after the record date.

 

(e)           Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Note shall bind every future Holder of the same Note and the Holder of every Note issued upon the registration or transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or an Issuer in reliance thereon, whether or not notation of such action is made upon such Note.

 

(f)            Without limiting the foregoing, a Holder entitled hereunder to take any action hereunder with regard to any particular Note may do so itself with regard to all or any part of the principal amount of such Note or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such principal amount.

 

(g)           For purposes of this Indenture, any action by the Holders that may be taken in writing may be taken by electronic means or as otherwise reasonably acceptable to the Trustee.

 

Section 11.15.      Patriot Act.

 

The parties hereto acknowledge that in accordance with Section 326 of the U.S.A. Patriot Act, the Trustee, like all financial institutions and in order to help fight the funding of terrorism and money laundering, is required to obtain, verify, and record information that identifies each person or legal entity that establishes a relationship or opens an account with the Trustee.  The parties to this Indenture agree that they will provide the Trustee with such information within their possession or control as it may reasonably request in order for the Trustee to satisfy the requirements of the U.S.A. Patriot Act.

 

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SIGNATURES

 

	
 
    	
LEGACY   RESERVES LP
    
	
 
    	
 
    
	
 
    	
By:
    	
Legacy   Reserves GP, LLC,
    
	
 
    	
 
    	
its   general partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   James Daniel Westcott
    
	
 
    	
 
    	
Name:
    	
James   Daniel Westcott
    
	
 
    	
 
    	
Title:
    	
Executive   Vice President and Chief
   Financial Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
LEGACY   RESERVES FINANCE CORPORATION
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   James Daniel Westcott
    
	
 
    	
 
    	
Name:
    	
James   Daniel Westcott
    
	
 
    	
 
    	
Title:
    	
Executive   Vice President and Chief
   Financial Officer
    

 

92

 

	
 
    	
GUARANTORS:
    
	
 
    	
 
    
	
 
    	
LEGACY   RESERVES OPERATING GP LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
Legacy   Reserves, LP,
    
	
 
    	
 
    	
its   sole member
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Legacy   Reserves GP, LLC,
    
	
 
    	
 
    	
its   general partner
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   James Daniel Westcott
    
	
 
    	
 
    	
Name:
    	
James   Daniel Westcott
    
	
 
    	
 
    	
Title:
    	
Executive   Vice President and Chief
   Financial Officer
    
	
 
    	
 
    	
 
    
	
 
    	
LEGACY   RESERVES OPERATING LP
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Legacy   Reserves Operating GP LLC,
    
	
 
    	
 
    	
its   general partner
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Legacy   Reserves, LP,
    
	
 
    	
 
    	
its   sole member
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Legacy   Reserves GP, LLC,
    
	
 
    	
 
    	
its   general partner
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   James Daniel Westcott
    
	
 
    	
 
    	
Name:
    	
James   Daniel Westcott
    
	
 
    	
 
    	
Title:
    	
Executive   Vice President and Chief
   Financial Officer
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
LEGACY   RESERVES SERVICES INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   James Daniel Westcott
    
	
 
    	
 
    	
Name:
    	
James   Daniel Westcott
    
	
 
    	
 
    	
Title:
    	
Executive   Vice President and Chief
   Financial Officer
    

 

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WELLS FARGO BANK, NATIONAL ASSOCIATION,
    
	
 
    	
as   Trustee
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Patrick Giordano
    
	
 
    	
 
    	
Name:
    	
Patrick   Giordano
    
	
 
    	
 
    	
Title:
    	
Vice   President
    

 

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RULE 144A/REGULATION S APPENDIX

 

PROVISIONS RELATING TO INITIAL NOTES
 AND EXCHANGE NOTES

 

1.             Definitions

 

1.1          Definitions.

 

For the purposes of this Appendix the following terms shall have the meanings indicated below:

 

“Depository” means The Depository Trust Company, its nominees and their respective successors.

 

“Exchange Notes” means (1) the 8% Senior Notes due 2020 issued pursuant to the Indenture in connection with a Registered Exchange Offer pursuant to a Registration Rights Agreement and (2) Additional Notes, if any, issued pursuant to a registration statement filed with the SEC under the Securities Act.

 

“Initial Notes” means (1) $300.0 million aggregate principal amount of 8% Senior Notes due 2020 issued on the Initial Issuance Date and (2) Additional Notes, if any, issued in a transaction exempt from the registration requirements of the Securities Act.

 

“Initial Purchasers” means (1) with respect to the Initial Notes issued on the Initial Issuance Date, Merrill Lynch, Pierce, Fenner & Smith Incorporated, RBC Capital Markets, LLC, Wells Fargo Securities, LLC, UBS Securities LLC, Barclays Capital Inc., BMO Capital Markets Corp., Credit Agricole Securities (USA) Inc., J.P. Morgan Securities LLC, KeyBanc Capital Markets Inc., Mitsubishi UFJ Securities (USA), Inc., Scotia Capital (USA) Inc., SG Americas Securities, LLC and U.S. Bancorp Investments, Inc. and (2) with respect to each issuance of Additional Notes, the Persons purchasing such Additional Notes under the related Purchase Agreement.

 

“Notes” means the Initial Notes, the Additional Notes and the Exchange Notes, treated as a single class.

 

“Notes Custodian” means the custodian with respect to a Global Note (as appointed by the Depository), or any successor Person thereto and shall initially be the Trustee.

 

“Purchase Agreement” means (1) with respect to the Initial Notes issued on the Initial Issuance Date, the Purchase Agreement dated November 19, 2012 among the Issuers, the Guarantors and the Initial Purchasers, and (2) with respect to each issuance of Additional Notes, the purchase agreement or underwriting agreement among the Issuers and the Persons purchasing such Additional Notes.

 

“Registered Exchange Offer” means the offer by the Issuers, pursuant to a Registration Rights Agreement, to certain Holders of Initial Notes, to issue and deliver to such Holders, in

 

App. - 1

 

exchange for the Initial Notes, a like aggregate principal amount of Exchange Notes registered under the Securities Act.

 

“Registration Rights Agreement” means (1) with respect to the Initial Notes issued on the Initial Issuance Date, the Registration Rights Agreement dated the Initial Issuance Date among the Issuers, the Guarantors and the Initial Purchasers, and (2) with respect to each issuance of Additional Notes issued in a transaction exempt from the registration requirements of the Securities Act, the registration rights agreement, if any, among the Issuers and the Persons purchasing such Additional Notes under the related Purchase Agreement.

 

“Shelf Registration Statement” means the registration statement issued by the Company in connection with the offer and sale of Initial Notes pursuant to a Registration Rights Agreement.

 

“Transfer Restricted Securities” means Notes that bear or are required to bear the legend set forth in Section 2.3(b) hereof.

 

1.2          Other Definitions.

 

	
Term
    	
 
    	
Defined in Section:
    
	
“Agent Members”
    	
 
    	
2.1(b)
    
	
“Distribution Compliance   Period”
    	
 
    	
2.1(b)
    
	
“Global Notes”
    	
 
    	
2.1(a)
    
	
“Regulation S”
    	
 
    	
2.1(a)
    
	
“Regulation S Notes”
    	
 
    	
2.1(a)
    
	
“Restricted Global Note”
    	
 
    	
2.1(a)
    
	
“Rule 144A”
    	
 
    	
2.1(a)
    
	
“Rule 144A Notes”
    	
 
    	
2.1(a)
    

 

2.             The Notes.

 

2.1          (a)  Form and Dating.  Initial Notes offered and sold to QIBs in reliance on Rule 144A (“Rule 144A Notes”) under the Securities Act (“Rule 144A”) or in reliance on Regulation S (“Regulation S Notes”) under the Securities Act (“Regulation S”), in each case as provided in a Purchase Agreement, shall be issued initially in the form of one or more permanent global Notes in definitive, fully registered form without interest coupons with the original issue discount legend, global Notes legend and restricted Notes legend set forth in Exhibit 1 hereto (each, a “Restricted Global Note”), which shall be deposited on behalf of the purchasers of the Initial Notes represented thereby with the Trustee, as custodian for the Depository (or with such other custodian as the Depository may direct), and registered in the name of the Depository or a nominee of the Depository, duly executed by the Issuers and authenticated by the Trustee as hereinafter provided.  Beneficial interests in a Restricted Global Note representing Initial Notes sold in reliance on either Rule 144A or Regulation S may be held through Euroclear or Clearstream, as indirect participants in the Depository.  The aggregate principal amount of the Global Notes may from time to time be increased or decreased by adjustments made on the

 

App. - 2

 

records of the Trustee and the Depository or its nominee as hereinafter provided.  Exchange Notes shall be issued in global form (with the original issue discount legend and global Notes legend set forth in Exhibit 1 hereto) or in certificated form as provided in Section 2.4 of this Appendix.  Exchange Notes issued in global form and Restricted Global Notes are sometimes referred to in this Appendix as “Global Notes.”

