-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JjpGe8uVsRyj2UxHtzK8xGvzgQAtqsx56bm8Yy12ZLmNdhnMqf6niDC5OFkLL+E0 olgSmUoSi2SL8M0z5XntHQ== 0000320321-98-000060.txt : 19980514 0000320321-98-000060.hdr.sgml : 19980514 ACCESSION NUMBER: 0000320321-98-000060 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980513 SROS: NYSE SROS: PHLX FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEAGULL ENERGY CORP CENTRAL INDEX KEY: 0000320321 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION & DISTRIBUTION [4923] IRS NUMBER: 741764876 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08094 FILM NUMBER: 98617511 BUSINESS ADDRESS: STREET 1: 1001 FANNIN STE 1700 STREET 2: 1001 FIRST CITY TOWER CITY: HOUSTON STATE: TX ZIP: 77002-6714 BUSINESS PHONE: 7139514700 MAIL ADDRESS: STREET 1: 1001 FANNIN, SUITE 1700 STREET 2: 1001 FIRST CITY TOWER CITY: HOUSTON STATE: TX ZIP: 77002-6714 FORMER COMPANY: FORMER CONFORMED NAME: SEAGULL PIPELINE CORP DATE OF NAME CHANGE: 19830815 10-Q 1 1ST QUARTER SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE - ------- SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED MARCH 31, 1998 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 1-8094 SEAGULL ENERGY CORPORATION (Exact name of registrant as specified in its charter) TEXAS 74-1764876 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1001 FANNIN, SUITE 1700, HOUSTON, TEXAS 77002-6714 (Address of principal executive offices) (Zip code) (713) 951-4700 (Registrant's telephone number, including area code) None (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X. No___. As of May 11, 1998, 63,030,308 shares of Common Stock, par value $0.10 per share, were outstanding. SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
INDEX PAGE NUMBER PART I. FINANCIAL INFORMATION Item 1. Unaudited Consolidated Financial Statements Consolidated Statements of Operations for the Three Months Ended March 31, 1998 and 1997................................................................. 3 Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 1998 and 1997 ........................................... 4 Consolidated Balance Sheets - March 31, 1998 and December 31, 1997............................ 5 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1998 and 1997................................................................. 6 Notes to Consolidated Financial Statements.................................................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................................................... 11 PART II. OTHER INFORMATION..................................................................................... 16 SIGNATURES...................................................................................................... 17
-2- ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEAGULL ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in Thousands Except Per Share Data) (Unaudited)
Three Months Ended March 31, --------------------------------------------------- 1998 1997 ----------------------- ---------------------- Revenues: Oil and gas operations............................................ $ 90,449 $ 125,004 Alaska transmission and distribution.............................. 31,876 34,569 ----------------------- ---------------------- 122,325 159,573 Costs of Operations: Operations and maintenance........................................ 39,880 42,871 Alaska transmission and distribution cost of gas sold............. 14,763 16,722 Exploration charges............................................... 10,118 8,953 Depreciation, depletion and amortization.......................... 39,979 42,111 General and administrative........................................ 3,384 2,310 ----------------------- ---------------------- 108,124 112,967 ----------------------- ---------------------- Operating Profit..................................................... 14,201 46,606 Other (Income) Expense: Interest expense.................................................. 8,547 10,410 Interest income and other......................................... (532) (698) ----------------------- ---------------------- 8,015 9,712 ----------------------- ---------------------- Income Before Income Taxes........................................... 6,186 36,894 Income Tax Expense................................................... 3,031 19,640 ----------------------- ---------------------- Net Income........................................................... $ 3,155 $ 17,254 ======================= ====================== Earnings Per Common Share: Basic............................................................. $ 0.05 $ 0.27 ======================= ====================== Diluted........................................................... $ 0.05 $ 0.27 ======================= ====================== Weighted Average Number of Common Shares Outstanding: Basic............................................................. 63,022 62,784 ======================= ====================== Diluted........................................................... 63,480 63,631 ======================= ====================== See accompanying Notes to Consolidated Financial Statements.
-3- SEAGULL ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Amounts in Thousands) (Unaudited)
Three Months Ended March 31, --------------------------------------------------- 1998 1997 ----------------------- ---------------------- Net income........................................................... $ 3,155 $ 17,254 Other comprehensive income, net of tax: Foreign currency translation adjustment........................... - (1,196) ----------------------- ---------------------- Comprehensive income................................................. $ 3,155 $ 16,058 ======================= ====================== See accompanying Notes to Consolidated Financial Statements.
-4- SEAGULL ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Amounts in Thousands Except Share and Per Share Data) (Unaudited)
MARCH 31, December 31, 1998 1997 --------------------- --------------------- ASSETS: Current Assets: Cash and cash equivalents............................................... $ 17,729 $ 45,654 Accounts receivable, net................................................ 132,319 147,442 Inventories............................................................. 14,345 13,635 Prepaid expenses and other.............................................. 15,361 16,240 --------------------- --------------------- Total Current Assets.................................................. 179,754 222,971 Property, Plant and Equipment (successful efforts method)................. 2,107,581 2,053,683 Accumulated Depreciation, Depletion and Amortization...................... 947,956 908,849 --------------------- --------------------- 1,159,625 1,144,834 Other Assets.............................................................. 42,146 43,261 --------------------- --------------------- Total Assets.............................................................. $ 1,381,525 $ 1,411,066 ===================== ===================== LIABILITIES AND SHAREHOLDERS' EQUITY: Current Liabilities: Accounts and note payable............................................... $ 141,710 $ 159,138 Accrued expenses........................................................ 34,745 47,625 Current maturities of long-term debt.................................... 7,193 7,097 --------------------- --------------------- Total Current Liabilities............................................. 183,648 213,860 Long-Term Debt............................................................ 469,016 469,017 Other Noncurrent Liabilities.............................................. 49,800 51,168 Deferred Income Taxes..................................................... 12,495 14,126 Redeemable Bearer Shares.................................................. 15,635 15,691 Commitments and Contingencies............................................. - - Shareholders' Equity: Common Stock, $.10 par value; authorized 100,000,000 shares; issued 63,910,150 shares (1998) and 63,877,442 (1997)................ 6,391 6,388 Additional paid-in capital.............................................. 494,475 493,829 Retained earnings....................................................... 168,090 164,935 Less: note receivable from employee stock ownership plan............... (3,067) (2,990) Less: treasury stock - 861,314 shares................................. (14,958) (14,958) --------------------- --------------------- Total Shareholders' Equity.............................................. 650,931 647,204 --------------------- --------------------- Total Liabilities and Shareholders' Equity................................. $ 1,381,525 $ 1,411,066 ===================== ===================== See accompanying Notes to Consolidated Financial Statements.
-5- SEAGULL ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in Thousands) (Unaudited)
Three Months Ended March 31, ------------------------------------------ 1998 1997 ------------------- ------------------- OPERATING ACTIVITIES: Net income............................................................... $ 3,155 $ 17,254 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization............................... 39,979 42,111 Amortization of deferred financing costs............................... 495 606 Deferred income taxes.................................................. (1,708) 12,494 Dry hole expense....................................................... 2,972 270 Other.................................................................. 167 378 ------------------- ------------------- 45,060 73,113 Changes in operating assets and liabilities, net of acquisitions: Decrease in accounts receivable...................................... 14,897 57,137 Decrease (increase) in inventories, prepaid expenses and other....... 1,015 (10,925) Decrease in accounts payable......................................... (14,928) (25,338) Decrease in accrued expenses and other............................... (13,041) (20,472) ------------------- ------------------- Net Cash Provided By Operating Activities................................ 33,003 73,515 INVESTING ACTIVITIES: Capital expenditures..................................................... (58,134) (55,427) Acquisitions, net of cash acquired....................................... (377) (101) Proceeds from sales of property, plant and equipment..................... 224 645 ------------------- ------------------- Net Cash Used In Investing Activities.................................... (58,287) (54,883) FINANCING ACTIVITIES: Proceeds from debt....................................................... 41,095 166,252 Principal payments on debt .............................................. (43,560) (174,147) Proceeds from sales of common stock...................................... 497 2,171 Other.................................................................... (673) (855) ------------------- ------------------- Net Cash Used In Financing Activities.................................... (2,641) (6,579) Effect of exchange rate changes on cash.................................... - (54) ------------------- ------------------- Increase (Decrease) In Cash And Cash Equivalents......................... (27,925) 11,999 Cash And Cash Equivalents At Beginning Of Period........................... 45,654 15,284 ------------------- ------------------- Cash And Cash Equivalents At End Of Period................................. $ 17,729 $ 27,283 =================== =================== See accompanying Notes to Consolidated Financial Statements.
-6- SEAGULL ENERGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1. PRESENTATION OF FINANCIAL INFORMATION In the opinion of management, the unaudited consolidated financial statements presented herein contain all adjustments necessary to present fairly the financial position of Seagull Energy Corporation and Subsidiaries (the "Company" or "Seagull") as of March 31, 1998, and the results of its operations, comprehensive income and cash flows for the three months ended March 31, 1998 and 1997. All adjustments made are of a normal, recurring nature. The results of operations for the three months ended March 31, 1998 are not necessarily indicative of the results to be expected for the full year. The financial information presented herein should be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. Comprehensive Income -- Effective January 1, 1998, the Company adopted Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standard ("SFAS") No. 130, "Reporting Comprehensive Income." This statement established standards for reporting and display of comprehensive income and its components in the Company's financial statements. Comprehensive income includes all changes in the Company's equity except those resulting from investments by and distributions to owners. Earnings Per Share -- The following table provides a reconciliation between basic and diluted earnings (loss) per share (stated in thousands except per share data):
Weighted Average Earnings Common Shares Per-Share Net Income Outstanding Amount ------------------------ ------------------------ ----------- QUARTER ENDED MARCH 31, 1998: BASIC..................................... $ 3,155 63,022 $ 0.05 EFFECT OF DILUTIVE STOCK OPTIONS.......... - 458 ------------------------ ------------------------ DILUTED................................... $ 3,155 63,480 $ 0.05 ======================== ======================== Quarter Ended March 31, 1997: Basic..................................... $ 17,254 62,784 $ 0.27 Effect of dilutive stock options.......... - 847 ------------------------ ------------------------ Diluted................................... $ 17,254 63,631 $ 0.27 ======================== ========================
Weighted average options to purchase 2,460,524 and 1,750,144 shares of common stock at $17.94 to $26.38 per share were outstanding during 1998 and 1997, respectively, but were not included in the computation of diluted earnings per share because the options' exercise prices were greater than the average market price of the common shares. These options expire at various dates from 2003 to 2008. -7- SEAGULL ENERGY CORORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Derivative Financial Instruments -- The Company enters into a variety of commodity derivative financial instruments (futures contracts, price swaps and options) only for non-trading purposes as a hedging strategy to manage commodity prices associated with oil and gas sales and to reduce the impact of price fluctuations. To qualify as hedges, these instruments must highly correlate to anticipated future production such that the Company's exposure to the effects of price changes is reduced. The Company uses the hedge or deferral method of accounting for these instruments and, as a result, gains and losses on commodity derivative financial instruments are generally offset by similar changes in the realized prices of the commodities. Income and costs related to these hedging activities are recognized in oil and gas revenues when the commodities are produced. Income and costs on commodity derivative financial instruments that are closed before the hedged production occurs are also deferred until the production month originally hedged. In the event of a loss of correlation between changes in oil and gas reference prices under a commodity derivative financial instrument and actual oil and gas prices, income or costs are recognized currently to the extent the financial instrument has not offset changes in actual oil and gas prices. Any realized income and costs that are deferred at the balance sheet date and any margin accounts for futures contracts are included as net current assets. While commodity derivative financial instruments are intended to reduce the Company's exposure to declines in the market price of oil and natural gas, the commodity derivative financial instruments may also limit the Company's gain from increases in those market prices. The Company recorded $0.2 million and $8 million for the quarter ended March 31, 1998 and 1997, respectively, in costs related to equity hedging activities, including costs related to the monetary production payment hedges of approximately $0.2 million and $1 million in 1998 and 1997, respectively. By the end of the first quarter of 1997, the Company's equity hedging activities had been substantially reduced, leaving primarily the commodity hedges in place as required by the monetary production payment (related to the 1995 sale of the Company's Section 29 tax credit-bearing properties) for approximately 11 MMcf per day through December 1998. The Company also recorded $0.5 million and $0.3 million in hedging costs for 1998 and 1997, respectively, related to third-party marketing activities. At March 31, 1998, the Company had open natural gas futures, swaps and option contracts related to its third-party marketing efforts totaling 14 Bcf related to purchases and 22 Bcf related to sales for the period from April 1998 through July 1999. At March 31, 1998, the fair value related to the Company's commodity hedging activities was $0.5 million of costs related to open contracts. Accounting Pronouncements -- In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." This statement establishes standards for reporting information about operating segments in annual financial statements and requires selected information about operating segments be included in interim reports issued to shareholders. In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits." This statement establishes standards for disclosure for pensions and other postretirement benefits in annual financial statements. These statements are effective for financial statements for periods beginning after December 15, 1997. As both SFAS Nos. 131 and 132 establish standards for reporting and display, the Company does not expect the adoption of these statements to have a material impact on its financial condition or results of operations. -8- SEAGULL ENERGY CORORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 2. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION (Amounts in Thousands)
Three Months Ended March 31, ----------------------------------------- 1998 1997 ------------------ ------------------- Cash paid during the period for: Interest, net of amount capitalized.......................................... $ 16,571 $ 15,988 Income taxes................................................................. $ 4,841 $ 6,432
NOTE 3. COMMITMENTS AND CONTINGENCIES Historically, most computer systems (including microprocessors embedded into field equipment and other machinery) utilized software that processed transactions using two digits to represent the year of the transaction (i.e., 97 represents the year 1997). This software (including software built into embedded microprocessors) requires modification to properly process dates beyond December 31, 1999 (the "Year 2000 Issue"). During 1997, the Company utilized both internal and external resources to reprogram, or replace, and test software for necessary modifications identified in its assessment of the Year 2000 Issue. By December 31, 1997, the Company's Year 2000 remediation was substantially complete and approximately $300,000 had been expensed related to this assessment and remediation. The Company presently believes that, as a result of these efforts, the Year 2000 Issue will not have a material adverse effect attributable to the Company's systems. The Company has initiated formal communications with all of its significant suppliers and large customers to determine the extent to which the Company is vulnerable to those third parties' potential failure to remediate their own Year 2000 Issue. However, there can be no guarantee that the systems of other companies, on which the Company's systems rely, will be timely converted, or that a failure to convert by another company, or a conversion that is incompatible with the Company's systems, would not have a material adverse effect on the Company. NOTE 4. SUBSEQUENT EVENTS NorAm Litigation -- In April 1998, Seagull, NorAm Gas Transmission Co. ("NorAm") and Arkansas Western Gas Company ("AWG") signed a final Settlement Agreement (the "Settlement") with respect to NorAm Gas Transmission Co., et al. v. Seagull Mid-South Inc. (the "NorAm Litigation"). The case relates to Seagull's termination of a 1956 gas contract which provided for the sale of gas by Seagull from certain wells in the Aetna Field in Arkansas for approximately $0.16 per Mcf. NorAm and AWG sought a declaratory judgment that the gas contract remain in effect with respect to these wells or, in the alternative, that they receive money damages. NorAm and AWG also sought a declaratory judgment to the effect that certain additional wells in the Aetna Field (including any new wells) would be subject to the $0.16 per Mcf price. The Settlement called for Seagull to make a cash payment and to deliver gas under a five-year gas sales contract. The Settlement resulted in no further charges to the Company's income in 1998. -9- SEAGULL ENERGY CORORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Acquisitions -- On March 30, 1998, the Company entered into a Purchase and Sale Agreement whereby Seagull will purchase the stock of BRG Petroleum, Inc. ("BRG"), a closely held private company, and the assets of BRG's limited partnerships and programs (collectively, the "BRG Assets") for $102 million in cash, subject to final closing adjustments. The Company expects to fund the acquisition through existing credit facilities. The transaction is expected to close during the second quarter of 1998. The BRG Assets include proved oil and gas reserves of 102 billion cubic feet of natural gas equivalents ("Bcfe"). BRG operates more than 70 percent of 600 currently producing oil and gas wells in approximately 140 fields. Daily production from the properties net to the combined BRG interests averaged approximately 18 million cubic feet of gas and 400 barrels of oil and natural gas liquids in 1997. The most significant of the BRG Assets are concentrated in East Texas, primarily in Freestone, Upshur, Rusk and Nacogdoches counties. -10- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SEAGULL ENERGY CORPORATION AND SUBSIDIARIES The following discussion is intended to assist in an understanding of the Company's financial position, results of operations and cash flows for each of the quarters ended March 31, 1998 and 1997. The Company's accompanying unaudited consolidated financial statements and the notes thereto and the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1997 contain detailed information that should be referred to in conjunction with the following discussion. RESULTS OF OPERATIONS CONSOLIDATED HIGHLIGHTS (Amounts in Thousands)
Three Months Ended March 31, ------------------------------------------ 1998 1997 ------------------ ------------------ Revenues: Oil and gas operations ..................................................... $ 90,449 $ 125,004 Alaska transmission and distribution........................................ 31,876 34,569 ------------------ ------------------ $ 122,325 $ 159,573 ================== ================== Operating profit: Oil and gas operations ..................................................... $ 8,931 $ 39,079 Alaska transmission and distribution........................................ 9,541 10,466 Corporate................................................................... (4,271) (2,939) ------------------ ------------------ $ 14,201 $ 46,606 ================== ================== Net income.................................................................... $ 3,155 $ 17,254 Net cash provided by operating activities before changes in operating assets and liabilities................................ $ 45,060 $ 73,113 Net cash provided by operating activities..................................... $ 33,003 $ 73,515
Revenues decreased $37 million and operating profit declined $32 million from the first quarter of 1997 to the first quarter of 1998 primarily due to significant decreases in domestic oil and gas prices and decreases in international oil prices combined with the sale of the Company's Canadian oil and gas operations. The price decreases were partially offset by higher oil production from the Company's international operations. Net income decreased from $17 million for the first quarter of 1997 to $3 million for the same period in 1998 due to the lower commodity prices discussed above. -11- SEAGULL ENERGY CORPORATION AND SUBSIDIARIES OIL AND GAS OPERATIONS (Amounts in Thousands)
Three Months Ended March 31, ------------------------------------------ 1998 1997 ------------------- ------------------ Revenues: Natural gas................................................................ $ 60,560 $ 85,500 Oil and NGL................................................................ 24,285 30,823 Pipeline and marketing..................................................... 5,604 8,681 ------------------- ------------------ 90,449 125,004 ------------------- ------------------ Production operating expense................................................. 27,444 29,883 Pipeline and marketing expenses.............................................. 6,986 7,691 Exploration charges.......................................................... 10,118 8,953 Depreciation, depletion and amortization..................................... 36,970 39,398 ------------------- ------------------ Operating profit........................................................... $ 8,931 $ 39,079 =================== ==================
The decline in commodity prices was the significant factor in the decrease in operating profit for the Oil and Gas Operations ("O&G") segment from $39 million for the first quarter of 1997 to $9 million for the first quarter of 1998. In addition, the first quarter of 1998 reflects the absence of the Company's Canadian operations which were sold in October 1997. These Canadian operations contributed approximately $11 million in revenues and $4 million in operating profit in the first quarter of 1997. Domestic natural gas prices decreased 18% from $2.60 per Mcf in the first quarter of 1997 to $2.14 per Mcf for the same period in 1998. This significant price decrease and a 3% decrease in domestic gas production combined to create a $15 million decrease in domestic natural gas revenues. Worldwide oil prices also showed a significant decrease of 34%, from $19.52 per Bbl in 1997's first quarter to $12.89 per Bbl in 1998. While declining oil prices were the primary factor for the $7 million decrease in oil revenues, this was partially offset by a 35% increase in oil production in the U.S. and Egypt as Seagull realized additional contributions from several new domestic wells and two Egyptian concessions - Qarun, where additional facilities became operational during mid 1997, and West Abu Gharadig, which was purchased in late 1997. The Company recorded $0.2 million and $8 million for the quarter ended March 31, 1998 and 1997, respectively, in costs related to equity hedging activities, including costs related to the monetary production payment hedges of approximately $0.2 million and $1 million in 1998 and 1997, respectively. By the end of the first quarter of 1997, the Company's equity hedging activities had been substantially reduced, leaving primarily the commodity hedges in place as required by the monetary production payment (related to the 1995 sale of the Company's Section 29 tax credit-bearing properties) for approximately 11 MMcf per day through December 1998. The Company also recorded $0.5 million and $0.3 million in hedging costs for 1998 and 1997, respectively, related to third-party marketing activities. At March 31, 1998, the Company had open natural gas futures, swaps and option contracts -12- SEAGULL ENERGY CORPORATION AND SUBSIDIARIES related to its third-party marketing efforts totaling 14 Bcf related to purchases and 22 Bcf related to sales for the period from April 1998 through July 1999. At March 31, 1998, the fair value related to the Company's commodity hedging activities was $0.5 million of costs related to open contracts. Pipeline and marketing revenues declined $3 million for the first quarter of 1998 due to a decrease in third party marketing margins and revenues related to the Company's gas gathering and processing facilities. This decrease in gas gathering and processing revenues was substantially offset by a decrease in the related cost of gas. EXPLORATION AND PRODUCTION OPERATING DATA (Amounts in thousands except per unit data)
Three Months Ended March 31, --------------------------------------------------------------------------------------------- Net Daily Production Unit Price 1998 1997 1998 1997 ---------------- ----------------- ----------------- ----------------- Gas Sales (1): Domestic.............. 292 302 $ 2.14 $ 2.60 Canada (2)............ - 48 - 2.19 Cote d'Ivoire......... 10 5 1.50 1.90 Indonesia............. 12 14 2.81 3.49 ---------------- ----------------- ----------------- ----------------- 314 369 $ 2.14 $ 2.57 ================ ================= ================= ================= Oil and NGL Sales(1): Domestic.............. 5,054 3,674 $ 13.62 $ 20.75 Canada (2)............ - 877 - 19.56 Egypt................. 10,504 7,861 13.16 19.76 Cote d'Ivoire......... 1,099 1,449 10.31 21.19 Tatarstan............. 3,993 3,413 11.62 16.87 Indonesia............. 276 259 17.79 20.02 Other................. 10 15 12.61 19.40 ---------------- ----------------- ----------------- ----------------- 20,936 17,548 $ 12.89 $ 19.52 ================ ================= ================= ================= (1) Natural gas is stated in MMcf and $ per Mcf. Oil and NGLs are stated in Bbl and $ per Bbl. (2) All of the Company's Canadian oil and gas operations were sold in October 1997.
While production expenses decreased by slightly more than $2 million to $27 million for the first quarter of 1998, production expenses per equivalent unit of production improved slightly to $4.16 per Boe in 1998 versus $4.20 per Boe in 1997. The $2 million decrease is primarily attributable to the absence of the Company's Canadian operations, partially offset by expenses related to the increased Egyptian production discussed above. The decrease in E&P depreciation, depletion and amortization ("DD&A") expense to $37 million for the first quarter of 1998 from $39 million for the first quarter of 1997 is primarily due to the sale of -13- SEAGULL ENERGY CORPORATION AND SUBSIDIARIES the Company's Canadian operations. The DD&A expense per equivalent unit of production for oil and gas producing activities remained stable at $5.54 per Boe for 1998 and $5.48 per Boe for 1997. ALASKA TRANSMISSION AND DISTRIBUTION (Amounts in Thousands Except Per Unit Data)
THREE MONTHS ENDED MARCH 31, ------------------------------------------- 1998 1997 ------------------- ----------------- Revenues................................................................... $ 31,876 $ 34,569 Cost of gas sold........................................................... 14,763 16,722 ------------------- ----------------- Gross margin........................................................... 17,113 17,847 Operations and maintenance expense......................................... 5,450 5,297 Depreciation, depletion and amortization................................... 2,122 2,084 ------------------- ----------------- Operating profit....................................................... $ 9,541 $ 10,466 =================== ================= OPERATING DATA: Degree days (1)........................................................ 3,697 3,720
(1) A measure of weather severity calculated by subtracting the mean temperature for each day from 65 degrees Fahrenheit. More degree days equate to colder weather. Operating profit of the Alaska Transmission and Distribution segment for the quarter ended March 31, 1998 decreased $1 million, or approximately 9%, from that of the prior year quarter, primarily due to decreased volumes. This decrease in volumes was due to a variety of factors, including a lower number of degree days. This segment's business is seasonal with approximately 65%-70% of its sales made in the first and fourth quarters of each year. OTHER General and administrative expenses of $3 million for the 1998 quarter were greater than 1997's $2 million of G&A expenses primarily due to 1997's reduction in expenses associated with compensation plans that are tied directly to the market price of Seagull's common stock as the stock price experienced an 18% decline during the first quarter of 1997. Interest expense decreased almost $2 million to $9 million in the first quarter of 1998 as a result of lower average debt balance on the Company's revolving credit facility after the utilization of the proceeds from the sale of the Canadian operations in late 1997 to pay down existing debt. Income tax expense decreased substantially from $20 million in 1997 to $3 million in 1998 primarily as a result of the 83% decrease in income before income taxes. -14- SEAGULL ENERGY CORPORATION AND SUBSIDIARIES LIQUIDITY AND CAPITAL RESOURCES
CAPITAL EXPENDITURES (Amounts in Thousands) Three Months Ended March 31, ------------------------------------------ 1998 1997 ------------------ ------------------- Exploration and production: Leasehold.................................................................. $ 1,608 $ 833 Exploration................................................................ 20,538 21,837 Development................................................................ 32,063 29,771 ------------------ ------------------- 54,209 52,441 Other oil and gas operations................................................. 556 37 ------------------ ------------------- Total oil and gas operations............................................. 54,765 52,478 Alaska transmission and distribution......................................... 1,539 1,405 Corporate ................................................................... 1,830 1,544 ------------------ ------------------- $ 58,134 $ 55,427 ================== ===================
Seagull's capital expenditure program is designed to fulfill the Company's goals of growing its reserve base and production capacity. Capital expenditures increased by nearly $3 million as expenditures increased related to the Company's Egyptian operations, partially offset by the sale of the Company's Canadian operations which had expenditures of $5 million in the first quarter of 1997. The Company has a revolving credit facility (the "Credit Facility") with a maximum commitment of $500 million. At March 31, 1998, there were no amounts borrowed under the Credit Facility and $481 million of the unused commitment was immediately available. The Credit Facility contains certain covenants and restrictive provisions, including limitations on the incurrence of additional debt or liens, the declaration or payment of dividends and the repurchase or redemption of capital stock and the maintenance of certain financial ratios. Under the most restrictive of these provisions, approximately $349 million was available for payment of cash dividends on common stock or to repurchase common stock as of March 31, 1998. On March 30, 1998, the Company entered into a Purchase and Sale Agreement whereby Seagull will purchase the stock of BRG Petroleum, Inc. ("BRG"), a closely held private company, and the assets of BRG's limited partnerships and programs (collectively, the "BRG Assets") for $102 million in cash, subject to final closing adjustments. The Company expects to fund the acquisition through existing credit facilities. The transaction is expected to close during the second quarter of 1998. Management believes that the Company's internally generated funds and bank borrowing capabilities will be sufficient to finance current and forecasted operations and the anticipated acquisition of the BRG Assets. -15- SEAGULL ENERGY CORPORATION AND SUBSIDIARIES In March 1998, Seagull announced that later in 1998 it may include some of the less strategic properties located away from its various core assets in a package of properties to be liquidated. DEFINED TERMS Natural gas is stated herein in billion cubic feet ("Bcf"), million cubic feet ("MMcf") or thousand cubic feet ("Mcf"). Oil, condensate and natural gas liquids ("NGL") are stated in barrels ("Bbl") or thousand barrels ("MBbl"). MMcfe and Mcfe represent the equivalent of one million and one thousand cubic feet of natural gas, respectively. Oil, condensate and NGL are converted to gas at a ratio of one barrel of liquids per six Mcf of gas, based on relative energy content. MMBoe, MBoe and Boe represent one million barrels, one thousand barrels and one barrel of oil equivalent, respectively, with six Mcf of gas converted to one barrel of liquid. FORWARD LOOKING STATEMENTS Item 2 of this document includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. Although Seagull believes that such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will in fact occur. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, the result of the acquisition of the BRG Assets, political developments in foreign countries, federal and state regulatory developments, the timing and extent of changes in commodity prices, the timing and extent of success in discovering, developing and producing or acquiring oil and gas reserves, the availability of skilled personnel, materials and equipment, operating hazards attendant to the industry, and conditions of the capital and equity markets during the periods covered by the forward-looking statements, as well as the other factors discussed in Seagull's Annual Report on Form 10-K for the year ended December 31, 1997. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: * 4.1 Senior Indenture dated as of July 15, 1993 by and between the Company and The Bank of New York, as Trustee. * 4.2 Senior Subordinated Indenture dated as of July 15, 1993 by and between the Company and The Bank of New York, as Trustee. *# 10.1 1998 Executive Incentive Plan. *# 10.2 Employment Agreement dated December 30, 1983 by and between the Company and Barry J. Galt, Chairman of the Board, President and Chief Executive Officer of the Company. *# 10.3 Seagull Energy Corporation 1981 Stock Option Plan (Restated).
-16- SEAGULL ENERGY CORPORATION AND SUBSIDIARIES *# 10.4 Seagull Energy Corporation 1983 Stock Option Plan (Restated). *# 10.5 Seagull Energy Corporation 1986 Stock Option Plan (Restated). * 10.6 Purchase and Sale Agreement, dated as of March 30, 1998, by and between Seagull Energy Corporation and The shareholder of BRG Petroleum, Inc. * 27.1 Financial Data Schedule for 3/31/98. * 27.2 Restated Financial Data Schedule for 1997 quarterly periods. * 27.3 Restated Financial Data Schedule for 1996 quarterly periods. * 27.4 Restated Financial Data Schedule for the years 1996 and 1996.
(b) There were no reports on Form 8-K filed during the three months ended March 31, 1998. - --------------------------- * Filed herewith. # Identifies management contracts and compensatory plans or arrangements. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SEAGULL ENERGY CORPORATION By: /s/ William L. Transier William L. Transier Senior Vice President and Chief Financial Officer (Principal Financial Officer) Date: May 13, 1998 By: /s/ Gordon L. McConnell Gordon L. McConnell Vice President and Controller (Principal Accounting Officer) Date: May 13, 1998 -17- EXHIBIT INDEX
Page EXHIBIT Number * 4.1 Senior Indenture dated as of July 15, 1993 by and between the Company and The Bank of New York, as Trustee. * 4.2 Senior Subordinated Indenture dated as of July 15, 1993 by and between the Company and The Bank of New York, as Trustee. *# 10.1 1998 Executive Incentive Plan. *# 10.2 Employment Agreement dated December 30, 1983 by and between the Company and Barry J. Galt, Chairman of the Board, President and Chief Executive Officer of the Company. *# 10.3 Seagull Energy Corporation 1981 Stock Option Plan (Restated). *# 10.4 Seagull Energy Corporation 1983 Stock Option Plan (Restated). *# 10.5 Seagull Energy Corporation 1986 Stock Option Plan (Restated). * 10.6 Purchase and Sale Agreement, dated as of March 30, 1998, by and between Seagull Energy Corporation and The shareholder of BRG Petroleum, Inc. * 27.1 Financial Data Schedule for 3/31/98. * 27.2 Restated Financial Data Schedule for 1997 quarterly periods. * 27.3 Restated Financial Data Schedule for 1996 quarterly periods. * 27.4 Restated Financial Data Schedule for the years 1996 and 1996. - --------------------------- * Filed herewith. # Identifies management contracts and compensatory plans or arrangements.