 

(b)           Book-Entry Provisions.  This Section 2.1(b) shall apply only to a Global Note deposited with or on behalf of the Depository.

 

The Issuers shall execute and the Trustee shall, in accordance with this Section 2.1(b), authenticate and deliver initially one or more Global Notes that (a) shall be registered in the name of the Depository for such Global Note or Global Notes or the nominee of such Depository and (b) shall be delivered by the Trustee to such Depository or pursuant to such Depository’s instructions or held by the Trustee as custodian for the Depository.  If such Global Notes are Restricted Global Notes, then separate Global Notes shall be issued to represent Rule 144A Notes and Regulation S Notes so long as required by law or the Depository.

 

Members of, or participants in, the Depository (“Agent Members”) shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depository or by the Trustee as the custodian of the Depository or under such Global Note, and the Issuers, the Trustee and any agent of the Issuers or the Trustee shall be entitled to treat the Holder as the absolute owner of such Global Note for all purposes whatsoever.  Notwithstanding the foregoing, nothing herein shall prevent the Issuers, the Trustee or any agent of the Issuers or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices of such Depository governing the exercise of the rights of a holder of a beneficial interest in any Global Note.

 

Until the 40th day after the later of the commencement of the offering of any Initial Notes and the original issue date of such Initial Notes (such period, the “Distribution Compliance Period”), a beneficial interest in a Restricted Global Note representing Regulation S Notes may be transferred to a Person who takes delivery in the form of an interest in a Restricted Global Note representing Rule 144A Notes only if the transferor first delivers to the Trustee a written certificate (in the form provided in Exhibit 1 hereto) to the effect that such transfer is being made to a Person who the transferor reasonably believes is purchasing for its own account or accounts as to which it exercises sole investment discretion and that such Person is a QIB, in each case in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States or any other jurisdiction.  After the expiration of the Distribution Compliance Period, such certification requirements shall not apply to such transfers of beneficial interests in a Restricted Global Note representing Regulation S Notes.

 

Beneficial interests in a Restricted Global Note representing Rule 144A Notes may be transferred to a Person who takes delivery in the form of an interest in a Restricted Global Note representing Regulation S Notes, whether before or after the expiration of the Distribution Compliance Period, only if the transferor first delivers to the Trustee a written certificate (in the form provided in Exhibit 1 hereto) to the effect that such transfer is being made in accordance with Rule 904 of Regulation S or Rule 144 (if available).

 

App. - 3

 

(c)           Certificated Notes.  Except as provided in Section 2.3 or 2.4, owners of beneficial interests in Restricted Global Notes shall not be entitled to receive physical delivery of certificated Notes.  Certificated Notes shall not be exchangeable for beneficial interests in Global Notes, except with the consent of the Company.

 

2.2          Authentication.  The Trustee shall authenticate and deliver:  (1) on the Initial Issuance Date, an aggregate principal amount of $300.0 million 8% Senior Notes due 2020, (2) any Additional Notes for an original issue in an aggregate principal amount specified in the written order of the Issuers pursuant to Section 2.02 of the Indenture and (3) Exchange Notes for issue only in a Registered Exchange Offer, pursuant to a Registration Rights Agreement, for a like principal amount of Initial Notes, in each case upon a written order of the Issuers.  Such order shall specify the amount of the Notes to be authenticated, the date on which the original issue of Notes is to be authenticated and to whom the Notes shall be registered and delivered and, in the case of any issuance of Additional Notes pursuant to Section 2.13 of the Indenture, shall certify that such issuance is in compliance with Section 4.09 of the Indenture.

 

2.3          Transfer and Exchange.

 

(a)           Transfer and Exchange of Global Notes.

 

(i)            The transfer and exchange of Global Notes or beneficial interests therein shall be effected through the Depository, in accordance with this Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depository therefor.  A transferor of a beneficial interest in a Global Note shall deliver to the Registrar a written order given in accordance with the Depository’s procedures containing information regarding the participant account of the Depository to be credited with a beneficial interest in the Global Note.  The Registrar shall, in accordance with such instructions instruct the Depository to credit to the account of the Person specified in such instructions a beneficial interest in the Global Note and to debit the account of the Person making the transfer the beneficial interest in the Global Note being transferred.

 

(ii)           Notwithstanding any other provisions of this Appendix, a Global Note may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository.

 

(iii)          In the event that a Restricted Global Note is exchanged for Notes in certificated form pursuant to Section 2.4 of this Appendix, prior to the consummation of a Registered Exchange Offer or the effectiveness of a Shelf Registration Statement with respect to such Notes, such Notes may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this Section 2.3 (including the certification requirements set forth on the reverse of the Initial Notes intended to ensure that such transfers comply with Rule 144A or Regulation S, as the case may be) and such other procedures as may from time to time be adopted by the Company.

 

App. - 4

 

(b)           Restricted Notes Legend.

 

(i)            Except as permitted by the following paragraphs (ii), (iii) and (iv), each Note certificate evidencing the Restricted Global Notes (and all Notes issued in exchange therefor or in substitution thereof) shall bear a legend in substantially the following form:

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE, NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS NOTE, BY ITS ACCEPTANCE HEREOF, AGREES NOT TO OFFER, SELL, OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS ONE YEAR AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF THIS NOTE) (THE “RESALE RESTRICTION TERMINATION DATE”), EXCEPT THAT THE NOTES MAY BE TRANSFERRED (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”), TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY’S AND THE TRUSTEE’S RIGHT PRIOR TO ANY SUCH OFFER, SALE, OR TRANSFER (1) PURSUANT TO CLAUSE (D) PRIOR TO THE END OF THE 40-DAY DISTRIBUTION COMPLIANCE PERIOD WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR PURSUANT TO CLAUSE (E) PRIOR TO THE RESALE RESTRICTION  TERMINATION DATE TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION, AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (2) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS NOTE IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED

 

App. - 5

 

UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.

 

(ii)           The Company, acting in its discretion, may remove the legend set forth in paragraph (i) above from any Transfer Restricted Security at any time on or after the Resale Restriction Termination Date applicable to such Transfer Restricted Security. Without limiting the generality of the preceding sentence, the Company may effect such removal by issuing and delivering, in exchange for such Transfer Restricted Security, a Note without such legend, registered to the same Holder and in an equal principal amount, and upon receipt of a written order of the Company given at least three Business Days in advance of the proposed date of exchange specified therein (which shall be no earlier than the Resale Restriction Termination Date), the Trustee shall authenticate and deliver such Note as directed in such order.

 

(iii)          After a transfer of any Initial Notes pursuant to and during the period of the effectiveness of a Shelf Registration Statement with respect to such Initial Notes all requirements pertaining to legends on such Initial Note will cease to apply, the requirements that any such Initial Note issued to certain Holders be issued in global form will cease to apply, and a certificated Initial Note or an Initial Note in global form, in each case without restrictive transfer legends, will be available to the transferee of the Holder of such Initial Notes upon exchange of such transferring Holder’s certificated Initial Note or directions to transfer such Holder’s interest in the Global Note, as applicable.

 

(iv)          Upon the consummation of a Registered Exchange Offer with respect to the Initial Notes, all requirements pertaining to such Initial Notes that Initial Notes issued to certain Holders be issued in global form will still apply with respect to Holders of such Initial Notes that do not exchange their Initial Notes, and Exchange Notes in certificated or global form will be available to Holders that exchange such Initial Notes in such Registered Exchange Offer.

 

(c)           Cancellation or Adjustment of Global Note.  At such time as all beneficial interests in a Global Note have either been exchanged for certificated Notes, redeemed, purchased or canceled, such Global Note shall be returned to the Trustee for cancellation or retained and canceled by the Trustee.  At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for certificated Notes, redeemed, purchased or canceled, or if any certificated Note is exchanged for such a beneficial interest, the principal amount of Notes represented by such Global Note shall be reduced or increased, as appropriate, and an adjustment shall be made on the books and records of the Trustee (if it is then the Notes Custodian for such Global Note) with respect to such Global Note, by the Trustee or the Notes Custodian, to reflect such reduction or increase, as the case may be.

 

(d)           Obligations with Respect to Transfers and Exchanges of Notes.

 

(i)            To permit registrations of transfers and exchanges, the Issuers shall execute and the Trustee shall authenticate certificated Notes and Global Notes at the Registrar’s request.

 

App. - 6

 

(ii)           No service charge shall be made for any registration of transfer or exchange, but the Issuers may require payment of a sum sufficient to cover any transfer tax, assessments or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charge payable upon exchange or transfer pursuant to Sections 3.06, 4.10, 4.15 and 9.05 and of the Indenture).

 

(iii)          The Registrar shall not be required to register the transfer of or exchange of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part.  Also, it need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed.

 

(iv)          Prior to the due presentation for registration of transfer of any Note, the Issuers, the Guarantors, the Trustee, the Paying Agent or the Registrar may deem and treat the Person in whose name a Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of, premium, if any, interest and Additional Interest, if any, on such Note and for all other purposes whatsoever, whether or not such Note is overdue, and none of the Issuers, the Guarantors, the Trustee, the Paying Agent or the Registrar shall be affected by notice to the contrary.

 

(v)           All Notes issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Notes surrendered upon such transfer or exchange.

 

(e)           No Obligation of the Trustee.

 

(i)            The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Note, a member of, or a participant in the Depository or other Person with respect to the accuracy of the records of the Depository or its nominee or of any participant or member thereof, with respect to any ownership interest in the Notes or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depository) of any notice (including any notice of optional redemption) or the payment of any amount, under or with respect to such Notes.  All notices and communications to be given to the Holders and all payments to be made to Holders under the Notes shall be given or made only to or upon the order of the registered Holders (which shall be the Depository or its nominee in the case of a Global Note).  The rights of beneficial owners in any Global Note shall be exercised only through the Depository subject to the applicable rules and procedures of the Depository.  The Trustee may rely and shall be fully protected in relying upon information furnished by the Depository with respect to its members, participants and any beneficial owners.

 

(ii)           The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under Applicable Law with respect to any transfer of any interest in any Note (including any transfers between or among Depository participants, members or beneficial owners in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

 

App. - 7

 

2.4          Certificated Notes.

 

(a)           A Global Note deposited with the Depository or with the Trustee as custodian for the Depository pursuant to Section 2.1 shall be transferred to the beneficial owners thereof in the form of certificated Notes in an aggregate principal amount equal to the principal amount of such Global Note, in exchange for such Global Note, only if such transfer complies with Section 2.3 and (i) the Depository notifies the Issuers that it is unwilling or unable to continue as Depository for such Global Note or if at any time such Depository ceases to be a “clearing agency” registered under the Exchange Act and in either event a successor depositary is not appointed by the Issuers within 90 days, (ii) the Issuers, at their option but subject to the Depository’s requirements, notify the Trustee in writing that they elect to cause the issuance of the certificated Notes, or (iii) an Event of Default has occurred and is continuing and DTC notifies the Trustee of its decision to exchange the Global Notes.  Except as provided in the preceding sentence, and notwithstanding any contrary indication in Section 2.3(b), beneficial interests in a Global Note may be exchanged for certificated Notes only with the consent of the Company, including if an affiliate (as defined in Rule 144) of the Company acquires such interests.

 

(b)           Any Global Note that is transferable to the beneficial owners thereof pursuant to this Section shall be surrendered by the Depository or the Notes Custodian to the Trustee located at its Corporate Trust Office to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Note, an equal aggregate principal amount of certificated Notes of authorized denominations.  Any portion of a Global Note transferred pursuant to this Section shall be executed, authenticated and delivered only in minimum denominations of $2,000 principal amount and any integral multiple of $1,000 in excess of $2,000 and registered in such names as the Depository shall direct.  Any certificated Note delivered in exchange for an interest in a Global Note shall, except as otherwise provided by Section 2.3(b), bear the restricted Notes legend set forth in Exhibit 1 hereto.

 

(c)           Subject to the provisions of Section 2.4(b), the Holder of a Global Note shall be entitled to grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes.

 

(d)           In the event of the occurrence of any of the circumstances specified in Section 2.4(a), the Issuers shall promptly make available to the Trustee a reasonable supply of certificated Notes in definitive, fully registered form without interest coupons.

 

(e)           Any certificated note shall bear the original issue discount legend set forth in Exhibit 1 hereto.

 

App. - 8

 

EXHIBIT 1 TO RULE 144A/REGULATION S APPENDIX

 

[FORM OF FACE OF INITIAL NOTE]

 

THE FOLLOWING INFORMATION IS SUPPLIED SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES.  THIS NOTE IS ISSUED WITH ORIGINAL ISSUE DISCOUNT UNDER SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.  A HOLDER MAY OBTAIN THE ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE DATE AND YIELD TO MATURITY FOR THIS NOTE BY SUBMITTING A REQUEST FOR SUCH INFORMATION TO THE COMPANY AT THE FOLLOWING ADDRESS:  LEGACY RESERVES LP, 303 W. WALL STREET, SUITE 1400, MIDLAND, TEXAS 79701, ATTENTION: CHIEF FINANCIAL OFFICER.

 

[Global Notes Legend]

 

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO AN ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

 

[Restricted Notes Legend]

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE, NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS NOTE, BY ITS ACCEPTANCE HEREOF, AGREES NOT TO OFFER, SELL, OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS ONE YEAR AFTER THE LATER OF THE ORIGINAL ISSUE DATE

 

Ex. 1 to App. - 1

 

HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF THIS NOTE) (THE “RESALE RESTRICTION TERMINATION DATE”), EXCEPT THAT THE NOTES MAY BE TRANSFERRED (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”), TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY’S AND THE TRUSTEE’S RIGHT PRIOR TO ANY SUCH OFFER, SALE, OR TRANSFER (1) PURSUANT TO CLAUSE (D) PRIOR TO THE END OF THE 40-DAY DISTRIBUTION COMPLIANCE PERIOD WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR PURSUANT TO CLAUSE (E) PRIOR TO THE RESALE RESTRICTION  TERMINATION DATE TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION, AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (2) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS NOTE IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.

 

Ex. 1 to App. - 2

 

LEGACY RESERVES LP

 

LEGACY RESERVES FINANCE CORPORATION

 

	
No. [    ]
    	
 
    	
$[                ]
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
CUSIP   No. [                 ]
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
ISIN   No. [                 ]
    

 

8% Senior Note due 2020

 

Legacy Reserves LP, a Delaware limited partnership, and Legacy Reserves Finance Corporation, a Delaware corporation, jointly and severally promise to pay to                     , or registered assigns, the principal sum of                    Dollars on December 1, 2020 [or such greater or lesser amount as may be indicated on Schedule A hereto].(1)

 

Interest Payment Dates:  June 1 and December 1.

 

Record Dates:  May 15 and November 15.

 

Additional provisions of this Note are set forth on the other side of this Note.

 

 

	
 
    	
LEGACY   RESERVES LP
    
	
 
    	
 
    
	
 
    	
By:
    	
LEGACY   RESERVES GP, LLC,
    
	
 
    	
 
    	
its   general partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
LEGACY   RESERVES FINANCE CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    
				

 

(1)  If this Note is a Global Note, add this provision.

 

Ex. 1 to App. - 3

 

TRUSTEE’S CERTIFICATE OF

AUTHENTICATION

 

 

Wells Fargo Bank, National Association,

as Trustee, certifies that

this is one of the Notes

referred to in the Indenture.

 

 

	
By
    	
 
    	
 
    
	
 
    	
           Authorized   Signatory
    	
 
    

 

Dated:

 

Ex. 1 to App. - 4

 

[FORM OF REVERSE SIDE OF INITIAL NOTE]

 

8% Senior Note due 2020

 

Capitalized terms used herein but not defined shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.