EX-4.1 2 SENIOR INDENTURE SEAGULL ENERGY CORPORATION AND THE BANK OF NEW YORK Senior Indenture Dated as of July 15, 1993 CROSS REFERENCE SHEET* Provisions of Trust Indenture Act of 1939 and Indenture to be dated as of July 15, 1993 between SEAGULL ENERGY CORPORATION and The Bank of New York, Trustee:
Section of the Act Section of Indenture 310(a)(1), (2) and (5)............................................................... 6.9 310(a)(3) and (4).................................................................... Inapplicable 310(b)............................................................................... 6.8 and 6.10(a), (b) and (d) 310(c)............................................................................... Inapplicable 311(a)............................................................................... 6.13(a) and (c) 311(b)............................................................................... 6.13(b) and (c) 311(c)............................................................................... Inapplicable 312(a)............................................................................... 4.1 and 4.2(a) 312(b)............................................................................... 4.2(a) and (b)(i) and (ii) 312(c)............................................................................... 4.2(c) 313(a)............................................................................... 4.4(a)(i), (ii), (iii), (iv), (v), (vi) and (vii) 313(a)(5)............................................................................ Inapplicable 313(b)(1)............................................................................ Inapplicable 313(b)(2)............................................................................ 4.4(b) 313(c)............................................................................... 4.4(c) 313(d)............................................................................... 4.4(d) 314(a)............................................................................... 4.3 314(b)............................................................................... Inapplicable 314(c)(1) and (2).................................................................... 11.5 314(c)(3)............................................................................ Inapplicable 314(d)............................................................................... Inapplicable 314(e)............................................................................... 11.5 314(f)............................................................................... Inapplicable 315(a), (c) and (d).................................................................. 6.1 315(b)............................................................................... 5.8 315(e)............................................................................... 5.9 316(a)(1)............................................................................ 5.7 316(a)(2)............................................................................ Not required 316(a) (last sentence)............................................................... 7.4 316(b)............................................................................... 5.4 317(a)............................................................................... 5.2 317(b)............................................................................... 3.5(a) 318(a)............................................................................... 11.7
ARTICLE ONE DEFINITIONS Affiliate....................................................................................................... 1 Asset Sale...................................................................................................... 2 Authenticating Agent............................................................................................ 2 Bankruptcy Code................................................................................................. 2 Board of Directors.............................................................................................. 2 Board Resolution................................................................................................ 2 Business Day.................................................................................................... 2 Commission...................................................................................................... 2 Consolidated Net Tangible Assets................................................................................ 2 Corporate Trust Office.......................................................................................... 2 Depositary...................................................................................................... 2 EBITDA.......................................................................................................... 3 EBITDA/Interest Ratio........................................................................................... 3 ENSTAR Alaska................................................................................................... 3 Event of Default................................................................................................ 3 Global Security................................................................................................. 3 Holder.......................................................................................................... 3 Holder of Securities............................................................................................ 3 Securityholder.................................................................................................. 3 Indebtedness.................................................................................................... 3 Indenture....................................................................................................... 4 interest........................................................................................................ 4 Issuer.......................................................................................................... 4 Issuer Order.................................................................................................... 4 Officers' Certificate........................................................................................... 4 Opinion of Counsel.............................................................................................. 4 original issue date............................................................................................. 4 original issue discount......................................................................................... 4 Original Issue Discount Security................................................................................ 5 Outstanding..................................................................................................... 5 Periodic Offering............................................................................................... 5 Person.......................................................................................................... 5 Place of Payment................................................................................................ 5 principal....................................................................................................... 5 principal amount................................................................................................ 6 Principal Property.............................................................................................. 6 record date..................................................................................................... 6 Responsible Officer............................................................................................. 6 Restricted Subsidiary........................................................................................... 6 Sale and Leaseback Transaction.................................................................................. 6 Secured Debt.................................................................................................... 6 Security........................................................................................................ 6 Securities...................................................................................................... 6 Subsidiary...................................................................................................... 6 Trust Indenture Act of 1939..................................................................................... 7 Trustee......................................................................................................... 7 Unrestricted Subsidiary......................................................................................... 7 U.S. Government Obligations..................................................................................... 7 vice president.................................................................................................. 7 Yield to Maturity............................................................................................... 7
ARTICLE TWO SECURITIES SECTION 2.1 Forms Generally............................................................................... 7 SECTION 2.2 Form of Trustee's Certificate of Authentication............................................... 8 SECTION 2.3 Amount Unlimited, Issuable in Series.......................................................... 8 SECTION 2.4 Authentication and Delivery of Securities..................................................... 10 SECTION 2.5 Execution of Securities....................................................................... 12 SECTION 2.6 Certificate of Authentication................................................................. 12 SECTION 2.7 Denomination and Date of Securities; Payments of Interest..................................... 13 SECTION 2.8 Registration Transfer and Exchange............................................................ 13 SECTION 2.9 Mutilated, Defaced, Destroyed, Lost and Stolen Securities..................................... 15 SECTION 2.10 Cancellation of Securities; Disposition Thereof............................................... 16 SECTION 2.11 Temporary Securities.......................................................................... 16 SECTION 2.12 CUSIP Numbers................................................................................. 16 ARTICLE THREE COVENANTS OF THE ISSUER SECTION 3.1 Payment of Principal and Interest............................................................. 16 SECTION 3.2 Offices for Notices and Payments, etc......................................................... 16 SECTION 3.3 No Interest Extension......................................................................... 17 SECTION 3.4 Appointments to Fill Vacancies in Trustee's Office............................................ 17 SECTION 3.5 Provision as to Paying Agent.................................................................. 17 SECTION 3.6 Restriction on Creation of Secured Debt....................................................... 18 SECTION 3.7 Restriction on Sale and Leaseback Transactions................................................ 19 SECTION 3.8 Restriction on Transfer of Principal Property to Unrestricted Subsidiary...................... 20 SECTION 3.9 Restriction on Incurrence of Indebtedness by Restricted Subsidiaries.......................... 20 SECTION 3.10 Limitation on Incurrence of Additional Indebtedness........................................... 21 ARTICLE FOUR SECURITYHOLDERS LISTS AND REPORTS BY THE ISSUER AND THE TRUSTEE SECTION 4.1 Issuer to Furnish Trustee Information as to Names and Addresses of Securityholders............ 21 SECTION 4.2 Preservation and Disclosure of Securityholders Lists.......................................... 21 SECTION 4.3 Reports by the Issuer......................................................................... 22 SECTION 4.4 Reports by the Trustee........................................................................ 23 ARTICLE FIVE REMEDIES OF THE TRUSTEE AND SECURITY HOLDERS ON EVENT OF DEFAULT SECTION 5.1 Events of Default............................................................................. 24 SECTION 5.2 Payment of Securities on Default; Suit Therefor............................................... 26 SECTION 5.3 Application of Moneys Collected by Trustee.................................................... 27 SECTION 5.4 Proceedings by Securityholders................................................................ 28 SECTION 5.5 Proceedings by Trustee........................................................................ 28 SECTION 5.6 Remedies Cumulative and Continuing............................................................ 28 SECTION 5.7 Direction of Proceedings; Waiver of Defaults by Majority of Securityholders................... 29 SECTION 5.8 Notice of Defaults............................................................................ 29 SECTION 5.9 Undertaking to Pay Costs...................................................................... 29
ARTICLE SIX CONCERNING THE TRUSTEE SECTION 6.1 Duties and Responsibilities of the Trustee; During Default; Prior to Default.................. 30 SECTION 6.2 Certain Rights of the Trustee................................................................. 30 SECTION 6.3 Trustee Not Responsible for Recitals, Disposition of Securities or Application of Proceeds Thereof.............................................................................. 31 SECTION 6.4 Trustee and Agents May Hold Securities; Collections, etc...................................... 31 SECTION 6.5 Moneys Held by Trustee........................................................................ 32 SECTION 6.6 Compensation and Indemnification of Trustee and Its Prior Claim............................... 32 SECTION 6.7 Right of Trustee to Rely on Officers' Certificate, etc........................................ 32 SECTION 6.8 Qualification of Trustee; Conflicting Interests............................................... 32 SECTION 6.9 Persons Eligible for Appointment as Trustee................................................... 37 SECTION 6.10 Resignation and Removal; Appointment of Successor Trustee..................................... 37 SECTION 6.11 Acceptance of Appointment by Successor Trustee................................................ 38 SECTION 6.12 Merger, Conversion, Consolidation or Succession to Business of Trustee........................ 39 SECTION 6.13 Preferential Collection of Claims Against the Issuer.......................................... 39 SECTION 6.14 Appointment of Authenticating Agent........................................................... 42 ARTICLE SEVEN CONCERNING THE SECURITYHOLDERS SECTION 7.1 Evidence of Action Taken by Securityholders................................................... 43 SECTION 7.2 Proof of Execution of Instruments and of Holding of Securities................................ 43 SECTION 7.3 Holders to be Treated as Owners............................................................... 43 SECTION 7.4 Securities Owned by Issuer Deemed Not Outstanding............................................. 43 SECTION 7.5 Right of Revocation of Action Taken........................................................... 44 SECTION 7.6 Record Date for Consents and Waivers.......................................................... 44 ARTICLE EIGHT SUPPLEMENTAL INDENTURES SECTION 8.1 Supplemental Indentures Without Consent of Securityholders.................................... 44 SECTION 8.2 Supplemental Indentures with Consent of Securityholders....................................... 45 SECTION 8.3 Effect of Supplemental Indenture.............................................................. 46 SECTION 8.4 Documents to Be Given to Trustee.............................................................. 47 SECTION 8.5 Notation on Securities in Respect of Supplemental Indentures.................................. 47 ARTICLE NINE CONSOLIDATION, MERGER, SALE, LEASE, EXCHANGE OR DISPOSITION SECTION 9.1 Issuer May Consolidate, etc................................................................... 47 SECTION 9.2 Securities to be Secured in Certain Events.................................................... 47 SECTION 9.3 Successor Corporation to be Substituted....................................................... 48 SECTION 9.4 Opinion of Counsel to be Given Trustee........................................................ 48 ARTICLE TEN SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS SECTION 10.1 Satisfaction and Discharge of Indenture....................................................... 48 SECTION 10.2 Application by Trustee of Funds Deposited for Payment of Securities........................... 50 SECTION 10.3 Repayment of Moneys Held by Paying Agent...................................................... 51 SECTION 10.4 Return of Moneys Held by Trustee and Paying Agent Unclaimed for Two Years..................... 51 SECTION 10.5 Indemnity for U.S. Government Obligations..................................................... 51 ARTICLE ELEVEN MISCELLANEOUS PROVISIONS SECTION 11.1 Partners, Incorporators, Stockholders, Officers and Directors of Issuer Exempt from Individual Liability.................................................................... 51 SECTION 11.2 Provisions of Indenture for the Sole Benefit of Parties and Holders of Securities............. 51 SECTION 11.3 Successors and Assigns of Issuer Bound by Indenture........................................... 51 SECTION 11.4 Notices and Demands on Issuer, Trustee and Holders of Securities.............................. 51 SECTION 11.5 Officers' Certificates and Opinions of Counsel; Statements to Be Contained Therein............ 52
SECTION 11.6 Payments Due on Saturdays, Sundays and Holidays............................................... 53 SECTION 11.7 Conflict of Any Provision of Indenture with Trust Indenture Act of 1939....................... 53 SECTION 11.8 GOVERNING LAW................................................................................. 53 SECTION 11.9 Counterparts.................................................................................. 53 SECTION 11.10 Effect of Headings............................................................................ 53 ARTICLE TWELVE REDEMPTION OF SECURITIES AND SINKING FUNDS SECTION 12.1 Applicability of Article...................................................................... 53 SECTION 12.2 Notice of Redemption; Partial Redemptions..................................................... 53 SECTION 12.3 Payment of Securities Called for Redemption................................................... 54 SECTION 12.4 Exclusion of Certain Securities from Eligibility for Selection for Redemption................. 55 SECTION 12.5 Mandatory and Optional Sinking Funds.......................................................... 55
THIS SENIOR INDENTURE, dated as of July 15, 1993 between SEAGULL ENERGY CORPORATION, a Texas corporation (the "Issuer"), and The Bank of New York, a New York banking corporation, as trustee (the "Trustee"), W I T N E S S E T H: WHEREAS, the Issuer has duly authorized the issuance from time to time of its unsecured debentures, notes or other evidences of indebtedness to be issued in one or more series (the "Securities") up to such principal amount or amounts as may from time to time be authorized in accordance with the terms of this Indenture; WHEREAS, the Issuer has duly authorized the execution and delivery of this Indenture to provide, among other things, for the authentication, delivery and administration of the Securities; and WHEREAS, all things necessary to make this Indenture a valid indenture and agreement according to its terms have been undertaken and completed; NOW, THEREFORE: In consideration of the premises and the purchases of the Securities by the Holders (as hereinafter defined) thereof, the Issuer and the Trustee mutually covenant and agree for the equal and proportionate benefit of the respective Holders from time to time of the Securities as follows: ARTICLE ONE DEFINITIONS SECTION 1.1 For all purposes of this Indenture and of any indenture supplemental hereto the following terms shall have the respective meanings specified in this Section 1.1 (except as otherwise expressly provided or unless the context otherwise clearly requires). All other terms used in this Indenture that are defined in the Trust Indenture Act of 1939, including terms defined therein by reference to the Securities Act of 1933, as amended, shall have the meanings assigned to such terms in said Trust Indenture Act and in said Securities Act as in force at the date of this Indenture (except as herein otherwise expressly provided or unless the context otherwise clearly requires). All accounting terms used herein and not expressly defined shall have the meanings assigned to such terms in accordance with generally accepted accounting principles, and the term "generally accepted accounting principles" means such accounting principles as are generally accepted at the time of any computation. The words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. The expressions "date of this Indenture", "date hereof", "date as of which this Indenture is dated" and "date of execution and delivery of this Indenture" and other expressions of similar import refer to the effective date of the original execution and delivery of this Indenture, viz. July 15, 1993. The terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Asset Sale" for any Person shall mean the sale, lease, conveyance or other disposition (including without limitation by merger or consolidation, and whether by operation of law or otherwise) of any of that Person's assets (including without limitation the sale or other disposition of capital stock of any Subsidiary of such Person, whether by such Person or by such Subsidiary), whether owned on the date of this Indenture or subsequently acquired, in one transaction or a series of related transactions, in which such Person and/or its Subsidiaries receive cash and/or other consideration (including without limitation the unconditional assumption of Indebtedness of such Person and/or its Subsidiaries) having an aggregate fair market value of $5 million or more as to such transaction or series of transactions; provided, however, that the following shall not constitute Asset Sales: (i) sales of inventories in the ordinary course of business or pledges of inventories and of accounts receivable by the Issuer or its Subsidiaries; (ii) transactions between the Issuer and any of its wholly owned Subsidiaries or among such wholly owned Subsidiaries; and (iii) the incurrence of any mortgage, security interest, pledge, lien or encumbrance that secures Secured Debt as permitted by Section 3.6. "Authenticating Agent" shall have the meaning set forth in Section 6.14. "Bankruptcy code" means the United States Bankruptcy Code, 11 United States Code ss.ss. 101 et seq., or any successor statute thereto. "Board of Directors" means either the Board of Directors of the Issuer or any committee of such Board duly authorized to act on its behalf. "Board Resolution" means one or more resolutions, certified by the secretary or an assistant secretary of the Issuer to have been duly adopted or consented to by the Board of Directors and to be in full force and effect. "Business Day" means, with respect to any Security, a day that (a) in the Place of Payment (or in any of the Places of Payment, if more than one) in which amounts are payable, as specified in the form of such Security, and (b) in the city in which the Corporate Trust Office is located, is not a day on which banking institutions are authorized or required by law or regulation to close. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, as amended, or, if at any time after the execution and delivery of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act of 1939, then the body performing such duties on such date. "Consolidated Net Tangible Assets" means the aggregate amount of assets included on the most recent consolidated balance sheet of the Issuer and its Restricted Subsidiaries, less applicable reserves and other properly deductible items and after deducting therefrom (a) all current liabilities and (b) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles, all in accordance with generally accepted accounting principles consistently applied. "Corporate Trust Office" means the office of the Trustee at which the corporate trust business of the Trustee shall, at any particular time, be principally administered, which office is, at the date as of which this Indenture is dated, located in New York, New York. "Depositary" means, with respect to the Securities of any series issuable or issued in the form of one or more Global Securities, the Person designated as Depositary by the Issuer pursuant to Section 2.3 until a successor Depositary shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Depositary" shall mean or include each Person who is then a Depositary hereunder, and, if at any time there is more than one such Person, "Depositary" as used with respect to the Securities of any such series shall mean the Depositary with respect to the Global Securities of such series. "EBITDA" shall mean net earnings (excluding gains and losses on sales and retirement of assets, non-cash write downs and charges resulting from accounting convention changes) before deduction for federal and state taxes, interest expense or depreciation, depletion and amortization expense, all determined in accordance with generally accepted accounting principles. "EBITDA/Interest Ratio", on any date, shall mean the ratio of (a) EBITDA of the Issuer and its Restricted Subsidiaries on a consolidated basis to (b) interest expense on all Indebtedness of the Issuer and its Restricted Subsidiaries on a consolidated basis for any twelve-month period ending on the last day of the most recent calendar quarter; provided, however, that if any calculation of the Issuer's EBITDA/Interest Ratio requires the use of any quarter prior to the date of the Indenture, such calculation shall be made on a pro forma basis, giving effect to the issuance of the Securities and the use of the net proceeds therefrom, as if the same had occurred at the beginning of the twelve-month period used to make such calculation; and provided further that if any such calculation requires the use of any quarter prior to the date that any Asset Sale was consummated, any Indebtedness described in clause (a) of the definition of Indebtedness was incurred, any capital stock of the Issuer was issued in a financing transaction or any acquisition other than in the ordinary course of business was consummated by the Issuer or any Restricted Subsidiary, such calculation shall be made on a pro forma basis, giving effect to each such Asset Sale, incurrence of Indebtedness, issuance of capital stock or acquisition, as the case may be, and the use of any proceeds therefrom, as if the same had occurred at the beginning of the twelve-month period used to make such calculation. "ENSTAR Alaska" means (i) the division of the Issuer known on the date of this Indenture as ENSTAR Natural Gas Company, which owns on the date of this Indenture the gas distribution system in south-central Alaska, or (ii) Alaska Pipeline Company, an Alaska corporation and a Subsidiary of the Issuer, in each case together with successors and assigns. "Event of Default" means any event or condition specified as such in Section 5.1. "Global Security" means a Security evidencing all or a part of a series of Securities issued to the Depositary for such series in accordance with Section 2.3 and bearing the legend prescribed in Section 2.4. "Holder" or other similar terms mean, in the case of any Security, the person in whose name such Security is registered in the security register kept by the Issuer for that purpose in accordance with the terms hereof. "Indebtedness" means, with respect to any Person, (a) (i) the principal of and premium, if any, and interest, if any, on indebtedness for money borrowed of such Person, indebtedness of such Person evidenced by bonds, notes, debentures or similar obligations, and any guaranty by such Person of any indebtedness for money borrowed or indebtedness evidenced by bonds, notes, debentures or similar obligations of any other Person, whether any such indebtedness or guaranty is outstanding on the date of this Indenture or is thereafter created, assumed or incurred, (ii) the principal of and premium, if any, and interest, if any, on indebtedness incurred, assumed or guaranteed by such Person in connection with the acquisition by it or any of its subsidiaries of any other businesses, properties or other assets and (iii) lease obligations which such Person capitalizes in accordance with Statement of Financial Accounting Standards No. 13 promulgated by the Financial Accounting Standards Board or such other generally accepted accounting principles as may be from time to time in effect; (b) any other indebtedness of such Person, including any indebtedness representing the balance deferred and unpaid of the purchase price of any property or interest therein, including any such balance that constitutes a trade payable, and any guaranty, endorsement or other contingent obligation of such Person in respect of any indebtedness of another that is outstanding on the date of this Indenture or is thereafter created, assumed or incurred by such Person; (c) obligations of such Person under interest rate, commodity or currency swaps, caps, collars, options and similar arrangements; (d) obligations of such Person for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction; and (c) any amendments, modifications, refundings, renewals or extensions of any indebtedness or obligation described as Indebtedness in clauses (a) through (d) above. "Indenture" means this instrument as originally executed and delivered or, if amended or supplemented as herein provided, as so amended or supplemented or both, including, for all purposes of this instrument and any such supplement, the provisions of the Trust Indenture Act of 1939 that are deemed to be a part of and govern this instrument and any such supplement, respectively, and shall include the forms and terms of particular series of Securities established as contemplated hereunder. The term "interest" means, when used with respect to non-interest bearing Securities (including, without limitation, any Original Issue Discount Security that by its terms bears interest only after maturity or upon default in any other payment due on such Security), interest payable after maturity (whether at stated maturity, upon acceleration or redemption or otherwise) or after the date, if any, on which the Issuer becomes obligated to acquire a Security, whether upon conversion, by purchase or otherwise. "Issuer" means (except as otherwise provided in Section 6.8) Seagull Energy Corporation, a Texas corporation, and, subject to Article Nine, its successors and assigns. "Issuer Order" means a written statement, request or order of the Issuer which is signed in its name by the chairman of the Board of Directors, the president or any vice president of the Issuer. "Officers Certificate", when used with respect to the Issuer, means a certificate signed by the chairman of the Board of Directors, the president, or any vice president and by the treasurer, any assistant treasurer, the controller, any assistant controller, the secretary or any assistant secretary of the Issuer. Each such certificate shall include the statements provided for in Section 11.5 if and to the extent required by the provisions of such Section 11.5. One of the officers signing an Officers' Certificate given pursuant to Section 4.3 shall be the principal executive, financial or accounting officer of the Issuer. "Opinion of Counsel" means an opinion in writing signed by the chief counsel of the Issuer or by such other legal counsel who may be an employee of or counsel to the Issuer and who shall be satisfactory to the Trustee. Each such opinion shall include the statements provided for in Section 11.5, if and to the extent required by the provisions of such Section 11.5. The term "original issue date" of any Security (or portion thereof) means the earlier of (a) the date of such Security or (b) the date of any Security (or portion thereof) for which such Security was issued (directly or indirectly) on registration of transfer, exchange or substitution. The term "original issue discount" of any debt security, including any Original Issue Discount Security, means the difference between the principal amount of such debt security and the initial issue price of such debt security (as set forth in the case of an Original Issue Discount Security on the face of such Security). "Original Issue Discount Security" means any Security that provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the maturity thereof pursuant to Section 5.1. "Outstanding" (except as otherwise provided in Section 6.8), when used with reference to Securities, shall, subject to the provisions of Section 7.4, mean, as of any particular time, all Securities authenticated and delivered by the Trustee under this Indenture, except: (a) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (b) Securities (other than Securities of any series as to which the provisions of Article Ten hereof shall not be applicable), or portions thereof, for the payment or redemption of which moneys or U.S. Government Obligations (as provided for in Section 10.1) in the necessary amount shall have been deposited in trust with the Trustee or with any paying agent (other than the Issuer) or shall have been set aside, segregated and held in trust by the Issuer for the Holders of such Securities (if the Issuer shall act as its own paying agent), provided that, if such Securities, or portions thereof, are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as herein provided, or provision satisfactory to the Trustee shall have been made for giving such notice; and (c) Securities which shall have been paid or in substitution for which other Securities shall have been authenticated and delivered pursuant to the terms of Section 2.9 (except with respect to any such Security as to which proof satisfactory to the Trustee is presented that such Security is held by a person in whose hands such Security is a legal, valid and binding obligation of the Issuer). In determining whether the Holders of the requisite aggregate principal amount of Outstanding Securities of any or all series have given any request, demand, authorization, direction, notice, consent or waiver hereunder, the principal amount of an Original Issue Discount Security that shall be deemed to be Outstanding for such purposes shall be the portion of the principal amount thereof that would be due and payable as of the date of such determination (as certified by the Issuer to the Trustee) upon a declaration of acceleration of the maturity thereof pursuant to Section 5.1. "Periodic Offering" means an offering of Securities of a series from time to time, the specific terms of which Securities, including, without limitation, the rate or rates of interest, if any, thereon, the stated maturity or maturities thereof and the redemption provisions, if any, with respect thereto, are to be determined by the Issuer or its agents upon the issuance of such Securities. "Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, estate, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment", when used with respect to the Securities of any series, means the place or places where the principal of and interest, if any, on the Securities of such series are payable as determined in accordance with Section 2.3. The term "principal" of a debt security, including any Security, means the amount (including, without limitation, if and to the extent applicable, any premium and, in the case of an Original Issue Discount Security, any accrued original issue discount, but excluding interest) that is payable with respect to such debt security as of any date and for any purpose (including, without limitation, in connection with any sinking fund, upon any redemption at the option of the Issuer, upon any purchase or exchange at the option of the Issuer or the holder of such debt security and upon any acceleration of the maturity of such debt security). The term "principal amount" of a debt security, including any Security, means the principal amount as set forth on the face of such debt security. "Principal Property" means any real property, manufacturing plant, processing plant, pipeline, office building, warehouse or other physical facility, or any other like depreciable or depletable asset of the Issuer or any Restricted Subsidiary whether owned at July 1, 1993 or thereafter acquired (other than any facility thereafter acquired for the control or abatement of atmospheric pollutants or contaminants or water, noise, odor or other pollution) which in the opinion of the Board of Directors is of material importance to the total business conducted by the Issuer and its Restricted Subsidiaries, as a whole; provided, however, that any such property shall not be deemed a Principal Property if such property does not have a fair value in excess of 3% of the total assets included on a consolidated balance sheet of the Issuer and its Restricted Subsidiaries prepared in accordance with generally accepted accounting principles consistently applied. The term "record date" shall have the meaning set forth in Section 2.7. "Responsible Officer", when used with respect to the Trustee, means any officer assigned by the Trustee to administer its corporate trust matters. "Restricted Subsidiary" means (a) any Subsidiary other than an Unrestricted Subsidiary, and (b) any Subsidiary which was an Unrestricted Subsidiary but which, subsequent to the date hereof, is designated by the Issuer (by certified resolution of the Board of Directors delivered to the Trustee) to be a Restricted Subsidiary; provided, however, that the Issuer may not designate any such Subsidiary to be a Restricted Subsidiary if the Issuer would thereby breach any covenant or agreement herein contained (on the assumptions that any outstanding Indebtedness of such Subsidiary was incurred at the time of such designation and that any Sale and Leaseback Transaction to which such Subsidiary is then a party was entered into at the time of such designation). "Sale and Leaseback Transaction" shall have the meaning set forth in Section 3.7. "Secured Debt" means indebtedness for money borrowed by the Issuer or a Restricted Subsidiary and any other indebtedness of the Issuer or a Restricted Subsidiary on which interest is paid or payable (other than indebtedness owed by a Restricted Subsidiary to the Issuer, by a Restricted Subsidiary to another Restricted Subsidiary or by the Issuer to a Restricted Subsidiary), that in any such case is secured by (a) a mortgage or other lien on any Principal Property of the Issuer or a Restricted Subsidiary, or (b) a pledge, lien or other security interest on any shares of stock or indebtedness of a Restricted Subsidiary, or (c) in the case of any such indebtedness of the Issuer, a guaranty by any Restricted Subsidiary. The amount of Secured Debt at any time outstanding shall be the amount then owing thereon by the Issuer or a Restricted Subsidiary. "Securities" or "Securities" (except as otherwise provided in Section 6.8) has the meaning stated in the first recital of this Indenture or, as the case may be, Securities that have been authenticated and delivered pursuant to this Indenture. "Subsidiary" means any corporation of which the Issuer, or the Issuer and one or more Subsidiaries, or any one or more Subsidiaries, directly or indirectly own voting securities entitling any one or more of the Issuer and its Subsidiaries to elect a majority of the directors, either at all times or, so long as there is no default or contingency which permits the holders of any other class or classes of securities to vote for the election of one or more directors. "Trust Indenture Act of 1939" (except as otherwise provided in Sections 8.1 and 8.2) means the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990, as in force at the date as of which this Indenture is originally executed. "Trustee" means the Person identified as "Trustee" in the first paragraph hereof and, subject to the provisions of Article Six, shall also include any successor trustee. "Trustee" shall also mean or include each Person who is then a trustee hereunder and, if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series shall mean the trustee with respect to the Securities of such series. "Unrestricted Subsidiary" means (a) any Subsidiary acquired or organized after the date hereof, provided, however, that such Subsidiary shall not be a successor, directly or indirectly, to any Restricted Subsidiary, and (b) any Subsidiary whose principal business and assets are located outside the United States of America, its territories and possessions and Canada or are located in Puerto Rico, and (c) any Subsidiary the principal business of which consists of financing or assisting in financing the acquisition or disposition of products of the Issuer or a Subsidiary by dealers, distributors or other customers, and (d) any Subsidiary the principal business of which is owning, leasing, dealing in or developing real property, and (e) any Subsidiary substantially all the assets of which consist of stock or other securities of a Subsidiary or Subsidiaries of the character described in clauses (a) through (d) of this paragraph, unless and until such Subsidiary shall have been designated to be a Restricted Subsidiary pursuant to clause (b) of the definition of "Restricted Subsidiary". "U.S Governement Obligations" shall have the meaning set forth in Section 10.1(B). The term,"vice president" when used with respect to the Issuer or the Trustee, means any vice president, regardless of whether designated by a number or a word or words added before or after the title "vice president." "Yield to Maturity" means the yield to maturity on a series of Securities, calculated at the time of issuance of such series, or, if applicable, at the most recent redetermination of interest on such series, and calculated in accordance with generally accepted financial practice or as otherwise provided in the terms of such series of Securities. ARTICLE TWO SECURITIES SECTION 2.1 Forms Generally. The Securities of each series shall be substantially in such form (not inconsistent with this Indenture) as shall be established by or pursuant to one or more Board Resolutions (as set forth in a Board Resolution or, to the extent established pursuant to rather than set forth in a Board Resolution, an Officers' Certificate detailing such establishment) or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have imprinted or otherwise reproduced thereon such legend or legends or endorsements, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto, or with any rules of any securities exchange or to conform to general usage, all as may be determined by the officers executing such Securities, as evidenced by their execution of such Securities. The definitive Securities shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Securities as evidenced by their execution of such Securities. SECTION 2.2 Form of Trustee's Certificate of Authentication. The Trustee's certificate of authentication on all Securities shall be substantially as follows: This is one of the Securities of the series designated herein referred to in the within mentioned Indenture. The Bank of New York, as Trustee By ________________________________ Authorized Signatory If at any time there shall be an Authenticating Agent appointed with respect to any series of Securities, then the Securities of such series shall bear, in addition to the Trustee's certificate of authentication, an alternate Certificate of Authentication which shall be substantially as follows: This is one of the Securities of the series designated herein referred to in the within mentioned Indenture. The Bank of New York, as Trustee By_______________________________ as Authenticating Agent By_______________________________ Authorized Signatory SECTION 2.3 Amount Unlimited, Issuable in Series. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued in one or more series and the Securities of each such series shall rank equally and pari passu with the Securities of each other series and with all other unsecured and unsubordinated debt of the Issuer. There shall be established in or pursuant to one or more Board Resolutions (and, to the extent established pursuant to rather than set forth in a Board Resolution, in an Officers' Certificate detailing such establishment) or established in one or more indentures supplemental hereto, prior to the initial issuance of Securities of any series: (1) the designation of the Securities of the series, which shall distinguish the Securities of such series from the Securities of all other series; (2) any limit upon the aggregate principal amount of the Securities of the series that may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Section 2.8, 2.9, 2.11, 8.5 or 12.3); (3) the date or dates on which the principal of the Securities of the series is payable; (4) the rate or rates at which the Securities of the series shall bear interest, if any, the date or dates from which any such interest shall accrue, on which any such interest shall be payable and on which a record shall be taken for the determination of Holders to whom any such interest is payable or the method by which such rate or rates or date or dates shall be determined or both; (5) the place or places where and the manner in which the principal of and interest, if any, on Securities of the series shall be payable (if other than as provided in Section 3.2) and the office or agency for the Securities of the series maintained by the Issuer pursuant to Section 3.2; (6) the right, if any, of the Issuer to redeem, purchase or repay Securities of the series, in whole or in part, at its option and the period or periods within which, the price or prices (or the method by which such price or prices shall be determined or both) at which, the form or method of payment therefor if other than in cash and any terms and conditions upon which and the manner in which (if different from the provisions of Article Twelve) Securities of the series may be so redeemed, purchased or repaid, in whole or in part, pursuant to any sinking fund or otherwise; (7) the obligation, if any, of the Issuer to redeem, purchase or repay Securities of the series in whole or in part pursuant to any mandatory redemption, sinking fund or analogous provisions or at the option of a Holder thereof and the period or periods within which the price or prices (or the method by which such price or prices shall be determined or both) at which, the form or method of payment therefor if other than in cash and any terms and conditions upon which and the manner in which (if different from the provisions of Article Twelve) Securities of the series shall be redeemed, purchased or repaid, in whole or in part, pursuant to such obligation; (8) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which Securities of the series shall be issuable; (9) if other than the principal amount thereof, the portion of the principal amount of Securities of the series which shall be payable upon acceleration of the maturity thereof; (10) whether Securities of the series will be issuable as Global Securities; (11) if the Securities of such series are to be issuable in definitive form (whether upon original issue or upon exchange of a temporary Security of such series) only upon receipt of certain certificates or other documents or satisfaction of other conditions, the form and terms of such certificates, documents or conditions; (12) any trustees, depositaries, authenticating or paying agents, transfer agents or registrars or any other agents with respect to the Securities of such series; (13) any deleted, modified or additional events of default or remedies or any additional covenants with respect to the Securities of such series; (14) whether the provisions of Section 10.1(C) will be applicable to Securities of such series; (15) any provision relating to the issuance of Securities of such series at an original issue discount (including, without limitation, the issue price thereof, the rate or rates at which such original issue discount shall accrue, if any, and the date or dates from or to which or period or periods during which such original issue discount shall accrue at such rate or rates); (16) if the amounts of payments of principal of and interest on the Securities of such series are to be determined with reference to an index, the manner in which such amounts shall be determined; and (17) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture). All Securities of any one series shall be substantially identical, except as to denomination and except as may otherwise be provided by or pursuant to the Board Resolution or Officers' Certificate referred to above or as set forth in any such indenture supplemental hereto. All Securities of any one series need not be issued at the same time and may be issued from time to time, consistent with the terms of this Indenture, if so provided by or pursuant to such Board Resolution, such Officers' Certificate or in any such indenture supplemental hereto. Any such Board Resolution or Officers' Certificate referred to above with respect to Securities of any series filed with the Trustee on or before the initial issuance of the Securities of such series shall bc incorporated herein by reference with respect to Securities of such series and shall thereafter be deemed to be a part of the Indenture for all purposes relating to Securities of such series as fully as if such Board Resolution or Officers' Certificate were set forth herein in full. SECTON 2.4 Authentication and Delivery of Securities. The Issuer may deliver Securities of any series executed by the Issuer to the Trustee for authentication together with the applicable documents referred to below in this Section 2.4, and the Trustee shall thereupon authenticate and deliver such Securities to, or upon the order of, the Issuer (contained in the Issuer Order referred to below in this Section 2.4) or pursuant to such procedures acceptable to the Trustee and to such recipients as may be specified from time to time by an Issuer Order. The maturity date, original issue date, interest rate, if any, and any other terms of the Securities of such series shall be determined by or pursuant to such Issuer Order and procedures. If provided for in such procedures and agreed to by the Trustee, such Issuer Order may authorize authentication and delivery pursuant to oral instructions from the Issuer or its duly authorized agent, which instructions shall be promptly confirmed in writing. In authenticating the Securities of such series and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive (in the case of subparagraphs (2), (3) and (4) below only at or before the time of the first request of the Issuer to the Trustee to authenticate Securities of such series) and (subject to Section 6.1) shall be fully protected in relying upon, unless and until such documents have been superseded or revoked: (1) an Issuer Order requesting such authentication and setting forth delivery instructions if the Securities of such series are not to be delivered to the Issuer, provided that, with respect to Securities of a series subject to a Periodic Offering, (a) such Issuer Order may be delivered by the Issuer to the Trustee prior to the delivery to the Trustee of such Securities for authentication and delivery, (b) the Trustee shall authenticate and deliver Securities of such series for original issue from time to time, in an aggregate principal amount not exceeding the aggregate principal amount established for such series, pursuant to an Issuer Order or pursuant to procedures acceptable to the Trustee as may be specified from time to time by an Issuer Order, (c) the maturity date or dates, original issue date or dates, interest rate or rates, if any, and any other terms of Securities of such series shall be determined by an Issuer Order or pursuant to such procedures, (d) if provided for in such procedures, such Issuer Order may authorize authentication and delivery pursuant to oral or electronic instructions from the Issuer or its duly authorized agent or agents, which oral instructions shall be promptly confirmed in writing and (e) after the original issuance of the first Security of such series to be issued, any separate request by the Issuer that the Trustee authenticate Securities of such series for original issuance will be deemed to be a certification by the Issuer that it is in compliance with all conditions precedent provided for in this Indenture relating to the authentication and delivery of such Securities; (2) the Board Resolution, Officers' Certificate or executed supplemental indenture referred to in Sections 2.1 and 2.3 by or pursuant to which the forms and terms of the Securities of such series were established; (3) an Officers' Certificate setting forth the form or forms and terms of the Securities stating that the form or forms and terms of the Securities have been established pursuant to Sections 2.1 and 2.3 and comply with this Indenture and covering such other matters as the Trustee may reasonably request; and (4) at the option of the Issuer, either an Opinion of Counsel, or a letter from legal counsel addressed to the Trustee permitting it to rely on an Opinion of Counsel, substantially to the effect that: (a) the form or forms of the Securities of such series have been duly authorized and established in conformity with the provisions of this Indenture; (b) in the case of an underwritten offering, the terms of the Securities of such series have been duly authorized and established in conformity with the provisions of this Indenture, and, in the case of an offering that is not underwritten, certain terms of the Securities of such series have been established pursuant to a Board Resolution, an Officers' Certificate or a supplemental indenture in accordance with this Indenture, and when such other terms as are to be established pursuant to procedures set forth in an Issuer Order shall have been established, all such terms will have been duly authorized by the Issuer and will have been established in conformity with the provisions of this Indenture; (c) when the Securities of such series have been executed by the Issuer and authenticated by the Trustee in accordance with the provisions of this Indenture and delivered to and duly paid for by the purchasers thereof, they will have been duly issued under this Indenture and will be valid and legally binding obligations of the Issuer, enforceable in accordance with their respective terms, and will be entitled to the benefits of this Indenture; and (d) the execution and delivery by the Issuer of, and the performance by the Issuer of its obligations under, the Securities of such series will not contravene any provision of applicable law or the articles of incorporation or bylaws of the Issuer or any agreement or other instrument binding upon the Issuer or any of its Subsidiaries that is material to the Issuer and its Subsidiaries, considered as one enterprise, or, to such counsel's knowledge after the inquiry indicated therein, any judgment, order or decree of any governmental agency or any court having jurisdiction over the Issuer or any Subsidiary, and no consent, approval or authorization of any governmental body or agency is required for the performance by the Issuer of its obligations under the Securities, except such as are specified and have been obtained and such as may be required by the securities or blue sky laws of the various states in connection with the offer and sale of the Securities. In rendering such opinions, such counsel may qualify any opinions as to enforceability by stating that such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium and other similar laws affecting the rights and remedies of creditors and is subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Such counsel may rely, as to all matters governed by the laws of jurisdictions other than the State of Texas and the federal law of the United States, upon opinions of other counsel (copies of which shall be delivered to the Trustee), who shall be counsel reasonably satisfactory to the Trustee, in which case the opinion shall state that such counsel believes that both such counsel and the Trustee are entitled so to rely. Such counsel may also state that, insofar as such opinion involves factual matters, such counsel has relied, to the extent such counsel deems proper, upon certificates of officers of the Issuer and its Subsidiaries and certificates of public officials. The Trustee shall have the right to decline to authenticate and deliver any Securities of any series under this Section 2.4 if the Trustee, being advised by counsel, determines that such action may not lawfully be taken by the Issuer or if the Trustee in good faith by its board of directors or board of trustees, executive committee or a trust committee of directors or trustees or Responsible Officers shall determine that such action would expose the Trustee to personal liability to existing Holders or would adversely affect the Trustee's own rights, duties or immunities under the Securities, this Indenture or otherwise. If the Issuer shall establish pursuant to Section 2.3 that the Securities of a series are to be issued in the form of one or more Global Securities, then the Issuer shall execute and the Trustee shall, in accordance with this Section 2.4 and the Issuer Order with respect to such series, authenticate and deliver one or more Global Securities that (i) shall represent and shall be denominated in an amount equal to the aggregate principal amount of all of the Securities of such series to be issued in the form of Global Securities and not yet cancelled, (ii) shall be registered in the name of the Depositary for such Global Security or Securities or the nominee of such Depositary, (iii) shall be delivered by the Trustee to such Depositary or pursuant to such Depositary's instructions, and (iv) shall bear a legend substantially to the following effect: "Unless and until it is exchanged in whole or in part for Securities in definitive registered form, this Security may not be transferred except as a whole by the Depositary to the nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary." Each Depositary designated pursuant to Section 2.3 must, at the time of its designation and at all times while it serves as Depositary, be a clearing agency registered under the Securities Exchange Act of 1934, as amended, and any other applicable statute or regulation. SECTION 2.5 Execution of Securities. The Securities shall be signed on behalf of the Issuer by the chairman of the Board of Directors, the president, any vice president or the treasurer of the Issuer, under its corporate seal which may, but need not, be attested by its secretary or one of its assistant secretaries. Such signatures may be the manual or facsimile signatures of the present or any future such officers. The seal of the Issuer may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Securities. Typographical and other minor errors or defects in any such reproduction of the seal or any such signature shall not affect the validity or enforceability of any Security that has been duly authenticated and delivered by the Trustee. In case any officer of the Issuer who shall have signed any of the Securities shall cease to be such officer before the Security so signed shall be authenticated and delivered by the Trustee or disposed of by the Issuer, such Security nevertheless may be authenticated and delivered or disposed of as though the person who signed such Security had not ceased to be such officer of the Issuer; and any Security may be signed on behalf of the Issuer by such persons as, at the actual date of the execution of such Security, shall be the proper officers of the Issuer, although at the date of the execution and delivery of this Indenture any such person was not such an officer. SECTION 2.6 Certificate of Authentication. Only such Securities as shall bear thereon a certificate of authentication substantially in the form hereinbefore recited, executed by the Trustee by the manual signature of one of its authorized signatories, or its Authenticating Agent, shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. The execution of such certificate by the Trustee or its Authenticating Agent upon any Security executed by the Issuer shall be conclusive evidence that the Security so authenticated has been duly authenticated and delivered hereunder and that the Holder is entitled to the benefits of this Indenture. Each reference in this Indenture to authentication by the Trustee includes authentication by an agent appointed pursuant to Section 6.14. SECTION 2.7 Denomination and Date of Securities; Payments of Interest. The Securities of each series shall be issuable in registered form in denominations established as contemplated by Section 2.3 or, with respect to the Securities of any series, if not so established, in denominations of $1,000 and any integral multiple thereof. The Securities of each series shall be numbered, lettered or otherwise distinguished in such manner or in accordance with such plan as the officers of the Issuer executing the same may determine with the approval of the Trustee, as evidenced by the execution and authentication thereof. Each Security shall be dated the date of its