 

1.              Interest.  Legacy Reserves LP, a Delaware limited partnership (the “Company”), and Legacy Reserves Finance Corporation, a Delaware corporation (the “Finance Corp.” and, together with the Company, the “Issuers”), jointly and severally promise to pay interest on the principal amount of this Note at 8% per annum from December 4, 2012 until maturity and shall pay the Additional Interest payable pursuant to Section 5 of the Registration Rights Agreement referred to below.  The Issuers will pay interest and Additional Interest, if any, semi-annually in arrears on June 1 and December 1 of each year, commencing June 1, 2013, 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 original issuance; provided that if there is no existing Default or Event of Default in the payment of interest, and 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, except in the case of the original issuance of Notes, in which case interest shall accrue from the date of authentication.  The Issuers shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate equal to the interest rate on the Notes then in effect; they shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Interest, if any (without regard to any applicable grace periods), from time to time on demand at the same rate to the extent lawful.  Interest will be computed on the basis of a 360-day year of twelve 30-day months.

 

2.                                      Method of Payment.  The Issuers will pay interest on the Notes (except defaulted interest) and Additional Interest, if any, to the Persons who are registered Holders of Notes at the close of business on the May 15 or November 15 next preceding the Interest Payment Date, even if such Notes are cancelled after such record date and on or before such Interest Payment Date, except as provided in Section 2.11 of the Indenture with respect to defaulted interest.  Holders must surrender Notes to the Paying Agent to collect payments of principal and premium, if any, together with accrued and unpaid interest and Additional Interest, if any, due at maturity.  The Notes will be payable as to principal, premium, if any, interest and Additional Interest, if any, at the office or agency of the Issuers maintained for such purpose within the City and State of New York, or, at the option of the Issuers, payment of interest and Additional Interest, if any, may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds to an account in the United States will be required with respect to any amounts due on all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Issuers or the Paying Agent.  Such payment shall 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, Wells Fargo Bank, National Association, the Trustee under the Indenture, will act as Paying Agent and Registrar.  The Company may

 

Ex. 1 to App. - 5

 

change any Paying Agent or Registrar without notice to any Holder.  The Company or any of its Subsidiaries may act in any such capacity.

 

4.                                      Indenture.  The Issuers issued the Notes under an Indenture dated as of December 4, 2012 (“Indenture”) among the Issuers, the Guarantors and the Trustee.  The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code §§ 77aaa-77bbbb).  The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms.  The Notes are unsecured senior obligations of the Issuers limited to $300.0 million aggregate principal amount in the case of Notes issued on the Initial Issuance Date (as defined in the Indenture).

 

5.                                      Optional Redemption.

 

(a)                                 Except as set forth in subparagraphs (b), (c) and (d) of this Paragraph 5, the Issuers shall not have the option to redeem the Notes prior to December 1, 2016.  On or after December 1, 2016, the Issuers shall have the option to redeem the Notes, in whole or in part at any time, upon prior notice as set forth in Paragraph 8, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest and Additional Interest, if any, to the applicable redemption date (subject to the right of Holders on the relevant record date to receive interest due on an Interest Payment Date that is on or prior to the redemption date), if redeemed during the twelve-month period beginning on December 1 of the years indicated below:

 

	
YEAR
    	
 
    	
PERCENTAGE
    	
 
    
	
2016
    	
 
    	
104.000
    	
%
    
	
2017
    	
 
    	
102.000
    	
%
    
	
2018 and thereafter
    	
 
    	
100.000
    	
%
    

 

(b)                                 Notwithstanding the provisions of subparagraph (a) of this Paragraph 5, at any time prior to December 1, 2015, the Issuers may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes (including any Additional Notes) issued under the Indenture at a redemption price of 108.0% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, thereon to the redemption date (subject to the right of Holders on the relevant record date to receive interest due on an Interest Payment Date that is on or prior to the redemption date), with the net cash proceeds of one or more Equity Offerings by the Company; provided that (i) at least 65% of the aggregate principal amount of Notes (including any Additional Notes) originally issued under the Indenture (excluding any Notes held by the Company and its Subsidiaries) remains outstanding immediately after the occurrence of each such redemption and (ii) each such redemption occurs within 180 days of the date of the closing of each such Equity Offering.

 

(c)                                  Prior to December 1, 2016, the Issuers may redeem all or part of the Notes at a redemption price equal to the sum of (1) the principal amount thereof, plus (2) accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders on the relevant record date to receive interest due on an interest payment date that is on or prior to the redemption date), plus (3) the Make Whole Premium at the redemption date.

 

Ex. 1 to App. - 6

 

(d)                                 The Notes may also be redeemed, as a whole, following certain Change of Control Offers, at the redemption price and subject to the conditions set forth in Section 4.15(f) of the Indenture.

 

6.                                      Mandatory Redemption.

 

Except as set forth in this Paragraph 6 and in Paragraph 7 below, neither of the Issuers is required to make mandatory redemption or sinking fund payments with respect to the Notes or to repurchase the Notes at the option of the Holders.

 

Following the Special Mandatory Redemption Trigger Event, the Initial Notes are subject to mandatory redemption as a whole, upon the giving of prior notice to Holders and on the redemption date and for the redemption price set forth in Section 3.08 of the Indenture.

 

7.                                      Repurchase at Option of Holder.

 

(a)                                 If there is a Change of Control, unless the Issuers have previously or concurrently exercised their right to redeem all of the Notes, the Company will be required to make 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 each Holder’s Notes at a purchase price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Additional Interest, if any, thereon to the date of purchase, subject to the rights of Holders on the relevant record date to receive interest due on an Interest Payment Date that is on or prior to the Change of Control Purchase Date.  Within 30 days following any Change of Control, unless the Issuers have previously or concurrently exercised their right to redeem all of the Notes, the Company will send a notice to each Holder and the Trustee 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 Sale, within ten Business 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 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 or redeem with the proceeds of sales of assets, offering to purchase or redeem, on a pro rata basis, the maximum principal amount of Notes and such other pari passu Indebtedness that may be purchased 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 and Additional Interest, if any, to the date of purchase or redemption, subject to the rights of Holders on the relevant record date to receive interest due on an Interest Payment Date that is on or prior to the date of purchase, and will be payable in cash.  If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company or any Restricted Subsidiary of the Company may use those Excess Proceeds for any purpose not otherwise prohibited by the Indenture.  If the aggregate principal amount of Notes accepted for purchase in such Asset Sale Offer exceeds the amount of Excess Proceeds allocated to the purchase of Notes, the Trustee will select the Notes to be purchased on a pro rata basis (except as provided in Section 4.10 of the Indenture).  Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero.

 

Ex. 1 to App. - 7

 

(c)                                  Holders of Definitive Notes that are the subject of an offer to purchase may elect to have such Notes purchased by completing the form entitled “Option of Holder to Elect Purchase” attached to the Notes.

 

8.                                      Notice of Redemption.  Notice of redemption will be given at least 30 days but not more than 60 days (except as otherwise provided in the Indenture if the notice is issued in connection with a Special Mandatory Redemption Trigger Event, Legal Defeasance, Covenant Defeasance or Discharge) before the redemption date to each Holder whose Notes are to be redeemed.  If given in the manner provided for in Section 3.03 of the Indenture, the notice of optional redemption shall be conclusively presumed to have been given whether or not a Holder receives such notice.  Failure to give timely notice or any defect in the notice shall not affect the validity of the redemption.  Notes in denominations larger than $2,000 may be redeemed in part but only in whole multiples of $1,000 in excess of $2,000, unless all of the Notes held by a Holder are to be redeemed.  On and after the redemption date interest and Additional Interest, if any, cease to accrue on Notes or portions thereof called for redemption.

 

9.                                      Guarantees.  The payment by the Issuers of the principal of and premium, interest and Additional Interest, if any, on the Notes is fully and unconditionally guaranteed on a joint and several senior unsecured basis by each of the Guarantors to the extent set forth in the Indenture.

 

10.                               Denominations, Transfer, Exchange.  The Notes are in registered form without coupons in denominations of $2,000 and integral multiples of $1,000 in excess of $2,000.  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 due on transfer or exchange.  The Issuers 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, they need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed.

 

11.                               Persons Deemed Owners.  The registered holder of a Note may be treated as its owner for all purposes.

 

12.                               Amendment, Supplement and Waiver.  Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of a majority in principal amount of the then outstanding Notes, and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes.  Without the consent of any Holder of a Note, the Indenture or the Notes may be amended or supplemented (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 an Issuer’s or Guarantor’s obligations to Holders of the Notes or a Subsidiary Guarantee pursuant to Article 5 of the Indenture, (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 under the Indenture of any such Holder, provided that any change to conform the Indenture to the Offering Memorandum shall not be deemed to adversely affect the legal rights under the Indenture of any Holder, (5) to

 

Ex. 1 to App. - 8

 

secure the Notes or the Subsidiary Guarantees pursuant to Section 4.12 of the Indenture or otherwise, (6) to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture, (7) to add any additional Guarantor with respect to the Notes or to evidence the release of any Guarantor from its Subsidiary Guarantee, in each case as provided in the Indenture, (8) to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act or (9) to evidence or provide for the acceptance of appointment under the Indenture of a successor Trustee.

 

13.                               Defaults and Remedies.  Events of Default include: (i) default for 30 days in the payment when due of interest or Additional Interest, if any, on the Notes; (ii) default in payment when due of the principal of or premium, if any, on the Notes when due at Stated Maturity, upon optional redemption, upon required repurchase, upon declaration or otherwise; (iii) failure by the Company to comply with Section 3.08, 3.09, 4.10, 4.15 or 5.01 of the Indenture; (iv) failure by the Company for 180 days after notice to comply with Section 4.03 of the Indenture; (v) failure by the Company for 60 days after notice to comply with any of its other agreements in the Indenture or the Notes; (vi) 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 Initial Issuance Date, if such default (a) is caused by a failure to pay principal of, or premium or interest, if any, on such Indebtedness prior to the expiration of any grace period provided in such Indebtedness (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 in excess of $15.0 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 60-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, such 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 or decree; (vii) failure by the Company or any of its Subsidiaries to pay final judgments aggregating in excess of $15.0 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; (viii) except as permitted by the Indenture, any Subsidiary 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 Subsidiary Guarantee; and (ix) certain events of bankruptcy, insolvency or reorganization with respect to the Company, Finance Corp., any of the Company’s Restricted Subsidiaries that is a Significant Subsidiary of the Company or any group of Restricted Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary of the Company as specified in Section 6.01(i) or 6.01(j) of the Indenture.  If any Event of Default occurs and is continuing, the Trustee, by notice to the Issuers, or the Holders of at least 25% in principal amount of the then outstanding Notes, by notice to the Issuers and the Trustee, may declare all the Notes to be due and payable immediately.

 

Ex. 1 to App. - 9

 

Notwithstanding the preceding, in the case of an Event of Default arising from such events of bankruptcy, insolvency or reorganization described in Section 6.01(i) or 6.01(j) of the Indenture, all outstanding Notes will become due and payable without further action or notice.  Holders may not enforce the Indenture or the Notes except as provided in the Indenture.  Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of 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, interest, premium or Additional Interest) if it determines that withholding notice is in their interests.  The Holders of a majority in principal amount of the Notes then outstanding by 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 under the Indenture except a continuing Default or Event of Default in the payment of the principal of or premium, interest or Additional Interest, if any, on the Notes.  The Issuers are required to deliver to the Trustee annually an Officers’ Certificate regarding compliance with the Indenture, and, so long as any Notes are outstanding, the Issuers are required upon certain Officers becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default.

 

14.                               Defeasance and Discharge.  The Notes are subject to defeasance and discharge upon the terms and conditions specified in the Indenture.

 

15.                               No Recourse Against Others.  No director, officer, partner, employee, incorporator, manager or unitholder or other owner of Capital Stock of the Issuers or any Guarantor, as such, shall have any liability for any obligations of the Issuers or any Guarantor under the Notes, the Subsidiary Guarantees or the Indenture, or for any claim based on, in respect of, or by reason of, such obligations or their creation.  Each Holder by accepting a Note waives and releases all such liability.  The waiver and release are part of the consideration for the issuance of the Notes.

 

16.                               Authentication.  This Note shall not be valid until authenticated by the manual signature of an authorized signatory 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 Transfer Restricted Securities.  In addition to the rights provided to Holders of Notes under the Indenture, Holders of Transfer Restricted Securities shall have all the rights set forth in the Registration Rights Agreement dated as of December 4, 2012, among the Issuers, the Guarantors and the Initial Purchasers (the “Registration Rights Agreement”).

 

19.                               Escrow.  The Initial Purchasers have deposited the net proceeds of the offering of the Initial Notes with the Escrow Agent on the Initial Issuance Date.  The Escrow Agent will hold such funds pursuant to the Escrow Agreement, and, subject to and in accordance with the conditions and requirements set forth in the Escrow Agreement, it will either disburse such funds

 

Ex. 1 to App. - 10

 

to or for the account of the Company or disburse them to the Trustee or the Paying Agent for application to the mandatory redemption of the Initial Notes following the Special Mandatory Redemption Trigger Event.

 

20.                               CUSIP Numbers.  Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuers have caused CUSIP numbers and corresponding ISIN numbers to be printed on the Notes and the Trustee may use CUSIP numbers and corresponding ISIN 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.

 

21.                               Governing Law.  THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

22.                               Successors.  In the event a successor assumes all the obligations of an Issuer under the Notes and the Indenture, pursuant to the terms thereof, such Issuer will be released from all such obligations.

 

The Company will furnish to any Holder upon written request and without charge a copy of the Indenture, the Escrow Agreement or the Registration Rights Agreement.  Requests may be made to:

 

Legacy Reserves LP

303 W. Wall Street

Suite 1400

Midland, Texas 79701

Attention:  Chief Financial Officer

 

Ex. 1 to App. - 11

 

ASSIGNMENT FORM

 

To assign this Note, fill in the form below:

 

I or we assign and transfer this Note to

 

	
 
    
	
Print or type assignee’s name, address and zip code)
    
	
 
    
	
(Insert assignee’s Soc. Sec. or Tax I.D. no.)
    

 

and irrevocably appoint                                      agent to transfer this Note on the books of the Issuers.  The agent may substitute another to act for him.

 

	
Date:
    	
 
    	
 
    	
Your   Signature:
    	
 
    
	
 
    	
Sign exactly as your name appears on the other side of this Note.
    

 

	
Signature   Guarantee:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
(Signature   must be guaranteed)
    	
 
    	
 
    

 

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

 

In connection with any transfer of any of the Notes evidenced by this certificate occurring prior to one year after the later of the date of original issuance of such Notes (or the date of any subsequent reopening of the Notes) and the last date, if any, on which such Notes were owned by an Issuer or any Affiliate of an Issuer (or, in the case of Regulation S Notes, prior to the expiration of the Distribution Compliance Period), the undersigned confirms that such Notes are being transferred in accordance with its terms:

 

CHECK ONE BOX BELOW

 

	
(1)
    	
o
    	
to   an Issuer; or
    
	
 
    	
 
    	
 
    
	
(2)
    	
o
    	
pursuant   to an effective registration statement under the Securities Act of 1933; or
    
	
 
    	
 
    	
 
    
	
(3)
    	
o
    	
to   a person who the undersigned reasonably believes is a “qualified   institutional buyer” (as defined in Rule 144A under the Securities Act   of 1933) that is purchasing for its own account or for the account of a   qualified institutional buyer to whom notice is given that such transfer is 
    

 

Ex. 1 to App. - 12

 

	
 
    	
 
    	
being   made in reliance on Rule 144A, in each case pursuant to and in   compliance with Rule 144A under the Securities Act of 1933; or
    
	
 
    	
 
    	
 
    
	
(4)
    	
o
    	
outside   the United States in an offshore transaction within the meaning of Regulation   S under the Securities Act in compliance with Rule 904 under the   Securities Act of 1933; or
    
	
 
    	
 
    	
 
    
	
(5)
    	
o
    	
pursuant   to another available exemption from the registration requirements of the   Securities Act of 1933.
    

 

Unless one of the boxes is checked, the Trustee will refuse to register any of the Notes evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (4) or (5) is checked, the Trustee shall be entitled to require, prior to registering any such transfer of the Notes, such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act.

 

 

	
 
    	
 
    	
 
    
	
 
    	
 
    	
Signature
    

 

Ex. 1 to App. - 13

 

TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.

 

The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Issuers and any Guarantors as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A.