authentication. The Securities of each series shall bear interest, if any, from the date, and such interest, if any, shall be payable on the dates, established as contemplated by Section 2.3. The Person in whose name any Security of any series is registered at the close of business on any record date applicable to a particular series with respect to any interest payment date for such series shall be entitled to receive the interest, if any, payable on such interest payment date notwithstanding any transfer or exchange of such Security subsequent to the record date and prior to such interest payment date, except if and to the extent the Issuer shall default in the payment of the interest due on such interest payment date for such series, in which case such defaulted interest shall be paid to the Persons in whose names Outstanding Securities for such series are registered (a) at the close of business on a subsequent record date (which shall be not less than five Business Days prior to the date of payment of such defaulted interest) established by notice given by mail by or on behalf of the Issuer to the Holders of Securities not less than 15 days preceding such subsequent record date or (b) as determined by such other procedure as is mutually acceptable to the Issuer and the Trustee. The term "record date" as used with respect to any interest payment date (except a date for payment of defaulted interest) for the Securities of any series shall mean the date specified as such in the terms of the Securities of such series established as contemplated by Section 2.3, or, if no such date is so established, if such interest payment date is the first day of a calendar month, the fifteenth day of the next preceding calendar month or, if such interest payment date is the fifteenth day of a calendar month, the first day of such calendar month, whether or not such record date is a Business Day. SECTION 2.8 Registration Transfer and Exchange. The Issuer will keep at each office or agency to be maintained for the purpose as provided in Section 3.2 for each series of Securities a register or registers in which, subject to such reasonable regulations as it may prescribe, it will provide for the registration of Securities of each series and the registration of transfer of Securities of such series. Each such register shall be in written form in the English language or in any other form capable of being converted into such form within a reasonable time. At all reasonable times such register or registers shall be open for inspection and available for copying by the Trustee. Upon due presentation for registration of transfer of any Security of any series at any such office or agency to be maintained for the purpose as provided in Section 3.2, the Issuer shall execute and the Trustee shall authenticate and deliver in the name of the transferee or transferees a new Security or Securities of the same series, maturity date, interest rate, if any, and original issue date in authorized denominations for a like aggregate principal amount. All Securities presented for registration of transfer shall (if so required by the Issuer or the Trustee) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Issuer and the Trustee duly executed by, the Holder or his attorney duly authorized in writing. At the option of the Holder thereof, Securities of any series (other than a Global Security, except as set forth below) may be exchanged for a Security or Securities of such series having authorized denominations and an equal aggregate principal amount, upon surrender of such Securities to be exchanged at the agency of the Issuer that shall be maintained for such purpose in accordance with Section 3.2. All Securities surrendered upon any exchange or transfer provided for in this Indenture shall be promptly cancelled and returned to the Issuer. The Issuer may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer of Securities. No service charge shall be made for any such transaction or for any exchange of Securities of any series as contemplated by the immediately preceding paragraph. The Issuer shall not be required to exchange or register a transfer of (a) any Securities of any series for a period of 15 days next preceding the first mailing or publication of notice of redemption of Securities of such series to be redeemed, (b) any Securities selected, called or being called for redemption, in whole or in part, except, in the case of any Security to be redeemed in part, the portion thereof not so to be redeemed or (c) any Security if the Holder thereof has exercised his right, if any, to require the Issuer to repurchase such Security in whole or in part, except the portion of such Security not required to be repurchased. Notwithstanding any other provision of this Section 2.8, unless and until it is exchanged in whole or in part for Securities in definitive registered form, a Global Security representing all or a part of the Securities of a series may not be transferred except as a whole by the Depositary for such series to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or another nominee of such Depositary or by such Depositary or any such nominee to a successor Depositary for such series or a nominee of such successor Depositary. If at any time the Depositary for any Securities of a series represented by one or more Global Securities notifies the Issuer that it is unwilling or unable to continue as Depositary for such Securities or if at any time the Depositary for such Securities shall no longer be eligible under Section 2.4, the Issuer shall appoint a successor Depositary with respect to such Securities. If a successor Depositary for such Securities is not appointed by the Issuer within 90 days after the Issuer receives such notice or becomes aware of such ineligibility, the Issuer's election pursuant to Section 2.3 that such Securities be represented by one or more Global Securities shall no longer be effective and the Issuer shall execute, and the Trustee, upon receipt of an Issuer Order for the authentication and delivery of definitive Securities of such series, will authenticate and deliver Securities of such series in definitive registered form, in any authorized denominations, in an aggregate principal amount equal to the principal amount of the Global Security or Securities representing such Securities in exchange for such Global Security or Securities. The Issuer may at any time and in its sole discretion determine that the Securities of any series issued in the form of one or more Global Securities shall no longer be represented by a Global Security or Securities. In such event the Issuer shall execute, and the Trustee, upon receipt of an Issuer Order for the authentication and delivery of definitive Securities of such series, shall authenticate and deliver, Securities of such series in definitive registered form, in any authorized denominations, in an aggregate principal amount equal to the principal amount of the Global Security or Securities representing such Securities, in exchange for such Global Security or Securities. If specified by the Issuer pursuant to Section 2.3 with respect to Securities represented by a Global Security, the Depositary for such Global Security may surrender such Global Security in exchange in whole or in part for Securities of the same series in definitive registered form on such terms as are acceptable to the Issuer and such Depositary. Thereupon, the Issuer shall execute, and the Trustee shall authenticate and deliver, without service charge, (i) to the Person specified by such Depositary, a new Security or Securities of the same series, of any authorized denominations as requested by such Person, in an aggregate principal amount equal to and in exchange for such Person's beneficial interest in the Global Security; and (ii) to such Depositary a new Global Security in a denomination equal to the difference, if any, between the principal amount of the surrendered Global Security and the aggregate principal amount of Securities authenticated and delivered pursuant to clause (i) above. Upon the exchange of a Global Security for Securities in definitive registered form in authorized denominations, such Global Security shall be cancelled by the Trustee or an agent of the Issuer or the Trustee. Securities in definitive registered form issued in exchange for a Global Security pursuant to this Section 2.8 shall be registered in such names and in such authorized denominations as the Depositary for such Global Security, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee or an agent of the Trustee or the Issuer or an agent of the Issuer. The Trustee or such agent shall deliver at its office such Securities to or as directed by the Persons in whose names such Securities are so registered. All Securities issued upon any transfer or exchange of Securities shall be valid and legally binding obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such transfer or exchange. SECTION 2.9 Mutilated, Defaced, Destroyed, Lost and Stolen Securities. In case any temporary or definitive Security shall become mutilated, defaced or be destroyed, lost or stolen, the Issuer in its discretion may execute, and upon the written request of any officer of the Issuer, the Trustee shall authenticate and deliver a new Security of the same series, maturity date, interest rate, if any, and original issue date, bearing a number or other distinguishing symbol not contemporaneously outstanding, in exchange and substitution for the mutilated or defaced Security, or in lieu of and in substitution for the Security so destroyed, lost or stolen. In every case the applicant for a substitute Security shall furnish to the Issuer and to the Trustee and any agent of the Issuer or the Trustee such security or indemnity as may be required by the Trustee or the Issuer to indemnify and defend and to save each of the Trustee and the Issuer harmless and, in every case of destruction, loss or theft, evidence to their satisfaction of the destruction, loss or theft of such Security and of the ownership thereof and in the case of mutilation or defacement, shall surrender the Security to the Trustee or such agent. Upon the issuance of any substitute Security, the Issuer may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee or its agent) connected therewith. In case any Security which has matured or is about to mature or has been called for redemption in full shall become mutilated or defaced or be destroyed, lost or stolen, the Issuer may instead of issuing a substitute Security, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated or defaced Security), if the applicant for such payment shall furnish to the Issuer and to the Trustee and any agent of the Issuer or the Trustee such security or indemnity as any of them may require to hold each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Issuer and the Trustee and any agent of the Issuer or the Trustee evidence to the Trustee's satisfaction of the destruction, loss or theft of such Security and of the ownership thereof. Every substitute Security of any series issued pursuant to the provisions of this Section by virtue of the fact that any such Security is destroyed, lost or stolen shall constitute an additional contractual obligation of the Issuer, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone and shall be entitled to all the benefits of (but shall be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Securities of such series duly authenticated and delivered hereunder. All Securities shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, defaced, destroyed, lost or stolen Securities and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. SECTON 2.10 Cancellation of Securities; Disposition Thereof. All Securities surrendered for payment, redemption, registration of transfer or exchange, or for credit against any payment in respect of a sinking or analogous fund, if surrendered to the Issuer or any agent of the Issuer or the Trustee or any agent of the Trustee, shall be delivered to the Trustee or its agent for cancellation or, if surrendered to the Trustee, shall be cancelled by it; and no Securities shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. The Trustee or its agent shall return cancelled Securities to the Issuer. If the Issuer or its agent shall acquire any of the Securities, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Securities unless and until the same are delivered to the Trustee or its agent for cancellation. SECTION 2.11 Temporary Securities. Pending the preparation of definitive Securities for any series, the Issuer may execute and the Trustee shall authenticate and deliver temporary Securities for such series (printed, lithographed, typewritten or otherwise reproduced, in each case in form satisfactory to the Trustee). Temporary Securities of any series shall be issuable in any authorized denomination, and substantially in the form of the definitive Securities of such series but with such omissions, insertions and variations as may be appropriate for temporary Securities, all as may be determined by the Issuer with the concurrence of the Trustee as evidenced by the execution and authentication thereof. Temporary Securities may contain such references to any provisions of this Indenture as may be appropriate. Every temporary Security shall be executed by the Issuer and be authenticated by the Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Securities. Without unreasonable delay the Issuer shall execute and shall furnish definitive Securities of such series and thereupon temporary Securities of such series may be surrendered in exchange therefor without charge at each office or agency to be maintained by the Issuer for that purpose pursuant to Section 3.2 and the Trustee shall authenticate and deliver in exchange for such temporary Securities of such series an equal aggregate principal amount of definitive Securities of the same series having authorized denominations. Until so exchanged, the temporary Securities of any series shall be entitled to the same benefits under this Indenture as definitive Securities of such series, unless otherwise established pursuant to Section 2.3. SECTION 2.12 CUSIP Numbers. The Issuer in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. ARTICLE THREE COVENANTS OF THE ISSUER SECTION 3.1 Payment of Principal and Interest. The Issuer covenants and agrees that it will duly and punctually pay or cause to be paid the principal of and interest, if any, on each of the Securities at the place, at the respective times and in the manner provided in the Securities. SECTION 3.2 Offices for Notices and Payments, etc. So long as any of the Securities are Outstanding, the Issuer will maintain in each Place of Payment, an office or agency where the Securities may be presented for payment, an office or agency where the Securities may be presented for registration of transfer and for exchange as in this Indenture provided, and an office or agency where notices and demands to or upon the Issuer in respect of the Securities or of this Indenture may be served. In case the Issuer shall at any time fail to maintain any such office or agency, or shall fail to give notice to the Trustee of any change in the location thereof, presentation may be made and notice and demand may be served in respect of the Securities or of this Indenture at the Corporate Trust Office. The Issuer hereby initially designates the Corporate Trust Office for each such purpose and appoints the Trustee as registrar and paying agent and as the agent upon whom notices and demands may be served with respect to the Securities. SECTION 3.3 No Interest Extension. In order to prevent any accumulation of claims for interest after maturity thereof, the Issuer will not directly or indirectly extend or consent to the extension of the time for the payment of any claim for interest on any of the Securities and will not directly or indirectly be a party to or approve any such arrangement by the purchase or funding of said claims or in any other manner; provided, however, that this Section 3.3 shall not apply in any case where an extension shall be made pursuant to a plan proposed by the Issuer to the Holders of all Securities of any series then Outstanding. SECTION 3.4 Appointments to Fill Vacancies in Trustee's Office. The Issuer, whenever necessary to avoid or fill a vacancy in the office of the Trustee, will appoint, in the manner provided in Section 6.10, a Trustee, so that there shall at all times be a Trustee hereunder. SECTION 3.5 Provision as to Paying Agent. (a) If the Issuer shall appoint a paying agent other than the Trustee, it will cause such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provisions of this Section 3.5, (1) that it will hold all sums held by it as such agent for the payment of the principal of or interest, if any, on the Securities (whether such sums have been paid to it by the Issuer or by any other obligor on the Securities) in trust for the benefit of the Holders of the Securities and the Trustee; and (2) that it will give the Trustee notice of any failure by the Issuer (or by any other obligor on the Securities) to make any payment of the principal of or interest, if any, on the Securities when the same shall be due and payable; and (3) that it will, at any time during the continuance of any such failure, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such paying agent. (b) If the Issuer shall act as its own paying agent, it will, on or before each due date of the principal of or interest, if any, on the Securities, set aside, segregate and hold in trust for the benefit of the Holders of the Securities a sum sufficient to pay such principal or interest, if any, so becoming due and will notify the Trustee of any failure to take such action and of any failure by the Issuer (or by any other obligor under the Securities) to make any payment of the principal of or interest, if any, on the Securities when the same shall become due and payable. (c) Anything in this Section 3.5 to the contrary notwithstanding, the Issuer may, at any time, for the purpose of obtaining a satisfaction and discharge of this Indenture, or for any other reason, pay or cause to be paid to the Trustee all sums held in trust by it, or any paying agent hereunder, as required by this Section 3.5, such sums to be held by the Trustee upon the trusts herein contained. (d) Anything in this Section 3.5 to the contrary notwithstanding, any agreement of the Trustee or any paying agent to hold sums in trust as provided in this Section 3.5 is subject to Sections 10.3 and 10.4. (e) Whenever the Issuer shall have one or more paying agents, it will, on or before each due date of the principal of or interest, if any, on any Securities, deposit with a paying agent a sum sufficient to pay the principal or interest, if any, so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal or interest, if any, and (unless such paying agent is the Trustee) the Issuer will promptly notify the Trustee of its action or failure so to act. SECTION 3.6 Restriction on Creation of Secured Debt. So long as any of the Securities are outstanding, the Issuer shall not at any time create, incur, assume or guarantee, and shall not cause, suffer or permit a Restricted Subsidiary to create, incur, assume or guarantee, any Secured Debt without making effective provision (and the Issuer covenants that in such case it will make or cause to be made such effective provision) whereby the Securities then Outstanding and any other indebtedness of or guaranteed by the Issuer or such Restricted Subsidiary then entitled thereto, subject to applicable priorities of payment, shall be secured by such mortgage, security interest, pledge, lien or encumbrance equally and ratably with any and all other obligations and indebtedness thereby secured, so long as any such other obligations and indebtedness shall be so secured; provided, that if any such mortgage, security interest, pledge, lien or encumbrance securing such indebtedness ceases to exist, such equal and ratable security for the benefit of the Holders of Securities shall automatically cease to exist without any further action; provided further that if such indebtedness is expressly subordinated to the Securities, the mortgage, security interest, pledge, lien or encumbrance securing such indebtedness shall be subordinate and junior to the mortgage, security interest, pledge, lien or encumbrance securing the Securities with the same relative priority as such indebtedness shall have with respect to the Securities; provided further, that the foregoing covenants shall not be applicable to the following: (a)(i) Any mortgage, security interest, pledge, lien or encumbrance on any property hereafter acquired (including acquisition through merger or consolidation) or constructed by the Issuer or a Restricted Subsidiary and created contemporaneously with, or within twelve months after, such acquisition or the completion of construction to secure or provide for the payment of all or any part of the purchase price of such property or the cost of construction thereof, as the case may be; or (ii) any mortgage on property (including any unimproved portion of partially improved property) of the Issuer or a Restricted Subsidiary created within twelve months of completion of construction of a new plant or plants on such property to secure all or part of the cost of such construction if, in the opinion of the Board of Directors, such property or such portion thereof was prior to such construction substantially unimproved for the use intended by the Issuer; or (iii) the acquisition of property subject to any mortgage, security interest, pledge, lien or encumbrance upon such property existing at the time of acquisition thereof, whether or not assumed by the Issuer or such Restricted Subsidiary; or (iv) any mortgage, security interest, pledge, lien or encumbrance existing on the property or on the outstanding shares or indebtedness of a corporation or other entity at the time such corporation or other entity shall become a Restricted Subsidiary; or (v) any mortgage, security interest, pledge, lien or encumbrance on property of a corporation or other entity existing at the time such corporation or other entity is merged into or consolidated with the Issuer or a Restricted Subsidiary or at the time of a sale, lease or other disposition of the properties of a corporation or other entity as an entirety or substantially as an entirety to the Issuer or a Restricted Subsidiary; or (b) Mortgages on property of the Issuer or a Restricted Subsidiary in favor of the United States of America or any State thereof or any foreign government, or any department, agency or instrumentality or political subdivision of any thereof, to secure partial, progress, advance or other payments pursuant to any contract or statute or to secure any indebtedness incurred for the purpose of financing all or any part of the purchase price or the cost of construction of the property subject to such mortgages; or (c) Any mortgage, security interest, pledge, lien or encumbrance existing on property owned by the Issuer or any of its Subsidiaries on the date of this Indenture; or (d) Any mortgage, security interest, pledge, lien or encumbrance created pursuant to the creation of trusts or other arrangements funded solely with cash, cash equivalents or other marketable investments or securities of the type customarily subject to such arrangements in customary financial practice with respect to long-term or medium-term indebtedness for money borrowed, the sole purpose of which is to make provision for the retirement or defeasance, without prepayment of Indebtedness; or (e) Any mortgage, security interest, pledge, lien or encumbrance on the assets or properties of ENSTAR Alaska; or (f) Any extension, renewal or replacement (or successive extensions, renewals or replacements) in whole or in part of any mortgage, security interest, pledge, lien or encumbrance referred to in the foregoing subparagraphs (a) through (e); provided, however, that the principal amount of Secured Debt secured thereby shall not exceed the principal amount outstanding at the time of such extension, renewal or replacement, and that such extension, renewal or replacement shall be limited to the property which secured the mortgage, security interest, pledge, lien or encumbrance so extended, renewed or replaced and additions to such property. Notwithstanding the foregoing provisions of this Section 3.6, the Issuer and any one or more Restricted Subsidiaries may create, incur, assume or guarantee Secured Debt which would otherwise be subject to the foregoing restrictions in an aggregate amount that, without duplication, together with all other Secured Debt of the Issuer and its Restricted Subsidiaries which would otherwise be subject to the foregoing restrictions (not including Secured Debt permitted to be secured under subparagraphs (a) through (f) above) and the aggregate value of the Sale and Leaseback Transactions (as defined in Section 3.7) in existence at such time (not including Sale and Leaseback Transactions the proceeds of which have been or will be applied in accordance with clause (b) of Section 3.7) and all Indebtedness for money borrowed of Restricted Subsidiaries in existence at such time (not including Indebtedness permitted to be incurred under subparagraphs (a) through (e) of Section 3.9), does not at the time exceed 10% of Consolidated Net Tangible Assets (excluding ENSTAR Alaska). Solely for purposes of subparagraphs (a) through (f) above, the term "mortgage" shall include any arrangements in connection with a production payment or similar financing arrangement. SECTION 3.7 Restriction on Sale and Leaseback Transactions. The Issuer will not, and will not permit any Restricted Subsidiary to, sell or transfer (except to the Issuer or to one or more Restricted Subsidiaries, or both) any Principal Property owned by it and which has been in full operation for more than 120 days prior to such sale or transfer with the intention (i) of taking back a lease on such property (other than a lease for a period not exceeding 36 months) and (ii) that the use by the Issuer or such Restricted Subsidiary of such property will be discontinued on or before the expiration of the term of such lease (any such transaction being herein referred to as a "Sale and Leaseback Transaction"), unless (a) the Issuer or such Restricted Subsidiary would be entitled, pursuant to the provisions of Section 3.6, to incur Secured Debt equal in amount to the amount realized or to be realized upon such sale or transfer secured by a mortgage on the property to be leased without equally and ratably securing the Securities, or (b) the Issuer or a Restricted Subsidiary shall apply an amount equal to the value of the property so leased to the retirement (other than any mandatory retirement), within 120 days of the effective date of any such arrangement, of indebtedness for money borrowed by the Issuer or any Restricted Subsidiary (other than such indebtedness owned by the Issuer or any Restricted Subsidiary) which was recorded as funded debt as of the date of its creation and which, in the case of such indebtedness of the Issuer, is not subordinate and junior in right of payment to the prior payment of the Securities; provided, however, that the amount to be so applied to the retirement of such indebtedness shall be reduced by (i) the aggregate principal amount of any Securities delivered within 120 days of the effective date of any such arrangement to the Trustee for retirement and cancellation, and (ii) the aggregate principal amount of such indebtedness (other than the Securities) retired by the Issuer or a Restricted Subsidiary within 120 days of the effective date of any such arrangement. The term "value" shall mean, with respect to a Sale and Leaseback Transaction, as of any particular time, the amount equal to the greater of (i) the net proceeds of the sale of the property leased pursuant to such Sale and Leaseback Transaction, or (ii) the fair value of such property at the time of entering into such Sale and Leaseback Transaction, as determined by the Board of Directors, in either case divided first by the number of full years of the term of the lease and then multiplied by the number of full years of such term remaining at the time of determination, without regard to any renewal or extension options contained in the lease. SECTON 3.8 Restriction on Transfer of Principal Property to Unrestricted Subsidiary. The Issuer will not itself, and will not permit any Restricted Subsidiary to, transfer (whether by merger, consolidation or otherwise) any Principal Property to any Unrestricted Subsidiary, except for fair value as determined by the Board of Directors, unless it shall apply an amount equal to the fair value of such property at the time of such transfer, as so determined, to the retirement (other than any mandatory retirement), within 10 days of the effective date of such transfer, of indebtedness for money borrowed by the Issuer or any Restricted Subsidiary (other than such indebtedness owned by the Issuer or any Restricted Subsidiary) which was recorded as funded debt as of the date of its creation and which, in case of such indebtedness of the Issuer, is not subordinate and junior in right of payment to the prior payment of the Securities; provided, however, that the amount to be so applied to the retirement of such indebtedness shall be reduced by (i) the aggregate principal amount of any Securities delivered within 10 days of the effective date of any such arrangement to the Trustee for retirement and cancellation, and (ii) the aggregate principal amount of such indebtedness (other than Securities) retired by the Issuer or a Restricted Subsidiary within 10 days of the effective date of any such arrangement. SECTION 3.9 Restriction on Incurrence of Indebtedness by Restricted Subsidiaries. So long as any of the Securities are outstanding, the Issuer shall not at any time permit any Restricted Subsidiary to create, incur, assume or guarantee any Indebtedness for money borrowed; provided that the foregoing covenant shall not be applicable to the following: (a) any Indebtedness of ENSTAR Alaska; (b) any Secured Debt that is permitted to be created, incurred, assumed or guaranteed pursuant to subparagraphs (a) through (f) of Section 3.6; (c) any Indebtedness of a Restricted Subsidiary existing at the time such Restricted Subsidiary was acquired by the Issuer (including without limitation Indebtedness incurred by such Restricted Subsidiary in connection with its acquisition by the Issuer); (d) intercompany Indebtedness owed to the Issuer by any Restricted Subsidiary and intercompany Indebtedness owed to any wholly owned Subsidiary of the Issuer by any Restricted Subsidiary; or (e) any extension, renewal or replacement (or successive extensions, renewals or replacements) in whole or in part of any Indebtedness referred to in the foregoing subparagraphs (a) through (d); provided, however, that the principal amount of Indebtedness so extended, renewed or replaced shall not exceed the principal amount outstanding at the time of such extension, renewal or replacement. Notwithstanding the foregoing provisions of this Section 3.9, any one or more Restricted Subsidiaries may create, incur, assume or guarantee Indebtedness that would otherwise be subject to the foregoing restrictions in an aggregate amount that, without duplication, together with all Indebtedness of Restricted Subsidiaries in existence at such time (not including Indebtedness permitted under subparagraphs (a) through (e) above), all Secured Debt of the Issuer and its Restricted Subsidiaries in existence at such time (not including Secured Debt permitted to be secured under subparagraphs (a) through (f) of Section 3.6) and the aggregate value of Sale and Leaseback Transactions (as defined in Section 3.7) in existence at such time (not including Sale and Leaseback Transactions the proceeds of which have been or will be applied in accordance with clause (b) of Section 3.7) does not at the time exceed 10% of Consolidated Net Tangible Assets of the Issuer and its Restricted Subsidiaries (excluding ENSTAR Alaska). SECTION 3.10 Limitation on Incurrence of Additional Indebtedness. So long as any of the Securities are outstanding, the Issuer shall not, and shall not permit any Restricted Subsidiary to, create, incur, assume, guarantee or otherwise become obligated with respect to any Indebtedness described in clause (a) of the definition of Indebtedness, unless, after giving effect thereto, the Issuer's EBITDA/Interest Ratio on the date thereof would be at least 2.5 to 1.0, determined on a pro forma basis as if the incurrence of such additional Indebtedness and the application of the net proceeds therefrom had occurred at the beginning of the twelve-month period used to calculate the Issuer's EBITDA/Interest Ratio; provided that the foregoing covenant shall not be applicable to the following: (a) (i) Indebtedness of the Issuer or any Restricted Subsidiary outstanding on the date of this Indenture or (ii) Indebtedness of the Issuer or any Restricted Subsidiary under a revolving credit facility to the extent that the aggregate commitment thereunder does not exceed $475 million, the maximum aggregate commitment for the Issuer's revolving credit facility on the date of this Indenture; (b) intercompany Indebtedness owed to the Issuer by any Restricted Subsidiary and intercompany Indebtedness owed to any wholly owned Subsidiary of the Issuer by any Restricted Subsidiary; or (c) any extension, renewal or replacement (or successive extensions, renewals or replacements) in whole or in part of any Indebtedness referred to in the foregoing subparagraphs (a) through (b); provided, however, that the principal amount of Indebtedness so extended, renewed or replaced shall not exceed the principal amount outstanding at the time of such extension, renewal or replacement. ARTICLE FOUR SECURITYHOLDERS LISTS AND REPORTS BY THE ISSUER AND THE TRUSTEE Issuer to Furnish Trustee Information as to Names and Addresses of Securityholders. The Issuer and any other obligor on the Securities covenant and agree that they will furnish or cause to be furnished to the Trustee a list in such form as the Trustee may reasonably require of the names and addresses of the Holders of the Securities of each series: (a) semiannually and not more than 15 days after each March 1 and September 1, and (b) at such other times as the Trustee may request in writing, within 30 days after receipt by the Issuer of any such request, provided that if and so long as the Trustee shall be the registrar for such series, such list shall not be required to be furnished. SECTION 4.2 Preservation and Disclosure of Securityholders Lists. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the Holders of each series of Securities (i) contained in the most recent list furnished to it as provided in Section 4.1, and (ii) received by it in the capacity of registrar or paying agent for such series, if so acting. The Trustee may destroy any list furnished to it as provided in Section 4.1 upon receipt of a new list so furnished. (b) In case three or more Holders of Securities (hereinafter referred to as "applicants") apply in writing to the Trustee and furnish to the Trustee reasonable proof that each such applicant has owned a Security for a period of at least six months preceding the date of such application, and such application states that the applicants desire to communicate with other Holders of Securities of a particular series (in which case the applicants must all hold Securities of such series) or with Holders of all Securities with respect to their rights under this Indenture or under such Securities and such application is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall, within five Business Days after the receipt of such application, at its election, either (i) afford to such applicants access to the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.2, or (ii) inform such applicants as to the approximate number of Holders of Securities of such series or of all Securities, as the case may be, whose names and addresses appear in the information preserved at the time by the Trustee, in accordance with the provisions of subsection (a) of this Section 4.2, and as to the approximate cost of mailing to such Securityholders the form of proxy or other communication, if any, specified in such application. If the Trustee shall elect not to afford to such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Securityholder of such series or all Holders of Securities, as the case may be, whose name and address appears in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.2 a copy of the form of proxy or other communication which is specified in such request, with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five days after such tender, the Trustee shall mail to such applicants and file with the Commission, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interests of the Holders of Securities of such series or of all Securities, as the case may be, or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If the Commission, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, the Commission shall find, after notice and opportunity for hearing, that all the objections so sustained have been met, and shall enter an order so declaring, the Trustee shall mail copies of such material to all such Securityholders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Trustee shall be relieved of any obligation or duty to such applicants respecting their application. (c) Each and every Holder of Securities, by receiving and holding the same, agrees with the Issuer and the Trustee that neither the Issuer nor the Trustee nor any agent of the Issuer or the Trustee shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders of Securities in accordance with the provisions of subsection (b) of this Section 4.2, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under such subsection (b). SECTION 4.3 Reports by the Issuer. The Issuer covenants: (a) to file with the Trustee, within 15 days after the Issuer is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Issuer may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended; or, if the Issuer is not required to file information, documents or reports pursuant to either of such Sections, then to file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934, as amended, in respect of a debt security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; (b) to file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Issuer with the conditions and covenants provided for in this Indenture as may be required from time to time by such rules and regulations; (c) to transmit by mail to the Holders of Securities within 30 days after the filing thereof with the Trustee, in the manner and to the extent provided in Section 4.4(c), such summaries of any information, documents and reports required to be filed by the Issuer pursuant to subsections (a) and (b) of this Section 4.3 as may be required to be transmitted to such Holders by rules and regulations prescribed from time to time by the Commission; and (d) furnish to the Trustee, not less than annually, a brief certificate from the principal executive officer, principal financial officer or principal accounting officer as to his knowledge of the Issuer's compliance with all conditions and covenants under this Indenture. For purposes of this subsection (d), such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Indenture. SECTION 4.4 Reports by the Trustee. (a) Within 60 days after January 1 of each year commencing with the year 1994, the Trustee shall transmit by mail to the Holders of Securities, as provided in subsection (c) of this Section, a brief report dated as of such January 1 with respect to any of the following events which may have occurred within the last 12 months (but if no such event has occurred within such period, no report need be transmitted): (i) any change to its eligibility under Section 6.9 and its qualification under Section 6.8; (ii) the creation of, or any material change to, a relationship specified in paragraph (i) through (x) of Section 6.8 (c); (iii) the character and amount of any advances (and if the Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee (as such) which remain unpaid on the date of such report and for the reimbursement of which it claims or may claim a lien or charge, prior to that of the Securities of any series, on any property or funds held or collected by it as Trustee, except that the Trustee shall not be required (but may elect) to report such advances if such advances so remaining unpaid aggregate not more than 1/2 of 1% of the principal amount of all Securities Outstanding on the date of such report; (iv) the amount, interest rate, if any, and maturity date of all other indebtedness owing by the Issuer (or by any other obligor on the Securities) to the Trustee in its individual capacity on the date of such report, with a brief description of any property held as collateral security therefor, except any indebtedness based upon a creditor relationship arising in any manner described in Section 6.13(b) (2), (3), (4) or (6); (v) any change to the property and funds, if any, physically in the possession of the Trustee (as such) on the date of such report; (vi) any additional issue of Securities which the Trustee has not previously reported; and (vii) any action taken by the Trustee in the performance of its duties under this Indenture which it has not previously reported and which in its opinion materially affects the Securities, except action in respect of a default, notice of which has been or is to be withheld by it in accordance with the provisions of Section 5.8. (b) The Trustee shall transmit to the Securityholders of each series, as provided in subsection (c) of this Section 4.4, a brief report with respect to the character and amount of any advances (and if the Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee, as such, since the date of the last report transmitted pursuant to the provisions of subsection (a) of this Section 4.4 (or if no such report has yet been so transmitted, since the date of this Indenture) for the reimbursement of which it claims or may claim a lien or charge prior to that of the Securities of such series on property or funds held or collected by it as Trustee and which it has not previously reported pursuant to this subsection (b), except that the Trustee shall not be required (but may elect) to report such advances if such advances remaining unpaid at any time aggregate 10% or less of the principal amount of all Securities Outstanding at such time, such report to be transmitted within 90 days after such time. (c) Reports pursuant to this Section shall be transmitted by mail: (i) to all Holders of Securities, as the names and addresses of such Holders appear upon the registry books of the Issuer; and (ii) to all other Persons to whom such reports are required to be transmitted pursuant to Section 313(c) of the Trust Indenture Act of 1939. (d) A copy of each such report shall, at the time of such transmission to Securityholders, be furnished to the Issuer and be filed by the Trustee with each stock exchange upon which the Securities of any applicable series are listed and also with the Commission. The Issuer agrees to promptly notify the Trustee with respect to any series when and as the Securities of such series become admitted to trading on any national securities exchange. ARTICLE FIVE REMEDIES OF THE TRUSTEE AND SECURITY HOLDERS ON EVENT OF DEFAULT SECTION 5.1 Events of Default. "Event of Default", wherever used herein with respect to Securities of any series, means any one or more of the following events (whatever the reason for such Event of Default), unless it is either inapplicable to a particular series or it is specifically deleted or modified in or pursuant to the Board Resolution or supplemental indenture establishing such series of Securities or in the form of Security, for such series: (a) default in the payment of any installment of interest upon any of the Securities of such series as and when the same shall become due and payable, and continuance of such default for a period of 30 days; or (b) default in the payment of the principal of or premium, if any, of the Securities of such series as and when the same shall become due and payable either at maturity, upon redemption, by declaration or otherwise; or (c) default in the payment or satisfaction of any sinking fund or other purchase obligation with respect to Securities of such series, as and when such obligation shall become due and payable as in this Indenture expressed; or (d) failure on the part of the Issuer duly to observe or perform any other of the covenants or agreements on the part of the Issuer in the Securities of such series or in this Indenture continued for a period of 60 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Issuer by the Trustee by certified or registered mail, or to the Issuer and the Trustee by the Holders of at least 25% in aggregate principal amount of the Securities of such series then Outstanding; or (e) without the consent of the Issuer a court having jurisdiction shall enter an order for relief with respect to the Issuer under the Bankruptcy Code or without the consent of the Issuer a court having jurisdiction shall enter a judgment, order or decree adjudging the Issuer a bankrupt or insolvent, or enter an order for relief for reorganization, arrangement, adjustment or composition of or in respect of the Issuer under the Bankruptcy Code or applicable state insolvency law and the continuance of any such judgment, order or decree is unstayed and in effect for a period of 90 consecutive days; or (f) the Issuer shall institute proceedings for entry of an order for relief with respect to the Issuer under the Bankruptcy Code or for an adjudication of insolvency, or shall consent to the institution of bankruptcy or insolvency proceedings against it, or shall file a petition seeking, or seek or consent to reorganization, arrangement, composition or relief under the Bankruptcy Code or any applicable state law, or shall consent to the filing of such petition or to the appointment of a receiver, custodian, liquidator, assignee, trustee, sequestrator or similar official of the Issuer or of substantially all of its property, or the Issuer shall make a general assignment for the benefit of creditors as recognized under the Bankruptcy Code; or (g) default under any bond, debenture, note or other evidence of Indebtedness for money borrowed by the Issuer or any Subsidiary or under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Issuer or any Subsidiary, whether such Indebtedness exists on the date hereof or shall hereafter be created, which default shall have resulted in such Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, or any default in payment of such Indebtedness (after the expiration of any applicable grace periods and the presentation of any debt instruments, if required), if the aggregate amount of all such Indebtedness that has been so accelerated and with respect to which there has been such a default in payment shall exceed $25,000,000, without each such default and acceleration having been rescinded or annulled within a period of ten days after there shall have been given to the Issuer by the Trustee by certified or registered mail, or to the Issuer and the Trustee by the Holders of at least 25% in aggregate principal amount of the Securities of such series then Outstanding, a written notice specifying each such default and requiring the Issuer to cause each such default and acceleration to be rescinded or annulled and stating that such notice is a "Notice of Default" hereunder; or (h) any other Event of Default provided with respect to the Securities of such series. If an Event of Default with respect to Securities of any series then Outstanding occurs and is continuing, then and in each and every such case, unless the principal of all of the Securities of such series shall have already become due and payable, either the Trustee or the Holders of not less than 25% in aggregate principal amount of the Securities of such series then Outstanding, by notice in writing to the Issuer (and to the Trustee if given by Securityholders), may declare the principal (or, if the Securities of such series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of such series) of all the Securities of such series and the interest, if any, accrued thereon to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, notwithstanding anything to the contrary contained in this Indenture or in the Securities of such series. This provision, however, is subject to the condition that, if at any time after the unpaid principal amount (or such specified amount) of the Securities of such series shall have been so declared due and payable and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, the Issuer shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest, if any, upon all of the Securities of such series and the principal of any and all Securities of such series which shall have become due otherwise than by acceleration (with interest on overdue installments of interest, if any, to the extent that payment of such interest is enforceable under applicable law and on such principal at the rate borne by the Securities of such series to the date of such payment or deposit) and the reasonable compensation, disbursements, expenses and advances of the Trustee, and any and all defaults under this Indenture, other than the nonpayment of such portion of the principal amount of and accrued interest, if any, on Securities of such series which shall have become due by acceleration, shall have been cured or shall have been waived in accordance with Section 5.7 or provision deemed by the Trustee to be adequate shall have been made therefor, then and in every such case the Holders of a majority in aggregate principal amount of the Securities of such series then Outstanding, by written notice to the Issuer and to the Trustee, may rescind and annul such declaration and its consequences; but no such rescission and annulment shall extend to or shall affect any subsequent default, or shall impair any right consequent thereon. If any Event of Default with respect to the Issuer specified in Section 5.1(e) or 5.1(f) occurs, all unpaid principal amount (or, if the Securities of any series then Outstanding are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of each such series) and accrued interest on all Securities of each series then Outstanding shall ipso facto become and be immediately due and payable without any declaration or other act by the Trustee or any Securityholder. If the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned because of such rescission or annulment or for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Issuer, the Trustee and the Securityholders shall be restored respectively to their several positions and rights hereunder, and all rights, remedies and powers of the Issuer, the Trustee and the Securityholders shall continue as though no such proceeding had been taken. Except with respect to an Event of Default pursuant to Section 5.1 (a), (b) or (c), the Trustee shall not be charged with knowledge of any Event of Default unless written notice thereof shall have been given to a Responsible Officer by the Issuer, a paying agent or any Securityholder. SECTION 5.2 Payment of Securities on Default; Suit Therefor. The Issuer covenants that (a) if default shall be made in the payment of any installment of interest upon any of the Securities of any series then Outstanding as and when the same shall become due and payable, and such default shall have continued for a period of 30 days, or (b) if default shall be made in the payment of the principal of any of the Securities of such series as and when the same shall have become due and payable, whether at maturity of the Securities of such series or upon redemption or by declaration or otherwise, then, upon demand of the Trustee, the Issuer will pay to the Trustee, for the benefit of the Holders of the Securities, the whole amount that then shall have become due and payable on all such Securities of such series for principal or interest, if any, or both, as the case may be, with interest upon the overdue principal and (to the extent that payment of such interest is enforceable under applicable law) upon the overdue installments of interest, if any, at the rate borne by the Securities of such series; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including a reasonable compensation to the Trustee, its agents, attorneys and counsel, and any expenses or liabilities incurred by the Trustee hereunder other than through its negligence or bad faith. If the Issuer shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any actions or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against the Issuer or any other obligor on the Securities of such series and collect in the manner provided by law out of the property of the Issuer or any other obligor on the Securities of such series, wherever situated, the moneys adjudged or decreed to be payable. If there shall be pending proceedings for the bankruptcy or for the reorganization of the Issuer or any other obligor on the Securities of any series then Outstanding under any bankruptcy, insolvency or other similar law now or hereafter in effect, or if a receiver or trustee or similar official shall have been appointed for the property of the Issuer or such other obligor, or in the case of any other similar judicial proceedings relative to the Issuer or other obligor upon the Securities of such series, or to the creditors or property of the Issuer or such other obligor, the Trustee, irrespective of whether the principal of the Securities of such series shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section 5.2, shall be entitled and empowered by intervention in such proceedings or otherwise to file and prove a claim or claims for the whole amount of principal and interest, if any, owing and unpaid in respect of the Securities of such series, and, in case of any judicial proceedings, to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and of the Securityholders allowed in such judicial proceedings relative to the Issuer or any other obligor on the Securities of such series, its or their creditors, or its or their property, and to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute the same after the deduction of its charges and expenses, and any receiver, assignee or trustee or similar official in bankruptcy or reorganization is hereby authorized by each of the Securityholders to make such payments to the Trustee, and, if the Trustee shall consent to the making of such payments directly to the Securityholders, to pay to the Trustee any amount due it for compensation and expenses, including counsel fees and expenses incurred by it up to the date of such distribution. To the extent that such payment of reasonable compensation, expenses and counsel fees and expenses out of the estate in any such proceedings shall be denied for any reason, payment of the same shall be secured by a lien on, and shall be paid out of, any and all distributions, dividends, moneys, securities and other property which the Holders of the Securities of such series may be entitled to receive in such proceedings, whether in liquidation or under any plan of reorganization or arrangement or otherwise. All rights of action and of asserting claims under this Indenture, or under any of the Securities, may be enforced by the Trustee without the possession of any of the Securities, or the production thereof at any trial or other proceeding relative thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall be for the ratable benefit of the Holders of the Securities of the series in respect of which such judgment has been recovered. SECTION 5.3 Application of Moneys Collected by Trustee. Any moneys collected by the Trustee pursuant to Section 5.2 with respect to Securities of any series then Outstanding shall be applied in the order following, at the date or dates fixed by the Trustee for the distribution of such moneys, upon presentation of the several Securities of such series, and stamping thereon the payment, if only partially paid, and upon surrender thereof, if fully paid: FIRST: To the payment of costs and expenses of collection and reasonable compensation to the Trustee, its agents, attorneys and counsel, and of all other expenses and liabilities incurred, and all advances made, by the Trustee pursuant to Section 6.6 except as a result of its negligence or bad faith; SECOND: If the principal of the Outstanding Securities of such series shall not have become due and be unpaid, to the payment of interest, if any, on the Securities of such series, in the order of the maturity of the installments of such interest, if any, with interest (to the extent that such interest has been collected by the Trustee) upon the overdue installments of interest, if any, at the rate borne by the Securities of such series, such payment to be made ratably to the Persons entitled thereto; THIRD: If the principal of the Outstanding Securities of such series shall have become due, by declaration or otherwise, to the payment of the whole amount then owing and unpaid upon the Securities of such series for principal and interest, if any, with interest on the overdue principal and (to the extent that such interest has been collected by the Trustee) upon overdue installments of interest, if any, at the rate borne by the Securities of such series; and in case such moneys shall be insufficient to pay in full the whole amounts so due and unpaid upon the Securities of such series, then to the payment of such principal and interest, if any, without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any Security over any other Security, ratably to the aggregate of such principal and accrued and unpaid interest; and FOURTH: To the payment of any surplus then remaining to the Issuer, its successors or assigns, or to whomsoever may be lawfully entitled to receive the same. No claim for interest which in any manner at or after maturity shall have been transferred or pledged separate or apart from the Securities to which it relates, or which in any manner shall have been kept alive after maturity by an extension (otherwise than pursuant to an extension made pursuant to a plan proposed by the Issuer to the Holders of all Securities of any series then Outstanding), purchase, funding or otherwise by or on behalf or with the consent or approval of the Issuer shall be entitled, in case of a default hereunder, to any benefit of this Indenture, except after prior payment in full of the principal of all Securities of any series then Outstanding and of all claims for interest not so transferred, pledged, kept alive, extended, purchased or funded. SECTION 5.4 Proceedings by Securityholders. No Holder of any Securities of any series then Outstanding shall have any right by virtue of or by availing of any provision of this Indenture to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Indenture or for the appointment of a receiver or trustee or similar official, or for any other remedy hereunder, unless such Holder previously shall have given to the Trustee written notice of default and of the continuance thereof, as hereinbefore provided, and unless the Holders of not less than 25% in aggregate principal amount of the Securities of such series then Outstanding shall have made written request to the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee for 60 days after its receipt of such notice, request and offer of indemnity, shall have neglected or refused to institute any such action, suit or proceeding, it being understood and intended, and being expressly covenanted by the Holder of every Security of such series with every other taker and Holder and the Trustee, that no one or more Holders of Securities of such series shall have any right in any manner whatever by virtue of or by availing of any provision of this Indenture or of the Securities to affect, disturb or prejudice the rights of any other Holder of such Securities of such series, or to obtain or seek to obtain priority over or preference as to any other such Holder, or to enforce any right under this Indenture or the Securities, except in the manner herein provided and for the equal, ratable and common benefit of all Holders of Securities of such series. Notwithstanding any other provisions in this Indenture, however, the right of any Holder of any Security to receive payment of the principal of and interest, if any, on such Security, on or after the respective due dates expressed in such Security, or to institute suit for the enforcement of any such payment on or after such respective dates shall not be impaired or affected without the consent of such Holder. SECTION 5.5 Proceedings by Trustee. In case of an Event of Default hereunder, the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either by suit in equity or by action at law or by proceedings in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law. SECTION 5.6 Remedies Cumulative and Continuing. All powers and remedies given by this Article Five to the Trustee or to the Securityholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any thereof or of any other powers and remedies available to the Trustee or the Securityholders, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture, and no delay or omission of the Trustee or of any Securityholder to exercise any right or power accruing upon any default occurring and continuing as aforesaid shall impair any such right or power, or shall be construed to be a waiver of any such default or an acquiescence therein; and, subject to the provisions of Section 5.4, every power and remedy given by this Article Five or by law to the Trustee or to the Securityholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Securityholders. SECTION 5.7 Direction of Proceedings; Waiver of Defaults by Majority of Securityholders. The Holders of a majority in aggregate principal amount of the Securities of any series then Outstanding shall have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to Securities of such series; provided, however, that (subject to the provisions of Section 6.1) the Trustee shall have the right to decline to follow any such direction if the Trustee shall determine upon advice of counsel that the action or proceeding so directed may not lawfully be taken or if the Trustee in good faith by its board of directors, its executive committee, or a trust committee of directors or Responsible Officers or both shall determine that the action or proceeding so directed would involve the Trustee in personal liability. The Holders of a majority in aggregate principal amount of the Securities of any series then Outstanding may on behalf of the Holders of all of the Securities of such series waive any past default or Event of Default hereunder and its consequences except a default in the payment of interest, if any, on, or the principal of, the Securities of such series. Upon any such waiver the Issuer, the Trustee and the Holders of the Securities of such series shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Whenever any default or Event of Default hereunder shall have been waived as permitted by this Section 5.7, said default or Event of Default shall for all purposes of the Securities and this Indenture be deemed to have been cured and to be not continuing. SECTION 5.8 Notice of Defaults. The Trustee shall, within 90 days after the occurrence of a default, with respect to Securities of any series then Outstanding, mail to all Holders of Securities of such series, as the names and the addresses of such Holders appear upon the Securities register, notice of all defaults known to the Trustee with respect to such series, unless such defaults shall have been cured before the giving of such notice (the term "defaults" for the purpose of this Section 5.8 being hereby defined to be the events specified in clauses (a), (b), (c), (d), (e), (f), (g) and (h) of Section 5.1, not including periods of grace, if any, provided for therein and irrespective of the giving of the written notice specified in said clause (d) or (g) but in the case of any default of the character specified in said clause (d) or (g) no such notice to Securityholders shall be given until at least 60 days after the giving of written notice thereof to the Issuer pursuant to said clause (d) or (g), as the case may be); provided, however, that, except in the case of default in the payment of the principal of or interest, if any, on any of the Securities, or in the payment or satisfaction of any sinking fund or other purchase obligation, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors or Responsible Officers or both of the Trustee in good faith determines that the withholding of such notice is in the best interests of the Securityholders. SECTION 5.9 Undertaking to Pay Costs. All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the cost of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorney's fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.9 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Securityholder, or group of Securityholders, holding in the aggregate more than 10% in principal amount of the Securities of any series then Outstanding, or to any suit instituted by any Securityholders for the enforcement of the payment of the principal of or interest, if any, on any Security against the Issuer on or after the due date expressed in such Security. ARTICLE SIX CONCERNING THE TRUSTEE SECTION 6.1 Duties and Responsibilities of the Trustee; During Default; Prior to Default. With respect to the Holders of any series of Securities issued hereunder, the Trustee, prior to the occurrence of an Event of Default with respect to the Securities of a particular series and after the curing or waiving of all Events of Default which may have occurred with respect to such series, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Event of Default with respect to the Securities of a series has occurred (which has not been cured or waived) the Trustee shall exercise with respect to such series of Securities such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that (a) prior to the occurrence of an Event of Default with respect to the Securities of any series and after the curing or waiving of all such Events of Default with respect to such series which may have occurred: (i) the duties and obligations of the Trustee with respect to the Securities of any series shall be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any statements, certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such statements, certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and (c) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders pursuant to Section 5.7 relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture. None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there shall be reasonable ground for believing that the repayment of such funds or adequate indemnity against such liability is not reasonably assured to it. SECTION 6.2 Certain Rights of the Trustee. Subject to Section 6.1: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officers' Certificate or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, note, coupon, security or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request, direction, order or demand of the Issuer mentioned herein shall be sufficiently evidenced by an Officers' Certificate or Issuer Order (unless other evidence in respect thereof be herein specifically prescribed); and any resolution of the Board of Directors may be evidenced to the Trustee by a copy thereof certified by the secretary or an assistant secretary of the Issuer; (c) the Trustee may consult with counsel of its selection and any advice of such counsel promptly confirmed in writing shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in reliance thereon in accordance with such advice or Opinion of Counsel; (d) the Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture at the request, order or direction of any of the Securityholders pursuant to the provisions of this Indenture (including, without limitation, pursuant to Section 5.1), unless such Securityholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred therein or thereby; (e) the Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture; (f) prior to the occurrence of an Event of Default hereunder and after the curing or waiving of all Events of Default, the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, coupon, security, or other paper or document unless requested in writing so to do by the Holders of not less than a majority in aggregate principal amount of the Securities of all series affected then Outstanding; provided that, if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such expenses or liabilities as a condition to proceeding; the reasonable expenses of every such investigation shall be paid by the Issuer or, if paid by the Trustee or any predecessor Trustee, shall be repaid by the Issuer upon demand; and (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys not regularly in its employ and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder. SECTION 6.3 Trustee Not Responsible for Recitals, Disposition of Securities or Application of Proceeds Trustee Not Responsible for Recitals, Disposition of Securities or Application of Proceeds Thereof. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Issuer, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representation as to the validity or sufficiency of this Indenture, of the Securities or of any prospectus used to sell the Securities. The Trustee shall not be accountable for the use or application by the Issuer of any of the Securities or of the proceeds thereof. SECTION 6.4 Trustee and Agents May Hold Securities; Collections, etc. The Trustee or any agent of the Issuer or the Trustee, in its individual or any other capacity, may become the owner or pledgee of Securities with the same rights it would have if it were not the Trustee or such agent and, subject to Sections 6.8 and 6.13, may otherwise deal with the Issuer and receive, collect, hold and retain collections from the Issuer with the same rights it would have if it were not the Trustee or such agent. SECTION 6.5 Moneys Held by Trustee. Subject to the provisions of Section 10.4 hereof, all moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by mandatory provisions of law. Neither the Trustee nor any agent of the Issuer or the Trustee shall be under any liability for interest on any moneys received by it hereunder. SECTION 6.6. Compensation and Indemnification of Trustee and Its Prior Claim. The Issuer covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, such compensation as shall be agreed to in writing between the Issuer and the Trustee (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) and the Issuer covenants and agrees to pay or reimburse the Trustee and each predecessor Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by or on behalf of it in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all agents and other persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence or bad faith. The Issuer also covenants to indemnify the Trustee and each predecessor Trustee for, and to hold it harmless against, any and all loss, liability, damage, claim or expense, including taxes (other than taxes based on the income of the Trustee), incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this Indenture or the trusts hereunder and its duties hereunder, including the costs and expenses of defending itself against or investigating any claim or liability in the premises. The obligations of the Issuer under this Section 6.6 to compensate and indemnify the Trustee and each predecessor Trustee and to pay or reimburse the Trustee and each predecessor Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture or the resignation or removal of the Trustee. Such additional indebtedness shall be a senior claim to that of the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the Holders of particular Securities, and the Securities are hereby subordinated to such senior claim. When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 5.1 or in connection with Article Five hereof, the expenses (including the reasonable fees and expenses of its counsel) and the compensation for the service in connection therewith are intended to constitute expenses of administration under any bankruptcy law. SECTION 6.7 Right of Trustee to Rely on Officers' Certificate, etc. Subject to Sections 6.1 and 6.2, whenever in the administration of the trusts of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or bad faith on the part of the Trustee, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Trustee, and such certificate, in the absence of negligence or bad faith on the part of the Trustee, shall be full warrant to the Trustee for any action taken, suffered or omitted by it under the provisions of this Indenture upon the faith thereof. SECTION 6.8 Qualification of Trustee; Conflicting Interests. (a) If the Trustee has or shall acquire any conflicting interest (as defined in subsection (c)), then within 90 days after ascertaining that it has such conflicting interest, and if the default (as defined in subsection (c)) to which such conflicting interest relates has not been cured or duly waived or otherwise eliminated before the end of such 90-day period, the Trustee shall either eliminate such conflicting interest or, except as otherwise provided below, resign, and the Issuer shall take prompt steps to have a successor appointed in the manner provided in Section 6.10. (b) If the Trustee shall fail to comply with the provisions of subsection (a), the Trustee shall, within 10 days after the expiration of such 90-day period, transmit notice of such failure to the Securityholders in the manner and to the extent provided in Section 4.4 and, subject to the provisions of Section 5.9, unless the Trustee's duty to resign is stayed as provided below, any Securityholder who has been a bona fide Holder of Securities for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee, and the appointment of a successor, if the Trustee fails, after written request thereof by such Securityholder, to comply with the provisions of subsection (a). Except in the case of a default in the payment of the principal of or interest on any Security, or in the payment of any sinking or purchase fund installment, the Trustee shall not be required to resign as provided by this Section 6.8 if the Trustee shall have sustained the burden of proving, on application to the Commission and after opportunity for hearing thereon, that (i) the default under the Indenture may be cured or waived during a reasonable period and under the procedures described in such application, and (ii) a stay of the Trustee's duty to resign will not be inconsistent with the interests of Holders of the Securities. The filing of such an application shall automatically stay the performance of the duty to resign until the Commission orders otherwise. Any resignation of the Trustee shall become effective only upon the appointment of a successor trustee in accordance with the provisions of Section 6.10 and such successor's acceptance of such an appointment. (c) For the purposes of this Section 6.8, the Trustee shall be deemed to have a conflicting interest with respect to Securities of any series if the Securities of such series are in default (as determined in accordance with the provisions of Section 5.1, but exclusive of any period of grace or requirement of notice) and (i) the Trustee is trustee under this Indenture with respect to the Outstanding securities of any other series or is a trustee under another indenture under which any other securities, or certificates of interest or participation in any other securities, of the Issuer are outstanding, unless such other indenture is a collateral trust indenture under which the only collateral consists of Securities issued under this Indenture; provided that there shall be excluded from the operation of this paragraph (i), this Indenture with respect to the Securities of any other series and there shall also be so excluded any other indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Issuer are outstanding if (x) this Indenture is and, if applicable, this Indenture and any series issued pursuant to this Indenture and such other indenture or indentures are wholly unsecured and rank equally and such other indenture or indentures are hereafter qualified under the Trust Indenture Act of 1939, unless the Commission shall have found and declared by order pursuant to Section 305(b) or Section 307(c) of the Trust Indenture Act of 1939 that differences exist between the provisions of this Indenture with respect to Securities of such series and one or more other series, or the provisions of this Indenture and the provisions of such other indenture or indentures which are so likely to involve a material conflict of interest as to make it necessary in the public interest or for the protection of investors to disqualify the Trustee from acting as such under this Indenture with respect to Securities of such series and such other series, or under this Indenture or such other indenture or indentures, or (y) the Issuer shall have sustained the burden of proving, on application to the Commission and after opportunity for hearing thereon, that trusteeship under this Indenture with respect to Securities of such series and such other series, or under this Indenture and such other indenture or indentures is not so likely to involve a material conflict of interest as to make it necessary in the public interest or for the protection of investors to disqualify the Trustee from acting as such under this Indenture with respect to Securities of such series and such other series, or under this Indenture and such other indentures; (ii) the Trustee or any of its directors or executive officers is an underwriter for the Issuer; (iii) the Trustee directly or indirectly controls or is directly or indirectly controlled by or is under direct or indirect common control with an underwriter for the Issuer; (iv) the Trustee or any of its directors or executive officers is a director, officer, partner, employee, appointee, or representative of the Issuer, or of an underwriter (other than the Trustee itself) for the Issuer who is currently engaged in the business of underwriting, except that (x) one individual may be a director or an executive officer, or both, of the Trustee and a director or an executive officer, or both, of the Issuer, but may not be at the same time an executive officer of both the Trustee and the Issuer; (y) if and so long as the number of directors of the Trustee in office is more than nine, one additional individual may be a director or an executive officer, or both, of the Trustee and a director of the Issuer; and (z) the Trustee may be designated by the Issuer or by any underwriter for the Issuer to act in the capacity of transfer agent, registrar, custodian, paying agent, fiscal agent, escrow agent, or depositary, or in any other similar capacity, or, subject to the provisions of subsection (c) (i) of this Section, to act as trustee, whether under an indenture or otherwise; (v) 10% or more of the voting securities of the Trustee is beneficially owned either by the Issuer or by any director, partner or executive officer thereof, or 20% or more of such voting securities is beneficially owned, collectively, by any two or more of such persons; or 10% or more of the voting securities of the Trustee is beneficially owned either by an underwriter for the Issuer or by any director, partner, or executive officer thereof, or is beneficially owned, collectively, by any two or more such persons; (vi) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default, (x) 5% or more of the voting securities or 10% or more of any other class of security of the Issuer, not including the Securities issued under this Indenture and securities issued under any other indenture under which the Trustee is also trustee, or (y) 10% or more of any class of security of an underwriter for the Issuer; (vii) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default, 5% or more of the voting securities of any person who, to the knowledge of the Trustee, owns 10% or more of the voting securities of, or controls directly or indirectly or is under direct or indirect common control with, the Issuer; (viii) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default, 10% or more of any class security of any person who, to the knowledge of the Trustee, owns 50% or more of the voting securities of the Issuer; (ix) the Trustee owns on the date of default (as determined in accordance with the provisions of Section 5.1, but exclusive of any period of grace or requirement of notice) or on any anniversary of such default while such default remains outstanding, in the capacity of executor, administrator, testamentary or inter vivos trustee, guardian, committee or conservator, or in any other similar capacity, an aggregate of 25% or more of the voting securities, or of any class of security, of any Person, the beneficial ownership of a specified percentage of which would have constituted a conflicting interest under paragraphs (vi), (vii) or (viii) of this subsection. As to any such securities of which the Trustee acquired ownership through becoming executor, administrator, or testamentary trustee of an estate which included them, the provisions of the preceding sentence shall not apply, for a period of two years from the date of such acquisition, to the extent that such securities included in such estate do not exceed 25% of such voting securities or 25% of any such class of security. Promptly after the dates of any such default and annually in each succeeding year that the Securities remain in default, the Trustee shall make a check of its holdings of such securities in any of the above-mentioned capacities as of such dates. If the Issuer fails to make payment in full of principal of or interest on any of the Securities when and as the same becomes due and payable, and such failure continues for 30 days thereafter, the Trustee shall make a prompt check of its holdings of such Securities in any of the above-mentioned capacities as of the date of the expiration of such 30-day period, and after such date, notwithstanding the foregoing provisions of this paragraph, all such Securities so held by the Trustee, with sole or joint control over such Securities vested in it, shall, but only so long as such failure shall continue, be considered as though beneficially owned by the Trustee for the purposes of paragraphs (vi), (vii) and (viii) of this subsection; or (x) except under the circumstances described in paragraphs (1), (3), (4), (5) or (6) of Section 6.13(b), the Trustee shall be or shall become a creditor of the Issuer. For purposes of subsection (c) (i), the term "series of securities" or "series" means a series, class or group of securities issuable under an indenture pursuant to the terms of which holders of one such series may vote to direct the Trustee, or otherwise take action pursuant to a vote of such holders, separately from holders of another such series; provided that "series of securities" or "series" shall not include any series of securities issuable under an indenture if all such series rank equally and are wholly unsecured. The specification of percentages in subsections (c) (v) to (ix) inclusive of this Section 6.8 shall not be construed as indicating that the ownership of such percentages of the securities of a person is or is not necessary or sufficient to constitute direct or indirect control for the purposes of subsections (c) (iii) or (vii) of this Section. For the purposes of subsections (c) (vi), (vii), (viii) and (ix), of this Section 6.8, only, (A) the terms "security" and "securities" shall include only such securities as are generally known as corporate securities, but shall not include any note or other evidence of indebtedness issued to evidence an obligation to repay moneys lent to a person by one or more banks, trust companies, or banking firms, or any certificate of interest or participation in any such note or evidence of indebtedness; (B) an obligation shall be deemed to be in default when a default in payment of principal shall have continued for 30 days or more and shall not have been cured; and (C) the Trustee shall not be deemed to be the owner or holder of (x) any security which it holds as collateral security, as trustee or otherwise, for an obligation which is not in default as defined in clause (B) above, or (y) any security which it holds as collateral security under this Indenture, irrespective of any default hereunder, or (z) any security which it holds as agent for collection, or as custodian, escrow agent, or depositary, or in any similar representative capacity. Except as provided above, the word "security" or "securities" as used in this Section 6.8 shall mean any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas or other mineral rights, or, in general, any interest or instrument commonly known as a "security", or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. (d) For purposes of this Section 6.8: (i) the term "underwriter" when used with reference to the Issuer shall mean every person who, within a one year period prior to the time as of which the determination is made, was an underwriter of any security of the Issuer outstanding at the time of the determination; (ii) the term "director" shall mean any director of a corporation or any individual performing similar functions with respect to any organization whether incorporated or unincorporated; (iii) the term "person" shall mean an individual, a corporation, a partnership, an association, a joint-stock company, a trust, an unincorporated organization, or a government or political subdivision thereof; as used in this paragraph, the term "trust" shall include only a trust where the interest or interests of the beneficiary or beneficiaries are evidenced by a security; (iv) the term "voting security" shall mean any security presently entitling the owner or holder thereof to vote in the direction or management of the affairs of a person, or any security issued under or pursuant to any trust, agreement or arrangement whereby a trustee or trustees or agent or agents for the owner or holder of such security are presently entitled to vote in the direction or management of the affairs of a person; (v) the term "Issuer" shall mean any obligor upon the Securities; and (vi) the term "executive officer" shall mean the president, every vice president, every trust officer, the cashier, the secretary, and the treasurer of a corporation, and any individual customarily performing similar functions with respect to any organization whether incorporated or unincorporated, but shall not include the chairman of the board of directors. (e) The percentages of voting securities and other securities specified in this Section 6.8 shall be calculated in accordance with the following provisions: (i) a specified percentage of the voting securities of the Trustee, the Issuer or any other person referred to in this Section (each of whom is referred to as a "person" in this paragraph) means such amount of the outstanding voting securities of such person as entitles the holder or holders thereof to cast such specified percentage of the aggregate votes which the holders of all the outstanding voting securities of such person are entitled to cast in the direction or management of the affairs of such person; (ii) a specified percentage of a class of securities of a person means such percentage of the aggregate amount of securities of the class outstanding; (iii) the term "amount", when used in regard to securities, means the principal amount if relating to evidences of indebtedness, the number of shares if relating to capital shares, and the number of units if relating to any other kind of security; (iv) the term "outstanding" means issued and not held by or for the account of the issuer; the following securities shall not be deemed outstanding within the meaning of this definition: (A) securities of an issuer held in a sinking fund relating to securities of the issuer of the same class; (B) securities of an issuer held in a sinking fund relating to another class of securities of the issuer, if the obligation evidenced by such other class of securities is not in default as to principal or interest or otherwise; (C) securities pledged by the issuer thereof as security for an obligation of the issuer not in default as to principal or interest or otherwise; and (D) securities held in escrow if placed in escrow by the issuer thereof; provided,that any voting securities of an issuer shall be deemed outstanding if any person other than the issuer is entitled to exercise the voting rights thereof; and (v) a security shall be deemed to be of the same class as another security if both securities confer upon the holder or holders thereof substantially the same rights and privileges; provided, that, in the case of secured evidences of indebtedness, all of which are issued under a single indenture, differences in the interest rates or maturity dates of various series thereof shall not be deemed sufficient to constitute such series different classes and provided, further, that, in the case of unsecured evidences of indebtedness, differences in the interest rates or maturity dates thereof shall not be deemed sufficient to constitute them securities of different classes, whether or not they are issued under a single indenture. SECTION 6.9 Persons Eligible for Appointment as Trustee. The Trustee for each series of Securities hereunder shall at all times be a corporation organized and doing business under the laws of the United States of America or of any state or the District of Columbia having a combined capital and surplus of at least $50,000,000, and which is authorized under such laws to exercise corporate trust powers and is subject to supervision or examination by federal, state or District of Columbia authority, or a corporation or other Person permitted to act as trustee by the Commission. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. No obligor upon the Securities or any Affiliate of such obligor shall serve as trustee upon the Securities. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.9, the Trustee shall resign immediately in the manner and with the effect specified in Section 6.10. SECTION 6.10 Resignation and Removal; Appointment of Successor Trustee. (a) The Trustee, or any trustee or trustees hereafter appointed, may at any time resign with respect to one or more or all series of Securities by giving written notice of resignation to the Issuer. Upon receiving such notice of resignation, the Issuer shall promptly appoint a successor trustee or trustees with respect to the applicable series by written instrument in duplicate, executed by authority of the Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee or trustees. If no successor trustee shall have been so appointed with respect to any series and have accepted appointment within 30 days after the mailing of such notice of resignation, the resigning trustee may petition any court of competent jurisdiction for the appointment of a successor trustee, or any Securityholder who has been a bona fide Holder of a Security or Securities of the applicable series for at least six months may, subject to the provisions of Section 5.9, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee. (b) In case at any time any of the following shall occur: (i) the Trustee shall fail to comply with the provisions of Section 6.8 with respect to any series of Securities after written request therefor by the Issuer or by any Securityholder who has been a bona fide Holder of a Security or Securities of such series for at least six months; or (ii) the Trustee shall cease to be eligible in accordance with the provisions of Section 6.9 and shall fail to resign after written request therefor by the Issuer or by any such Securityholder; or (iii) the Trustee shall become incapable of acting with respect to any series of Securities, or shall be adjudged a bankrupt or insolvent, or a receiver or liquidator of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; 1 then, in any such case, the Issuer may remove the Trustee with respect to the applicable series of Securities and appoint a successor trustee for such series by written instrument, in duplicate, executed by order of the Board of Directors one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 5.9, any Securityholder who has been a bona fide Holder of a Security or Securities of such series for at least six months may on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor trustee with respect to such series. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee. (c) The Holders of a majority in aggregate principal amount of the Securities of each series then Outstanding may at any time remove the Trustee with respect to Securities of such series and appoint a successor trustee with respect to the Securities of such series by delivering to the Trustee so removed, to the successor trustee so appointed and to the Issuer the evidence provided for in Section 7.1 of the action in that regard taken by the Securityholders. If no successor trustee shall have been so appointed with respect to any series and have accepted appointment within 30 days after the delivery of such evidence of removal, the Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee, or any Securityholder who has been a bona fide Holder of a Security or Securities of the applicable series for at least six months may, subject to the provisions of Section 5.9, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee. (d) Any resignation or removal of the Trustee with respect to any series and any appointment of a successor trustee with respect to such series pursuant to any of the provisions of this Section 6.10 shall become effective upon acceptance of appointment by the successor trustee as provided in Section 6.11. SECTION 6.11 Acceptance of Appointment by Successor Trustee. Any successor trustee appointed as provided in Section 6.10 shall execute and deliver to the Issuer and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee with respect to all or any applicable series shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all rights, powers, duties and obligations with respect to such series of its predecessor hereunder, with like effect as if originally named as trustee for such series hereunder; but, nevertheless, on the written request of the Issuer or of the successor trustee, upon payment of its charges then unpaid, the trustee ceasing to act shall, subject to Section 10.4, pay over to the successor trustee all moneys at the time held by it hereunder and shall execute and deliver an instrument transferring to such successor trustee all such rights, powers, duties and obligations. Upon request of any such successor trustee, the Issuer shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a prior claim upon all property or funds held or collected by such trustee to secure any amounts then due it pursuant to the provisions of Section 6.6. If a successor trustee is appointed with respect to the Securities of one or more (but not all) series, the Issuer, the predecessor Trustee and each successor trustee with respect to the Securities of any applicable series shall execute and deliver an indenture supplemental hereto which shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the predecessor Trustee with respect to the Securities of any series as to which the predecessor Trustee is not retiring shall continue to be vested in the predecessor Trustee, and shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such trustees co-trustees of the same trust and that each such trustee shall be trustee of a trust or trusts under separate indentures. No successor trustee with respect to any series of Securities shall accept appointment as provided in this Section 6.11 unless at the time of such acceptance such successor trustee shall be qualified under the provisions of Section 6.8 and eligible under the provisions of Section 6.9. Upon acceptance of appointment by any successor trustee as provided in this Section 6.11, the Issuer shall give notice thereof to the Holders of Securities of each series affected, by mailing such notice to such Holders at their addresses as they shall appear on the registry books. If the Issuer fails to give such notice within ten days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be given at the expense of the Issuer. SECTION 6.12 Merger, Conversion, Consolidation or Succession to Business of Trustee. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided that such corporation shall be qualified under the provisions of Section 6.8 and eligible under the provisions of Section 6.9, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture any of the Securities of any series shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor Trustee and deliver such Securities so authenticated; and, in case at that time any of the Securities of any series shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor Trustee; and in all such cases such certificate shall have the full force which it is anywhere in the Securities of such series or in this Indenture provided that the certificate of the Trustee shall have; provided, that the right to adopt the certificate of authentication of any predecessor Trustee or to authenticate Securities of any series in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation. SECTION 6.13 Preferential Collection of Claims Against the Issuer. (a) Subject to the provisions of this Section, if the Trustee shall be or shall become a creditor, directly or indirectly, secured or unsecured, of the Issuer within three months prior to a default, as defined in subsection (c) of this Section 6.13, or subsequent to such a default, then, unless and until such default shall be cured, the Trustee shall set apart and hold in a special account for the benefit of the Trustee individually, the Holders of the Securities and the holders of other indenture securities (as defined in this Section 6.13): (1) an amount equal to any and all reductions in the amount due and owing upon any claim as such creditor in respect of principal or interest, effected after the beginning of such three month period and valid as against the Issuer and its other creditors, except any such reduction resulting from the receipt or disposition of any property described in subsection (a) (2) of this section, or from the exercise of any right of set-off which the Trustee could have exercised if a petition in bankruptcy had been filed by or against the Issuer upon the date of such default; and (2) all property received by the Trustee in respect of any claim as such creditor, either as security therefor, or in satisfaction or composition thereof, or otherwise, after the beginning of such three month period, or an amount equal to the proceeds of any such property, if disposed of, subject, however, to the rights, if any, of the Issuer and its other creditors in such property or such proceeds. Nothing herein contained, however, shall affect the right of the Trustee: (A) to retain for its own account (i) payments made on account of any such claim by any Person (other than the Issuer) who is liable thereon, (ii) the proceeds of the bona fide sale of any such claim by the Trustee to a third Person, and (iii) distributions made in cash, securities or other property in respect of claims filed against the Issuer in bankruptcy or receivership or in proceedings for reorganization pursuant to the Bankruptcy Code or applicable state law; (B) to realize, for its own account, upon any property held by it as security for any such claim, if such property was so held prior to the beginning of such three month period; (C) to realize, for its own account, but only to the extent of the claim hereinafter mentioned, upon any property held by it as security for any such claim, if such claim was created after the beginning of such three month period and such property was received as security therefor simultaneously with the creation thereof, and if the Trustee shall sustain the burden of proving that at the time such property was so received the Trustee had no reasonable cause to believe that a default as defined in subsection (c) of this Section would occur within three months; or (D) to receive payment on any claim referred to in paragraph (B) or (C), against the release of any property held as security for such claim as provided in such paragraph (B) or (C), as the case may be, to the extent of the fair value of such property. For the purposes of paragraphs (B), (C) and (D), property substituted after the beginning of such three month period for property held as security at the time of such substitution shall, to the extent of the fair value of the property released, have the same status as the property released, and, to the extent that any claim referred to in any of such paragraphs is created in renewal of or in substitution for or for the purpose of repaying or refunding any preexisting claim of the Trustee as such creditor, such claim shall have the same status as such pre-existing claim. If the Trustee shall be required to account, the funds and property held in such special account and the proceeds thereof shall be apportioned between the Trustee, the Securityholders and the holders of other indenture securities in such manner that the Trustee, such Securityholders and the holders of other indenture securities realize, as a result of payments from such special account and payments of dividends on claims filed against the Issuer in bankruptcy or receivership or in proceedings for reorganization pursuant to the Bankruptcy Code or applicable state law, the same percentage of their respective claims, figured before crediting to the claim of the Trustee anything on account of the receipt by it from the Issuer of the funds and property in such special account, and before crediting to the respective claims of the Trustee, such Securityholders and the holders of other indenture securities, dividends on claims filed against the Issuer in bankruptcy or receivership or in proceedings for reorganization pursuant to the Bankruptcy Code or applicable state law, but after crediting thereon receipts on account of the indebtedness represented by their respective claims from all sources other than from such dividends and from the funds and property so held in such special account. As used in this paragraph, with respect to any claim, the term "dividends" shall include any distribution with respect to such claim, in bankruptcy or receivership or in proceedings for reorganization pursuant to the Bankruptcy Code or applicable 3 state law, whether such distribution is made in cash, securities or other property, but shall not include any such distribution with respect to the secured portion, if any, of such claim. The court in which such bankruptcy, receivership or proceeding for reorganization is pending shall have jurisdiction (i) to apportion between the Trustee, such Securityholders and the holders of other indenture securities, in accordance with the provisions of this paragraph, the funds and property held in such special account and the proceeds thereof, or (ii) in lieu of such apportionment, in whole or in part, to give to the provisions of this paragraph due consideration in determining the fairness of the distributions to be made to the Trustee, such Securityholders and the holders of other indenture securities with respect to their respective claims, in which event it shall not be necessary to liquidate or to appraise the value of any securities or other property held in such special account or as security for any such claim, or to make a specific allocation of such distributions as between the secured and unsecured portions of such claims, or otherwise to apply the provisions of this paragraph as a mathematical formula. Any Trustee who has resigned or been removed after the beginning of such three month period shall be subject to the provisions of this subsection (a) as though such resignation or removal had not occurred. If any Trustee has resigned or been removed prior to the beginning of such three month period, it shall be subject to the provisions of this subsection (a) if and only if the following conditions exist: (i) the receipt of property or reduction of claim which would have given rise to the obligation to account, if such Trustee had continued as trustee, occurred after the beginning of such three month period; and (ii) such receipt of property or reduction of claim occurred within three months after such resignation or removal. (b) There shall be excluded from the operation of this Section 6.13 a creditor relationship arising from: (1) the ownership or acquisition of securities issued under any indenture or any security or securities having a maturity of one year or more at the time of acquisition by the Trustee; (2) advances authorized by a receivership or bankruptcy court of competent jurisdiction or by this Indenture for the purpose of preserving any property which shall at any time be subject to the lien of this Indenture or of discharging tax liens or other prior liens or encumbrances thereon, if notice of such advance and of the circumstances surrounding the making thereof is given to the Securityholders at the time and in the manner provided in this Indenture; (3) disbursements made in the ordinary course of business in the capacity of trustee under an indenture, transfer agent, registrar, custodian, paying agent, fiscal agent or depositary, or other similar capacity; (4) an indebtedness created as a result of services rendered or premises rented or an indebtedness created as a result of goods or securities sold in a cash transaction as defined in subsection (c)(2) of this Section; (5) the ownership of stock or of other securities of a corporation organized under the provisions of Section 25 (a) of the Federal Reserve Act, as amended, which is directly or indirectly a creditor of the Issuer; or (6) the acquisition, ownership, acceptance or negotiation of any drafts, bills of exchange, acceptances or obligations which fall within the classification of self-liquidating paper as defined in subsection (c) (3) of this Section. (c) As used in this Section 6.13: (1) the term "default" shall mean any failure to make payment in full of the principal of or interest on any of the Securities when and as such principal or interest becomes due and payable; (2) the term "cash transaction" shall mean any transaction in which full payment for goods or securities sold is made within seven days after delivery of the goods or securities in currency or in checks or other orders drawn upon banks or bankers and payable upon demand; (3) the term "self-liquidating paper" shall mean any draft, bill of exchange, acceptance or obligation which is made, drawn, negotiated or incurred by the Issuer for the purpose of financing the purchase, processing, manufacture, shipment, storage or sale of goods, wares or merchandise and which is secured by documents evidencing title to, possession of, or a lien upon the goods, wares or merchandise or the receivables or proceeds arising from the sale of the goods, wares or merchandise previously constituting the security, provided the security is received by the Trustee simultaneously with the creation of the creditor relationship with the Issuer arising from the making, drawing, negotiating or incurring of the draft, bill of exchange, acceptance or obligation; and 4 (4) the term "Issuer" shall mean any obligor upon the Securities. SECTION 6.14 Appointment of Authenticating Agent. As long as any Securities of a series remain Outstanding, the Trustee may, by an instrument in writing, appoint with the approval of the Issuer an authenticating agent (the "Authenticating Agent") which shall be authorized to act on behalf of the Trustee to authenticate Securities, including Securities issued upon exchange, registration of transfer, partial redemption or pursuant to Section 2.9. Securities of each such series authenticated by such Authenticating Agent shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee. Whenever reference is made in this Indenture to the authentication and delivery of Securities of any series by the Trustee or to the Trustee's Certificate of Authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent for such series and a Certificate of Authentication executed on behalf of the Trustee by such Authenticating Agent. Such Authenticating Agent shall at all times be a corporation organized and doing business under the laws of the United States of America or of any state or the District of Columbia, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000 (determined as provided in Section 6.9 with respect to the Trustee) and subject to supervision or examination by federal or state authority. Any corporation into which any Authenticating Agent may be merged or converted, or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which any Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency business of any Authenticating Agent, shall continue to be the Authenticating Agent with respect to all series of Securities for which it served as Authenticating Agent without the execution or filing of any paper or any further act on the part of the Trustee or such Authenticating Agent. Any Authenticating Agent may at any time, and if it shall cease to be eligible shall, resign by giving written notice of resignation to the Trustee and to the Issuer. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Issuer. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 6.14 with respect to one or more series of Securities, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Issuer and the Issuer shall provide notice of such appointment to all Holders of Securities of such series in the manner and to the extent provided in Section 11.4. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all rights, powers, duties and responsibilities of its predecessor hereunder, with like effect as if originally named as Authenticating Agent. The Issuer agrees to pay to the Authenticating Agent for such series from time to time reasonable compensation. The Authenticating Agent for the Securities of any series shall have no responsibility or liability for any action taken by it as such at the direction of the Trustee. Sections 6.2, 6.3, 6.4 and 7.3 shall be applicable to any Authenticating Agent. ARTICLE SEVEN CONCERNING THE SECURITYHOLDERS SECTOIN 7.1 Evidence of Action Taken by Securityholders. Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by a specified percentage in principal amount of the Securityholders of any or all series may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such specified percentage of Securityholders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee. Proof of execution of any instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Sections 6.1 and 6.2) conclusive in favor of the Trustee and the Issuer, if made in the manner provided in this Article Seven. SECTION 7.2 Proof of Execution of Instruments and of Holding of Securities. Subject to Sections 6.1 and 6.2, the execution of any instrument by a Securityholder or his agent or proxy may be proved in the following manner: (a) The fact and date of the execution by any Holder of any instrument may be proved by the certificate of any notary public or other officer of any jurisdiction authorized to take acknowledgments of deeds or administer oaths that the person executing such instruments acknowledged to him the execution thereof, or by an affidavit of a witness to such execution sworn to before any such notary or other such officer. Where such execution is by or on behalf of any legal entity other than an individual, such certificate or affidavit shall also constitute sufficient proof of the authority of the person executing the same. (b) The ownership of Securities shall be proved by the Security register or by a certificate of the Security registrar. SECTION 7.3 Holders to be Treated as Owners. The Issuer, the Trustee and any agent of the Issuer or the Trustee may deem and treat the Person in whose name any Security shall be registered upon the Security register for such series as the absolute owner of such Security (whether or not such Security shall be overdue and notwithstanding any notation of ownership or other writing thereon) for the purpose of receiving payment of or on account of the principal of and, subject to the provisions of this Indenture, interest, if any, on such Security and for all other purposes; and neither the Issuer nor the Trustee nor any agent of the Issuer or the Trustee shall be affected by any notice to the contrary. SECTION 7.4 Securities Owned by Issuer Deemed Not Outstanding. In determining whether the Holders of the requisite aggregate principal amount of Outstanding Securities of any or all series have concurred in any direction, consent or waiver under this Indenture, Securities which are owned by the Issuer or any other obligor on the Securities with respect to which such determination is being made or by any Affiliate of the Issuer or any other obligor on the Securities with respect to which such determination is being made shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, except that for the purpose of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver only securities which the Trustee knows are so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Issuer or any other obligor upon the Securities or any Affiliate of the Issuer or any other obligor on the Securities. In case of a dispute as to such right, the advice of counsel shall be full protection in respect of any decision made by the Trustee in accordance with such advice. Upon request of the Trustee, the Issuer shall furnish to the Trustee promptly an Officers' Certificate listing and identifying all Securities, if any, known by the Issuer to be owned or held by or for the account of any of the above-described Persons; and, subject to Sections 6.1 and 6.2, the Trustee shall be entitled to accept such Officers' Certificate as conclusive evidence of the facts therein set forth and of the fact that all Securities not listed therein are Outstanding for the purpose of any such determination. SECTION 7.5 Right of Revocation of Action Taken. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 7.1, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Securities of any or all series, as the case may be, specified in this Indenture in connection with such action, any Holder of a Security the serial number of which is shown by the evidence to be included among the serial numbers of the Securities the Holders of which have consented to such action may, by filing written notice at the Corporate Trust Office and upon proof of holding as provided in this Article Seven, revoke such action so far as concerns such Security provided that such revocation shall not become effective until three business days after such filing. Except as aforesaid any such action taken by the Holder of any Security shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Security and of any Securities issued in exchange or substitution therefor or on registration of transfer thereof, irrespective of whether or not any notation in regard thereto is made upon any such Security. Any action taken by the Holders of the percentage in aggregate principal amount of the Securities of any or all series, as the case may be, specified in this Indenture in connection with such action shall be conclusively binding upon the Issuer, the Trustee and the Holders of all the Securities affected by such action. SECTION 7.6 Record Date for Consents and Waivers. The Issuer may, but shall not be obligated to, direct the Trustee to establish a record date for the purpose of determining the Persons entitled to (i) waive any past default with respect to the Securities of such series in accordance with Section 5.7 of the Indenture, (ii) consent to any supplemental indenture in accordance with Section 8.2 of the Indenture or (iii) waive compliance with any term, condition or provision of any covenant hereunder. If a record date is fixed, the Holders on such record date, or their duly designated proxies, and any such Persons, shall be entitled to waive any such past default, consent to any such supplemental indenture or waive compliance with any such term, condition or provision, whether or not such Holder remains a Holder after such record date; provided, however, that unless such waiver or consent is obtained from the Holders, or duly designated proxies, of the requisite principal amount of Outstanding Securities of such series prior to the date which is the 180th day after such record date, any such waiver or consent previously given shall automatically and without further action by any Holder be cancelled and of no further effect. ARTICLE EIGHT SUPPLEMENTAL INDENTURES SECTION 8.1 Supplemental Indentures Without Consent of Securityholders. The Issuer, when authorized by a resolution of its Board of Directors (which resolution may provide general terms or parameters for such action and may provide that the specific terms of such action may be determined in accordance with or pursuant to an Issuer Order), and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act of 1939 as in force at the date of the execution thereof) for one or more of the following purposes: (a) to convey, transfer, assign, mortgage or pledge to the Trustee as security for the Securities of one or more series any property or assets; (b) to evidence the succession of another corporation to the Issuer, or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Issuer pursuant to Article Nine; (c) to add to the covenants of the Issuer such further covenants, restrictions, conditions or provisions as the Issuer and the Trustee shall consider to be for the protection of the Holders of all or any series of Securities (and if such covenants, restrictions, conditions or provisions are to be for the protection of less than all series of Securities, stating that the same are expressly being included solely for the protection of such series), and to make the occurrence, or the occurrence and continuance, of a default in any such additional covenants, restrictions, conditions or provisions an Event of Default permitting the enforcement of all or any of the several remedies provided in this Indenture as herein set forth; provided, however, that in respect of any such additional covenant, restriction, condition or provision such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such an Event of Default or may limit the remedies available to the Trustee upon such an Event of Default or may limit the right of the Holders of a majority in aggregate principal amount of the Securities of such series to waive such an Event of Default; (d) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture, or to make any other provisions as the Issuer may deem necessary or desirable, provided, however, that no such action shall adversely affect the interests of the Holders of the Securities; (e) to establish the form or terms of Securities of any series as permitted by Sections 2.1 and 2.3; and (f) to evidence and provide for the acceptance of appointment hereunder by a successor trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one trustee, pursuant to the requirements of Section 6.11. The Trustee is hereby authorized to join with the Issuer in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Any supplemental indenture authorized by the provisions of this Section may be executed without the consent of the Holders of any of the Securities then Outstanding, notwithstanding any of the provisions of Section 8.2. SECTION 8.2 Supplemental Indentures with Consent of Securityholders. With the consent (evidenced as provided in Article Seven) of the Holders of not less than a majority in aggregate principal amount of the Securities then Outstanding of any series affected by such supplemental indenture, the Issuer, when authorized by a resolution of its Board of Directors (which resolution may provide general terms or parameters for such action and may provide that the specific terms of such action may be determined in accordance with or pursuant to an Issuer Order), and the Trustee may, from time to time and at any time, enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act of 1939 as in force at the date of execution thereof) for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders of the Securities of such series; provided, that no such supplemental indenture shall (a) extend the stated final maturity of the principal of any Security, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest, if any, thereon (or, in the case of an Original Issue Discount Security, reduce the rate of accrual of original issue discount thereon), or reduce or alter the method of computation of any amount payable on redemption, repayment or purchase by the Issuer thereof (or the time at which any such redemption, repayment or purchase may be made), or make the principal thereof (including any amount in respect of original issue discount), or interest, if any, thereon payable in any coin or currency other than that provided in the Securities or in accordance with the terms of the Securities, or reduce the amount of the principal of an Original Issue Discount Security that would be due and payable upon an acceleration of the maturity thereof pursuant to Section 5.1 or the amount thereof provable in bankruptcy pursuant to Section 5.2, or impair or affect the right of any Securityholder to institute suit for the payment thereof or, if the Securities provide therefor, any right of repayment or purchase at the option of the Securityholder, in each case without the consent of the Holder of each Security so affected, or (b) reduce the aforesaid percentage of Securities of any series, the consent of the Holders of which is required for any such supplemental indenture, without the consent of the Holders of each Security so affected. No consent of any Holder of any Security shall be necessary under this Section 8.2 to permit the Trustee and the Issuer to execute supplemental indentures pursuant to Sections 8.1 and 9.2. A supplemental indenture which changes or eliminates any covenant, Event of Default or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of Holders of Securities of such series, with respect to such covenant or provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series. Upon the request of the Issuer, accompanied by a copy of a resolution of the Board of Directors (which resolution may provide general terms or parameters for such action and may provide that the specific terms of such action may be determined in accordance with or pursuant to an Issuer Order) certified by the secretary or an assistant secretary of the Issuer authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of the Holders of the Securities as aforesaid 8 and other documents, if any, required by Section 7.1, the Trustee shall join with the Issuer in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. It shall not be necessary for the consent of the Securityholders under this Section 8.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Issuer and the Trustee of any supplemental indenture pursuant to the provisions of this Section 8.2, the Trustee shall give notice thereof to the Holders of then Outstanding Securities of each series affected thereby, as provided in Section 11.4. Any failure of the Issuer to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. SECTION 8.3 Effect of Supplemental Indenture. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and shall be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Issuer and the Holders of Securities of each series affected thereby shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and shall be deemed to be part of the terms and conditions of this Indenture for any and all purposes. SECTION 8.4 Documents to Be Given to Trustee. The Trustee, subject to the provisions of Sections 6.1 and 6.2, shall be entitled to receive an Officers' Certificate and an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant to this Article Eight complies with the applicable provisions of this Indenture. SECTION 8.5 Notation on Securities in Respect of Supplemental Indentures. Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article Eight may bear a notation in form approved by the Trustee for such series as to any matter provided for by such supplemental indenture or as to any action taken by Securityholders. If the Issuer or the Trustee shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Issuer, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Issuer, authenticated by the Trustee and delivered in exchange for the Securities of such series then Outstanding. ARTICLE NINE CONSOLIDATION, MERGER, SALE, LEASE, EXCHANGE OR DISPOSITION SECTION 9.1 Issuer May Consolidate, etc., on Certain Terms. Subject to the provisions of Section 9.3, nothing contained in this Indenture or in any of the Securities shall prevent any consolidation or merger of the Issuer with or into any other corporation or corporations (whether or not affiliated with the Issuer), or successive consolidations or mergers in which the Issuer or its successor or successors shall be a party or parties, or shall prevent any sale, lease, exchange or other disposition of all or substantially all the property and assets of the Issuer to any other corporation (whether or not affiliated with the Issuer) authorized to acquire and operate the same; provided, however, and the Issuer hereby covenants and agrees, that any such consolidation, merger, sale, lease, exchange or other disposition shall be upon the conditions that (a) immediately after such consolidation, merger, sale, lease, exchange or other disposition of the corporation (whether the Issuer or such other corporation) formed by or surviving any such consolidation or merger, or to which such sale, lease, exchange or other disposition shall have been made, shall not be in default in the performance or observance of any of the terms, covenants and conditions of this Indenture to be kept or performed by the Issuer; (b) the corporation (if other than the Issuer) formed by or surviving any such consolidation or merger, or to which such sale, lease, exchange or other disposition shall have been made, shall be a corporation organized under the laws of the United States of America, any state thereof or the District of Columbia; and (c) the due and punctual payment of the principal of and interest, if any, on all the Securities, according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed by the Issuer, shall be expressly assumed, by supplemental indenture satisfactory in form to the Trustee executed and delivered to the Trustee, by the corporation (if other than the Issuer) formed by such consolidation, or into which the Issuer shall have been merged, or by the corporation which shall have acquired or leased such property. SECTION 9.2 Securities to be Secured in Certain Events. If, upon any such consolidation, merger, or upon any such sale, lease, exchange or other disposition, or upon any acquisition by the Issuer by purchase or otherwise of all or any part of the properties of any other corporation, any Principal Property owned by the Issuer or a Restricted Subsidiary immediately prior thereto would thereupon become subject to any mortgage, security interest, pledge, lien or encumbrance, not permitted by Section 3.6 hereof, the Issuer, prior to such consolidation, merger, sale, conveyance, lease or acquisition, will by indenture supplemental hereto secure the due and punctual payment of the principal of and interest, if any, on the Securities then outstanding (equally and ratably, or with such other relative priority specified in Section 3.6, with any other indebtedness of or guaranteed by the Issuer then entitled thereto) by a direct lien on such Principal Property, together with any other properties and assets of the Issuer or of any such Restricted Subsidiary, whichever shall be the owner of any such Principal Property, which would thereupon become subject to any such mortgage, security interest, pledge, lien or encumbrance, prior to all liens other than any theretofore existing thereon. SECTION 9.3 Successor Corporation to be Substituted. In case of any such 9 consolidation or merger or any sale, conveyance or lease of all or substantially all of the property of the Issuer and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the due and punctual payment of the principal of and interest, if any, on all of the Securities and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Issuer, such successor corporation shall succeed to and be substituted for the Issuer, with the same effect as if it had been named herein as the party of the first part, and the Issuer (including any intervening successor to the Issuer which shall have become the obligor hereunder) shall be relieved of any further obligation under this Indenture and the Securities; provided, however, that in the case of a sale, lease, exchange or other disposition of the property and assets of the Issuer (including any such intervening successor), the Issuer (including any such intervening successor) shall continue to be liable on its obligations under this Indenture and the Securities to the extent, but only to the extent, of liability to pay the principal of and interest, if any, on the Securities at the time, places and rate prescribed in this Indenture and the Securities. Such successor corporation thereupon may cause to be signed, and may issue either in its own name or in the name of the Issuer, any or all of the Securities issuable hereunder which theretofore shall not have been signed by the Issuer and delivered to the Trustee; and, upon the order of such successor corporation instead of the Issuer and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities which previously shall have been signed and delivered by the officers of the Issuer to the Trustee for authentication, and any Securities which such successor corporation thereafter shall cause to be signed and delivered to the Trustee for that purpose. All the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Securities had been issued at the date of the execution hereof. In case of any such consolidation or merger or any sale, lease, exchange or other disposition of all or substantially all of the property and assets of the Issuer, such changes in phraseology and form (but not in substance) may be made in the Securities, thereafter to be issued, as may be appropriate. SECTION 9.4 Opinion of Counsel to be Given Trustee. The Trustee, subject to Sections 6.1 and 6.2, may receive an Officers' Certificate and Opinion of Counsel as conclusive evidence that any such consolidation, merger, sale, lease, exchange or other disposition and any such assumption complies with the provisions of this Article Nine. ARTICLE TEN SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS SECTIO 10.1 Satisfaction and Discharge of Indenture. (A) If at any time (a) the Issuer shall have paid or caused to be paid the principal of and interest, if any, on all the Securities Outstanding (other than Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.9) as and when the same shall have become due and payable, or (b) the Issuer shall have delivered to the Trustee for cancellation all Securities theretofore authenticated (other than Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.9); and if, in any such case, the Issuer shall also pay or cause to be paid all other sums payable hereunder by the Issuer, then this Indenture shall cease to be of further effect, and the Trustee, on demand of the Issuer accompanied by an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the satisfaction and discharge contemplated by this provision have been complied with, and at the cost and expense of the Issuer, shall execute proper instruments acknowledging such satisfaction and discharging this Indenture. The Issuer agrees to reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred, and to compensate the Trustee for any services thereafter reasonably and properly rendered, by the Trustee in connection with this Indenture or the Securities. (B) If at any time (a) the Issuer shall have paid or caused to be paid the principal of, premium, if any, and interest, if any, on all the Securities of any series Outstanding (other than Securities of such series which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.9) as and when the same shall have become due and payable, or (b) the Issuer shall have delivered to the Trustee for cancellation all Securities of any series theretofore authenticated (other than any Securities of such series which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.9), or (c) in the case of any series of Securities with respect to which the exact amount described in clause (ii) below can be determined at the time of making the deposit referred to in such clause (ii), (i) all the Securities of such series not theretofore delivered to the Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption, and (ii) the Issuer shall have irrevocably deposited or caused to be deposited with the Trustee as funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of Securities of such series, cash in an amount (other than moneys repaid by the Trustee or any paying agent to the Issuer in accordance with Section 10.4) or direct obligations of the United States of America, backed by its full faith and credit ("U.S. Government Obligations"), maturing as to principal and interest, if any, at such times and in such amounts as will insure the availability of cash, or a combination thereof, sufficient in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay (A) the principal of, premium, if any, and interest, if any, on all Securities of such series on each date that such principal of, premium, if any, or interest, if any, is due and payable, and (B) any mandatory sinking fund payments on the dates on which such payments are due and payable in accordance with the terms of the Indenture and the Securities of such series; then the Issuer shall be deemed to have paid and discharged the entire indebtedness on all the Securities of such series on the date of the deposit referred to in clause (ii) above and the provisions of this Indenture with respect to the Securities of such series shall no longer be in effect (except, in the case of clause (c) of this Section 10.1(B), as to (i) rights of registration of transfer and exchange of Securities of such series, (ii) rights of substitution of mutilated, defaced, destroyed, lost or stolen Securities of such series, (iii) rights of Holders of Securities of such series to receive payments of principal thereof and premium, if any, and interest, if any, thereon upon the original stated due dates therefor (but not upon acceleration), and remaining rights of the Holders of Securities of such series to receive mandatory sinking fund payments thereon, if any, when due, (iv) the rights, obligations, duties and immunities of the Trustee hereunder, (v) the rights of the Holders of Securities of such series as beneficiaries hereof with respect to the property so deposited with the Trustee payable to all or any of them and (vi) the obligations of the Issuer under Section 3.2 with respect to Securities of such series) and the Trustee, on demand of the Issuer accompanied by an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent contemplated by this provision have been complied with, and at the cost and expense of the Issuer, shall execute proper instruments acknowledging the same. (C) The following provisions shall apply to the Securities of each series unless specifically otherwise provided in a Board Resolution, Officers' Certificate or indenture supplemental hereto provided pursuant to Section 2.3. In addition to discharge of the Indenture pursuant to the next preceding paragraph, in the case of any series of Securities with respect to which the exact amount described in subparagraph (a) below can be determined at the time of making the deposit referred to in such subparagraph (a), the Issuer shall be deemed to have paid and discharged the entire indebtedness on all the Securities of such a series on the 91st day after the date of the deposit referred to in subparagraph (a) below, and the provisions of this Indenture with respect to the Securities of such series shall no longer be in effect (except as to (i) rights of registration of transfer and exchange of Securities of such series, (ii) substitution of mutilated, defaced, destroyed, lost or stolen Securities of such series, (iii) rights of Holders of Securities of such series to receive payments of principal thereof, premium, if any, and interest, if any, thereon upon the original stated due dates therefor (but not upon acceleration), and remaining rights of the Holders of Securities of such series to receive mandatory sinking fund payments, if any, (iv) the rights, obligations, duties and immunities of the Trustee hereunder, (v) the rights of the Holders of Securities of such series as beneficiaries hereof with respect to the property so deposited with the Trustee payable to all or any of them and (vi) the obligations of the Issuer under Section 3.2 with respect to Securities of such series) and the Trustee, on demand of the Issuer accompanied by an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent contemplated by this provision have been complied with, and at the cost and expense of the Issuer, shall execute proper instruments acknowledging the same, if (a) with reference to this provision the Issuer has irrevocably deposited or caused to be irrevocably deposited with the Trustee as funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of Securities of such series (i) cash in an amount, or (ii) U.S. Government Obligations, maturing as to principal and interest, if any, at such times and in such amounts as will insure the availability of cash, or (iii) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay (A) the principal of, premium, if any, and interest, if any, on all Securities of such series on each date that such principal or interest, if any, is due and payable, and (B) any mandatory sinking fund payments on the dates on which such payments are due and payable in accordance with the terms of the Indenture and the Securities of such series; (b) such deposit will not result in a breach or violation of, or constitute a default under, any agreement or instrument to which the Issuer is a party or by which it is bound; and (c) the Issuer has delivered to the Trustee an Opinion of Counsel based on the fact that (x) the Issuer has received from, or there has been published by, the Internal Revenue Service a ruling or (y), since the date hereof, there has been a change in the applicable United States federal income tax law, in either case to the effect that, and such opinion shall confirm that, the Holders of the Securities of such series will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to Federal income tax on the same amount and in the same manner and at the same times, as would have been the case if such deposit, defeasance and discharge had not occurred. SECTION 10.2 Application by Trustee of Funds Deposited for Payment of Securities. Subject to Section 10.4, all moneys and U.S. Government Obligations deposited with the Trustee pursuant to Section 10.1 shall be held in trust, and such moneys and all moneys from such U.S. Government Obligations shall be applied by it to the payment, either directly or through any paying agent (including the Issuer acting as its own paying agent), to the Holders of the particular Securities of such series for the payment or redemption of which such moneys and U.S. Government Obligations have been deposited with the Trustee, of all sums due and to become due thereon for principal and interest, if any, but such moneys and U.S. Government Obligations need not be segregated from other funds except to the extent required by law. 11 SECTION 10.3 Repayment of Moneys Held by Paying Agent. In connection with the satisfaction and discharge of this Indenture with respect to Securities of any series, all moneys then held by any paying agent under the provisions of this Indenture with respect to such series of Securities shall, upon demand of the Issuer, be repaid to it or paid to the Trustee and thereupon such paying agent shall be released from all further liability with respect to such moneys. SECTION 10.4 Return of Moneys Held by Trustee and Paying Agent Unclaimed for Two Years. Any moneys deposited with or paid to the Trustee or any paying agent for the payment of the principal of or interest, if any, on any Security of any series and not applied but remaining unclaimed for two years after the date upon which such principal or interest, if any, shall have become due and payable, shall, upon the written request of the Issuer and unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, be repaid to the Issuer by the Trustee for such series or such paying agent, and the Holder of the Securities of such series shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property laws, thereafter look only to the Issuer for any payment which such Holder may be entitled to collect, and all liability of the Trustee or any paying agent with respect to such moneys shall thereupon cease. SECTION 10.5 Indemnity for U.S. Government Obligations. The Issuer shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 10.1 or the principal or interest received in respect of such obligations. ARTICLE ELEVEN MISCELLANEOUS PROVISIONS SECTION 11.1 Partners, Incorporators, Stockholders, Officers and Directors of Issuer Exempt from IndividuaPartners, Incorporators, Stockholders, Officers and Directors of Issuer Exempt from Individual Liability. No recourse under or upon any obligation, covenant or agreement contained in this Indenture, or in any Security, or because of any indebtedness evidenced thereby, shall be had against any incorporator, as such or against any past, present or future stockholder, officer or director, as such, of the Issuer, or any partner of the Issuer or of any successor, either directly or through the Issuer or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of the Securities by the Holders thereof and as part of the consideration for the issue of the Securities. SECTION 11.2 Provisions of Indenture for the Sole Benefit of Parties and Holders of Securities. Nothing in this Indenture or in the Securities, expressed or implied, shall give or be construed to give to any Person, other than the parties hereto and their successors and the Holders of the Securities, any legal or equitable right, remedy or claim under this Indenture or under any covenant or provision herein contained, all such covenants and provisions being for the sole benefit of the parties hereto and their successors and of the Holders of the Securities. SECTION 11.3 Successors and Assigns of Issuer Bound by Indenture. All the covenants, stipulations, promises and agreements in this Indenture contained by or on behalf of the Issuer shall bind its successors and assigns, whether so expressed or not. SECTION 11.4 Notices and Demands on Issuer, Trustee and Holders of Securities. Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the Holders of Securities to or on the Issuer, or as required pursuant to the Trust Indenture Act of 1939, may be given or served by being deposited postage prepaid, first-class mail (except as otherwise specifically provided herein) addressed (until another address of the Issuer is filed by the Issuer with the Trustee) to Seagull Energy Corporation, 1001 Fannin, Suite 1700, Houston, Texas 77002, Attention: Chairman of the Board. Any notice, direction, request or demand by the Issuer or any Holder of Securities to or upon the Trustee shall be deemed to have been sufficiently given or served by being deposited postage prepaid, first-class mail (except as otherwise specifically provided herein) addressed (until another address of the Trustee is filed by the Trustee with the Issuer) to The Bank of New York, 101 Barclay Street, Floor 21 West, New York, New York 10286, Attention: Corporate Trust Trustee Administration. Where this Indenture provides for notice to Holders of Securities, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder entitled thereto, at his last address as it appears in the Security register. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case, by reason of the suspension of or irregularities in regular mail service, it shall be impracticable to mail notice to the Issuer when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be reasonably satisfactory to the Trustee shall be deemed to be sufficient notice. SECTION 11.5 Officers' Certificates and Opinions of Counsel; Statements to Be Contained Therein. Upon any herein application or demand by the Issuer to the Trustee to take any action under any of the provisions of this Indenture, or as required pursuant to the Trust Indenture Act of 1939, the Issuer shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. Each certificate or opinion provided for in this Indenture (other than a certificate provided pursuant to Section 4.3(d)) and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture shall include (a) a statement that the person making such certificate or opinion has read such covenant or condition, (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based, (c) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an opinion as to whether or not such covenant or condition has been complied with, and (d) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with. Any certificate, statement or opinion of an officer of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of counsel may be based, insofar as it relates to factual matters, information with respect to which is in the possession of the Issuer, upon the certificate, statement or opinion of or representations by an officer or officers of the Issuer, unless such counsel knows that the certificate, statement or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of an officer of the Issuer or of counsel may be based, insofar as it relates to accounting matters, upon a certificate or opinion of or representations by an accountant or firm of accountants in the employ of the Issuer, unless such officer or counsel, as the case may be, knows that the certificate or opinion or representations with respect to the accounting matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate or opinion of any independent firm of public accountants filed with and directed to the Trustee shall contain a statement that such firm is independent. SECTION 11.6 Payments Due on Saturdays, Sundays and Holidays. If the date of maturity of principal of or interest, if any, on the Securities of any series or the date fixed for redemption, purchase or repayment of any such Security shall not be a Business Day, then payment of interest, if any, or principal need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date of maturity or the date fixed for redemption, purchase or repayment, and, in the case of payment, no interest shall accrue for the period after such date. SECTION 11.7 Conflict of Any Provision of Indenture with Trust Indenture Act of 1939. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with another provision included in this Indenture which is required to be included herein by any of Sections 310 to 317, inclusive, or is deemed applicable to this Indenture by virtue of the provisions, of the Trust Indenture Act of 1939, such required provision shall control. SECTION 11.8 GOVERNING LAW. THIS INDENTURE AND EACH SECURITY SHALL BE DEEMED TO BE A CONTRACT UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE. SECTION 11.9 Counterparts. This Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. SECTION 11.10 Effect of Headings. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. ARTICLE TWELVE REDEMPTION OF SECURITIES AND SINKING FUNDS SECTION 12.1 Applicability of Article. The provisions of this Article shall be applicable to the Securities of any series which are redeemable before their maturity or to any sinking fund for the retirement of Securities of a series except as otherwise specified, as contemplated by Section 2.3 for Securities of such series. SECTION 12.2 Notice of Redemption; Partial Redemptions. Notice of redemption to the Holders of Securities of any series to be redeemed as a whole or in part at the option of the Issuer shall be given by mailing notice of such redemption by first class mail, postage prepaid, at least 30 days and not more than 60 days prior to the date fixed for redemption to such Holders of Securities of such series at their last addresses as they shall appear in the Security register. Any notice which is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives the notice. Failure to give notice by mail, or any defect in the notice to the Holder of any Security of a series designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Security of such series. The notice of redemption to each such Holder shall specify the principal amount of each Security of such series held by such Holder to be redeemed, the date fixed for redemption, the redemption price, the place or places of payment, the CUSIP number relating to such Securities, that payment will be made upon presentation and surrender of such Securities, that such redemption is pursuant to the mandatory or optional sinking fund, or both, if such be the case, that interest, if any, (or, in the case of Original Issue Discount Securities, original issue discount) accrued to the date fixed for redemption will be paid as specified in such notice and that on and after said date interest, if any, (or, in the case of Original Issue Discount Securities, original issue discount) thereon or on the portions thereof to be redeemed will cease to accrue. In case any Security of a series is to be redeemed in part only, the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the date fixed for redemption, upon surrender of such Security, a new Security or Securities of such series in principal amount equal to the unredeemed portion thereof will be issued. The notice of redemption of Securities of any series to be redeemed at the option of the Issuer shall be given by the Issuer or, at the Issuer's request, by the Trustee in the name and at the expense of the Issuer. On or before the redemption date specified in the notice of redemption given as provided in this Section 12.2, the Issuer will deposit with the Trustee or with one or more paying agents (or, if the Issuer is acting as its own paying agent, set aside, segregate and hold in trust as provided in Section 3.5) an amount of money sufficient to redeem on the redemption date all the Securities of such series so called for redemption at the appropriate redemption price, together with accrued interest, if any, to the date fixed for redemption. The Issuer will deliver to the Trustee at least 45 days prior to the date fixed for redemption (unless a shorter notice period shall be satisfactory to the Trustee) an Officers' Certificate stating the aggregate principal amount of Securities to be redeemed. In case of a redemption at the election of the Issuer prior to the expiration of any restriction on such redemption, the Issuer shall deliver to the Trustee, prior to the giving of any notice of redemption to Holders pursuant to this Section, an Officers' Certificate stating that such restriction has been complied with. If less than all the Securities of a series are to be redeemed, the Trustee shall select, in such manner as it shall deem appropriate and fair, Securities of such series to be redeemed. Securities may be redeemed in part in multiples equal to the minimum authorized denomination for Securities of such series or any multiple thereof. The Trustee shall promptly notify the Issuer in writing of the Securities of such series selected for redemption and, in the case of any Securities of such series selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities of any series shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. SECTION 12.3 Payment of Securities Called for Redemption. If notice of redemption has been given as above provided, the Securities or portions of Securities specified in such notice shall become due and payable on the date and at the place or places stated in such notice at the applicable redemption price, together with interest, if any, accrued to the date fixed for redemption, and on and after said date (unless the Issuer shall default in the payment of such Securities at the redemption price, together with interest, if any, accrued to said date) interest (or, in the case of Original Issue Discount Securities, original issue discount) on the Securities or portions of Securities so called for redemption shall cease to accrue, and such Securities shall cease from and after the date fixed for redemption (unless an earlier date shall be specified in a Board Resolution, Officers' Certificate or executed supplemental indenture referred to in Sections 2.1 and 2.3 by or pursuant to which the form and terms of the Securities of such series were established) except as provided in Sections 6.5 and 10.4, to be entitled to any benefit or security under this Indenture, and the Holders thereof shall have no right in respect of such Securities except the right to receive the redemption price thereof and unpaid interest to the date fixed for redemption. On presentation and surrender of such Securities at a place of payment specified in said notice, said Securities or the specified portions thereof shall be paid and redeemed by the Issuer at the applicable redemption price, together with interest, if any, accrued thereon to the date fixed for redemption; provided that payment of interest, if any, becoming due on or prior to the date fixed for redemption shall be payable to the Holders of Securities registered as such on the relevant record date subject to the terms and provisions of Sections 2.3 and 2.7 hereof. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the redemption price shall, until paid or duly provided for, bear interest from the date fixed for redemption at the rate of interest or Yield to Maturity (in the case of an Original Issue Discount Security) borne by such Security. Upon presentation of any Security redeemed in part only, the Issuer shall 14 execute and the Trustee shall authenticate and deliver to or on the order of the Holder thereof, at the expense of the Issuer, a new Security or Securities of such series, and of like tenor, of authorized denominations, in principal amount equal to the unredeemed portion of the Security so presented. SECTION 12.4 Exclusion of Certain Securities from Eligibility for Selection for Redemption. Securities shall be excluded from eligibility for selection for redemption if they are identified by registration and certificate number in an Officers' Certificate delivered to the Trustee at least 45 days prior to the last date on which notice of redemption may be given as being owned of record and beneficially by, and not pledged or hypothecated by either (a) the Issuer, or (b) a Person specifically identified in such written statement as an Affiliate of the Issuer. SECTION 12.5 Mandatory and Optional Sinking Funds. The minimum amount of any sinking fund payment provided for by the terms of the Securities of any series is herein referred to as a "mandatory sinking fund payment", and any payment in excess of such minimum amount provided for by the terms of the Securities of any series is herein referred to as an "optional sinking fund payment". The date on which a sinking fund payment is to be made is herein referred to as the "sinking fund payment date". In lieu of making all or any part of any mandatory sinking fund payment with respect to any series of Securities in cash, the Issuer may at its option (a) deliver to the Trustee Securities of such series theretofore purchased or otherwise acquired (except upon redemption pursuant to the mandatory sinking fund) by the Issuer or receive credit for Securities of such series (not previously so credited) theretofore purchased or otherwise acquired (except as aforesaid) by the Issuer and delivered to the Trustee for cancellation pursuant to Section 2.10, (b) receive credit for optional sinking fund payments (not previously so credited) made pursuant to this Section 12.5, or (c) receive credit for Securities of such series (not previously so credited) redeemed by the Issuer through any optional redemption provision contained in the terms of such series. Securities so delivered or credited shall be received or credited by the Trustee at the sinking fund redemption price specified in such Securities. On or before the 60th day next preceding each sinking fund payment date for any series, the Issuer will deliver to the Trustee an Officers' Certificate (a) specifying the portion of the mandatory sinking fund payment to be satisfied by payment of cash and the portion to be satisfied by credit of Securities of such series and the basis for such credit, (b) stating that none of the Securities of such series to be so credited has theretofore been so credited, (c) stating that no defaults in the payment of interest or Events of Default with respect to such series have occurred (which have not been waived or cured or otherwise ceased to exist) and are continuing, and (d) stating whether or not the Issuer intends to exercise its right to make an optional sinking fund payment with respect to such series and, if so, specifying the amount of such optional sinking fund payment which the Issuer intends to pay on or before the next succeeding sinking fund payment date. Any Securities of such series to be credited and required to be delivered to the Trustee in order for the Issuer to be entitled to credit therefor as aforesaid which have not theretofore been delivered to the Trustee shall be delivered for cancellation pursuant to Section 2.10 to the Trustee with such Officers' Certificate (or reasonably promptly thereafter if acceptable to the Trustee). Such Officers' Certificate shall be irrevocable and upon its receipt by the Trustee the Issuer shall become unconditionally obligated to make all the cash payments or payments therein referred to, if any, on or before the next succeeding sinking fund payment date. Failure of the Issuer, on or before any such 60th day, to deliver such Officers' Certificate and Securities (subject to the parenthetical clause in the second preceding sentence) specified in this paragraph, if any, shall not constitute a default but shall constitute, on and as of such date, the irrevocable election of the Issuer (i) that the mandatory sinking fund payment for such series due on the next succeeding sinking fund payment date shall be paid entirely in cash without the option to deliver or credit Securities of such series in respect thereof, and (ii) that the Issuer will make no optional sinking fund payment with respect to such series as provided in this Section 12.5. If the sinking fund payment or payments (mandatory or optional or both) to be made in cash on the next succeeding sinking fund payment date plus any unused balance of any preceding sinking fund payments made in cash shall exceed $50,000, or a lesser sum if the Issuer shall so request with respect to the Securities of any particular series, such cash shall be applied on the next succeeding sinking fund payment date to the redemption of Securities of such series at the sinking fund redemption price together with accrued interest, if any, to the date fixed for redemption. If such amount shall be $50,000 or less and the Issuer makes no such request, then it shall be carried over until a sum in excess of $50,000 is available. The Trustee shall select, in the manner provided in Section 12.2, for redemption on such sinking fund payment date a sufficient principal amount of Securities of such series to absorb said cash, as nearly as may be, and shall (if requested in writing by the Issuer) inform the Issuer of the serial numbers of the Securities of such series (or portions thereof) so selected. The Trustee, in the name and at the expense of the Issuer (or the Issuer, if it shall so request the Trustee in writing) shall cause notice of redemption of the Securities of such series to be given in substantially the manner provided in Section 12.2 (and with the effect provided in Section 12.3) for the redemption of Securities of such series in part at the option of the Issuer. The amount of any sinking fund payments not so applied or allocated to the redemption of Securities of such series shall be added to the next cash sinking fund payment for such series and, together with such payment, shall be applied in accordance with the provisions of this Section 12.5. Any and all sinking fund moneys held on the stated maturity date of the Securities of any particular series (or earlier, if such maturity is accelerated), which are not held for the payment or redemption of particular Securities of such series shall be applied, together with other moneys, if necessary, sufficient for the purpose, to the payment of the principal of, and interest, if any, on, the Securities of such series at maturity. On or before each sinking fund payment date, the Issuer shall pay to the Trustee in cash or shall otherwise provide for the payment of all interest, if any, accrued to the date fixed for redemption on Securities to be redeemed on such sinking fund payment date. The Trustee shall not redeem or cause to be redeemed any Securities of a series with sinking fund moneys or give any notice of redemption of Securities for such series by operation of the sinking fund during the continuance of a default in payment of interest on such Securities or of any Event of Default with respect to such series except that, where the giving of notice of redemption of any Securities shall theretofore have been made, the Trustee shall redeem or cause to be redeemed such Securities, provided that it shall have received from the Issuer a sum sufficient for such redemption. Except as aforesaid, any moneys in the sinking fund for such series at the time when any such default or Event of Default shall occur, and any moneys thereafter paid into the sinking fund, shall, during the continuance of such default or Event of Default, be deemed to have been collected under Article Five and held for the payment of all such Securities. In case such Event of Default shall have been waived as provided in Section 5.7 or the default cured on or before the 60th day preceding the sinking fund payment date in any year, such moneys shall thereafter be applied on the next succeeding sinking fund payment date in accordance with this Section to the redemption of such Securities. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of July 15, 1993. SEAGULL ENERGY CORPORATION By: Title: Attest: By Title: THE BANK OF NEW YORK, as Trustee By: Title: Attest: By Title: SEAGULL ENERGY CORPORATION 7-7/8% Senior Note due 2003 SEAGULL ENERGY CORPORATION, a corporation duly organized and existing under the laws of Texas (herein called the "Company", which term indicates any successor corporation under the indenture hereinafter referred to), FOR VALUE RECEIVED, HEREBY PROMISES TO PAY TO , or registered assigns the principal sum of Dollars on August 1, 2003, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay interest, semi-annually on February 1 and August 1 of each year, on said principal sum, in like coin or currency, at the rate per annum specified in the title of this Security, to the registered holder hereof as of the close of business on the January 15 or July 15 next preceding such interest payment date, except as otherwise provided in the indenture referred to on the reverse hereof, all at the office or agency of the Company in the City of Houston, State of Texas, from the February 1 or August 1, as the case may be, next preceding the date of this Security to which interest has been paid (unless the date hereof is a February 1 or August 1 to which interest has been paid, in which case from the date hereof, or unless the date hereof is prior to the payment of any interest on the Securities, in which case from July 29, 1993, or unless the date hereof is between the January 15 or July 15, as the case may be, and the next following February 1 or August 1 to which interest has been paid or, if no interest has been paid on the Securities, from July 29, 1993) until payment of said principal sum has been made or duly provided for; provided, however, that payment of interest may be made at the option of the Company by check mailed on or before the payment date to the address of the person entitled thereto as such address shall appear in the Security register. Interest shall be computed on the basis of a 360-day year consisting of twelve 30-day months. This Security shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been signed by the Trustee or an Authenticating Agent under the Indenture referred to on the reverse hereof. REFERENCE IS MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON THE REVERSE HEREOF. SHUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH AT THIS PLACE. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: TRUSTEES'S AUTHENTICATION CERTIFICATE This is one of the Securities of the series designated herein referred to in the within-mentioned Indenture. THE BANK OF NEW YOURK, as Trustee By: Authorized Signatory SEAGULL ENERGY CORPORATION /s/ Sylvia Sanchez /s/ Barry J. Galt Secretary Chairman of the Board SEAGULL ENERGY CORPORATION 7-7/8% SENIOR NOTE DUE 2003 1. Designation This Security is one of a duly authorized series of Securities of the Company, designated as its 7-7/8% Senior Notes Due 2003 (herein called the "Securities"), limited to the aggregate principal amount of $100,000,000, all issued or to be issued under and pursuant to a senior subordinated indenture dated as of July 15, 1993 (herein called the "Indenture"), duly executed and delivered by the Company and The Bank of New York, as trustee, to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the Holders of the Securities. Capitalized terms used but not defined herein are defined in the Indenture and are used herein with the same meanings as ascribed to them therein. 2. Paying Agent and Registrar Initially, the Trustee will act as paying agent, registrar and as the agent where notices and demands to or upon the Company in respect of the Securities may be served. The Company may appoint and change any paying agent, registrar or agent for notices without notice, other than notice to the Trustee. The Company or any of its Subsidiaries or any of their Affiliates may act as paying agent, registrar or agent of notices. 3. Denominations; Transfers; Exchange The Securities are in registered form, without coupons, in denominations of $1,000 in principal amount and integral multiples of $1,000. Upon due presentation for registration of transfer of this Security at the corporate trust office of the Trustee in the City of New York, State of New York or any other such designated office or agency of the Company, a new Security or Securities of authorized denominations for an equal aggregate principal amount will be issued to the transferee in exchange herefor, subject to the limitations imposed by the Indenture, without charges except for any tax or other governmental charge imposed in connection therewith, and the Security may in a like manner be exchanged for one or more new Securities for other authorized denominations but of the same aggregate principal amount. 4. Persons Deemed Owners The Company, the Trustee, any paying agent and any registrar may deem and treat the registered Holder hereof as the absolute owner of this Security (whether or not this Security shall be overdue and notwithstanding any notation of ownership or other writing hereon) for purposes of receiving payment hereof, or on account hereof, and for all other purposes, and neither the Company, the Trustee, any paying agent not any registrar shall be affected by any notice to the contrary. All payments made to or upon the order of such registered Holder shall, to the extent of the sum or sums so paid, satisfy and discharge the liability for moneys payable on this Security. 5. Defaults; Amendment; Waiver In case an Event of Default shall have occurred and be continuing, the principal hereof and the interest accrued thereon may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions permitting the Company and the Trustee with the consent of the Holders of not less than a majority in aggregate principal amount of each series of Securities then Outstanding under the Indenture and affected thereby, evidenced as provided in the Indenture, to execute supplemental indentures adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or modifying in manner the rights of the Holders of the Securities of such series; provided, however, that no such supplemental indenture shall (i) extend the stated final maturity of any Security, or reduce the principal amount hereof, or reduce the rate or extend the time of payment of interest hereon, or reduce or alter the method of computation of any amount payable on redemption, repayment or purchase by the Company, or change the coin or currency in which payments are to be made, or impair or affect her right of any Holder to institute suit for enforcement of any payment hereof or (ii) reduce the aforesaid percentage of any series of such Securities, without the consent of the Holders of each Security of any series so affected. It is also provided in the Indenture that the Holders of a majority in aggregate principal amount of the Securities of any series then Outstanding may on behalf of the Holders of all of the Securities of such series waive any past default or Event of Default under the Indenture and its consequences except a default in the payment of the principal of or interest on any of the Securities of such Series. Any such consent or waiver by the Holder of this Security (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Security and any Securities which may be issued in exchange or substitution hereof, irrespective of whether or not any notation thereof is made upon this Security or such other Securities. 6. Change of Control If a Change of Control shall occur at any time, than each Holder shall have the right to require that the Company repurchase such Holder's Securities in whole or in part in integral multiples of $1,000, at a purchase price in cash in an amount equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any to the date of purchase. The Company shall be obligated to give the holders of securities and the Trustee within 30 days following a Change of Control notice specifying (i) the purchase date, (ii) the place at which the Securities shall be presented and surrendered for purchase, (iii) that interest accrued to the purchase date will be paid upon such presentation and surrender and (iv) that interest shall cease to accrue on Securities surrendered for purchase as of such purchase date. 7. No Recourse Against Others No recourse under or upon any obligation, covenant or agreement contained in the Indenture, or in any Security, or because of any indebtedness evidenced thereby or hereby, shall be had against any incorporator, as such or against any past, present or future stockholder, officer or director, as such of the Company, or any partner of the Company or of any successor, wither directly or though the Company or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of this Security by the Holder hereof and as part of the consideration of the issue of the Securities. 8. GOVERNING LAW THE INDENYURE AND THIS SECURITY SHALL BE DEEMED TO BE A CONTRACT UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE. ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with rights of survivorship and not as tenants in common UNIF GIFT MIN ACT ______________ Custodian ________________ (Cust) (Minor) Under Uniform Gifts to Minors Act _____________________ (State) Additional abbreviations may also be used though not in the above list. - ------------------------------------------------------------------------------- FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Please print or typewrite name and address including postal zip code of assignee - ------------------------------------------------------------------------------- the within Security and all rights thereunder, hereby irrevocably constituting and appointing - ------------------------------------------------------------------------------- attorney to transfer said Security on the books of the Company, with full power of substitution in the premises. Dated:_______________________ ____________________________________ Notice: The signature to this assignment must correspond with the name as written upon the face of the within instrument in every particular, without alteration or enlargement or any change whatever. SEAGULL ENERGY CORPORATION RESOLUTIONS ADOPTED BY THE CHAIRMAN OF THE BOARD OF DIRECTORS EFFECTIVE JULY 22, 1993 WHEREAS, on June 23, 1993, the Board of Directors of the Company approved the issuance by the Company, publicly or privately from time to time, of up to $350,000,000 aggregate initial offering prices of bonds, debentures, notes and/or other debt obligations (collectively, "Securities"); WHEREAS, the Board of Directors has authorized the Executive Committee of the Company or the Chairman of the Board of the Company to determine the terms and conditions of the Securities; NOW, THEREFORE, in furtherance of the foregoing, the Chairman of the Board of the Company hereby adopts the following resolutions: RESOLVED, that Seagull Energy Corporation (the "Company") issue and sell $100,000,000 aggregate principal amount of 7-7/8% Senior Notes Due 2003 (the "Senior Notes") on substantially the terms and conditions set forth in Exhibit A hereto; RESOLVED, that the Company issue and sell $150,000,000 aggregate principal amount of 8-5/8% Senior Subordinated Notes Due 2005 ("Senior Subordinated Notes") on substantially the terms and conditions set forth in Exhibit B hereto; RESOLVED, that the Senior Notes and Senior Subordinated Notes shall have the terms set forth in the Company's Prospectus Supplement dated July 22, 1993 to its Prospectus dated July 22, 1993; RESOLVED, that the form, terms and provisions of the Underwriting Agreement dated July 22, 1993 (the "Underwriting Agreement") by and among the Company and Dillon, Read & Co. Inc., Donaldson, Lufkin & Jenrette Securities Corporation, J.P. Morgan Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Underwriters"), as well as the execution and delivery of the Underwriting Agreement by the President, and Vice President or the Treasurer of the Company on behalf of the Company and the performance of the transactions contemplated by the Underwriting Agreement on behalf of the Company by the appropriate officers of the Company, be and they hereby are, adopted, ratified and approved; RESOLVED, that the public offering price for the Senior Notes and for the Senior Subordinated Notes set forth in the Prospectus Supplement dated July 22, 1993 be, and it hereby is, adopted, ratified and approved; RESOLVED, that the discounts and commissions for the sale of the Senior Notes and the Senior Subordinated Notes, payable tot he Underwriters pursuant to the Underwriting Agreement be, and they hereby are, ratified, adopted and approved; RESOLVED, that the Senior Notes and the Senior Subordinated Notes shall be in the form approved by the Chairman of the Board, the President or any Vice President of the Company, such officer's approval to be conclusively evidenced by his delivery of the Senior Notes and the Senior Subordinated Notes for and on behalf of the Company at the closing under Underwriting Agreement to be executed among the Company, Dillon, Read & Co. Inc., Donaldson, Lufkin & Jenrette Securities Corporation, J.P. Morgan Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated; and RESOLVED, that the Chairman of the Board, the President or any Vice President of the Company be, and each of them hereby is, authorized and empowered, for and on behalf of the Company and in its name, to execute and deliver all agreements, powers of attorney, certificates and other instruments and documents as he may deem necessary or appropriate to carry out the transactions approved by the preceding resolutions. EXECUTED to be effective as of July 22, 1993. /s/ Barry J. Galt Barry J. Galt Chairman of the Board EXHIBIT A TERMS OF THE SENIOR NOTES Title: 7-7/8% Senior Notes due 2003. Principal Amount: $100,000,000. Interest: 7-7/8% per annum, from July 29, 1993, payable semiannually on each February 1 and August 1, commencing on February 1, 1994, to holders of record on the preceding January 15 or July 15, as the case may be. Interest on the Senior Notes shall be calculated on the basis of a 360-day year of twelve 30-day months. Maturity: August 1, 2003. Mandatory Redemption: If a "Change of Control" shall occur at any time, than each holder shall have the right to require that the Company repurchase such holder's Senior Notes in whole or in part in integral multiples of $1,000, at a purchase price in cash in an amount equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any to the date of purchase. The Company shall be obligated to give holders of Senior Notes and the Trustee within 30 days following a Change of Control notice specifying (i) the purchase date (which date shall be no earlier than 30 days nor more than 60 days from the date the Company notifies the holders of the occurrence of a Change of Control), (ii) the place at which Notes shall be presented and surrendered for purchase, (iii) that interest accrued to the purchase date shall be paid upon such presentation and surrender and (iv) that interest shall cease to accrue on Senior Notes surrendered for purchase as of such purchase date. Any tender by a holder of Senior Notes shall be irrevocable. A-1 For purposes of the Senior Notes, a "Change of Control: shall mean a change resulting when any Unrelated Person or any Unrelated Persons acting together which would constitute a Group together with any Affiliates or Related Persons thereof (in each case also constituting Unrelated Persons) shall at any time either (i) Beneficially Own more than 50% of the aggregate voting power of all classes of Voting Stock of the Company or (ii) succeed in having sufficient of its or their nominees elected to the Board of Directors of the Company such that such nominees, when added to any existing director remaining on the Board of Directors of the Company after such election who is an Affiliate or Related Person of such person or Group, shall constitute a majority of the Board of Directors of the Company. As used herein (a) "Beneficially Own" means "beneficially own" as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the "exchange Act"), or any successor provision thereto; provided, however, that, for purposes of this definition, a person shall not be deemed to Beneficially Own securities tendered pursuant to a tender or exchange offer made by or on behalf of such person or any of such person's Affiliates until such tendered securities are accepted for purchase or exchange; (b) "Group" means "group" for purposes of Section 13(d) of the Exchange Act; (c) "Unrelated Person" means at any time any person other than the Company or any subsidiary of the Company and other than any trust for any employee benefit plan of the Company or any subsidiary of the Company; (d) "related Person" of any person shall mean any other person owning (1) 5% or more of the outstanding common stock of such person or (2) 5% or more of the Voting Stock of such person; (e) "Voting Stock" of any such person shall mean capital stock of such person that ordinarily has voting power for the election of directors (or persons performing similar functions) of such person, whether at all times or only so long as no senior class of securities has such voting power by reason of any contingency; and (f) "Affiliate" of any persons shall mean any other person that directly or indirectly control, or in under common control with, or is controlled by, such person. Sinking Fund: None. Offices for Notices and Payments, Etc.: Principal of and interest on the Senior Notes shall be payable, and the Senior Notes shall be exchangeable and transfers thereof shall be registrable, at the corporate trust office of the Trustee in New York, New York; provided however, that at the option of the Company, payment of interest may be made by check mailed to the address of the person entitled thereto at such person's registered address. A-2 Global Securities: The Senior Notes shall not be issuable as Global Securities. Trustee: The Bank of New York shall serve as the trustee, depositary, authenticating or paying agent, transfer agent and registrar with respect to the Senior Notes. Names and Addresses of Underwriters: Dillon, Read & Co. Inc. Donaldson, Lufkin & Jenrette Securities Corporation J.P. Morgan Securities Inc. Merrill Lynch, Pierce, Fenner & Smith Incorporated c/o Dillon, Read & Co. Inc. 535 Madison Avenue New York, New York 10022 A-3 EXHIBIT B TERMS OF THE SENIOR SUBORDINATED NOTES Title: 8-5/8% Senior Subordinated Notes due 2005. Principal Amount: $150,000,000. Interest: 8-5/8% per annum, from July 29, 1993, payable semiannually on each February 1 and August 1, commencing on February 1, 1994, to holders of record on the preceding January 15 or July 15, as the case may be. Interest on the Senior Subordinated Notes shall be calculated on the basis of a 360-day year of twelve 30-day months. Maturity: August 1, 2005. Optional Redemption: On or after August 1, 2000, the Senior Subordinated Notes shall be redeemable at any time at the option of the Company, in whole or from time to time in part, at the redemption prices set forth below (expressed as a percentage of principal amount), plus accrued interest to the redemption date:
If redeemed during the 12-month Redemption period beginning August 1, Price ---------------------------------------- --------------- 2000.................................. 102.59% 2001.................................. 101.73% 2002.................................. 100.86% 2003 and thereafter................... 100.00%
Notice of redemption shall be mailed to each holder at least 30 days but not more than 60 days prior to the redemption date. On and after the redemption date, interest shall cease to accrue on Senior Subordinated Notes or portions thereof called for redemption. B-1 Mandatory Redemption: If a "Change of Control" shall occur at any time, than each holder shall have the right to require that the Company repurchase such holder's Senior Subordinated Notes in whole or in part in integral multiples of $1,000, at a purchase price in cash in an amount equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any to the date of purchase. The Company shall be obligated to give holders of Senior Subordinated Notes and the Trustee within 30 days following a Change of Control notice specifying (i) the purchase date (which date shall be no earlier than 30 days nor more than 60 days from the date the Company notifies the holders of the occurrence of a Change of Control), (ii) the place at which Notes shall be presented and surrendered for purchase, (iii) that interest accrued to the purchase date shall be paid upon such presentation and surrender and (iv) that interest shall cease to accrue on Senior Subordinated Notes surrendered for purchase as of such purchase date. Any tender by a holder of Senior Subordinated Notes shall be irrevocable. For purposes of the Senior Subordinated Notes, a "Change of Control: shall mean a change resulting when any Unrelated Person or any Unrelated Persons acting together which would constitute a Group together with any Affiliates or Related Persons thereof (in each case also constituting Unrelated Persons) shall at any time either (i) Beneficially Own more than 50% of the aggregate voting power of all classes of Voting Stock of the Company or (ii) succeed in having sufficient of its or their nominees elected to the Board of Directors of the Company such that such nominees, when added to any existing director remaining on the Board of Directors of the Company after such election who is an Affiliate or Related Person of such person or Group, shall constitute a majority of the Board of Directors of the Company. As used herein (a) "Beneficially Own" means "beneficially own" as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the "exchange Act"), or any successor provision thereto; provided, however, that, for purposes of this definition, a person shall not be deemed to Beneficially Own securities tendered pursuant to a tender or exchange offer made by or on behalf of such person or any of such person's Affiliates until such tendered securities are accepted for purchase or exchange; (b) "Group" means "group" for purposes of Section 13(d) of the Exchange Act; (c) "Unrelated Person" means at any time any person other than the Company or any subsidiary of the Company and other than any trust for any employee benefit plan of the Company or any subsidiary of the Company; (d) "related Person" of any person shall mean any other person owning (1) 5% or more of the outstanding common stock of such person or (2) 5% or more of the Voting Stock of such person; (e) "Voting Stock" of any such person shall mean capital stock of such person that ordinarily has voting power for the election of directors (or persons B-2 performing similar functions) of such person, whether at all times or only so long as no senior class of securities has such voting power by reason of any contingency; and (f) "Affiliate" of any persons shall mean any other person that directly or indirectly control, or in under common control with, or is controlled by, such person. Sinking Fund: None. Offices for Notices and Payments, Etc.: Principal of and interest on the Senior Subordinated Notes shall be payable, and the Senior Subordinated Notes shall be exchangeable and transfers thereof shall be registrable, at the corporate trust office of the Trustee in New York, New York; provided however, that at the option of the Company, payment of interest may be made by check mailed to the address of the person entitled thereto at such person's registered address. Global Securities: The Senior Subordinated Notes shall not be issuable as Global Securities. Trustee: The Bank of New York shall serve as the trustee, depositary, authenticating or paying agent, transfer agent and registrar with respect to the Senior Notes. Names and Addresses of Underwriters: Dillon, Read & Co. Inc. Donaldson, Lufkin & Jenrette Securities Corporation J.P. Morgan Securities Inc. Merrill Lynch, Pierce, Fenner & Smith Incorporated c/o Dillon, Read & Co. Inc. 535 Madison Avenue New York, New York 10022 B-3 EX-4.2 3 SENIOR SUBORDINATED INDENTURE SEAGULL ENERGY CORPORATION AND THE BANK OF NEW YORK Senior Subordinated Indenture Dated as of July 15, 1993 CROSS REFERENCE SHEET* Provisions of Trust Indenture Act of 1939 and Indenture to be dated as of July 15, 1993 between SEAGULL ENERGY CORPORATION and The Bank of New York, Trustee:
Section of the Act Section of Indenture 310(a)(1), (2) and (5)............................................................... 6.9 310(a)(3) and (4).................................................................... Inapplicable 310(b)............................................................................... 6.8 and 6.10(a), (b) and (d) 310(c)............................................................................... Inapplicable 311(a)............................................................................... 6.13(a) and (c) 311(b)............................................................................... 6.13(b) and (c) 311(c)............................................................................... Inapplicable 312(a)............................................................................... 4.1 and 4.2(a) 312(b)............................................................................... 4.2(a) and (b)(i) and (ii) 312(c)............................................................................... 4.2(c) 313(a)............................................................................... 4.4(a)(i), (ii), (iii), (iv), (v), (vi) and (vii) 313(a)(5)............................................................................ Inapplicable 313(b)(1)............................................................................ Inapplicable 313(b)(2)............................................................................ 4.4(b) 313(c)............................................................................... 4.4(c) 313(d)............................................................................... 4.4(d) 314(a)............................................................................... 4.3 314(b)............................................................................... Inapplicable 314(c)(1) and (2).................................................................... 11.5 314(c)(3)............................................................................ Inapplicable 314(d)............................................................................... Inapplicable 314(e)............................................................................... 11.5 314(f)............................................................................... Inapplicable 315(a), (c) and (d).................................................................. 6.1 315(b)............................................................................... 5.8 315(e)............................................................................... 5.9 316(a)(1)............................................................................ 5.7 316(a)(2)............................................................................ Not required 316(a) (last sentence)............................................................... 7.4 316(b)............................................................................... 5.4 317(a)............................................................................... 5.2 317(b)............................................................................... 3.5(a) 318(a)............................................................................... 11.7
ARTICLE ONE DEFINITIONS Affiliate....................................................................................................... 1 Asset Sale...................................................................................................... 2 Authenticating Agent............................................................................................ 2 Bankruptcy Code................................................................................................. 2 Board of Directors.............................................................................................. 2 Board Resolution................................................................................................ 2 Business Day.................................................................................................... 2 Commission...................................................................................................... 2 Consolidated Net Tangible Assets................................................................................ 2 Corporate Trust Office.......................................................................................... 2 Depositary...................................................................................................... 2 EBITDA.......................................................................................................... 3 EBITDA/Interest Ratio........................................................................................... 3 ENSTAR Alaska................................................................................................... 3 Event of Default................................................................................................ 3 Global Security................................................................................................. 3 Holder.......................................................................................................... 3 Holder of Securities............................................................................................ 3 Securityholder.................................................................................................. 3 Indebtedness.................................................................................................... 3 Indenture....................................................................................................... 4 interest........................................................................................................ 4 Issuer.......................................................................................................... 4 Issuer Order.................................................................................................... 4 Officers' Certificate........................................................................................... 4 Opinion of Counsel.............................................................................................. 4 original issue date............................................................................................. 4 original issue discount......................................................................................... 4 Original Issue Discount Security................................................................................ 5 Outstanding..................................................................................................... 5 Periodic Offering............................................................................................... 5 Person.......................................................................................................... 5 Place of Payment................................................................................................ 5 principal....................................................................................................... 5 principal amount................................................................................................ 6 Principal Property.............................................................................................. 6 record date..................................................................................................... 6 Responsible Officer............................................................................................. 6 Restricted Subsidiary........................................................................................... 6 Sale and Leaseback Transaction.................................................................................. 6 Secured Debt.................................................................................................... 6 Security........................................................................................................ 6 Securities...................................................................................................... 6 Senior Indebtedness............................................................................................. 6 Senior Subordinated Indebtedness................................................................................ 6 Subordinated Indebtedness....................................................................................... 7 Subsidiary...................................................................................................... 7 Trust Indenture Act of 1939..................................................................................... 7 Trustee......................................................................................................... 7 Unrestricted Subsidiary......................................................................................... 7 U.S. Government Obligations..................................................................................... 7 vice president.................................................................................................. 7 Yield to Maturity............................................................................................... 7
ARTICLE TWO SECURITIES SECTION 2.1 Forms Generally............................................................................... 8 SECTION 2.2 Form of Trustee's Certificate of Authentication............................................... 8 SECTION 2.3 Amount Unlimited, Issuable in Series.......................................................... 8 SECTION 2.4 Authentication and Delivery of Securities..................................................... 10 SECTION 2.5 Execution of Securities....................................................................... 12 SECTION 2.6 Certificate of Authentication................................................................. 13 SECTION 2.7 Denomination and Date of Securities; Payments of Interest..................................... 13 SECTION 2.8 Registration Transfer and Exchange............................................................ 13 SECTION 2.9 Mutilated, Defaced, Destroyed, Lost and Stolen Securities..................................... 15 SECTION 2.10 Cancellation of Securities; Disposition Thereof............................................... 16 SECTION 2.11 Temporary Securities.......................................................................... 16 SECTION 2.12 CUSIP Numbers................................................................................. 16 ARTICLE THREE COVENANTS OF THE ISSUER SECTION 3.1 Payment of Principal and Interest............................................................. 17 SECTION 3.2 Offices for Notices and Payments, etc......................................................... 17 SECTION 3.3 No Interest Extension......................................................................... 17 SECTION 3.4 Appointments to Fill Vacancies in Trustee's Office............................................ 17 SECTION 3.5 Provision as to Paying Agent.................................................................. 17 SECTION 3.6 Restriction on Creation of Secured Debt....................................................... 18 SECTION 3.7 Restriction on Sale and Leaseback Transactions................................................ 19 SECTION 3.8 Restriction on Transfer of Principal Property to Unrestricted Subsidiary...................... 20 SECTION 3.9 Restriction on Incurrence of Indebtedness by Restricted Subsidiaries.......................... 20 SECTION 3.10 Limitation on Incurrence of Additional Indebtedness........................................... 21 SECTION 3.11 Limitation on Issuance of Certain Other Subordinated Indebtedness............................. 21 ARTICLE FOUR SECURITYHOLDERS LISTS AND REPORTS BY THE ISSUER AND THE TRUSTEE SECTION 4.1 Issuer to Furnish Trustee Information as to Names and Addresses of Securityholders........... 22 SECTION 4.2 Preservation and Disclosure of Securityholders Lists.......................................... 22 SECTION 4.3 Reports by the Issuer......................................................................... 23 SECTION 4.4 Reports by the Trustee........................................................................ 23 ARTICLE FIVE REMEDIES OF THE TRUSTEE AND SECURITY HOLDERS ON EVENT OF DEFAULT SECTION 5.1 Events of Default............................................................................. 25 SECTION 5.2 Payment of Securities on Default; Suit Therefor............................................... 27 SECTION 5.3 Application of Moneys Collected by Trustee.................................................... 28 SECTION 5.4 Proceedings by Securityholders................................................................ 28 SECTION 5.5 Proceedings by Trustee........................................................................ 29 SECTION 5.6 Remedies Cumulative and Continuing............................................................ 29 SECTION 5.7 Direction of Proceedings; Waiver of Defaults by Majority of Securityholders................... 29 SECTION 5.8 Notice of Defaults............................................................................ 30 SECTION 5.9 Undertaking to Pay Costs...................................................................... 30
ARTICLE SIX CONCERNING THE TRUSTEE SECTION 6.1 Duties and Responsibilities of the Trustee; During Default; Prior to Default.................. 30 SECTION 6.2 Certain Rights of the Trustee................................................................. 31 SECTION 6.3 Trustee Not Responsible for Recitals, Disposition of Securities or Application of Proceeds Thereof......................................................................... 32 SECTION 6.4 Trustee and Agents May Hold Securities; Collections, etc...................................... 32 SECTION 6.5 Moneys Held by Trustee........................................................................ 32 SECTION 6.6 Compensation and Indemnification of Trustee and Its Prior Claim............................... 32 SECTION 6.7 Right of Trustee to Rely on Officers' Certificate, etc........................................ 33 SECTION 6.8 Qualification of Trustee; Conflicting Interests............................................... 33 SECTION 6.9 Persons Eligible for Appointment as Trustee................................................... 37 SECTION 6.10 Resignation and Removal; Appointment of Successor Trustee..................................... 38 SECTION 6.11 Acceptance of Appointment by Successor Trustee................................................ 39 SECTION 6.12 Merger, Conversion, Consolidation or Succession to Business of Trustee........................ 39 SECTION 6.13 Preferential Collection of Claims Against the Issuer.......................................... 40 SECTION 6.14 Appointment of Authenticating Agent........................................................... 42 ARTICLE SEVEN CONCERNING THE SECURITYHOLDERS SECTION 7.1 Evidence of Action Taken by Securityholders................................................... 43 SECTION 7.2 Proof of Execution of Instruments and of Holding of Securities................................ 43 SECTION 7.3 Holders to be Treated as Owners............................................................... 44 SECTION 7.4 Securities Owned by Issuer Deemed Not Outstanding............................................. 44 SECTION 7.5 Right of Revocation of Action Taken........................................................... 44 SECTION 7.6 Record Date for Consents and Waivers.......................................................... 45 ARTICLE EIGHT SUPPLEMENTAL INDENTURES SECTION 8.1 Supplemental Indentures Without Consent of Securityholders.................................... 45 SECTION 8.2 Supplemental Indentures with Consent of Securityholders....................................... 46 SECTION 8.3 Effect of Supplemental Indenture.............................................................. 47 SECTION 8.4 Documents to Be Given to Trustee.............................................................. 47 SECTION 8.5 Notation on Securities in Respect of Supplemental Indentures.................................. 47 SECTION 8.6 Subordination Unimpaired...................................................................... 47 ARTICLE NINE CONSOLIDATION, MERGER, SALE, LEASE, EXCHANGE OR OTHER DISPOSITION SECTION 9.1 Issuer May Consolidate, etc., on Certain Terms................................................ 48 SECTION 9.2 Securities to be Secured in Certain Events.................................................... 48 SECTION 9.3 Successor Corporation to be Substituted....................................................... 48 SECTION 9.4 Opinion of Counsel to be Given Trustee........................................................ 49 ARTICLE TEN SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS SECTION 10.1 Satisfaction and Discharge of Indenture....................................................... 49 SECTION 10.2 Application by Trustee of Funds Deposited for Payment of Securities........................... 51 SECTION 10.3 Repayment of Moneys Held by Paying Agent...................................................... 51 SECTION 10.4 Return of Moneys Held by Trustee and Paying Agent Unclaimed for Two Years..................... 51 SECTION 10.5 Indemnity for U.S. Government Obligations..................................................... 51
ARTICLE ELEVEN MISCELLANEOUS PROVISIONS SECTION 11.1 Partners, Incorporators, Stockholders, Officers and Directors of Issuer Exempt from Individual Liability.................................................................... 52 SECTION 11.2 Provisions of Indenture for the Sole Benefit of Parties and Holders of Securities............. 52 SECTION 11.3 Successors and Assigns of Issuer Bound by Indenture........................................... 52 SECTION 11.4 Notices and Demands on Issuer, Trustee and Holders of Securities.............................. 52 SECTION 11.5 Officers' Certificates and Opinions of Counsel; Statements to Be Contained Therein............ 52 SECTION 11.6 Payments Due on Saturdays, Sundays and Holidays............................................... 53 SECTION 11.7 Conflict of Any Provision of Indenture with Trust Indenture Act of 1939....................... 53 SECTION 11.8 GOVERNING LAW................................................................................. 53 SECTION 11.9 Counterparts.................................................................................. 54 SECTION 11.10 Effect of Headings............................................................................ 54 ARTICLE TWELVE REDEMPTION OF SECURITIES AND SINKING FUNDS SECTION 12.1 Applicability of Article...................................................................... 54 SECTION 12.2 Notice of Redemption; Partial Redemptions..................................................... 54 SECTION 12.3 Payment of Securities Called for Redemption................................................... 55 SECTION 12.4 Exclusion of Certain Securities from Eligibility for Selection for Redemption................. 55 SECTION 12.5 Mandatory and Optional Sinking Funds.......................................................... 55 ARTICLE THIRTEEN SUBORDINATION SECTION 13.1 Securities Subordinated to Senior Indebtedness................................................ 57 SECTION 13.2 Reliance on Certificate of Liquidating Agent; Further Evidence as to Ownership of Senior Indebtedness ........................................................................ 59 SECTION 13.3 Payment Permitted If No Default............................................................... 60 SECTION 13.4 Disputes with Holders of Certain Senior Indebtedness.......................................... 60 SECTION 13.5 Trustee Not Charged with Knowledge of Prohibition............................................. 60 SECTION 13.6 Trustee to Effectuate Subordination........................................................... 61 SECTION 13.7 Rights of Trustee as Holder of Senior Indebtedness............................................ 61 SECTION 13.8 Article Applicable to Paying Agents........................................................... 61 SECTION 13.9 Subordination Rights Not Impaired by Acts or Omissions of the Issuer or Holders of Senior Indebtedness...................................................................... 61 SECTION 13.10 Trustee Not Fiduciary for Holders of Senior Indebtedness...................................... 61
THIS SENIOR SUBORDINATED INDENTURE, dated as of July 15, 1993 between SEAGULL ENERGY CORPORATION, a Texas corporation (the "Issuer"), and The Bank of New York, a New York banking corporation as trustee (the "Trustee"), W I T N E S S E T H: WHEREAS, the Issuer has duly authorized the issuance from time to time of its unsecured senior subordinated debentures, notes or other evidences of indebtedness to be issued in one or more series (the "Securities") up to such principal amount or amounts as may from time to time be authorized in accordance with the terms of this Indenture; WHEREAS, the Issuer has duly authorized the execution and delivery of this Indenture to provide, among other things, for the authentication, delivery and administration of the Securities; and WHEREAS, all things necessary to make this Indenture a valid indenture and agreement according to its terms have been undertaken and completed; NOW, THEREFORE: In consideration of the premises and the purchases of the Securities by the Holders (as hereinafter defined) thereof, the Issuer and the Trustee mutually covenant and agree for the equal and proportionate benefit of the respective Holders from time to time of the Securities as follows: ARTICLE ONE DEFINITIONS SECTION 1.1 For all purposes of this Indenture and of any indenture supplemental hereto the following terms shall have the respective meanings specified in this Section 1.1 (except as otherwise expressly provided or unless the context otherwise clearly requires). All other terms used in this Indenture that are defined in the Trust Indenture Act of 1939, including terms defined therein by reference to the Securities Act of 1933, as amended, shall have the meanings assigned to such terms in said Trust Indenture Act and in said Securities Act as in force at the date of this Indenture (except as herein otherwise expressly provided or unless the context otherwise clearly requires). All accounting terms used herein and not expressly defined shall have the meanings assigned to such terms in accordance with generally accepted accounting principles, and the term "generally accepted accounting principles" means such accounting principles as are generally accepted at the time of any computation. The words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. The expressions "date of this Indenture", "date hereof", "date as of which this Indenture is dated" and "date of execution and delivery of this Indenture" and other expressions of similar import refer to the effective date of the original execution and delivery of this Indenture, viz. July 15, 1993. The terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Asset Sale" for any Person shall mean the sale, lease, conveyance or other disposition (including without limitation by merger or consolidation, and whether by operation of law or otherwise) of any of that Person's assets (including without limitation the sale or other disposition of capital stock of any Subsidiary of such Person, whether by such Person or by such Subsidiary), whether owned on the date of this Indenture or subsequently acquired, in one transaction or a series of related transactions, in which such Person and/or its Subsidiaries receive cash and/or other consideration (including without limitation the unconditional assumption of Indebtedness of such Person and/or its Subsidiaries) having an aggregate fair market value of $5 million or more as to such transaction or series of transactions; provided, however, that the following shall not constitute Asset Sales: (i) sales of inventories in the ordinary course of business or pledges of inventories and of accounts receivable by the Issuer or its Subsidiaries; (ii) transactions between the Issuer and any of its wholly owned Subsidiaries or among such wholly owned Subsidiaries; and (iii) the incurrence of any mortgage, security interest, pledge, lien or encumbrance that secures Secured Debt as permitted by Section 3.6. "Authenticating Agent" shall have the meaning set forth in Section 6.14. "Bankruptcy Code" means the United States Bankruptcy Code, 11 United States Code ss.ss. 101 et seq., or any successor statute thereto. "Board of Directors" means either the Board of Directors of the Issuer or any committee of such Board duly authorized to act on its behalf. "Board Resolutions" means one or more resolutions, certified by the secretary or an assistant secretary of the Issuer to have been duly adopted or consented to by the Board of Directors and to be in full force and effect. "Business Day" means, with respect to any Security, a day that (a) in the Place of Payment (or in any of the Places of Payment, if more than one) in which amounts are payable, as specified in the form of such Security, and (b) in the city in which the Corporate Trust Office is located, is not a day on which banking institutions are authorized or required by law or regulation to close. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, as amended, or, if at any time after the execution and delivery of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act of 1939, then the body performing such duties on such date. "Consolidated Net Tangible Assets" means the aggregate amount of assets included on the most recent consolidated balance sheet of the Issuer and its Restricted Subsidiaries, less applicable reserves and other properly deductible items and after deducting therefrom (a) all current liabilities and (b) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles, all in accordance with generally accepted accounting principles consistently applied. "Corporate Trust Office" means the office of the Trustee at which the corporate trust business of the Trustee shall, at any particular time, be principally administered, which office is, at the date as of which this Indenture is dated, located in New York, New York. "Depositary" means, with respect to the Securities of any series issuable or issued in the form of one or more Global Securities, the Person designated as Depositary by the Issuer pursuant to Section 2.3 until a successor Depositary shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Depositary" shall mean or include each Person who is then a Depositary hereunder, and, if at any time there is more than one such Person, "Depositary" as used with respect to the Securities of any such series shall mean the Depositary with respect to the Global Securities of such series. "EBITDA" shall mean net earnings (excluding gains and losses on sales and retirement of assets, non-cash write downs and charges resulting from accounting convention changes) before deduction for federal and state taxes, interest expense or depreciation, depletion and amortization expense, all determined in accordance with generally accepted accounting principles. "EBITDA/Interest Ratio", on any date, shall mean the ratio of (a) EBITDA of the Issuer and its Restricted Subsidiaries on a consolidated basis to (b) interest expense on all Indebtedness of the Issuer and its Restricted Subsidiaries on a consolidated basis for any twelve-month period ending on the last day of the most recent calendar quarter; provided, however, that if any calculation of the Issuer's EBITDA/Interest Ratio requires the use of any quarter prior to the date of the Indenture, such calculation shall be made on a pro forma basis, giving effect to the issuance of the Securities and the use of the net proceeds therefrom, as if the same had occurred at the beginning of the twelve-month period used to make such calculation; and provided further that if any such calculation requires the use of any quarter prior to the date that any Asset Sale was consummated, any Indebtedness described in clause (a) of the definition of Indebtedness was incurred, any capital stock of the Issuer was issued in a financing transaction or any acquisition other than in the ordinary course of business was consummated by the Issuer or any Restricted Subsidiary, such calculation shall be made on a pro forma basis, giving effect to each such Asset Sale, incurrence of Indebtedness, issuance of capital stock or acquisition, as the case may be, and the use of any proceeds therefrom, as if the same had occurred at the beginning of the twelve-month period used to make such calculation. "ENSTAR Alaksa" means (i) the division of the Issuer known on the date of this Indenture as ENSTAR Natural Gas Company, which owns on the date of this Indenture the gas distribution system in south-central Alaska, and (ii) Alaska Pipeline Company, an Alaska corporation and a Subsidiary of the Issuer, in each case together with successors and assigns. "Event of Default" means any event or condition specified as such in Section 5.1. "Global Security" means a Security evidencing all or a part of a series of Securities issued to the Depositary for such series in accordance with Section 2.3 and bearing the legend prescribed in Section 2.4. "Holder", "Holder of Securities" or other similar terms mean, in the case of any Security, the person in whose name such Security is registered in the security register kept by the Issuer for that purpose in accordance with the terms hereof. "Indebtedness" means, with respect to any Person, (a) (i) the principal of and premium, if any, and interest, if any, on indebtedness for money borrowed of such Person, indebtedness of such Person evidenced by bonds, notes, debentures or similar obligations, and any guaranty by such Person of any indebtedness for money borrowed or indebtedness evidenced by bonds, notes, debentures or similar obligations of any other Person, whether any such indebtedness or guaranty is outstanding on the date of this Indenture or is thereafter created, assumed or incurred, (ii) the principal of and premium, if any, and interest, if any, on indebtedness for money borrowed, incurred, assumed or guaranteed by such Person in connection with the acquisition by it or any of its subsidiaries of any other businesses, properties or other assets and (iii) lease obligations which such Person capitalizes in accordance with Statement of Financial Accounting Standards No. 13 promulgated by the Financial Accounting Standards Board or such other generally accepted accounting principles as may be from time to time in effect; (b) any other indebtedness of such Person, including any indebtedness representing the balance deferred and unpaid of the purchase price of any property or interest therein, and any guaranty, endorsement or other contingent obligation of such Person in respect of any indebtedness of another that is outstanding on the date of this Indenture or is thereafter created, assumed or incurred by such Person; (c) obligations of such Person under interest rate, commodity or currency swaps, caps, collars, options and similar arrangements; (d) obligations of such Person for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction; and (e) any amendments, modifications, refundings, renewals or extensions of any indebtedness or obligation described as Indebtedness in clauses (a) through (d) above. "Indenture" means this instrument as originally executed and delivered or, if amended or supplemented as herein provided, as so amended or supplemented or both, including, for all purposes of this instrument and any such supplement, the provisions of the Trust Indenture Act of 1939 that are deemed to be a part of and govern this instrument and any such supplement, respectively, and shall include the forms and terms of particular series of Securities established as contemplated hereunder. The term "interest" means, when used with respect to non-interest bearing Securities (including, without limitation, any Original Issue Discount Security that by its terms bears interest only after maturity or upon default in any other payment due on such Security), interest payable after maturity (whether at stated maturity, upon acceleration or redemption or otherwise) or after the date, if any, on which the Issuer becomes obligated to acquire a Security, whether upon conversion, by purchase or otherwise. "Issuer" means (except as otherwise provided in Section 6.8) Seagull Energy Corporation, a Texas corporation, and, subject to Article Nine, its successors and assigns. "Issuer Order" means a written statement, request or order of the Issuer which is signed in its name by the chairman of the Board of Directors, the president or any vice president of the Issuer. "Officers' Certificate", when used with respect to the Issuer, means a certificate signed by the chairman of the Board of Directors, the president, or any vice president and by the treasurer, any assistant treasurer, the controller, any assistant controller, the secretary or any assistant secretary of the Issuer. Each such certificate shall include the statements provided for in Section 11.5 if and to the extent required by the provisions of such Section 11.5. One of the officers signing an Officers' Certificate given pursuant to Section 4.3 shall be the principal executive, financial or accounting officer of the Issuer. "Opinion of Counsel" means an opinion in writing signed by the chief counsel of the Issuer or by such other legal counsel who may be an employee of or counsel to the Issuer and who shall be satisfactory to the Trustee. Each such opinion shall include the statements provided for in Section 11.5, if and to the extent required by the provisions of such Section 11.5. The term "original issue date" of any Security (or portion thereof) means the earlier of (a) the date of such Security or (b) the date of any Security (or portion thereof) for which such Security was issued (directly or indirectly) on registration of transfer, exchange or substitution. The term "original issue discount" of any debt security, including any Original Issue Discount Security, means the difference between the principal amount of such debt security and the initial issue price of such debt security (as set forth in the case of an Original Issue Discount Security on the face of such Security). "Original Issue Discount Security" means any Security that provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the maturity thereof pursuant to Section 5.1. "Outstanding" (except as otherwise provided in Section 6.8), when used with reference to Securities, shall, subject to the provisions of Section 7.4, mean, as of any particular time, all Securities authenticated and delivered by the Trustee under this Indenture, except: (a) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (b) Securities (other than Securities of any series as to which the provisions of Article Ten hereof shall not be applicable), or portions thereof, for the payment or redemption of which moneys or U.S. Government Obligations (as provided for in Section 10.1) in the necessary amount shall have been deposited in trust with the Trustee or with any paying agent (other than the Issuer) or shall have been set aside, segregated and held in trust by the Issuer for the Holders of such Securities (if the Issuer shall act as its own paying agent), provided that, if such Securities, or portions thereof, are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as herein provided, or provision satisfactory to the Trustee shall have been made for giving such notice; and (c) Securities which shall have been paid or in substitution for which other Securities shall have been authenticated and delivered pursuant to the terms of Section 2.9 (except with respect to any such Security as to which proof satisfactory to the Trustee is presented that such Security is held by a person in whose hands such Security is a legal, valid and binding obligation of the Issuer). In determining whether the Holders of the requisite aggregate principal amount of Outstanding Securities of any or all series have given any request, demand, authorization, direction, notice, consent or waiver hereunder, the principal amount of an Original Issue Discount Security that shall be deemed to be Outstanding for such purposes shall be the portion of the principal amount thereof that would be due and payable as of the date of such determination (as certified by the Issuer to the Trustee) upon a declaration of acceleration of the maturity thereof pursuant to Section 5.1. "Periodic Offering" means an offering of Securities of a series from time to time, the specific terms of which Securities, including, without limitation, the rate or rates of interest, if any, thereon, the stated maturity or maturities thereof and the redemption provisions, if any, with respect thereto, are to be determined by the Issuer or its agents upon the issuance of such Securities. "Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, estate, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment", when used with respect to the Securities of any series, means the place or places where the principal of and interest, if any, on the Securities of such series are payable as determined in accordance with Section 2.3. The term "principal" of a debt security, including any Security, means the amount (including, without limitation, if and to the extent applicable, any premium and, in the case of an Original Issue Discount Security, any accrued original issue discount, but excluding interest) that is payable with respect to such debt security as of any date and for any purpose (including, without limitation, in connection with any sinking fund, upon any redemption at the option of the Issuer, upon any purchase or exchange at the option of the Issuer or the holder of such debt security and upon any acceleration of the maturity of such debt security). The term "principal amount" of a debt security, including any Security, means the principal amount as set forth on the face of such debt security. "Principal Property" means any real property, manufacturing plant, processing plant, pipeline, office building, warehouse or other physical facility, or any other like depreciable or depletable asset of the Issuer or any Restricted Subsidiary whether owned at July 1, 1993 or thereafter acquired (other than any facility thereafter acquired for the control or abatement of atmospheric pollutants or contaminants or water, noise, odor or other pollution) which in the opinion of the Board of Directors is of material importance to the total business conducted by the Issuer and its Restricted Subsidiaries, as a whole; provided, however, that any such property shall not be deemed a Principal Property if such property does not have a fair value in excess of 3% of the total assets included on a consolidated balance sheet of the Issuer and its Restricted Subsidiaries prepared in accordance with generally accepted accounting principles consistently applied. The term "record date" shall have the meaning set forth in Section 2.7. "Responsible Officer", when used with respect to the Trustee, means any officer assigned by the Trustee to administer its corporate trust matters. "Restricted Subsidiary" means (a) any Subsidiary other than an Unrestricted Subsidiary, and (b) any Subsidiary which was an Unrestricted Subsidiary but which, subsequent to the date hereof, is designated by the Issuer (by certified resolution of the Board of Directors delivered to the Trustee) to be a Restricted Subsidiary; provided, however, that the Issuer may not designate any such Subsidiary to be a Restricted Subsidiary if the Issuer would thereby breach any covenant or agreement herein contained (on the assumptions that any outstanding Indebtedness of such Subsidiary was incurred at the time of such designation and that any Sale and Leaseback Transaction to which such Subsidiary is then a party was entered into at the time of such designation). " Sale and Leaseback" shall have the meaning set forth in Section 3.7. "Secured Debt" means indebtedness for money borrowed by the Issuer or a Restricted Subsidiary and any other indebtedness of the Issuer or a Restricted Subsidiary on which interest is paid or payable (other than indebtedness owed by a Restricted Subsidiary to the Issuer, by a Restricted Subsidiary to another Restricted Subsidiary or by the Issuer to a Restricted Subsidiary), that in any such case is secured by (a) a mortgage or other lien on any Principal Property of the Issuer or a Restricted Subsidiary, or (b) a pledge, lien or other security interest on any shares of stock or indebtedness of a Restricted Subsidiary, or (c) in the case of any such indebtedness of the Issuer, a guaranty by any Restricted Subsidiary. The amount of Secured Debt at any time outstanding shall be the amount then owing thereon by the Issuer or a Restricted Subsidiary. "Secrity" or "Securities" (except as otherwise provided in Section 6.8) has the meaning stated in the first recital of this Indenture or, as the case may be, Securities that have been authenticated and delivered pursuant to this Indenture. "Senior Indebtedness" means Indebtedness of the Issuer outstanding at any time except (a) any Indebtedness as to which, by the terms of the instrument creating or evidencing the same, it is provided that such Indebtedness is not senior in right of payment to the Securities, (b) the Securities, (c) any Indebtedness of the Issuer to a wholly-owned subsidiary of the Issuer, (d) interest accruing after the filing of a petition initiating any proceeding referred to in Sections 5.1(e) and 5.1(f) unless such interest is an allowed claim enforceable against the Issuer in a proceeding under federal or state bankruptcy laws and (e) trade payables. "Senior Subordinated Indebtedness" means the Securities and any other Indebtedness of the Issuer that ranks pari passu with the Securities. Any Indebtedness of the Issuer that is subordinate or junior by its terms in right of payment to any other Indebtedness of the Issuer shall be subordinate to Senior Subordinated Indebtedness unless the instrument creating or evidencing the same or pursuant to which the same is outstanding specifically provides that such Indebtedness (i) is to rank pari passu with other Senior Subordinated Indebtedness and (ii) is not subordinated by its terms to any Indebtedness of the Issuer which is not Senior Indebtedness. "Subordinated Indebtedness" means the Securities, any other Senior Subordinated Indebtedness and any other Indebtedness that is subordinate or junior in right of payment to Senior Indebtedness. "Subsidiary" means any corporation of which the Issuer, or the Issuer and one or more Subsidiaries, or any one or more Subsidiaries, directly or indirectly own voting securities entitling any one or more of the Issuer and its Subsidiaries to elect a majority of the directors, either at all times or, so long as there is no default or contingency which permits the holders of any other class or classes of securities to vote for the election of one or more directors. "Trust Indenture Act of 1939" (except as otherwise provided in Sections 8.1 and 8.2) means the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990, as in force at the date as of which this Indenture is originally executed. "Trustee" means the Person identified as "Trustee" in the first paragraph hereof and, subject to the provisions of Article Six, shall also include any successor trustee. "Trustee" shall also mean or include each Person who is then a trustee hereunder and, if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series shall mean the trustee with respect to the Securities of such series. "Inrestricted Subsidiary" means (a) any Subsidiary acquired or organized after the date hereof, provided, however, that such Subsidiary shall not be a successor, directly or indirectly, to any Restricted Subsidiary, and (b) any Subsidiary whose principal business and assets are located outside the United States of America, its territories and possessions and Canada or are located in Puerto Rico, and (c) any Subsidiary the principal business of which consists of financing or assisting in financing the acquisition or disposition of products of the Issuer or a Subsidiary by dealers, distributors or other customers, and (d) any Subsidiary the principal business of which is owning, leasing, dealing in or developing real property, and (e) any Subsidiary substantially all the assets of which consist of stock or other securities of a Subsidiary or Subsidiaries of the character described in clauses (a) through (d) of this paragraph, unless and until such Subsidiary shall have been designated to be a Restricted Subsidiary pursuant to clause (b) of the definition of "Restricted Subsidiary". "U.S. Government Obligations" shall have the meaning set forth in Section 10.1(B). The term "vice president," when used with respect to the Issuer or the Trustee, means any vice president, regardless of whether designated by a number or a word or words added before or after the title "vice president." "Yield to Maturity" means the yield to maturity on a series of Securities, calculated at the time of issuance of such series, or, if applicable, at the most recent redetermination of interest on such series, and calculated in accordance with generally accepted financial practice or as otherwise provided in the terms of such series of Securities. ARTICLE TWO SECURITIES SECTION 2.1 Forms Generally. The Securities of each series shall be substantially in such form (not inconsistent with this Indenture) as shall be established by or pursuant to one or more Board Resolutions (as set forth in a Board Resolution or, to the extent established pursuant to rather than set forth in a Board Resolution, an Officers' Certificate detailing such establishment) or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have imprinted or otherwise reproduced thereon such legend or legends or endorsements, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto, or with any rules of any securities exchange or to conform to general usage, all as may be determined by the officers executing such Securities, as evidenced by their execution of such Securities. The definitive Securities shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Securities as evidenced by their execution of such Securities. SECTION 2.2 Form of Trustee's Certificate of Authentication. The Trustee's certificate of authentication on all Securities shall be substantially as follows: This is one of the Securities of the series designated herein referred to in the within mentioned Indenture. The Bank of New York, as Trustee By_______________________________ Authorized Signatory If at any time there shall be an Authenticating Agent appointed with respect to any series of Securities, then the Securities of such series shall bear, in addition to the Trustee's certificate of authentication, an alternate Certificate of Authentication which shall be substantially as follows: This is one of the Securities of the series designated herein referred to in the within mentioned Indenture. The Bank of New York, as Trustee By _________________________________ as Authenticating Agent By__________________________________ Authorized Signatory SECTION 2.3 Amount Unlimited, Issuable in Series. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued in one or more series and the Securities of each such series shall rank equally and pari passu with the Securities of each other series, but all Securities issued hereunder shall be subordinate and junior in right of payment, to the extent and in the manner set forth in Article Thirteen, to all Senior Indebtedness. There shall be established in or pursuant to one or more Board Resolutions (and, to the extent established pursuant to rather than set forth in a Board Resolution, in an Officers' Certificate detailing such establishment) or established in one or more indentures supplemental hereto, prior to the initial issuance of Securities of any series: (1) the designation of the Securities of the series, which shall distinguish the Securities of such series from the Securities of all other series; (2) any limit upon the aggregate principal amount of the Securities of the series that may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Section 2.8, 2.9, 2.11, 8.5 or 12.3); (3) the date or dates on which the principal of the Securities of the series is payable; (4) the rate or rates at which the Securities of the series shall bear interest, if any, the date or dates from which any such interest shall accrue, on which any such interest shall be payable and on which a record shall be taken for the determination of Holders to whom any such interest is payable or the method by which such rate or rates or date or dates shall be determined or both; (5) the place or places where and the manner in which the principal of and interest, if any, on Securities of the series shall be payable (if other than as provided in Section 3.2) and the office or agency for the Securities of the series maintained by the Issuer pursuant to Section 3.2; (6) the right, if any, of the Issuer to redeem, purchase or repay Securities of the series, in whole or in part, at its option and the period or periods within which, the price or prices (or the method by which such price or prices shall be determined or both) at which, the form or method of payment therefor if other than in cash and any terms and conditions upon which and the manner in which (if different from the provisions of Article Twelve) Securities of the series may be so redeemed, purchased or repaid, in whole or in part, pursuant to any sinking fund or otherwise; (7) the obligation, if any, of the Issuer to redeem, purchase or repay Securities of the series in whole or in part pursuant to any mandatory redemption, sinking fund or analogous provisions or at the option of a Holder thereof and the period or periods within which the price or prices (or the method by which such price or prices shall be determined or both) at which, the form or method of payment therefor if other than in cash and any terms and conditions upon which and the manner in which (if different from the provisions of Article Twelve) Securities of the series shall be redeemed, purchased or repaid, in whole or in part, pursuant to such obligation; (8) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which Securities of the series shall be issuable; (9) if other than the principal amount thereof, the portion of the principal amount of Securities of the series which shall be payable upon acceleration of the maturity thereof; (10) whether Securities of the series will be issuable as Global Securities; (11) if the Securities of such series are to be issuable in definitive form (whether upon original issue or upon exchange of a temporary Security of such series) only upon receipt of certain certificates or other documents or satisfaction of other conditions, the form and terms of such certificates, documents or conditions; (12) any trustees, depositaries, authenticating or paying agents, transfer agents or registrars or any other agents with respect to the Securities of such series; (13) any deleted, modified or additional events of default or remedies or any additional covenants with respect to the Securities of such series; (14) whether the provisions of Section 10.1(C) will be applicable to Securities of such series; (15) any provision relating to the issuance of Securities of such series at an original issue discount (including, without limitation, the issue price thereof, the rate or rates at which such original issue discount shall accrue, if any, and the date or dates from or to which or period or periods during which such original issue discount shall accrue at such rate or rates); (16) if the amounts of payments of principal of and interest on the Securities of such series are to be determined with reference to an index, the manner in which such amounts shall be determined; and (17) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture). All Securities of any one series shall be substantially identical, except as to denomination and except as may otherwise be provided by or pursuant to the Board Resolution or Officers' Certificate referred to above or as set forth in any such indenture supplemental hereto. All Securities of any one series need not be issued at the same time and may be issued from time to time, consistent with the terms of this Indenture, if so provided by or pursuant to such Board Resolution, such Officers' Certificate or in any such indenture supplemental hereto. Any such Board Resolution or Officers' Certificate referred to above with respect to Securities of any series filed with the Trustee on or before the initial issuance of the Securities of such series shall bc incorporated herein by reference with respect to Securities of such series and shall thereafter be deemed to be a part of the Indenture for all purposes relating to Securities of such series as fully as if such Board Resolution or Officers' Certificate were set forth herein in full. SECTION 2.4 Authentication and Delivery of Securities. The Issuer may deliver Securities of any series executed by the Issuer to the Trustee for authentication together with the applicable documents referred to below in this Section 2.4, and the Trustee shall thereupon authenticate and deliver such Securities to, or upon the order of, the Issuer (contained in the Issuer Order referred to below in this Section 2.4) or pursuant to such procedures acceptable to the Trustee and to such recipients as may be specified from time to time by an Issuer Order. The maturity date, original issue date, interest rate, if any, and any other terms of the Securities of such series shall be determined by or pursuant to such Issuer Order and procedures. If provided for in such procedures and agreed to by the Trustee, such Issuer Order may authorize authentication and delivery pursuant to oral instructions from the Issuer or its duly authorized agent, which instructions shall be promptly confirmed in writing. In authenticating the Securities of such series and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive (in the case of subparagraphs (2), (3) and (4) below only at or before the time of the first request of the Issuer to the Trustee to authenticate Securities of such series) and (subject to Section 6.1) shall be fully protected in relying upon, unless and until such documents have been superseded or revoked: (1) an Issuer Order requesting such authentication and setting forth delivery instructions if the Securities of such series are not to be delivered to the Issuer, provided that, with respect to Securities of a series subject to a Periodic Offering, (a) such Issuer Order may be delivered by the Issuer to the Trustee prior to the delivery to the Trustee of such Securities for authentication and delivery, (b) the Trustee shall authenticate and deliver Securities of such series for original issue from time to time, in an aggregate principal amount not exceeding the aggregate principal amount established for such series, pursuant to an Issuer Order or pursuant to procedures acceptable to the Trustee as may be specified from time to time by an Issuer Order, (c) the maturity date or dates, original issue date or dates, interest rate or rates, if any, and any other terms of Securities of such series shall be determined by an Issuer Order or pursuant to such procedures, (d) if provided for in such procedures, such Issuer Order may authorize authentication and delivery pursuant to oral or electronic instructions from the Issuer or its duly authorized agent or agents, which oral instructions shall be promptly confirmed in writing and (e) after the original issuance of the first Security of such series to be issued, any separate request by the Issuer that the Trustee authenticate Securities of such series for original issuance will be deemed to be a certification by the Issuer that it is in compliance with all conditions precedent provided for in this Indenture relating to the authentication and delivery of such Securities; (2) the Board Resolution, Officers' Certificate or executed supplemental indenture referred to in Sections 2.1 and 2.3 by or pursuant to which the forms and terms of the Securities of such series were established; (3) an Officers' Certificate setting forth the form or forms and terms of the Securities stating that the form or forms and terms of the Securities have been established pursuant to Sections 2.1 and 2.3 and comply with this Indenture and covering such other matters as the Trustee may reasonably request; and (4) at the option of the Issuer, either an Opinion of Counsel, or a letter from legal counsel addressed to the Trustee permitting it to rely on an Opinion of Counsel, substantially to the effect that: (a) the form or forms of the Securities of such series have been duly authorized and established in conformity with the provisions of this Indenture; (b) in the case of an underwritten offering, the terms of the Securities of such series have been duly authorized and established in conformity with the provisions of this Indenture, and, in the case of an offering that is not underwritten, certain terms of the Securities of such series have been established pursuant to a Board Resolution, an Officers' Certificate or a supplemental indenture in accordance with this Indenture, and when such other terms as are to be established pursuant to procedures set forth in an Issuer Order shall have been established, all such terms will have been duly authorized by the Issuer and will have been established in conformity with the provisions of this Indenture; (c) when the Securities of such series have been executed by the Issuer and authenticated by the Trustee in accordance with the provisions of this Indenture and delivered to and duly paid for by the purchasers thereof, they will have been duly issued under this Indenture and will be valid and legally binding obligations of the Issuer, enforceable in accordance with their respective terms, and will be entitled to the benefits of this Indenture; and (d) the execution and delivery by the Issuer of, and the performance by the Issuer of its obligations under, the Securities of such series will not contravene any provision of applicable law or the articles of incorporation or bylaws of the Issuer or any agreement or other instrument binding upon the Issuer or any of its Subsidiaries that is material to the Issuer and its Subsidiaries, considered as one enterprise, or, to such counsel's knowledge after the inquiry indicated therein, any judgment, order or decree of any governmental agency or any court having jurisdiction over the Issuer or any Subsidiary, and no consent, approval or authorization of any governmental body or agency is required for the performance by the Issuer of its obligations under the Securities, except such as are specified and have been obtained and such as may be required by the securities or blue sky laws of the various states in connection with the offer and sale of the Securities. In rendering such opinions, such counsel may qualify any opinions as to enforceability by stating that such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium and other similar laws affecting the rights and remedies of creditors and is subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Such counsel may rely, as to all matters governed by the laws of jurisdictions other than the State of Texas and the federal law of the United States, upon opinions of other counsel (copies of which shall be delivered to the Trustee), who shall be counsel reasonably satisfactory to the Trustee, in which case the opinion shall state that such counsel believes that both such counsel and the Trustee are entitled so to rely. Such counsel may also state that, insofar as such opinion involves factual matters, such counsel has relied, to the extent such