 

 

	
Dated:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
Notice:  To be executed by an executive officer
    

 

Ex. 1 to App. - 14

 

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 box below:

 

	
o Section 4.10
    	
o Section 4.15
    

 

If you want to elect to have only part of this Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount (in minimum denomination of $2,000 or integral multiples of $1,000 in excess of $2,000) you elect to have purchased:  $            

 

	
Date:
    	
 
    	
 
    	
Your   Signature:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
(Sign   exactly as your name appears on the other side of this Note)
    

 

	
Soc. Sec. or Tax Identification No.:  
    	
 
    

 

	
Signature   Guarantee:
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
(Signature must be guaranteed)
    	
 
    	
 
    	
 
    

 

 

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

 

Ex. 1 to App. - 15

 

[TO BE ATTACHED TO GLOBAL NOTE]

 

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE

 

The following increases or decreases in this Global Note have been made:

 

	
Date
    	
 
    	
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
   Notes Custodian
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

Ex. 1 to App. - 16

 

EXHIBIT A TO RULE 144A/REGULATION S APPENDIX

 

[FORM OF FACE OF EXCHANGE NOTE]    */

 

*/ If the Note is to be issued in global form add the Global Notes Legend from Exhibit 1 to Rule 144A/Regulation S Appendix and the attachment from such Exhibit 1 captioned “[TO BE ATTACHED TO GLOBAL NOTES] - SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE.”

 

All references to “Additional Interest” in the Note shall be deleted unless, at the date of issuance of the Exchange Note, any Registration Default (as defined in the Registration Rights Agreement) has occurred with respect to the related Initial Notes during the interest period in which such date of issuance occurs.

 

Ex. A to App. - 1

 

[FORM OF FACE OF EXCHANGE NOTE]

 

LEGACY RESERVES LP

 

LEGACY RESERVES FINANCE CORPORATION

 

	
No. [        ]
    	
 
    	
$ [                ]
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
CUSIP   No. [                ]
    
	
 
    	
 
    	
ISIN   No. [                ]
    

 

8% Senior Note due 2020

 

Legacy Reserves LP, a Delaware limited partnership, and Legacy Reserves Finance Corporation, a Delaware corporation, jointly and severally promise to pay to                     , or registered assigns, the principal sum of                      Dollars on December 1, 2020 [or such greater or lesser amount as may be indicated on Schedule A hereto].(2)

 

Interest Payment Dates:  June 1 and December 1.

 

Record Dates: May 15 and November 15.

 

Additional provisions of this Note are set forth on the other side of this Note.

 

 

	
 
    	
 
    	
LEGACY   RESERVES LP
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
LEGACY   RESERVES GP, LLC,
    
	
 
    	
 
    	
 
    	
its   general partner
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
LEGACY   RESERVES FINANCE CORPORATION
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    

 

(2)  If this Note is a Global Note, add this provision.

 

Ex. A to App. - 2

 

	
TRUSTEE’S   CERTIFICATE OF
    	
 
    	
 
    
	
AUTHENTICATION
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Wells   Fargo Bank, National Association,
    	
 
    	
 
    
	
as Trustee, certifies that
    	
 
    	
 
    
	
this is one of the Notes
    	
 
    	
 
    
	
referred to in the Indenture.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By
    	
 
    	
 
    	
 
    
	
 
    	
Authorized Signatory
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Dated:
    	
 
    	
 
    	
 
    
					

 

Ex. A to App. - 3

 

[FORM OF REVERSE SIDE OF EXCHANGE NOTE]

 

8% Senior Note due 2020

 

Capitalized terms used herein but not defined shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.

 

1.                                      Interest.  Legacy Reserves LP, a Delaware limited partnership (the “Company”), and Legacy Reserves Finance Corporation, a Delaware corporation (the “Finance Corp.” and, together with the Company, the “Issuers”), jointly and severally promise to pay interest on the principal amount of this Note at 8% per annum from December 4, 2012 until maturity and shall pay the Additional Interest payable pursuant to Section 5 of the Registration Rights Agreement referred to below.  The Issuers will pay interest and Additional Interest, if any, semi-annually in arrears on June 1 and December 1of each year, commencing June 1, 2013, 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 original issuance; provided that if there is no existing Default or Event of Default in the payment of interest, and 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, except in the case of the original issuance of Notes, in which case interest shall accrue from the date of authentication.  The Issuers shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate equal to the interest rate on the Notes then in effect; they shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Interest, if any (without regard to any applicable grace periods), from time to time on demand at the same rate to the extent lawful.  Interest will be computed on the basis of a 360-day year of twelve 30-day months.

 

2.                                      Method of Payment.  The Issuers will pay interest on the Notes (except defaulted interest) and Additional Interest, if any, to the Persons who are registered Holders of Notes at the close of business on the May 15 or November 15 next preceding the Interest Payment Date, even if such Notes are cancelled after such record date and on or before such Interest Payment Date, except as provided in Section 2.11 of the Indenture with respect to defaulted interest.  Holders must surrender Notes to the Paying Agent to collect payments of principal and premium, if any, together with accrued and unpaid interest and Additional Interest, if any, due at maturity.  The Notes will be payable as to principal, premium, if any, interest and Additional Interest, if any, at the office or agency of the Issuers maintained for such purpose within the City and State of New York, or, at the option of the Issuers, payment of interest and Additional Interest, if any, may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds to an account in the United States will be required with respect to any amounts due on all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Issuers or the Paying Agent.  Such payment shall 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.

 

Ex. A to App. - 4

 

3.                                      Paying Agent and Registrar.  Initially, Wells Fargo Bank, National Association, the Trustee under the Indenture, will act as Paying Agent and Registrar.  The Company may change any Paying Agent or Registrar without notice to any Holder.  The Company or any of its Subsidiaries may act in any such capacity.

 

4.                                      Indenture.  The Issuers issued the Notes under an Indenture dated as of December 4, 2012 (“Indenture”) among the Issuers, the Guarantors and the Trustee.  The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code §§ 77aaa-77bbbb).  The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms.  The Notes are unsecured senior obligations of the Issuers limited to $300.0 million aggregate principal amount in the case of Notes issued on the Initial Issuance Date (as defined in the Indenture).

 

5.                                      Optional Redemption.

 

(a)                                 Except as set forth in subparagraphs (b), (c) and (d) of this Paragraph 5, the Issuers shall not have the option to redeem the Notes prior to December 1, 2016.  On or after December 1, 2016, the Issuers shall have the option to redeem the Notes, in whole or in part at any time, upon prior notice as set forth in Paragraph 8, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest and Additional Interest, if any, to the applicable redemption date (subject to the right of Holders on the relevant record date to receive interest due on an Interest Payment Date that is on or prior to the redemption date), if redeemed during the twelve-month period beginning on December 1 of the years indicated below:

 

	
YEAR
    	
 
    	
PERCENTAGE
    	
 
    
	
2016
    	
 
    	
104.000
    	
%
    
	
2017
    	
 
    	
102.000
    	
%
    
	
2018 and thereafter
    	
 
    	
100.000
    	
%
    

 

(b)                                 Notwithstanding the provisions of subparagraph (a)of this Paragraph 5, at any time prior to December 1, 2015, the Issuers may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes (including any Additional Notes) issued under the Indenture at a redemption price of 108.0% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, thereon to the redemption date (subject to the right of Holders on the relevant record date to receive interest due on an Interest Payment Date that is on or prior to the redemption date), with the net cash proceeds of one or more Equity Offerings by the Company; provided that (i) at least 65% of the aggregate principal amount of Notes (including any Additional Notes) originally issued under the Indenture (excluding any Notes held by the Company and its Subsidiaries) remains outstanding immediately after the occurrence of each such redemption and (ii) each such redemption occurs within 180 days of the date of the closing of each such Equity Offering.

 

(c)                                  Prior to December 1, 2016, the Issuers may redeem all or part of the Notes at a redemption price equal to the sum of (1) the principal amount thereof, plus (2) accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders on the relevant 

 

Ex. A to App. - 5

 

record date to receive interest due on an interest payment date that is on or prior to the redemption date), plus (3) the Make Whole Premium at the redemption date.

 

(d)                                 The Notes may also be redeemed, as a whole, following certain Change of Control Offers, at the redemption price and subject to the conditions set forth in Section 4.15(f) of the Indenture.

 

6.                                      Mandatory Redemption.

 

Except as set forth in this Paragraph 6 and in Paragraph 7 below, neither of the Issuers is required to make mandatory redemption or sinking fund payments with respect to the Notes or to repurchase the Notes at the option of the Holders.

 

Following the Special Mandatory Redemption Trigger Event, the Initial Notes are subject to mandatory redemption as a whole, upon the giving of prior notice to Holders and on the redemption date and for the redemption price set forth in Section 3.08 of the Indenture.

 

7.                                      Repurchase at Option of Holder.

 

(a)                                 If there is a Change of Control, unless the Issuers have previously or concurrently exercised their right to redeem all of the Notes, the Company will be required to make 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 each Holder’s Notes at a purchase price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Additional Interest, if any, thereon to the date of purchase, subject to the rights of Holders on the relevant record date to receive interest due on an Interest Payment Date that is on or prior to the Change of Control Purchase Date.  Within 30 days following any Change of Control, unless the Issuers have previously or concurrently exercised their right to redeem all of the Notes, the Company will send a notice to each Holder and the Trustee 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 Sale, within ten Business 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 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 or redeem with the proceeds of sales of assets, offering to purchase or redeem, on a pro rata basis, the maximum principal amount of Notes and such other pari passu Indebtedness that may be purchased 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 and Additional Interest, if any, to the date of purchase or redemption, subject to the rights of Holders on the relevant record date to receive interest due on an Interest Payment Date that is on or prior to the date of purchase, and will be payable in cash.  If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company or any Restricted Subsidiary of the Company may use those Excess Proceeds for any purpose not otherwise prohibited by the Indenture.  If the aggregate principal amount of Notes accepted for purchase in such Asset Sale Offer exceeds the amount of Excess Proceeds allocated to the purchase of Notes, the Trustee will select the Notes to be purchased on a pro rata basis 

 

Ex. A to App. - 6

 

(except as provided in Section 4.10 of the Indenture).  Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero.

 

(c)                                  Holders of Definitive Notes that are the subject of an offer to purchase may elect to have such Notes purchased by completing the form entitled “Option of Holder to Elect Purchase” attached to the Notes.

 

8.                                      Notice of Redemption.  Notice of redemption will be given at least 30 days but not more than 60 days (except as otherwise provided in the Indenture if the notice is issued in connection with a Special Mandatory Redemption Trigger Event, Legal Defeasance, Covenant Defeasance or Discharge) before the redemption date to each Holder whose Notes are to be redeemed.  If given in the manner provided for in Section 3.03 of the Indenture, the notice of optional redemption shall be conclusively presumed to have been given whether or not a Holder receives such notice.  Failure to give timely notice or any defect in the notice shall not affect the validity of the redemption.  Notes in denominations larger than $2,000 may be redeemed in part but only in whole multiples of $1,000 in excess of $2,000, unless all of the Notes held by a Holder are to be redeemed.  On and after the redemption date interest and Additional Interest, if any, cease to accrue on Notes or portions thereof called for redemption.

 

9.                                      Guarantees.  The payment by the Issuers of the principal of and premium, interest and Additional Interest, if any, on the Notes is fully and unconditionally guaranteed on a joint and several senior unsecured basis by each of the Guarantors to the extent set forth in the Indenture.

 

10.                               Denominations, Transfer, Exchange.  The Notes are in registered form without coupons in denominations of $2,000 and integral multiples of $1,000 in excess of $2,000.  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 due on transfer or exchange.  The Issuers 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, they need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed.

 

11.                               Persons Deemed Owners.  The registered holder of a Note may be treated as its owner for all purposes.

 

12.                               Amendment, Supplement and Waiver.  Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of a majority in principal amount of the then outstanding Notes, and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes.  Without the consent of any Holder of a Note, the Indenture or the Notes may be amended or supplemented (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 an Issuer’s or Guarantor’s obligations to Holders of the Notes or a Subsidiary Guarantee pursuant to Article 5 of the Indenture, (4) to make any change that would provide any additional rights or benefits to the 

 

Ex. A to App. - 7

 

Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, provided that any change to conform the Indenture to the Offering Memorandum shall not be deemed to adversely affect the legal rights under the Indenture of any Holder, (5) to secure the Notes or the Subsidiary Guarantees pursuant to Section 4.12 of the Indenture or otherwise, (6) to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture, (7) to add any additional Guarantor with respect to the Notes or to evidence the release of any Guarantor from its Subsidiary Guarantee, in each case as provided in the Indenture, (8) to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act or (9) to evidence or provide for the acceptance of appointment under the Indenture of a successor Trustee.

 

13.                               Defaults and Remedies.  Events of Default include: (i) default for 30 days in the payment when due of interest or Additional Interest, if any, on the Notes; (ii) default in payment when due of the principal of or premium, if any, on the Notes when due at Stated Maturity, upon optional redemption, upon required repurchase, upon declaration or otherwise; (iii) failure by the Company to comply with Section 3.08, 3.09, 4.10, 4.15 or 5.01 of the Indenture; (iv) failure by the Company for 180 days after notice to comply with Section 4.03 of the Indenture; (v) failure by the Company for 60 days after notice to comply with any of its other agreements in the Indenture or the Notes; (vi) 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 Initial Issuance Date, if such default (a) is caused by a failure to pay principal of, or premium or interest, if any, on such Indebtedness prior to the expiration of any grace period provided in such Indebtedness (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 in excess of $15.0 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 60-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, such 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 or decree; (vii) failure by the Company or any of its Subsidiaries to pay final judgments aggregating in excess of $15.0 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; (viii) except as permitted by the Indenture, any Subsidiary 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 Subsidiary Guarantee; and (ix) certain events of bankruptcy, insolvency or reorganization with respect to the Company, Finance Corp., any of the Company’s Restricted Subsidiaries that is a Significant Subsidiary of the Company or any group of Restricted Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary of the Company as specified in Section 6.01(i) or 6.01(j) of the Indenture.  

 

Ex. A to App. - 8

 

If any Event of Default occurs and is continuing, the Trustee, by notice to the Issuers, or the Holders of at least 25% in principal amount of the then outstanding Notes, by notice to the Issuers and the Trustee, may declare all the Notes to be due and payable immediately.  Notwithstanding the preceding, in the case of an Event of Default arising from such events of bankruptcy, insolvency or reorganization described in Section 6.01(i) or 6.01(j) of the Indenture, all outstanding Notes will become due and payable without further action or notice.  Holders may not enforce the Indenture or the Notes except as provided in the Indenture.  Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of 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, interest, premium or Additional Interest) if it determines that withholding notice is in their interests.  The Holders of a majority in principal amount of the Notes then outstanding by 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 under the Indenture except a continuing Default or Event of Default in the payment of the principal of or premium, interest or Additional Interest, if any, on the Notes.  The Issuers are required to deliver to the Trustee annually an Officers’ Certificate regarding compliance with the Indenture, and, so long as any Notes are outstanding, the Issuers are required upon certain Officers becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default.

 

14.                               Defeasance and Discharge.  The Notes are subject to defeasance and discharge upon the terms and conditions specified in the Indenture.

 

15.                               No Recourse Against Others.  No director, officer, partner, employee, incorporator, manager or unitholder or other owner of Capital Stock of the Issuers or any Guarantor, as such, shall have any liability for any obligations of the Issuers or any Guarantor under the Notes, the Subsidiary Guarantees or the Indenture, or for any claim based on, in respect of, or by reason of, such obligations or their creation.  Each Holder by accepting a Note waives and releases all such liability.  The waiver and release are part of the consideration for the issuance of the Notes.

 

16.                               Authentication.  This Note shall not be valid until authenticated by the manual signature of an authorized signatory 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 Transfer Restricted Securities.  In addition to the rights provided to Holders of Notes under the Indenture, Holders of Transfer Restricted Securities shall have all the rights set forth in the Registration Rights Agreement dated as of 

 

Ex. A to App. - 9

 

December       , 2012, among the Issuers, the Guarantors and the Initial Purchasers (the “Registration Rights Agreement”).](3)

 

19.                               CUSIP Numbers.  Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuers have caused CUSIP numbers and corresponding ISIN numbers to be printed on the Notes and the Trustee may use CUSIP numbers and corresponding ISIN 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.

 

20.                               [Escrow.  The Initial Purchasers have deposited the net proceeds of the offering of the Initial Notes with the Escrow Agent on the Initial Issuance Date.  The Escrow Agent will hold such funds pursuant to the Escrow Agreement, and, subject to and in accordance with the conditions and requirements set forth in the Escrow Agreement, it will either disburse such funds to or for the account of the Company or disburse them to the Trustee or the Paying Agent for application to the mandatory redemption of the Initial Notes following the Special Mandatory Redemption Trigger Event.](4)

 

21.                               Governing Law.  THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

22.                               Successors.  In the event a successor assumes all the obligations of an Issuer under the Notes and the Indenture, pursuant to the terms thereof, such Issuer will be released from all such obligations.