counsel deems proper, upon certificates of officers of the Issuer and its Subsidiaries and certificates of public officials. The Trustee shall have the right to decline to authenticate and deliver any Securities of any series under this Section 2.4 if the Trustee, being advised by counsel, determines that such action may not lawfully be taken by the Issuer or if the Trustee in good faith by its board of directors or board of trustees, executive committee or a trust committee of directors or trustees or Responsible Officers shall determine that such action would expose the Trustee to personal liability to existing Holders or would adversely affect the Trustee's own rights, duties or immunities under the Securities, this Indenture or otherwise. If the Issuer shall establish pursuant to Section 2.3 that the Securities of a series are to be issued in the form of one or more Global Securities, then the Issuer shall execute and the Trustee shall, in accordance with this Section 2.4 and the Issuer Order with respect to such series, authenticate and deliver one or more Global Securities that (i) shall represent and shall be denominated in an amount equal to the aggregate principal amount of all of the Securities of such series to be issued in the form of Global Securities and not yet cancelled, (ii) shall be registered in the name of the Depositary for such Global Security or Securities or the nominee of such Depositary, (iii) shall be delivered by the Trustee to such Depositary or pursuant to such Depositary's instructions, and (iv) shall bear a legend substantially to the following effect: "Unless and until it is exchanged in whole or in part for Securities in definitive registered form, this Security may not be transferred except as a whole by the Depositary to the nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary." Each Depositary designated pursuant to Section 2.3 must, at the time of its designation and at all times while it serves as Depositary, be a clearing agency registered under the Securities Exchange Act of 1934, as amended, and any other applicable statute or regulation. SECTION 2.5 Execution of Securities. The Securities shall be signed on behalf of the Issuer by the chairman of the Board of Directors, the president, any vice president or the treasurer of the Issuer, under its corporate seal which may, but need not, be attested by its secretary or one of its assistant secretaries. Such signatures may be the manual or facsimile signatures of the present or any future such officers. The seal of the Issuer may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Securities. Typographical and other minor errors or defects in any such reproduction of the seal or any such signature shall not affect the validity or enforceability of any Security that has been duly authenticated and delivered by the Trustee. In case any officer of the Issuer who shall have signed any of the Securities shall cease to be such officer before the Security so signed shall be authenticated and delivered by the Trustee or disposed of by the Issuer, such Security nevertheless may be authenticated and delivered or disposed of as though the person who signed such Security had not ceased to be such officer of the Issuer; and any Security may be signed on behalf of the Issuer by such persons as, at the actual date of the execution of such Security, shall be the proper officers of the Issuer, although at the date of the execution and delivery of this Indenture any such person was not such an officer. SECTION 2.6 Certificate of Authentication. Only such Securities as shall bear thereon a certificate of authentication substantially in the form hereinbefore recited, executed by the Trustee by the manual signature of one of its authorized signatories, or its Authenticating Agent, shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. The execution of such certificate by the Trustee or its Authenticating Agent upon any Security executed by the Issuer shall be conclusive evidence that the Security so authenticated has been duly authenticated and delivered hereunder and that the Holder is entitled to the benefits of this Indenture. Each reference in this Indenture to authentication by the Trustee includes authentication by an agent appointed pursuant to Section 6.14. SECTION 2.7 Denomination and Date of Securities; Payments of Interest. The Securities of each series shall be issuable in registered form in denominations established as contemplated by Section 2.3 or, with respect to the Securities of any series, if not so established, in denominations of $1,000 and any integral multiple thereof. The Securities of each series shall be numbered, lettered or otherwise distinguished in such manner or in accordance with such plan as the officers of the Issuer executing the same may determine with the approval of the Trustee, as evidenced by the execution and authentication thereof. Each Security shall be dated the date of its authentication. The Securities of each series shall bear interest, if any, from the date, and such interest, if any, shall be payable on the dates, established as contemplated by Section 2.3. The Person in whose name any Security of any series is registered at the close of business on any record date applicable to a particular series with respect to any interest payment date for such series shall be entitled to receive the interest, if any, payable on such interest payment date notwithstanding any transfer or exchange of such Security subsequent to the record date and prior to such interest payment date, except if and to the extent the Issuer shall default in the payment of the interest due on such interest payment date for such series, in which case such defaulted interest shall be paid to the Persons in whose names Outstanding Securities for such series are registered (a) at the close of business on a subsequent record date (which shall be not less than five Business Days prior to the date of payment of such defaulted interest) established by notice given by mail by or on behalf of the Issuer to the Holders of Securities not less than 15 days preceding such subsequent record date or (b) as determined by such other procedure as is mutually acceptable to the Issuer and the Trustee. The term "record date" as used with respect to any interest payment date (except a date for payment of defaulted interest) for the Securities of any series shall mean the date specified as such in the terms of the Securities of such series established as contemplated by Section 2.3, or, if no such date is so established, if such interest payment date is the first day of a calendar month, the fifteenth day of the next preceding calendar month or, if such interest payment date is the fifteenth day of a calendar month, the first day of such calendar month, whether or not such record date is a Business Day. SECTION 2.8 Registration Transfer and Exchange. The Issuer will keep at each office or agency to be maintained for the purpose as provided in Section 3.2 for each series of Securities a register or registers in which, subject to such reasonable regulations as it may prescribe, it will provide for the registration of Securities of each series and the registration of transfer of Securities of such series. Each such register shall be in written form in the English language or in any other form capable of being converted into such form within a reasonable time. At all reasonable times such register or registers shall be open for inspection and available for copying by the Trustee. Upon due presentation for registration of transfer of any Security of any series at any such office or agency to be maintained for the purpose as provided in Section 3.2, the Issuer shall execute and the Trustee shall authenticate and deliver in the name of the transferee or transferees a new Security or Securities of the same series, maturity date, interest rate, if any, and original issue date in authorized denominations for a like aggregate principal amount. All Securities presented for registration of transfer shall (if so required by the Issuer or the Trustee) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Issuer and the Trustee duly executed by, the Holder or his attorney duly authorized in writing. At the option of the Holder thereof, Securities of any series (other than a Global Security, except as set forth below) may be exchanged for a Security or Securities of such series having authorized denominations and an equal aggregate principal amount, upon surrender of such Securities to be exchanged at the agency of the Issuer that shall be maintained for such purpose in accordance with Section 3.2. All Securities surrendered upon any exchange or transfer provided for in this Indenture shall be promptly cancelled and returned to the Issuer. The Issuer may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer of Securities. No service charge shall be made for any such transaction or for any exchange of Securities of any series as contemplated by the immediately preceding paragraph. The Issuer shall not be required to exchange or register a transfer of (a) any Securities of any series for a period of 15 days next preceding the first mailing or publication of notice of redemption of Securities of such series to be redeemed, (b) any Securities selected, called or being called for redemption, in whole or in part, except, in the case of any Security to be redeemed in part, the portion thereof not so to be redeemed or (c) any Security if the Holder thereof has exercised his right, if any, to require the Issuer to repurchase such Security in whole or in part, except the portion of such Security not required to be repurchased. Notwithstanding any other provision of this Section 2.8, unless and until it is exchanged in whole or in part for Securities in definitive registered form, a Global Security representing all or a part of the Securities of a series may not be transferred except as a whole by the Depositary for such series to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or another nominee of such Depositary or by such Depositary or any such nominee to a successor Depositary for such series or a nominee of such successor Depositary. If at any time the Depositary for any Securities of a series represented by one or more Global Securities notifies the Issuer that it is unwilling or unable to continue as Depositary for such Securities or if at any time the Depositary for such Securities shall no longer be eligible under Section 2.4, the Issuer shall appoint a successor Depositary with respect to such Securities. If a successor Depositary for such Securities is not appointed by the Issuer within 90 days after the Issuer receives such notice or becomes aware of such ineligibility, the Issuer's election pursuant to Section 2.3 that such Securities be represented by one or more Global Securities shall no longer be effective and the Issuer shall execute, and the Trustee, upon receipt of an Issuer Order for the authentication and delivery of definitive Securities of such series, will authenticate and deliver Securities of such series in definitive registered form, in any authorized denominations, in an aggregate principal amount equal to the principal amount of the Global Security or Securities representing such Securities in exchange for such Global Security or Securities. The Issuer may at any time and in its sole discretion determine that the Securities of any series issued in the form of one or more Global Securities shall no longer be represented by a Global Security or Securities. In such event the Issuer shall execute, and the Trustee, upon receipt of an Issuer Order for the authentication and delivery of definitive Securities of such series, shall authenticate and deliver, Securities of such series in definitive registered form, in any authorized denominations, in an aggregate principal amount equal to the principal amount of the Global Security or Securities representing such Securities, in exchange for such Global Security or Securities. If specified by the Issuer pursuant to Section 2.3 with respect to Securities represented by a Global Security, the Depositary for such Global Security may surrender such Global Security in exchange in whole or in part for Securities of the same series in definitive registered form on such terms as are acceptable to the Issuer and such Depositary. Thereupon, the Issuer shall execute, and the Trustee shall authenticate and deliver, without service charge, (i) to the Person specified by such Depositary, a new Security or Securities of the same series, of any authorized denominations as requested by such Person, in an aggregate principal amount equal to and in exchange for such Person's beneficial interest in the Global Security; and (ii) to such Depositary a new Global Security in a denomination equal to the difference, if any, between the principal amount of the surrendered Global Security and the aggregate principal amount of Securities authenticated and delivered pursuant to clause (i) above. Upon the exchange of a Global Security for Securities in definitive registered form in authorized denominations, such Global Security shall be cancelled by the Trustee or an agent of the Issuer or the Trustee. Securities in definitive registered form issued in exchange for a Global Security pursuant to this Section 2.8 shall be registered in such names and in such authorized denominations as the Depositary for such Global Security, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee or an agent of the Trustee or the Issuer or an agent of the Issuer. The Trustee or such agent shall deliver at its office such Securities to or as directed by the Persons in whose names such Securities are so registered. All Securities issued upon any transfer or exchange of Securities shall be valid and legally binding obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such transfer or exchange. SECTION 2.9 Mutilated, Defaced, Destroyed, Lost and Stolen Securities. In case any temporary or definitive Security shall become mutilated, defaced or be destroyed, lost or stolen, the Issuer in its discretion may execute, and upon the written request of any officer of the Issuer, the Trustee shall authenticate and deliver a new Security of the same series, maturity date, interest rate, if any, and original issue date, bearing a number or other distinguishing symbol not contemporaneously outstanding, in exchange and substitution for the mutilated or defaced Security, or in lieu of and in substitution for the Security so destroyed, lost or stolen. In every case the applicant for a substitute Security shall furnish to the Issuer and to the Trustee and any agent of the Issuer or the Trustee such security or indemnity as may be required by the Trustee or the Issuer to indemnify and defend and to save each of the Trustee and the Issuer harmless and, in every case of destruction, loss or theft, evidence to their satisfaction of the destruction, loss or theft of such Security and of the ownership thereof and in the case of mutilation or defacement, shall surrender the Security to the Trustee or such agent. Upon the issuance of any substitute Security, the Issuer may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee or its agent) connected therewith. In case any Security which has matured or is about to mature or has been called for redemption in full shall become mutilated or defaced or be destroyed, lost or stolen, the Issuer may instead of issuing a substitute Security, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated or defaced Security), if the applicant for such payment shall furnish to the Issuer and to the Trustee and any agent of the Issuer or the Trustee such security or indemnity as any of them may require to hold each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Issuer and the Trustee and any agent of the Issuer or the Trustee evidence to the Trustee's satisfaction of the destruction, loss or theft of such Security and of the ownership thereof. Every substitute Security of any series issued pursuant to the provisions of this Section by virtue of the fact that any such Security is destroyed, lost or stolen shall constitute an additional contractual obligation of the Issuer, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone and shall be entitled to all the benefits of (but shall be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Securities of such series duly authenticated and delivered hereunder. All Securities shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, defaced, destroyed, lost or stolen Securities and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. SECTION 2.10 Cancellation of Securities; Disposition Thereof. All Securities surrendered for payment, redemption, registration of transfer or exchange, or for credit against any payment in respect of a sinking or analogous fund, if surrendered to the Issuer or any agent of the Issuer or the Trustee or any agent of the Trustee, shall be delivered to the Trustee or its agent for cancellation or, if surrendered to the Trustee, shall be cancelled by it; and no Securities shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. The Trustee or its agent shall return cancelled Securities to the Issuer. If the Issuer or its agent shall acquire any of the Securities, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Securities unless and until the same are delivered to the Trustee or its agent for cancellation. SECTION 2.11 Temporary Securities. Pending the preparation of definitive Securities for any series, the Issuer may execute and the Trustee shall authenticate and deliver temporary Securities for such series (printed, lithographed, typewritten or otherwise reproduced, in each case in form satisfactory to the Trustee). Temporary Securities of any series shall be issuable in any authorized denomination, and substantially in the form of the definitive Securities of such series but with such omissions, insertions and variations as may be appropriate for temporary Securities, all as may be determined by the Issuer with the concurrence of the Trustee as evidenced by the execution and authentication thereof. Temporary Securities may contain such references to any provisions of this Indenture as may be appropriate. Every temporary Security shall be executed by the Issuer and be authenticated by the Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Securities. Without unreasonable delay the Issuer shall execute and shall furnish definitive Securities of such series and thereupon temporary Securities of such series may be surrendered in exchange therefor without charge at each office or agency to be maintained by the Issuer for that purpose pursuant to Section 3.2 and the Trustee shall authenticate and deliver in exchange for such temporary Securities of such series an equal aggregate principal amount of definitive Securities of the same series having authorized denominations. Until so exchanged, the temporary Securities of any series shall be entitled to the same benefits under this Indenture as definitive Securities of such series, unless otherwise established pursuant to Section 2.3. SECTION 2.12 CUSIP Numbers. The Issuer in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. ARTICLE THREE COVENANTS OF THE ISSUER SECTION 3.1 Payment of Principal and Interest. The Issuer covenants and agrees that it will duly and punctually pay or cause to be paid the principal of and interest, if any, on each of the Securities at the place, at the respective times and in the manner provided in the Securities. SECTION 3.2 Offices for Notices and Payments, etc. So long as any of the Securities are Outstanding, the Issuer will maintain in each Place of Payment, an office or agency where the Securities may be presented for payment, an office or agency where the Securities may be presented for registration of transfer and for exchange as in this Indenture provided, and an office or agency where notices and demands to or upon the Issuer in respect of the Securities or of this Indenture may be served. In case the Issuer shall at any time fail to maintain any such office or agency, or shall fail to give notice to the Trustee of any change in the location thereof, presentation may be made and notice and demand may be served in respect of the Securities or of this Indenture at the Corporate Trust Office. The Issuer hereby initially designates the Corporate Trust Office for each such purpose and appoints the Trustee as registrar and paying agent and as the agent upon whom notices and demands may be served with respect to the Securities. SECTION 3.3. No Interest Extension. In order to prevent any accumulation of claims for interest after maturity thereof, the Issuer will not directly or indirectly extend or consent to the extension of the time for the payment of any claim for interest on any of the Securities and will not directly or indirectly be a party to or approve any such arrangement by the purchase or funding of said claims or in any other manner; provided, however, that this Section 3.3 shall not apply in any case where an extension shall be made pursuant to a plan proposed by the Issuer to the Holders of all Securities of any series then Outstanding. SECTION 3.4 Appointments to Fill Vacancies in Trustee's Office. The Issuer, whenever necessary to avoid or fill a vacancy in the office of the Trustee, will appoint, in the manner provided in Section 6.10, a Trustee, so that there shall at all times be a Trustee hereunder. SECTION 3.5 Provision as to Paying Agent. (a) If the Issuer shall appoint a paying agent other than the Trustee, it will cause such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provisions of this Section 3.5, (1) that it will hold all sums held by it as such agent for the payment of the principal of or interest, if any, on the Securities (whether such sums have been paid to it by the Issuer or by any other obligor on the Securities) in trust for the benefit of the Holders of the Securities and the Trustee; and (2) that it will give the Trustee notice of any failure by the Issuer (or by any other obligor on the Securities) to make any payment of the principal of or interest, if any, on the Securities when the same shall be due and payable; and (3) that it will, at any time during the continuance of any such failure, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such paying agent. (b) If the Issuer shall act as its own paying agent, it will, on or before each due date of the principal of or interest, if any, on the Securities, set aside, segregate and hold in trust for the benefit of the Holders of the Securities a sum sufficient to pay such principal or interest, if any, so becoming due and will notify the Trustee of any failure to take such action and of any failure by the Issuer (or by any other obligor under the Securities) to make any payment of the principal of or interest, if any, on the Securities when the same shall become due and payable. (c) Anything in this Section 3.5 to the contrary notwithstanding, the Issuer may, at any time, for the purpose of obtaining a satisfaction and discharge of this Indenture, or for any other reason, pay or cause to be paid to the Trustee all sums held in trust by it, or any paying agent hereunder, as required by this Section 3.5, such sums to be held by the Trustee upon the trusts herein contained. (d) Anything in this Section 3.5 to the contrary notwithstanding, any agreement of the Trustee or any paying agent to hold sums in trust as provided in this Section 3.5 is subject to Sections 10.3 and 10.4. (e) Whenever the Issuer shall have one or more paying agents, it will, on or before each due date of the principal of or interest, if any, on any Securities, deposit with a paying agent a sum sufficient to pay the principal or interest, if any, so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal or interest, if any, and (unless such paying agent is the Trustee) the Issuer will promptly notify the Trustee of its action or failure so to act. SECTION 3.6 Restriction on Creation of Secured Debt. So long as any of the Securities are outstanding, the Issuer shall not at any time create, incur, assume or guarantee, and shall not cause, suffer or permit a Restricted Subsidiary to create, incur, assume or guarantee, any Secured Debt that is expressly by its terms Subordinated Indebtedness without making effective provision (and the Issuer covenants that in such case it will make or cause to be made such effective provision) whereby the Securities then Outstanding and any other indebtedness of or guaranteed by the Issuer or such Restricted Subsidiary then entitled thereto, subject to applicable priorities of payment, shall be secured by such mortgage, security interest, pledge, lien or encumbrance equally and ratably with any and all other obligations and indebtedness thereby secured, so long as any such other obligations and indebtedness shall be so secured; provided, that if any such mortgage, security interest, pledge, lien or encumbrance securing such Subordinated Indebtedness ceases to exist, such equal and ratable security for the benefit of the Holders of Securities shall automatically cease to exist without any further action; provided further that if such Subordinated Indebtedness is expressly subordinated to the Securities, the mortgage, security interest, pledge, lien or encumbrance securing such Subordinated Indebtedness shall be subordinate and junior to the mortgage, security interest, pledge, lien or encumbrance securing the Securities with the same relative priority as such Subordinated Indebtedness shall have with respect to the Securities; provided, further that the foregoing covenants shall not be applicable to the following: (a)(i) Any mortgage, security interest, pledge, lien or encumbrance on any property hereafter acquired (including acquisition through merger or consolidation) or constructed by the Issuer or a Restricted Subsidiary and created contemporaneously with, or within twelve months after, such acquisition or the completion of construction to secure or provide for the payment of all or any part of the purchase price of such property or the cost of construction thereof, as the case may be; or (ii) any mortgage on property (including any unimproved portion of partially improved property) of the Issuer or a Restricted Subsidiary created within twelve months of completion of construction of a new plant or plants on such property to secure all or part of the cost of such construction if, in the opinion of the Board of Directors, such property or such portion thereof was prior to such construction substantially unimproved for the use intended by the Issuer; or (iii) the acquisition of property subject to any mortgage, security interest, pledge, lien or encumbrance upon such property existing at the time of acquisition thereof, whether or not assumed by the Issuer or such Restricted Subsidiary; or (iv) any mortgage, security interest, pledge, lien or encumbrance existing on the property or on the outstanding shares or indebtedness of a corporation or other entity at the time such corporation or other entity shall become a Restricted Subsidiary; or (v) any mortgage, security interest, pledge, lien or encumbrance on property of a corporation or other entity existing at the time such corporation or other entity is merged into or consolidated with the Issuer or a Restricted Subsidiary or at the time of a sale, lease or other disposition of the properties of a corporation or other entity as an entirety or substantially as an entirety to the Issuer or a Restricted Subsidiary; or (b) Mortgages on property of the Issuer or a Restricted Subsidiary in favor of the United States of America or any State thereof or any foreign government, or any department, agency or instrumentality or political subdivision of any thereof, to secure partial, progress, advance or other payments pursuant to any contract or statute or to secure any indebtedness incurred for the purpose of financing all or any part of the purchase price or the cost of construction of the property subject to such mortgages; or (c) Any mortgage, security interest, pledge, lien or encumbrance existing on property owned by the Issuer or any of its Subsidiaries on the date of this Indenture; or (d) Any mortgage, security interest, pledge, lien or encumbrance created pursuant to the creation of trusts or other arrangements funded solely with cash, cash equivalents or other marketable investments or securities of the type customarily subject to such arrangements in customary financial practice with respect to long-term or medium-term Indebtedness for money borrowed, the sole purpose of which is to make provision for the retirement or defeasance, without prepayment, of Indebtedness; or (e) Any mortgage, security interest, pledge, lien or encumbrance on the assets or properties of ENSTAR Alaska; or (f) Any extension, renewal or replacement (or successive extensions, renewals or replacements) in whole or in part of any mortgage, security interest, pledge, lien or encumbrance referred to in the foregoing subparagraphs (a) through (e); provided, however, that the principal amount of Secured Debt secured thereby shall not exceed the principal amount outstanding at the time of such extension, renewal or replacement, and that such extension, renewal or replacement shall be limited to the property which secured the mortgage, security interest, pledge, lien or encumbrance so extended, renewed or replaced and additions to such property. Notwithstanding the foregoing provisions of this Section 3.6, the Issuer and any one or more Restricted Subsidiaries may create, incur, assume or guarantee Secured Debt which would otherwise be subject to the foregoing restrictions in an aggregate amount that, without duplication, together with all other Secured Debt of the Issuer and its Restricted Subsidiaries which would otherwise be subject to the foregoing restrictions (not including Secured Debt permitted to be secured under subparagraphs (a) through (f) above) and the aggregate value of the Sale and Leaseback Transactions (as defined in Section 3.7) in existence at such time (not including Sale and Leaseback Transactions the proceeds of which have been or will be applied in accordance with clause (b) of Section 3.7) and all Indebtedness for money borrowed of Restricted Subsidiaries in existence at such time (not including Indebtedness permitted to be incurred under subparagraphs (a) through (e) of Section 3.9), does not at the time exceed 10% of Consolidated Net Tangible Assets (excluding ENSTAR Alaska). Solely for purposes of subparagraphs (a) through (f) above, the term "mortgage" shall include any arrangements in connection with a production payment or similar financing arrangement. SECTION 3.7 Restriction on Sale and Leaseback Transactions. The Issuer will not, and will not permit any Restricted Subsidiary to, sell or transfer (except to the Issuer or to one or more Restricted Subsidiaries, or both) any Principal Property owned by it and which has been in full operation for more than 120 days prior to such sale or transfer with the intention (i) of taking back a lease on such property (other than a lease for a period not exceeding 36 months) and (ii) that the use by the Issuer or such Restricted Subsidiary of such property will be discontinued on or before the expiration of the term of such lease (any such transaction being herein referred to as a "Sale and Leaseback Transaction"), unless (a) the Issuer or such Restricted Subsidiary would be entitled, pursuant to the provisions of Section 3.6, to incur Secured Debt equal in amount to the amount realized or to be realized upon such sale or transfer secured by a mortgage on the property to be leased without equally and ratably securing the Securities, or (b) the Issuer or a Restricted Subsidiary shall apply an amount equal to the value of the property so leased to the retirement (other than any mandatory retirement), within 120 days of the effective date of any such arrangement, of indebtedness for money borrowed by the Issuer or any Restricted Subsidiary (other than such indebtedness owned by the Issuer or any Restricted Subsidiary) which was recorded as funded debt as of the date of its creation and which, in the case of such indebtedness of the Issuer, is not subordinate and junior in right of payment to the prior payment of the Securities; provided, however, that the amount to be so applied to the retirement of such indebtedness shall be reduced by (i) the aggregate principal amount of any Securities delivered within 120 days of the effective date of any such arrangement to the Trustee for retirement and cancellation, and (ii) the aggregate principal amount of such indebtedness (other than the Securities) retired by the Issuer or a Restricted Subsidiary within 120 days of the effective date of any such arrangement. The term "value" shall mean, with respect to a Sale and Leaseback Transaction, as of any particular time, the amount equal to the greater of (i) the net proceeds of the sale of the property leased pursuant to such Sale and Leaseback Transaction, or (ii) the fair value of such property at the time of entering into such Sale and Leaseback Transaction, as determined by the Board of Directors, in either case divided first by the number of full years of the term of the lease and then multiplied by the number of full years of such term remaining at the time of determination, without regard to any renewal or extension options contained in the lease. SECTION 3.8 Restriction on Transfer of Principal Property to Unrestricted Subsidiary. The Issuer will not itself, and will not permit any Restricted Subsidiary to, transfer (whether by merger, consolidation or otherwise) any Principal Property to any Unrestricted Subsidiary, except for fair value as determined by the Board of Directors, unless it shall apply an amount equal to the fair value of such property at the time of such transfer, as so determined, to the retirement (other than any mandatory retirement), within 10 days of the effective date of such transfer, of indebtedness for money borrowed by the Issuer or any Restricted Subsidiary (other than such indebtedness owned by the Issuer or any Restricted Subsidiary) which was recorded as funded debt as of the date of its creation and which, in case of such indebtedness of the Issuer, is not subordinate and junior in right of payment to the prior payment of the Securities; provided, however, that the amount to be so applied to the retirement of such indebtedness shall be reduced by (i) the aggregate principal amount of any Securities delivered within 10 days of the effective date of any such arrangement to the Trustee for retirement and cancellation, and (ii) the aggregate principal amount of such indebtedness (other than Securities) retired by the Issuer or a Restricted Subsidiary within 10 days of the effective date of any such arrangement. SECTION 3.9 Restriction on Incurrence of Indebtedness by Restricted Subsidiaries. So long as any of the Securities are outstanding, the Issuer shall not at any time permit any Restricted Subsidiary to create, incur, assume or guarantee any Indebtedness for money borrowed; provided that the foregoing covenant shall not be applicable to the following: (a) any Indebtedness of ENSTAR Alaska; (b) any Secured Debt that is permitted to be created, incurred, assumed or guaranteed pursuant to subparagraphs (a) through (f) of Section 3.6; (c) any Indebtedness of a Restricted Subsidiary existing at the time such Restricted Subsidiary was acquired by the Issuer (including without limitation Indebtedness incurred by such Restricted Subsidiary in connection with its acquisition by the Issuer); (d) intercompany Indebtedness owed to the Issuer by any Restricted Subsidiary and intercompany Indebtedness owed to any wholly owned Subsidiary of the Issuer by any Restricted Subsidiary; or (e) any extension, renewal or replacement (or successive extensions, renewals or replacements) in whole or in part of any Indebtedness referred to in the foregoing subparagraphs (a) through (d); provided, however, that the principal amount of Indebtedness so extended, renewed or replaced shall not exceed the principal amount outstanding at the time of such extension, renewal or replacement. Notwithstanding the foregoing provisions of this Section 3.9, any one or more Restricted Subsidiaries may create, incur, assume or guarantee Indebtedness that would otherwise be subject to the foregoing restrictions in an aggregate amount that, without duplication, together with all Indebtedness of Restricted Subsidiaries in existence at such time (not including Indebtedness permitted under subparagraphs (a) through (e) above), all Secured Debt of the Issuer and its Restricted Subsidiaries in existence at such time (not including Secured Debt permitted to be secured under subparagraphs (a) through (f) of Section 3.6) and the aggregate value of Sale and Leaseback Transactions (as defined in Section 3.7) in existence at such time (not including Sale and Leaseback Transactions the proceeds of which have been or will be applied in accordance with clause (b) of Section 3.7) does not at the time exceed 10% of Consolidated Net Tangible Assets of the Issuer and its Restricted Subsidiaries (excluding ENSTAR Alaska). SECTION 3.10 Limitation on Incurrence of Additional Indebtedness. So long as any of the Securities are outstanding, the Issuer shall not, and shall not permit any Restricted Subsidiary to, create, incur, assume, guarantee or otherwise become obligated with respect to any Indebtedness described in clause (a) of the definition of Indebtedness, unless, after giving effect thereto, the Issuer's EBITDA/Interest Ratio on the date thereof would be at least 2.5 to 1.0, determined on a pro forma basis as if the incurrence of such additional Indebtedness and the application of the net proceeds therefrom had occurred at the beginning of the twelve-month period used to calculate the Issuer's EBITDA/Interest Ratio; provided that the foregoing covenant shall not be applicable to the following: (a) (i) Indebtedness of the Issuer or any Restricted Subsidiary outstanding on the date of this Indenture or (ii) Indebtedness of the Issuer or any Restricted Subsidiary under a revolving credit facility to the extent that the aggregate commitment thereunder does not exceed $475 million, the maximum aggregate commitment for the Issuer's revolving credit facility on the date of this Indenture; (b) intercompany Indebtedness owed to the Issuer by any Restricted Subsidiary and intercompany Indebtedness owed to any wholly owned Subsidiary of the Issuer by any Restricted Subsidiary; or (c) any extension, renewal or replacement (or successive extensions, renewals or replacements) in whole or in part of any Indebtedness referred to in the foregoing subparagraphs (a) through (b); provided, however, that the principal amount of Indebtedness so extended, renewed or replaced shall not exceed the principal amount outstanding at the time of such extension, renewal or replacement. SECTION 3.11 Limitation on Issuance of Certain Other Subordinated Indebtedness. The Issuer shall not issue, guarantee, assume or incur, directly or indirectly, any Indebtedness which by its terms is both (a) subordinate or junior in right of payment to Senior Indebtedness and (b) senior in right of payment to the Securities. ARTICLE FOUR SECURITYHOLDERS LISTS AND REPORTS BY THE ISSUER AND THE TRUSTEE SECTION 4.1 Issuer to Furnish Trustee Information as to Names and Addresses of Securityholders. The Issuer and any other obligor on the Securities covenant and agree that they will furnish or cause to be furnished to the Trustee a list in such form as the Trustee may reasonably require of the names and addresses of the Holders of the Securities of each series: (a) semiannually and not more than 15 days after each March 1 and September 1, and (b) at such other times as the Trustee may request in writing, within 30 days after receipt by the Issuer of any such request,provided that if and so long as the Trustee shall be the registrar for such series, such list shall not be required to be furnished. SECTION 4.2 Preservation and Disclosure of Securityholders Lists. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the Holders of each series of Securities (i) contained in the most recent list furnished to it as provided in Section 4.1, and (ii) received by it in the capacity of registrar or paying agent for such series, if so acting. The Trustee may destroy any list furnished to it as provided in Section 4.1 upon receipt of a new list so furnished. (b) In case three or more Holders of Securities (hereinafter referred to as "applicants") apply in writing to the Trustee and furnish to the Trustee reasonable proof that each such applicant has owned a Security for a period of at least six months preceding the date of such application, and such application states that the applicants desire to communicate with other Holders of Securities of a particular series (in which case the applicants must all hold Securities of such series) or with Holders of all Securities with respect to their rights under this Indenture or under such Securities and such application is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall, within five Business Days after the receipt of such application, at its election, either (i) afford to such applicants access to the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.2, or (ii) inform such applicants as to the approximate number of Holders of Securities of such series or of all Securities, as the case may be, whose names and addresses appear in the information preserved at the time by the Trustee, in accordance with the provisions of subsection (a) of this Section 4.2, and as to the approximate cost of mailing to such Securityholders the form of proxy or other communication, if any, specified in such application. If the Trustee shall elect not to afford to such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Securityholder of such series or all Holders of Securities, as the case may be, whose name and address appears in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.2 a copy of the form of proxy or other communication which is specified in such request, with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five days after such tender, the Trustee shall mail to such applicants and file with the Commission, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interests of the Holders of Securities of such series or of all Securities, as the case may be, or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If the Commission, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, the Commission shall find, after notice and opportunity for hearing, that all the objections so sustained have been met, and shall enter an order so declaring, the Trustee shall mail copies of such material to all such Securityholders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Trustee shall be relieved of any obligation or duty to such applicants respecting their application. (c) Each and every Holder of Securities, by receiving and holding the same, agrees with the Issuer and the Trustee that neither the Issuer nor the Trustee nor any agent of the Issuer or the Trustee shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders of Securities in accordance with the provisions of subsection (b) of this Section 4.2, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under such subsection (b). SECTION 4.3 Reports by the Issuer. The Issuer covenants: (a) to file with the Trustee, within 15 days after the Issuer is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Issuer may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended; or, if the Issuer is not required to file information, documents or reports pursuant to either of such Sections, then to file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, docVE LaserJet Series IIVEHP11.PRSational securities exchange as may be prescribed from time to time in such rules and regulations; (b) to file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Issuer with the conditions and covenants provided for in this Indenture as may be required from time to time by such rules and regulations; (c) to transmit by mail to the Holders of Securities within 30 days after the filing thereof with the Trustee, in the manner and to the extent provided in Section 4.4(c), such summaries of any information, documents and reports required to be filed by the Issuer pursuant to subsections (a) and (b) of this Section 4.3 as may be required to be transmitted to such Holders by rules and regulations prescribed from time to time by the Commission; and (d) furnish to the Trustee, not less than annually, a brief certificate from the principal executive officer, principal financial officer or principal accounting officer as to his knowledge of the Issuer's compliance with all conditions and covenants under this Indenture. For purposes of this subsection (d), such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Indenture. SECTION 4.4 Reports by the Trustee. (a) Within 60 days after January 1 of each year commencing with the year 1994, the Trustee shall transmit by mail to the Holders of Securities, as provided in subsection (c) of this Section, a brief report dated as of such January 1 with respect to any of the following events which may have occurred within the last 12 months (but if no such event has occurred within such period, no report need be transmitted): (i) any change to its eligibility under Section 6.9 and its qualification under Section 6.8; (ii) the creation of, or any material change to, a relationship specified in paragraph (i) through (x) of Section 6.8 (c); (iii) the character and amount of any advances (and if the Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee (as such) which remain unpaid on the date of such report and for the reimbursement of which it claims or may claim a lien or charge, prior to that of the Securities of any series, on any property or funds held or collected by it as Trustee, except that the Trustee shall not be required (but may elect) to report such advances if such advances so remaining unpaid aggregate not more than 1/2 of 1% of the principal amount of all Securities Outstanding on the date of such report; (iv) the amount, interest rate, if any, and maturity date of all other indebtedness owing by the Issuer (or by any other obligor on the Securities) to the Trustee in its individual capacity on the date of such report, with a brief description of any property held as collateral security therefor, except any indebtedness based upon a creditor relationship arising in any manner described in Section 6.13(b) (2), (3), (4) or (6); (v) any change to the property and funds, if any, physically in the possession of the Trustee (as such) on the date of such report; (vi) any additional issue of Securities which the Trustee has not previously reported; and (vii) any action taken by the Trustee in the performance of its duties under this Indenture which it has not previously reported and which in its opinion materially affects the Securities, except action in respect of a default, notice of which has been or is to be withheld by it in accordance with the provisions of Section 5.8. (b) The Trustee shall transmit to the Securityholders of each series, as provided in subsection (c) of this Section 4.4, a brief report with respect to the character and amount of any advances (and if the Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee, as such, since the date of the last report transmitted pursuant to the provisions of subsection (a) of this Section 4.4 (or if no such report has yet been so transmitted, since the date of this Indenture) for the reimbursement of which it claims or may claim a lien or charge prior to that of the Securities of such series on property or funds held or collected by it as Trustee and which it has not previously reported pursuant to this subsection (b), except that the Trustee shall not be required (but may elect) to report such advances if such advances remaining unpaid at any time aggregate 10% or less of the principal amount of all Securities Outstanding at such time, such report to be transmitted within 90 days after such time. (c) Reports pursuant to this Section shall be transmitted by mail: (i) to all Holders of Securities, as the names and addresses of such Holders appear upon the registry books of the Issuer; and (ii) to all other Persons to whom such reports are required to be transmitted pursuant to Section 313(c) of the Trust Indenture Act of 1939. (d) A copy of each such report shall, at the time of such transmission to Securityholders, be furnished to the Issuer and be filed by the Trustee with each stock exchange upon which the Securities of any applicable series are listed and also with the Commission. The Issuer agrees to promptly notify the Trustee with respect to any series when and as the Securities of such series become admitted to trading on any national securities exchange. ARTICLE FIVE REMEDIES OF THE TRUSTEE AND SECURITY HOLDERS ON EVENT OF DEFAULT SECTION 5.1 Events of Default. "Event of Default", wherever used herein with respect to Securities of any series, means any one or more of the following events (whatever the reason for such Event of Default and whether it shall be occasioned by the provisions of Article Thirteen or otherwise), unless it is either inapplicable to a particular series or it is specifically deleted or modified in or pursuant to the Board Resolution or supplemental indenture establishing such series of Securities or in the form of Security, for such series: (a) default in the payment of any installment of interest upon any of the Securities of such series as and when the same shall become due and payable, and continuance of such default for a period of 30 days; or (b) default in the payment of the principal of or premium, if any, of the Securities of such series as and when the same shall become due and payable either at maturity, upon redemption, by declaration or otherwise; or (c) default in the payment or satisfaction of any sinking fund or other purchase obligation with respect to Securities of such series, as and when such obligation shall become due and payable as in this Indenture expressed; or (d) failure on the part of the Issuer duly to observe or perform any other of the covenants or agreements on the part of the Issuer in the Securities of such series or in this Indenture continued for a period of 60 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Issuer by the Trustee by certified or registered mail, or to the Issuer and the Trustee by the Holders of at least 25% in aggregate principal amount of the Securities of such series then Outstanding; or (e) without the consent of the Issuer a court having jurisdiction shall enter an order for relief with respect to the Issuer under the Bankruptcy Code or without the consent of the Issuer a court having jurisdiction shall enter a judgment, order or decree adjudging the Issuer a bankrupt or insolvent, or enter an order for relief for reorganization, arrangement, adjustment or composition of or in respect of the Issuer under the Bankruptcy Code or applicable state insolvency law and the continuance of any such judgment, order or decree is unstayed and in effect for a period of 90 consecutive days; or (f) the Issuer shall institute proceedings for entry of an order for relief with respect to the Issuer under the Bankruptcy Code or for an adjudication of insolvency, or shall consent to the institution of bankruptcy or insolvency proceedings against it, or shall file a petition seeking, or seek or consent to reorganization, arrangement, composition or relief under the Bankruptcy Code or any applicable state law, or shall consent to the filing of such petition or to the appointment of a receiver, custodian, liquidator, assignee, trustee, sequestrator or similar official of the Issuer or of substantially all of its property, or the Issuer shall make a general assignment for the benefit of creditors as recognized under the Bankruptcy Code; or (g) default under any bond, debenture, note or other evidence of Indebtedness for money borrowed by the Issuer or under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Issuer, whether such Indebtedness exists on the date hereof or shall hereafter be created, which default shall have resulted in such Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, or any default in payment of such Indebtedness (after the expiration of any applicable grace periods and the presentation of any debt instruments, if required), if the aggregate amount of all such Indebtedness that has been so accelerated and with respect to which there has been such a default in payment shall exceed $25,000,000, without each such default and acceleration having been rescinded or annulled within a period of ten days after there shall have been given to the Issuer by the Trustee by certified or registered mail, or to the Issuer and the Trustee by the Holders of at least 25% in aggregate principal amount of the Securities of such series then Outstanding, a written notice specifying each such default and requiring the Issuer to cause each such default and acceleration to be rescinded or annulled and stating that such notice is a "Notice of Default" hereunder; or (h) any other Event of Default provided with respect to the Securities of such series. If an Event of Default with respect to Securities of any series then Outstanding occurs and is continuing, then and in each and every such case, unless the principal of all of the Securities of such series shall have already become due and payable, either the Trustee or the Holders of not less than 25% in aggregate principal amount of the Securities of such series then Outstanding, by notice in writing to the Issuer (and to the Trustee if given by Securityholders), may declare the principal (or, if the Securities of such series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of such series) of all the Securities of such series and the interest, if any, accrued thereon to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, notwithstanding anything to the contrary contained in this Indenture or in the Securities of such series. This provision, however, is subject to the condition that, if at any time after the unpaid principal amount (or such specified amount) of the Securities of such series shall have been so declared due and payable and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, the Issuer shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest, if any, upon all of the Securities of such series and the principal of any and all Securities of such series which shall have become due otherwise than by acceleration (with interest on overdue installments of interest, if any, to the extent that payment of such interest is enforceable under applicable law and on such principal at the rate borne by the Securities of such series to the date of such payment or deposit) and the reasonable compensation, disbursements, expenses and advances of the Trustee, and any and all defaults under this Indenture, other than the nonpayment of such portion of the principal amount of and accrued interest, if any, on Securities of such series which shall have become due by acceleration, shall have been cured or shall have been waived in accordance with Section 5.7 or provision deemed by the Trustee to be adequate shall have been made therefor, then and in every such case the Holders of a majority in aggregate principal amount of the Securities of such series then Outstanding, by written notice to the Issuer and to the Trustee, may rescind and annul such declaration and its consequences; but no such rescission and annulment shall extend to or shall affect any subsequent default, or shall impair any right consequent thereon. If any Event of Default with respect to the Issuer specified in Section 5.1(e) or 5.1(f) occurs, all unpaid principal amount (or, if the Securities of any series then Outstanding are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of each such series) and accrued interest on all Securities of each series then Outstanding shall ipso facto become and be immediately due and payable without any declaration or other act by the Trustee or any Securityholder. If the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned because of such rescission or annulment or for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Issuer, the Trustee and the Securityholders shall be restored respectively to their several positions and rights hereunder, and all rights, remedies and powers of the Issuer, the Trustee and the Securityholders shall continue as though no such proceeding had been taken. Except with respect to an Event of Default pursuant to Section 5.1 (a), (b) or (c), the Trustee shall not be charged with knowledge of any Event of Default unless written notice thereof shall have been given to a Responsible Officer by the Issuer, a paying agent or any Securityholder. SECTION 5.2 Payment of Securities on Default; Suit Therefor. The Issuer covenants that (a) if default shall be made in the payment of any installment of interest upon any of the Securities of any series then Outstanding as and when the same shall become due and payable, and such default shall have continued for a period of 30 days, or (b) if default shall be made in the payment of the principal of any of the Securities of such series as and when the same shall have become due and payable, whether at maturity of the Securities of such series or upon redemption or by declaration or otherwise, then, upon demand of the Trustee, the Issuer will pay to the Trustee, for the benefit of the Holders of the Securities, the whole amount that then shall have become due and payable on all such Securities of such series for principal or interest, if any, or both, as the case may be, with interest upon the overdue principal and (to the extent that payment of such interest is enforceable under applicable law) upon the overdue installments of interest, if any, at the rate borne by the Securities of such series; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including a reasonable compensation to the Trustee, its agents, attorneys and counsel, and any expenses or liabilities incurred by the Trustee hereunder other than through its negligence or bad faith. If the Issuer shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any actions or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against the Issuer or any other obligor on the Securities of such series and collect in the manner provided by law out of the property of the Issuer or any other obligor on the Securities of such series, wherever situated, the moneys adjudged or decreed to be payable. If there shall be pending proceedings for the bankruptcy or for the reorganization of the Issuer or any other obligor on the Securities of any series then Outstanding under any bankruptcy, insolvency or other similar law now or hereafter in effect, or if a receiver or trustee or similar official shall have been appointed for the property of the Issuer or such other obligor, or in the case of any other similar judicial proceedings relative to the Issuer or other obligor upon the Securities of such series, or to the creditors or property of the Issuer or such other obligor, the Trustee, irrespective of whether the principal of the Securities of such series shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section 5.2, shall be entitled and empowered by intervention in such proceedings or otherwise to file and prove a claim or claims for the whole amount of principal and interest, if any, owing and unpaid in respect of the Securities of such series, and, in case of any judicial proceedings, to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and of the Securityholders allowed in such judicial proceedings relative to the Issuer or any other obligor on the Securities of such series, its or their creditors, or its or their property, and to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute the same after the deduction of its charges and expenses, and any receiver, assignee or trustee or similar official in bankruptcy or reorganization is hereby authorized by each of the Securityholders to make such payments to the Trustee, and, if the Trustee shall consent to the making of such payments directly to the Securityholders, to pay to the Trustee any amount due it for compensation and expenses, including counsel fees and expenses incurred by it up to the date of such distribution. To the extent that such payment of reasonable compensation, expenses and counsel fees and expenses out of the estate in any such proceedings shall be denied for any reason, payment of the same shall be secured by a lien on, and shall be paid out of, any and all distributions, dividends, moneys, securities and other property which the Holders of the Securities of such series may be entitled to receive in such proceedings, whether in liquidation or under any plan of reorganization or arrangement or otherwise. All rights of action and of asserting claims under this Indenture, or under any of the Securities, may be enforced by the Trustee without the possession of any of the Securities, or the production thereof at any trial or other proceeding relative thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall be for the ratable benefit of the Holders of the Securities of the series in respect of which such judgment has been recovered. SECTION 5.3 Application of Moneys Collected by Trustee. Any moneys collected by the Trustee pursuant to Section 5.2 with respect to Securities of any series then Outstanding shall be applied in the order following, at the date or dates fixed by the Trustee for the distribution of such moneys, upon presentation of the several Securities of such series, and stamping thereon the payment, if only partially paid, and upon surrender thereof, if fully paid: FIRST: To the payment of costs and expenses of collection and reasonable