 

The Company will furnish to any Holder upon written request and without charge a copy of the Indenture [and/or the Escrow Agreement and the Registration Rights Agreement](5).  Requests may be made to:

 

Legacy Reserves LP

313 W. Wall Street

Suite 1400

Midland, Texas 79701

Attention:  Chief Financial Officer

 

(3)  Delete if this Note is not being issued in exchange for an Initial Note.

 

(4)  Delete for Additional Securities or if this Note is issued after the closing of the Pending Permian Basin Acquisition.

 

(5)  Delete if this Note is not being issued in exchange for an Initial Note.

 

Ex. A to App. - 10

 

ASSIGNMENT FORM

 

To assign this Note, fill in the form below:

 

I or we assign and transfer this Note to

 

 

	
 
    
	
Print or type assignee’s name, address and zip code)
    
	
 
    
	
 
    
	
(Insert assignee’s Soc. Sec. or Tax I.D. no.)
    

 

and irrevocably appoint                                      agent to transfer this Note on the books of the Issuers.  The agent may substitute another to act for him.

 

 

	
Date:
    	
 
    	
 
    	
Your   Signature:
    	
 
    
	
Sign exactly as your name appears on the other side of this Note.
    

 

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

 

Ex. A to App. - 11

 

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 box below:

 

	
o   Section 4.10
    	
o   Section 4.15
    

 

If you want to elect to have only part of this Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount (in minimum denomination of $2,000 or integral multiples of $1,000 in excess of $2,000) you elected to have purchased:  $

 

	
Date:
    	
 
    	
 
    	
Your   Signature:
    	
 
    
	
 
    	
 
    	
 
    	
(Sign   exactly as your name appears on the other side of this Note)
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
Soc.   Sec. or Tax Identification No.:
    	
 
    
	
 
    
	
Signature   Guarantee:
    	
 
    	
 
    
	
 
    	
(Signature   must be guaranteed)
    	
 
    
								

 

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

 

Ex. A to App. - 12

 

SCHEDULE 1

 

AGREEMENT WITH AFFILIATES

 

Each of the following is an agreement referred to in paragraph (4) of Section 4.11(b):

 

1)                         Employment Agreement dated as of March 15, 2006, between Cary D. Brown and Legacy Reserves Services, Inc.

 

2)                         Section 409A Compliance Amendment to Employment Agreement dated December 31, 2008, between Cary D. Brown and Legacy Reserves Services, Inc.

 

3)                         Employment Agreement dated as of March 15, 2006, between Kyle A. McGraw and Legacy Reserves Services, Inc.

 

4)                         Section 409A Compliance Amendment to Employment Agreement dated December 31, 2008, between Kyle A. McGraw and Legacy Reserves Services, Inc.

 

5)                         Employment Agreement dated as of March 15, 2006, between Paul T. Horne and Legacy Reserves Services, Inc.

 

6)                         Section 409A Compliance Amendment to Employment Agreement dated December 31, 2008, between Paul T. Horne and Legacy Reserves Services, Inc.

 

7)                         Employment Agreement dated as of April 1, 2012 between Micah C. Foster and Legacy Reserves Services, Inc.

 

8)                         Employment Agreement effective as of May 1, 2012 between Dan G. LeRoy and Legacy Reserves Services, Inc.

 

9)                         Employment Agreement effective September 24, 2012 between James Daniel Westcott and Legacy Reserves Services, Inc.

 

10)                  Lease Agreement effective October 27, 2010 between Legacy Reserves Services, Inc. and TCTB Management Group LLC, as amended.

 

11)                  Amended and Restated Agreement of Limited Partnership of Legacy Reserves LP, dated March 15, 2006; Amendment No. 1 to the Amended and Restated Agreement of Limited Partnership of Legacy Reserves LP, dated December 27, 2007.

 

12)                  Registration Rights Agreement dated March 15, 2006, by and among Legacy Reserves LP, Legacy Reserves GP, LLC and the other parties thereto (Founders Registration Rights Agreement).

 

S-1

 

13)                  Legacy Reserves LP Long-Term Incentive Plan (LTIP) effective as of August 17, 2007 and various agreements entered into with executive officers pursuant to the LTIP, as follows:

 

a)                   Form of Legacy Reserves LP Long-Term Incentive Plan Restricted Unit Grant Agreement.

 

b)                   Form of Legacy Reserves LP Long-Term Incentive Plan Unit Option Grant Agreement.

 

c)                    Form of Legacy Reserves LP Long-Term Incentive Plan Unit Grant Agreement.

 

d)                   Form of Legacy Reserves LP Long-Term Incentive Plan Grant of Phantom Units.

 

e)                    Form of Legacy Reserves LP Long-Term Incentive Plan Grant of Phantom Units (Objective).

 

f)                     Form of Legacy Reserves LP Long-Term Incentive Plan Grant of Phantom Units (Subjective).

 

S-2

 

ANNEX A

 

 

LEGACY RESERVES LP

 

LEGACY RESERVES FINANCE CORPORATION

 

and

 

THE GUARANTORS PARTY HERETO

 

 

8% SENIOR NOTES DUE 2020

 

 

FORM OF SUPPLEMENTAL INDENTURE

AND AMENDMENT — SUBSIDIARY GUARANTEE

 

DATED AS OF                              ,        

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,

 

as Trustee

 

 

 

A-1

 

This SUPPLEMENTAL INDENTURE, dated as of                            ,         , is among Legacy Reserves LP, a Delaware limited partnership (the “Company”), Legacy Reserves Finance Corporation, a Delaware corporation (“Finance Corp.” and, together with the Company, the “Issuers”), each of the parties identified under the caption “Guarantors” on the signature page hereto (the “Guarantors”) and Wells Fargo Bank, National Association, a national banking association, as Trustee.

 

RECITALS

 

WHEREAS, the Issuers, the initial Guarantors and the Trustee entered into an Indenture, dated as of December 4, 2012 (the “Indenture”), pursuant to which the Issuers have issued $300,000,000 in the aggregate principal amount of 8% Senior Notes due 2020 (the “Notes”);

 

WHEREAS, Section 9.01(g) of the Indenture provides that the Issuers, the Guarantors and the Trustee may amend or supplement the Indenture in order to comply with Section 4.13 or 10.03 thereof, without the consent of the Holders of the Notes; and

 

WHEREAS, all acts and things prescribed by the Indenture, by law and by the Certificate of Incorporation and the Bylaws (or comparable constituent documents) of the Issuers, of the Guarantors and of the Trustee necessary to make this Supplemental Indenture a valid instrument legally binding on the Issuers, the Guarantors and the Trustee, in accordance with its terms, have been duly done and performed;

 

NOW, THEREFORE, to comply with the provisions of the Indenture and in consideration of the above premises, the Issuers, the Guarantors and the Trustee covenant and agree for the equal and proportionate benefit of the respective Holders of the Notes as follows:

 

ARTICLE 1

 

Section 1.01.                          This Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes.

 

Section 1.02.                          This Supplemental Indenture shall become effective immediately upon its execution and delivery by each of the Issuers, the Guarantors and the Trustee.

 

ARTICLE 2

 

From this date, in accordance with Section 4.13 or 10.03 and by executing this Supplemental Indenture, the Guarantors whose signatures appear below are subject to the provisions of the Indenture to the extent provided for in Article 10 thereunder.

 

ARTICLE 3

 

Section 3.01.                          Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms with all capitalized terms used herein without definition having the same respective meanings ascribed to them as in the Indenture.

 

A-2

 

Section 3.02.                          Except as otherwise expressly provided herein, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Supplemental Indenture.  This Supplemental Indenture is executed and accepted by the Trustee subject to all the terms and conditions set forth in the Indenture with the same force and effect as if those terms and conditions were repeated at length herein and made applicable to the Trustee with respect hereto.

 

Section 3.03.                          THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

Section 3.04.                          The parties may sign any number of copies of this Supplemental Indenture.  Each signed copy shall be an original, but all of such executed copies together shall represent the same agreement.

 

[NEXT PAGE IS SIGNATURE PAGE]

 

A-3

 

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the date first written above.

 

	
 
    	
LEGACY   RESERVES LP
    
	
 
    	
 
    
	
 
    	
BY:   
    	
LEGACY   RESERVES GP, LLC,
    
	
 
    	
 
    	
its   general partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
LEGACY   RESERVES FINANCE CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
GUARANTORS
    
	
 
    	
[                                                                                                     
    	
]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
WELLS   FARGO BANK, NATIONAL ASSOCIATION,
    
	
 
    	
as   Trustee
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
					

 

A-4

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