compensation to the Trustee, its agents, attorneys and counsel, and of all other expenses and liabilities incurred, and all advances made, by the Trustee pursuant to Section 6.6 except as a result of its negligence or bad faith; SECOND: If the principal of the Outstanding Securities of such series shall not have become due and be unpaid, to the payment of interest, if any, on the Securities of such series, in the order of the maturity of the installments of such interest, if any, with interest (to the extent that such interest has been collected by the Trustee) upon the overdue installments of interest, if any, at the rate borne by the Securities of such series, such payment to be made ratably to the Persons entitled thereto; THIRD: If the principal of the Outstanding Securities of such series shall have become due, by declaration or otherwise, to the payment of the whole amount then owing and unpaid upon the Securities of such series for principal and interest, if any, with interest on the overdue principal and (to the extent that such interest has been collected by the Trustee) upon overdue installments of interest, if any, at the rate borne by the Securities of such series; and in case such moneys shall be insufficient to pay in full the whole amounts so due and unpaid upon the Securities of such series, then to the payment of such principal and interest, if any, without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any Security over any other Security, ratably to the aggregate of such principal and accrued and unpaid interest; and FOURTH: To the payment of any surplus then remaining to the Issuer, its successors or assigns, or to whomsoever may be lawfully entitled to receive the same. No claim for interest which in any manner at or after maturity shall have been transferred or pledged separate or apart from the Securities to which it relates, or which in any manner shall have been kept alive after maturity by an extension (otherwise than pursuant to an extension made pursuant to a plan proposed by the Issuer to the Holders of all Securities of any series then Outstanding), purchase, funding or otherwise by or on behalf or with the consent or approval of the Issuer shall be entitled, in case of a default hereunder, to any benefit of this Indenture, except after prior payment in full of the principal of all Securities of any series then Outstanding and of all claims for interest not so transferred, pledged, kept alive, extended, purchased or funded. SECTION 5.4 Proceedings by Securityholders. No Holder of any Securities of any series then Outstanding shall have any right by virtue of or by availing of any provision of this Indenture to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Indenture or for the appointment of a receiver or trustee or similar official, or for any other remedy hereunder, unless such Holder previously shall have given to the Trustee written notice of default and of the continuance thereof, as hereinbefore provided, and unless the Holders of not less than 25% in aggregate principal amount of the Securities of such series then Outstanding shall have made written request to the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee for 60 days after its receipt of such notice, request and offer of indemnity, shall have neglected or refused to institute any such action, suit or proceeding, it being understood and intended, and being expressly covenanted by the Holder of every Security of such series with every other taker and Holder and the Trustee, that no one or more Holders of Securities of such series shall have any right in any manner whatever by virtue of or by availing of any provision of this Indenture or of the Securities to affect, disturb or prejudice the rights of any other Holder of such Securities of such series, or to obtain or seek to obtain priority over or preference as to any other such Holder, or to enforce any right under this Indenture or the Securities, except in the manner herein provided and for the equal, ratable and common benefit of all Holders of Securities of such series. Notwithstanding any other provisions in this Indenture, but subject to Article Thirteen, the right of any Holder of any Security to receive payment of the principal of and interest, if any, on such Security, on or after the respective due dates expressed in such Security, or to institute suit for the enforcement of any such payment on or after such respective dates shall not be impaired or affected without the consent of such Holder. SECTION 5.5 Proceedings by Trustee. In case of an Event of Default hereunder, the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either by suit in equity or by action at law or by proceedings in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law. SECTION 5.6 Remedies Cumulative and Continuing. All powers and remedies given by this Article Five to the Trustee or to the Securityholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any thereof or of any other powers and remedies available to the Trustee or the Securityholders, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture, and no delay or omission of the Trustee or of any Securityholder to exercise any right or power accruing upon any default occurring and continuing as aforesaid shall impair any such right or power, or shall be construed to be a waiver of any such default or an acquiescence therein; and, subject to the provisions of Section 5.4, every power and remedy given by this Article Five or by law to the Trustee or to the Securityholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Securityholders. SECTION 5.7 Direction of Proceedings; Waiver of Defaults by Majority of Securityholders. The Holders of a majority in aggregate principal amount of the Securities of any series then Outstanding shall have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to Securities of such series; provided, however, that (subject to the provisions of Section 6.1) the Trustee shall have the right to decline to follow any such direction if the Trustee shall determine upon advice of counsel that the action or proceeding so directed may not lawfully be taken or if the Trustee in good faith by its board of directors, its executive committee, or a trust committee of directors or Responsible Officers or both shall determine that the action or proceeding so directed would involve the Trustee in personal liability. The Holders of a majority in aggregate principal amount of the Securities of any series then Outstanding may on behalf of the Holders of all of the Securities of such series waive any past default or Event of Default hereunder and its consequences except a default in the payment of interest, if any, on, or the principal of, the Securities of such series. Upon any such waiver the Issuer, the Trustee and the Holders of the Securities of such series shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Whenever any default or Event of Default hereunder shall have been waived as permitted by this Section 5.7, said default or Event of Default shall for all purposes of the Securities and this Indenture be deemed to have been cured and to be not continuing. SECTION 5.8 Notice of Defaults. The Trustee shall, within 90 days after the occurrence of a default, with respect to Securities of any series then Outstanding, mail to all Holders of Securities of such series, as the names and the addresses of such Holders appear upon the Securities register, notice of all defaults known to the Trustee with respect to such series, unless such defaults shall have been cured before the giving of such notice (the term "defaults" for the purpose of this Section 5.8 being hereby defined to be the events specified in clauses (a), (b), (c), (d), (e), (f), (g) and (h) of Section 5.1, not including periods of grace, if any, provided for therein and irrespective of the giving of the written notice specified in said clause (d) or (g) but in the case of any default of the character specified in said clause (d) or (g) no such notice to Securityholders shall be given until at least 60 days after the giving of written notice thereof to the Issuer pursuant to said clause (d) or (g), as the case may be); provided, however, that, except in the case of default in the payment of the principal of or interest, if any, on any of the Securities, or in the payment or satisfaction of any sinking fund or other purchase obligation, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors or Responsible Officers or both of the Trustee in good faith determines that the withholding of such notice is in the best interests of the Securityholders. SECTION 5.9 Undertaking to Pay Costs. All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the cost of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorney's fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.9 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Securityholder, or group of Securityholders, holding in the aggregate more than 10% in principal amount of the Securities of any series then Outstanding, or to any suit instituted by any Securityholders for the enforcement of the payment of the principal of or interest, if any, on any Security against the Issuer on or after the due date expressed in such Security. ARTICLE SIX CONCERNING THE TRUSTEE SECTION 6.1 Duties and Responsibilities of the Trustee; During Default; Prior to Default. With respect to the Holders of any series of Securities issued hereunder, the Trustee, prior to the occurrence of an Event of Default with respect to the Securities of a particular series and after the curing or waiving of all Events of Default which may have occurred with respect to such series, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Event of Default with respect to the Securities of a series has occurred (which has not been cured or waived) the Trustee shall exercise with respect to such series of Securities such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that (a) prior to the occurrence of an Event of Default with respect to the Securities of any series and after the curing or waiving of all such Events of Default with respect to such series which may have occurred: (i) the duties and obligations of the Trustee with respect to the Securities of any series shall be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any statements, certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such statements, certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and (c) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders pursuant to Section 5.7 relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture. None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there shall be reasonable ground for believing that the repayment of such funds or adequate indemnity against such liability is not reasonably assured to it. SECTION 6.2 Certain Rights of the Trustee. Subject to Section 6.1: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officers' Certificate or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, note, coupon, security or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request, direction, order or demand of the Issuer mentioned herein shall be sufficiently evidenced by an Officers' Certificate or Issuer Order (unless other evidence in respect thereof be herein specifically prescribed); and any resolution of the Board of Directors may be evidenced to the Trustee by a copy thereof certified by the secretary or an assistant secretary of the Issuer; (c) the Trustee may consult with counsel of its selection and any advice of such counsel promptly confirmed in writing shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in reliance thereon in accordance with such advice or Opinion of Counsel; (d) the Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture at the request, order or direction of any of the Securityholders pursuant to the provisions of this Indenture (including, without limitation, pursuant to Section 5.1), unless such Securityholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred therein or thereby; (e) the Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture; (f) prior to the occurrence of an Event of Default hereunder and after the curing or waiving of all Events of Default, the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, coupon, security, or other paper or document unless requested in writing so to do by the Holders of not less than a majority in aggregate principal amount of the Securities of all series affected then Outstanding; provided that, if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such expenses or liabilities as a condition to proceeding; the reasonable expenses of every such investigation shall be paid by the Issuer or, if paid by the Trustee or any predecessor Trustee, shall be repaid by the Issuer upon demand; and (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys not regularly in its employ and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder. SECTION 6.3 Trustee Not Responsible for Recitals, Disposition of Securities or Application of Proceeds Trustee Not Responsible for Recitals, Disposition of Securities or Application of Proceeds Thereof. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Issuer, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representation as to the validity or sufficiency of this Indenture, of the Securities or of any prospectus used to sell the Securities. The Trustee shall not be accountable for the use or application by the Issuer of any of the Securities or of the proceeds thereof. SECTION 6.4 Trustee and Agents May Hold Securities; Collections, etc. The Trustee or any agent of the Issuer or the Trustee, in its individual or any other capacity, may become the owner or pledgee of Securities with the same rights it would have if it were not the Trustee or such agent and, subject to Sections 6.8 and 6.13, may otherwise deal with the Issuer and receive, collect, hold and retain collections from the Issuer with the same rights it would have if it were not the Trustee or such agent. SECTION 6.5 Moneys Held by Trustee. Subject to the provisions of Section 10.4 hereof, all moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by mandatory provisions of law. Neither the Trustee nor any agent of the Issuer or the Trustee shall be under any liability for interest on any moneys received by it hereunder. SECTION 6.6 Compensation and Indemnification of Trustee and Its Prior Claim. The Issuer covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, such compensation as shall be agreed to in writing between the Issuer and the Trustee (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) and the Issuer covenants and agrees to pay or reimburse the Trustee and each predecessor Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by or on behalf of it in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all agents and other persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence or bad faith. The Issuer also covenants to indemnify the Trustee and each predecessor Trustee for, and to hold it harmless against, any and all loss, liability, damage, claim or expense, including taxes (other than taxes based on the income of the Trustee), incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this Indenture or the trusts hereunder and its duties hereunder, including the costs and expenses of defending itself against or investigating any claim or liability in the premises. The obligations of the Issuer under this Section 6.6 to compensate and indemnify the Trustee and each predecessor Trustee and to pay or reimburse the Trustee and each predecessor Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture or the resignation or removal of the Trustee and shall not be subordinate to the payment of Senior Indebtedness pursuant to Article Thirteen. Such additional indebtedness shall be a senior claim to that of the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the Holders of particular Securities, and the Securities are hereby subordinated to such senior claim. When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 5.1 or in connection with Article Five hereof, the expenses (including the reasonable fees and expenses of its counsel) and the compensation for the service in connection therewith are intended to constitute expenses of administration under any bankruptcy law. SECTION 6.7 Right of Trustee to Rely on Officers' Certificate, etc. Subject to Sections 6.1 and 6.2, whenever in the administration of the trusts of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or bad faith on the part of the Trustee, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Trustee, and such certificate, in the absence of negligence or bad faith on the part of the Trustee, shall be full warrant to the Trustee for any action taken, suffered or omitted by it under the provisions of this Indenture upon the faith thereof. SECTION 6.8 Qualification of Trustee; Conflicting Interests. (a) If the Trustee has or shall acquire any conflicting interest (as defined in subsection (c)), then within 90 days after ascertaining that it has such conflicting interest, and if the default (as defined in subsection (c)) to which such conflicting interest relates has not been cured or duly waived or otherwise eliminated before the end of such 90-day period, the Trustee shall either eliminate such conflicting interest or, except as otherwise provided below, resign, and the Issuer shall take prompt steps to have a successor appointed in the manner provided in Section 6.10. (b) If the Trustee shall fail to comply with the provisions of subsection (a), the Trustee shall, within 10 days after the expiration of such 90-day period, transmit notice of such failure to the Securityholders in the manner and to the extent provided in Section 4.4 and, subject to the provisions of Section 5.9, unless the Trustee's duty to resign is stayed as provided below, any Securityholder who has been a bona fide Holder of Securities for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee, and the appointment of a successor, if the Trustee fails, after written request thereof by such Securityholder, to comply with the provisions of subsection (a). Except in the case of a default in the payment of the principal of or interest on any Security, or in the payment of any sinking or purchase fund installment, the Trustee shall not be required to resign as provided by this Section 6.8 if the Trustee shall have sustained the burden of proving, on application to the Commission and after opportunity for hearing thereon, that (i) the default under the Indenture may be cured or waived during a reasonable period and under the procedures described in such application, and (ii) a stay of the Trustee's duty to resign will not be inconsistent with the interests of Holders of the Securities. The filing of such an application shall automatically stay the performance of the duty to resign until the Commission orders otherwise. Any resignation of the Trustee shall become effective only upon the appointment of a successor trustee in accordance with the provisions of Section 6.10 and such successor's acceptance of such an appointment. (c) For the purposes of this Section 6.8, the Trustee shall be deemed to have a conflicting interest with respect to Securities of any series if the Securities of such series are in default (as determined in accordance with the provisions of Section 5.1, but exclusive of any period of grace or requirement of notice) and (i) the Trustee is trustee under this Indenture with respect to the Outstanding securities of any other series or is a trustee under another indenture under which any other securities, or certificates of interest or participation in any other securities, of the Issuer are outstanding, unless such other indenture is a collateral trust indenture under which the only collateral consists of Securities issued under this Indenture; provided that there shall be excluded from the operation of this paragraph (i), this Indenture with respect to the Securities of any other series and there shall also be so excluded any other indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Issuer are outstanding if (x) this Indenture is and, if applicable, this Indenture and any series issued pursuant to this Indenture and such other indenture or indentures are wholly unsecured and rank equally and such other indenture or indentures are hereafter qualified under the Trust Indenture Act of 1939, unless the Commission shall have found and declared by order pursuant to Section 305(b) or Section 307(c) of the Trust Indenture Act of 1939 that differences exist between the provisions of this Indenture with respect to Securities of such series and one or more other series, or the provisions of this Indenture and the provisions of such other indenture or indentures which are so likely to involve a material conflict of interest as to make it necessary in the public interest or for the protection of investors to disqualify the Trustee from acting as such under this Indenture with respect to Securities of such series and such other series, or under this Indenture or such other indenture or indentures, or (y) the Issuer shall have sustained the burden of proving, on application to the Commission and after opportunity for hearing thereon, that trusteeship under this Indenture with respect to Securities of such series and such other series, or under this Indenture and such other indenture or indentures is not so likely to involve a material conflict of interest as to make it necessary in the public interest or for the protection of investors to disqualify the Trustee from acting as such under this Indenture with respect to Securities of such series and such other series, or under this Indenture and such other indentures; (ii) the Trustee or any of its directors or executive officers is an underwriter for the Issuer; (iii) the Trustee directly or indirectly controls or is directly or indirectly controlled by or is under direct or indirect common control with an underwriter for the Issuer; (iv) the Trustee or any of its directors or executive officers is a director, officer, partner, employee, appointee, or representative of the Issuer, or of an underwriter (other than the Trustee itself) for the Issuer who is currently engaged in the business of underwriting, except that (x) one individual may be a director or an executive officer, or both, of the Trustee and a director or an executive officer, or both, of the Issuer, but may not be at the same time an executive officer of both the Trustee and the Issuer; (y) if and so long as the number of directors of the Trustee in office is more than nine, one additional individual may be a director or an executive officer, or both, of the Trustee and a director of the Issuer; and (z) the Trustee may be designated by the Issuer or by any underwriter for the Issuer to act in the capacity of transfer agent, registrar, custodian, paying agent, fiscal agent, escrow agent, or depositary, or in any other similar capacity, or, subject to the provisions of subsection (c) (i) of this Section, to act as trustee, whether under an indenture or otherwise; (v) 10% or more of the voting securities of the Trustee is beneficially owned either by the Issuer or by any director, partner or executive officer thereof, or 20% or more of such voting securities is beneficially owned, collectively, by any two or more of such persons; or 10% or more of the voting securities of the Trustee is beneficially owned either by an underwriter for the Issuer or by any director, partner, or executive officer thereof, or is beneficially owned, collectively, by any two or more such persons; (vi) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default, (x) 5% or more of the voting securities or 10% or more of any other class of security of the Issuer, not including the Securities issued under this Indenture and securities issued under any other indenture under which the Trustee is also trustee, or (y) 10% or more of any class of security of an underwriter for the Issuer; (vii) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default, 5% or more of the voting securities of any person who, to the knowledge of the Trustee, owns 10% or more of the voting securities of, or controls directly or indirectly or is under direct or indirect common control with, the Issuer; (viii) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default, 10% or more of any class security of any person who, to the knowledge of the Trustee, owns 50% or more of the voting securities of the Issuer; (ix) the Trustee owns on the date of default (as determined in accordance with the provisions of Section 5.1, but exclusive of any period of grace or requirement of notice) or on any anniversary of such default while such default remains outstanding, in the capacity of executor, administrator, testamentary or inter vivos trustee, guardian, committee or conservator, or in any other similar capacity, an aggregate of 25% or more of the voting securities, or of any class of security, of any Person, the beneficial ownership of a specified percentage of which would have constituted a conflicting interest under paragraphs (vi), (vii) or (viii) of this subsection. As to any such securities of which the Trustee acquired ownership through becoming executor, administrator, or testamentary trustee of an estate which included them, the provisions of the preceding sentence shall not apply, for a period of two years from the date of such acquisition, to the extent that such securities included in such estate do not exceed 25% of such voting securities or 25% of any such class of security. Promptly after the dates of any such default and annually in each succeeding year that the Securities remain in default, the Trustee shall make a check of its holdings of such securities in any of the above-mentioned capacities as of such dates. If the Issuer fails to make payment in full of principal of or interest on any of the Securities when and as the same becomes due and payable, and such failure continues for 30 days thereafter, the Trustee shall make a prompt check of its holdings of such Securities in any of the above-mentioned capacities as of the date of the expiration of such 30-day period, and after such date, notwithstanding the foregoing provisions of this paragraph, all such Securities so held by the Trustee, with sole or joint control over such Securities vested in it, shall, but only so long as such failure shall continue, be considered as though beneficially owned by the Trustee for the purposes of paragraphs (vi), (vii) and (viii) of this subsection; or (x) except under the circumstances described in paragraphs (1), (3), (4), (5) or (6) of Section 6.13(b), the Trustee shall be or shall become a creditor of the Issuer. For purposes of subsection (c) (i), the term "series of securities" or "series" means a series, class or group of securities issuable under an indenture pursuant to the terms of which holders of one such series may vote to direct the Trustee, or otherwise take action pursuant to a vote of such holders, separately from holders of another such series; provided that "series of securities" or "series" shall not include any series of securities issuable under an indenture if all such series rank equally and are wholly unsecured. The specification of percentages in subsections (c) (v) to (ix) inclusive of this Section 6.8 shall not be construed as indicating that the ownership of such percentages of the securities of a person is or is not necessary or sufficient to constitute direct or indirect control for the purposes of subsections (c) (iii) or (vii) of this Section. For the purposes of subsections (c) (vi), (vii), (viii) and (ix), of this Section 6.8, only, (A) the terms "security" and "securities" shall include only such securities as are generally known as corporate securities, but shall not include any note or other evidence of indebtedness issued to evidence an obligation to repay moneys lent to a person by one or more banks, trust companies, or banking firms, or any certificate of interest or participation in any such note or evidence of indebtedness; (B) an obligation shall be deemed to be in default when a default in payment of principal shall have continued for 30 days or more and shall not have been cured; and (C) the Trustee shall not be deemed to be the owner or holder of (x) any security which it holds as collateral security, as trustee or otherwise, for an obligation which is not in default as defined in clause (B) above, or (y) any security which it holds as collateral security under this Indenture, irrespective of any default hereunder, or (z) any security which it holds as agent for collection, or as custodian, escrow agent, or depositary, or in any similar representative capacity. Except as provided above, the word "security" or "securities" as used in this Section 6.8 shall mean any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas or other mineral rights, or, in general, any interest or instrument commonly known as a "security", or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. (d) For purposes of this Section 6.8: (i) the term "underwriter" when used with reference to the Issuer shall mean every person who, within a one year period prior to the time as of which the determination is made, was an underwriter of any security of the Issuer outstanding at the time of the determination; (ii) the term "director" shall mean any director of a corporation or any individual performing similar functions with respect to any organization whether incorporated or unincorporated; (iii) the term "person" shall mean an individual, a corporation, a partnership, an association, a joint-stock company, a trust, an unincorporated organization, or a government or political subdivision thereof; as used in this paragraph, the term "trust" shall include only a trust where the interest or interests of the beneficiary or beneficiaries are evidenced by a security; (iv) the term "voting security" shall mean any security presently entitling the owner or holder thereof to vote in the direction or management of the affairs of a person, or any security issued under or pursuant to any trust, agreement or arrangement whereby a trustee or trustees or agent or agents for the owner or holder of such security are presently entitled to vote in the direction or management of the affairs of a person; (v) the term "Issuer" shall mean any obligor upon the Securities; and (vi) the term "executive officer" shall mean the president, every vice president, every trust officer, the cashier, the secretary, and the treasurer of a corporation, and any individual customarily performing similar functions with respect to any organization whether incorporated or unincorporated, but shall not include the chairman of the board of directors. (e) The percentages of voting securities and other securities specified in this Section 6.8 shall be calculated in accordance with the following provisions: (i) a specified percentage of the voting securities of the Trustee, the Issuer or any other person referred to in this Section (each of whom is referred to as a "person" in this paragraph) means such amount of the outstanding voting securities of such person as entitles the holder or holders thereof to cast such specified percentage of the aggregate votes which the holders of all the outstanding voting securities of such person are entitled to cast in the direction or management of the affairs of such person; (ii) a specified percentage of a class of securities of a person means such percentage of the aggregate amount of securities of the class outstanding; (iii) the term "amount", when used in regard to securities, means the principal amount if relating to evidences of indebtedness, the number of shares if relating to capital shares, and the number of units if relating to any other kind of security; (iv) the term "outstanding" means issued and not held by or for the account of the issuer; the following securities shall not be deemed outstanding within the meaning of this definition: (A) securities of an issuer held in a sinking fund relating to securities of the issuer of the same class; (B) securities of an issuer held in a sinking fund relating to another class of securities of the issuer, if the obligation evidenced by such other class of securities is not in default as to principal or interest or otherwise; (C) securities pledged by the issuer thereof as security for an obligation of the issuer not in default as to principal or interest or otherwise; and (D) securities held in escrow if placed in escrow by the issuer thereof; provided,that any voting securities of an issuer shall be deemed outstanding if any person other than the issuer is entitled to exercise the voting rights thereof; and (v) a security shall be deemed to be of the same class as another security if both securities confer upon the holder or holders thereof substantially the same rights and privileges; provided, that, in the case of secured evidences of indebtedness, all of which are issued under a single indenture, differences in the interest rates or maturity dates of various series thereof shall not be deemed sufficient to constitute such series different classes and provided, further, that, in the case of unsecured evidences of indebtedness, differences in the interest rates or maturity dates thereof shall not be deemed sufficient to constitute them securities of different classes, whether or not they are issued under a single indenture. SECTION 6.9 Persons Eligible for Appointment as Trustee. The Trustee for each series of Securities hereunder shall at all times be a corporation organized and doing business under the laws of the United States of America or of any state or the District of Columbia having a combined capital and surplus of at least $50,000,000, and which is authorized under such laws to exercise corporate trust powers and is subject to supervision or examination by federal, state or District of Columbia authority, or a corporation or other Person permitted to act as trustee by the Commission. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. No obligor upon the Securities or any Affiliate of such obligor shall serve as trustee upon the Securities. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.9, the Trustee shall resign immediately in the manner and with the effect specified in Section 6.10. SECTION 6.10 Resignation and Removal; Appointment of Successor Trustee. (a) The Trustee, or any trustee or trustees hereafter appointed, may at any time resign with respect to one or more or all series of Securities by giving written notice of resignation to the Issuer. Upon receiving such notice of resignation, the Issuer shall promptly appoint a successor trustee or trustees with respect to the applicable series by written instrument in duplicate, executed by authority of the Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee or trustees. If no successor trustee shall have been so appointed with respect to any series and have accepted appointment within 30 days after the mailing of such notice of resignation, the resigning trustee may petition any court of competent jurisdiction for the appointment of a successor trustee, or any Securityholder who has been a bona fide Holder of a Security or Securities of the applicable series for at least six months may, subject to the provisions of Section 5.9, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee. (b) In case at any time any of the following shall occur: (i) the Trustee shall fail to comply with the provisions of Section 6.8 with respect to any series of Securities after written request therefor by the Issuer or by any Securityholder who has been a bona fide Holder of a Security or Securities of such series for at least six months; or (ii) the Trustee shall cease to be eligible in accordance with the provisions of Section 6.9 and shall fail to resign after written request therefor by the Issuer or by any such Securityholder; or (iii) the Trustee shall become incapable of acting with respect to any series of Securities, or shall be adjudged a bankrupt or insolvent, or a receiver or liquidator of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then, in any such case, the Issuer may remove the Trustee with respect to the applicable series of Securities and appoint a successor trustee for such series by written instrument, in duplicate, executed by order of the Board of Directors one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 5.9, any Securityholder who has been a bona fide Holder of a Security or Securities of such series for at least six months may on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor trustee with respect to such series. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee. (c) The Holders of a majority in aggregate principal amount of the Securities of each series then Outstanding may at any time remove the Trustee with respect to Securities of such series and appoint a successor trustee with respect to the Securities of such series by delivering to the Trustee so removed, to the successor trustee so appointed and to the Issuer the evidence provided for in Section 7.1 of the action in that regard taken by the Securityholders. If no successor trustee shall have been so appointed with respect to any series and have accepted appointment within 30 days after the delivery of such evidence of removal, the Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee, or any Securityholder who has been a bona fide Holder of a Security or Securities of the applicable series for at least six months may, subject to the provisions of Section 5.9, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee. (d) Any resignation or removal of the Trustee with respect to any series and any appointment of a successor trustee with respect to such series pursuant to any of the provisions of this Section 6.10 shall become effective upon acceptance of appointment by the successor trustee as provided in Section 6.11. SECTION 6.11 Acceptance of Appointment by Successor Trustee. Any successor trustee appointed as provided in Section 6.10 shall execute and deliver to the Issuer and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee with respect to all or any applicable series shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all rights, powers, duties and obligations with respect to such series of its predecessor hereunder, with like effect as if originally named as trustee for such series hereunder; but, nevertheless, on the written request of the Issuer or of the successor trustee, upon payment of its charges then unpaid, the trustee ceasing to act shall, subject to Section 10.4, pay over to the successor trustee all moneys at the time held by it hereunder and shall execute and deliver an instrument transferring to such successor trustee all such rights, powers, duties and obligations. Upon request of any such successor trustee, the Issuer shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a prior claim upon all property or funds held or collected by such trustee to secure any amounts then due it pursuant to the provisions of Section 6.6. If a successor trustee is appointed with respect to the Securities of one or more (but not all) series, the Issuer, the predecessor Trustee and each successor trustee with respect to the Securities of any applicable series shall execute and deliver an indenture supplemental hereto which shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the predecessor Trustee with respect to the Securities of any series as to which the predecessor Trustee is not retiring shall continue to be vested in the predecessor Trustee, and shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such trustees co-trustees of the same trust and that each such trustee shall be trustee of a trust or trusts under separate indentures. No successor trustee with respect to any series of Securities shall accept appointment as provided in this Section 6.11 unless at the time of such acceptance such successor trustee shall be qualified under the provisions of Section 6.8 and eligible under the provisions of Section 6.9. Upon acceptance of appointment by any successor trustee as provided in this Section 6.11, the Issuer shall give notice thereof to the Holders of Securities of each series affected, by mailing such notice to such Holders at their addresses as they shall appear on the registry books. If the Issuer fails to give such notice within ten days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be given at the expense of the Issuer. SECTION 6.12 Merger, Conversion, Consolidation or Succession to Business of Trustee. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided that such corporation shall be qualified under the provisions of Section 6.8 and eligible under the provisions of Section 6.9, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture any of the Securities of any series shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor Trustee and deliver such Securities so authenticated; and, in case at that time any of the Securities of any series shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor Trustee; and in all such cases such certificate shall have the full force which it is anywhere in the Securities of such series or in this Indenture provided that the certificate of the Trustee shall have; provided, that the right to adopt the certificate of authentication of any predecessor Trustee or to authenticate Securities of any series in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation. SECTION 6.13 Preferential Collection of Claims Against the Issuer. (a) Subject to the provisions of this Section, if the Trustee shall be or shall become a creditor, directly or indirectly, secured or unsecured, of the Issuer within three months prior to a default, as defined in subsection (c) of this Section 6.13, or subsequent to such a default, then, unless and until such default shall be cured, the Trustee shall set apart and hold in a special account for the benefit of the Trustee individually, the Holders of the Securities and the holders of other indenture securities (as defined in this Section 6.13): (1) an amount equal to any and all reductions in the amount due and owing upon any claim as such creditor in respect of principal or interest, effected after the beginning of such three month period and valid as against the Issuer and its other creditors, except any such reduction resulting from the receipt or disposition of any property described in subsection (a) (2) of this section, or from the exercise of any right of set-off which the Trustee could have exercised if a petition in bankruptcy had been filed by or against the Issuer upon the date of such default; and (2) all property received by the Trustee in respect of any claim as such creditor, either as security therefor, or in satisfaction or composition thereof, or otherwise, after the beginning of such three month period, or an amount equal to the proceeds of any such property, if disposed of, subject, however, to the rights, if any, of the Issuer and its other creditors in such property or such proceeds. Nothing herein contained, however, shall affect the right of the Trustee: (A) to retain for its own account (i) payments made on account of any such claim by any Person (other than the Issuer) who is liable thereon, (ii) the proceeds of the bona fide sale of any such claim by the Trustee to a third Person, and (iii) distributions made in cash, securities or other property in respect of claims filed against the Issuer in bankruptcy or receivership or in proceedings for reorganization pursuant to the Bankruptcy Code or applicable state law; (B) to realize, for its own account, upon any property held by it as security for any such claim, if such property was so held prior to the beginning of such three month period; (C) to realize, for its own account, but only to the extent of the claim hereinafter mentioned, upon any property held by it as security for any such claim, if such claim was created after the beginning of such three month period and such property was received as security therefor simultaneously with the creation thereof, and if the Trustee shall sustain the burden of proving that at the time such property was so received the Trustee had no reasonable cause to believe that a default as defined in subsection (c) of this Section would occur within three months; or (D) to receive payment on any claim referred to in paragraph (B) or (C), against the release of any property held as security for such claim as provided in such paragraph (B) or (C), as the case may be, to the extent of the fair value of such property. For the purposes of paragraphs (B), (C) and (D), property substituted after the beginning of such three month period for property held as security at the time of such substitution shall, to the extent of the fair value of the property released, have the same status as the property released, and, to the extent that any claim referred to in any of such paragraphs is created in renewal of or in substitution for or for the purpose of repaying or refunding any preexisting claim of the Trustee as such creditor, such claim shall have the same status as such pre-existing claim. If the Trustee shall be required to account, the funds and property held in such special account and the proceeds thereof shall be apportioned between the Trustee, the Securityholders and the holders of other indenture securities in such manner that the Trustee, such Securityholders and the holders of other indenture securities realize, as a result of payments from such special account and payments of dividends on claims filed against the Issuer in bankruptcy or receivership or in proceedings for reorganization pursuant to the Bankruptcy Code or applicable state law, the same percentage of their respective claims, figured before crediting to the claim of the Trustee anything on account of the receipt by it from the Issuer of the funds and property in such special account, and before crediting to the respective claims of the Trustee, such Securityholders and the holders of other indenture securities, dividends on claims filed against the Issuer in bankruptcy or receivership or in proceedings for reorganization pursuant to the Bankruptcy Code or applicable state law, but after crediting thereon receipts on account of the indebtedness represented by their respective claims from all sources other than from such dividends and from the funds and property so held in such special account. As used in this paragraph, with respect to any claim, the term "dividends" shall include any distribution with respect to such claim, in bankruptcy or receivership or in proceedings for reorganization pursuant to the Bankruptcy Code or applicable state law, whether such distribution is made in cash, securities or other property, but shall not include any such distribution with respect to the secured portion, if any, of such claim. The court in which such bankruptcy, receivership or proceeding for reorganization is pending shall have jurisdiction (i) to apportion between the Trustee, such Securityholders and the holders of other indenture securities, in accordance with the provisions of this paragraph, the funds and property held in such special account and the proceeds thereof, or (ii) in lieu of such apportionment, in whole or in part, to give to the provisions of this paragraph due consideration in determining the fairness of the distributions to be made to the Trustee, such Securityholders and the holders of other indenture securities with respect to their respective claims, in which event it shall not be necessary to liquidate or to appraise the value of any securities or other property held in such special account or as security for any such claim, or to make a specific allocation of such distributions as between the secured and unsecured portions of such claims, or otherwise to apply the provisions of this paragraph as a mathematical formula. Any Trustee who has resigned or been removed after the beginning of such three month period shall be subject to the provisions of this subsection (a) as though such resignation or removal had not occurred. If any Trustee has resigned or been removed prior to the beginning of such three month period, it shall be subject to the provisions of this subsection (a) if and only if the following conditions exist: (i) the receipt of property or reduction of claim which would have given rise to the obligation to account, if such Trustee had continued as trustee, occurred after the beginning of such three month period; and (ii) such receipt of property or reduction of claim occurred within three months after such resignation or removal. (b) There shall be excluded from the operation of this Section 6.13 a creditor relationship arising from: (1) the ownership or acquisition of securities issued under any indenture or any security or securities having a maturity of one year or more at the time of acquisition by the Trustee; (2) advances authorized by a receivership or bankruptcy court of competent jurisdiction or by this Indenture for the purpose of preserving any property which shall at any time be subject to the lien of this Indenture or of discharging tax liens or other prior liens or encumbrances thereon, if notice of such advance and of the circumstances surrounding the making thereof is given to the Securityholders at the time and in the manner provided in this Indenture; (3) disbursements made in the ordinary course of business in the capacity of trustee under an indenture, transfer agent, registrar, custodian, paying agent, fiscal agent or depositary, or other similar capacity; (4) an indebtedness created as a result of services rendered or premises rented or an indebtedness created as a result of goods or securities sold in a cash transaction as defined in subsection (c)(2) of this Section; (5) the ownership of stock or of other securities of a corporation organized under the provisions of Section 25(a) of the Federal Reserve Act, as amended, which is directly or indirectly a creditor of the Issuer; or (6) the acquisition, ownership, acceptance or negotiation of any drafts, bills of exchange, acceptances or obligations which fall within the classification of self-liquidating paper as defined in subsection (c) (3) of this Section. (c) As used in this Section 6.13: (1) the term "default" shall mean any failure to make payment in full of the principal of or interest on any of the Securities when and as such principal or interest becomes due and payable; (2) the term "cash transaction" shall mean any transaction in which full payment for goods or securities sold is made within seven days after delivery of the goods or securities in currency or in checks or other orders drawn upon banks or bankers and payable upon demand; (3) the term "self-liquidating paper" shall mean any draft, bill of exchange, acceptance or obligation which is made, drawn, negotiated or incurred by the Issuer for the purpose of financing the purchase, processing, manufacture, shipment, storage or sale of goods, wares or merchandise and which is secured by documents evidencing title to, possession of, or a lien upon the goods, wares or merchandise or the receivables or proceeds arising from the sale of the goods, wares or merchandise previously constituting the security, provided the security is received by the Trustee simultaneously with the creation of the creditor relationship with the Issuer arising from the making, drawing, negotiating or incurring of the draft, bill of exchange, acceptance or obligation; and (4) the term "Issuer" shall mean any obligor upon the Securities. SECTION 6.14 Appointment of Authenticating Agent. As long as any Securities of a series remain Outstanding, the Trustee may, by an instrument in writing, appoint with the approval of the Issuer an authenticating agent (the "Authenticating Agent") which shall be authorized to act on behalf of the Trustee to authenticate Securities, including Securities issued upon exchange, registration of transfer, partial redemption or pursuant to Section 2.9. Securities of each such series authenticated by such Authenticating Agent shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee. Whenever reference is made in this Indenture to the authentication and delivery of Securities of any series by the Trustee or to the Trustee's Certificate of Authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent for such series and a Certificate of Authentication executed on behalf of the Trustee by such Authenticating Agent. Such Authenticating Agent shall at all times be a corporation organized and doing business under the laws of the United States of America or of any state or the District of Columbia, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000 (determined as provided in Section 6.9 with respect to the Trustee) and subject to supervision or examination by federal or state authority. Any corporation into which any Authenticating Agent may be merged or converted, or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which any Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency business of any Authenticating Agent, shall continue to be the Authenticating Agent with respect to all series of Securities for which it served as Authenticating Agent without the execution or filing of any paper or any further act on the part of the Trustee or such Authenticating Agent. Any Authenticating Agent may at any time, and if it shall cease to be eligible shall, resign by giving written notice of resignation to the Trustee and to the Issuer. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Issuer. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 6.14 with respect to one or more series of Securities, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Issuer and the Issuer shall provide notice of such appointment to all Holders of Securities of such series in the manner and to the extent provided in Section 11.4. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all rights, powers, duties and responsibilities of its predecessor hereunder, with like effect as if originally named as Authenticating Agent. The Issuer agrees to pay to the Authenticating Agent for such series from time to time reasonable compensation. The Authenticating Agent for the Securities of any series shall have no responsibility or liability for any action taken by it as such at the direction of the Trustee. Sections 6.2, 6.3, 6.4 and 7.3 shall be applicable to any Authenticating Agent. ARTICLE SEVEN CONCERNING THE SECURITYHOLDERS SECTION 7.1 Evidence of Action Taken by Securityholders. Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by a specified percentage in principal amount of the Securityholders of any or all series may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such specified percentage of Securityholders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee. Proof of execution of any instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Sections 6.1 and 6.2) conclusive in favor of the Trustee and the Issuer, if made in the manner provided in this Article Seven. SECTION 7.2 Proof of Execution of Instruments and of Holding of Securities. Subject to Sections 6.1 and 6.2, the execution of any instrument by a Securityholder or his agent or proxy may be proved in the following manner: (a) The fact and date of the execution by any Holder of any instrument may be proved by the certificate of any notary public or other officer of any jurisdiction authorized to take acknowledgments of deeds or administer oaths that the person executing such instruments acknowledged to him the execution thereof, or by an affidavit of a witness to such execution sworn to before any such notary or other such officer. Where such execution is by or on behalf of any legal entity other than an individual, such certificate or affidavit shall also constitute sufficient proof of the authority of the person executing the same. (b) The ownership of Securities shall be proved by the Security register or by a certificate of the Security registrar. SECTION 7.3 Holders to be Treated as Owners. The Issuer, the Trustee and any agent of the Issuer or the Trustee may deem and treat the Person in whose name any Security shall be registered upon the Security register for such series as the absolute owner of such Security (whether or not such Security shall be overdue and notwithstanding any notation of ownership or other writing thereon) for the purpose of receiving payment of or on account of the principal of and, subject to the provisions of this Indenture, interest, if any, on such Security and for all other purposes; and neither the Issuer nor the Trustee nor any agent of the Issuer or the Trustee shall be affected by any notice to the contrary. SECTION 7.4 Securities Owned by Issuer Deemed Not Outstanding. In determining whether the Holders of the requisite aggregate principal amount of Outstanding Securities of any or all series have concurred in any direction, consent or waiver under this Indenture, Securities which are owned by the Issuer or any other obligor on the Securities with respect to which such determination is being made or by any Affiliate of the Issuer or any other obligor on the Securities with respect to which such determination is being made shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, except that for the purpose of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver only securities which the Trustee knows are so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Issuer or any other obligor upon the Securities or any Affiliate of the Issuer or any other obligor on the Securities. In case of a dispute as to such right, the advice of counsel shall be full protection in respect of any decision made by the Trustee in accordance with such advice. Upon request of the Trustee, the Issuer shall furnish to the Trustee promptly an Officers' Certificate listing and identifying all Securities, if any, known by the Issuer to be owned or held by or for the account of any of the above-described Persons; and, subject to Sections 6.1 and 6.2, the Trustee shall be entitled to accept such Officers' Certificate as conclusive evidence of the facts therein set forth and of the fact that all Securities not listed therein are Outstanding for the purpose of any such determination. SECTION 7.5 Right of Revocation of Action Taken. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 7.1, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Securities of any or all series, as the case may be, specified in this Indenture in connection with such action, any Holder of a Security the serial number of which is shown by the evidence to be included among the serial numbers of the Securities the Holders of which have consented to such action may, by filing written notice at the Corporate Trust Office and upon proof of holding as provided in this Article Seven, revoke such action so far as concerns such Security provided that such revocation shall not become effective until three business days after such filing. Except as aforesaid any such action taken by the Holder of any Security shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Security and of any Securities issued in exchange or substitution therefor or on registration of transfer thereof, irrespective of whether or not any notation in regard thereto is made upon any such Security. Any action taken by the Holders of the percentage in aggregate principal amount of the Securities of any or all series, as the case may be, specified in this Indenture in connection with such action shall be conclusively binding upon the Issuer, the Trustee and the Holders of all the Securities affected by such action. SECTION 7.6 Record Date for Consents and Waivers. The Issuer may, but shall not be obligated to, direct the Trustee to establish a record date for the purpose of determining the Persons entitled to (i) waive any past default with respect to the Securities of such series in accordance with Section 5.7 of the Indenture, (ii) consent to any supplemental indenture in accordance with Section 8.2 of the Indenture or (iii) waive compliance with any term, condition or provision of any covenant hereunder. If a record date is fixed, the Holders on such record date, or their duly designated proxies, and any such Persons, shall be entitled to waive any such past default, consent to any such supplemental indenture or waive compliance with any such term, condition or provision, whether or not such Holder remains a Holder after such record date; provided, however, that unless such waiver or consent is obtained from the Holders, or duly designated proxies, of the requisite principal amount of Outstanding Securities of such series prior to the date which is the 180th day after such record date, any such waiver or consent previously given shall automatically and without further action by any Holder be cancelled and of no further effect. ARTICLE EIGHT SUPPLEMENTAL INDENTURES SECTION 8.1 Supplemental Indentures Without Consent of Securityholders. The Issuer, when authorized by a resolution of its Board of Directors (which resolution may provide general terms or parameters for such action and may provide that the specific terms of such action may be determined in accordance with or pursuant to an Issuer Order), and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act of 1939 as in force at the date of the execution thereof) for one or more of the following purposes: (a) to convey, transfer, assign, mortgage or pledge to the Trustee as security for the Securities of one or more series any property or assets; (b) to evidence the succession of another corporation to the Issuer, or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Issuer pursuant to Article Nine; (c) to add to the covenants of the Issuer such further covenants, restrictions, conditions or provisions as the Issuer and the Trustee shall consider to be for the protection of the Holders of all or any series of Securities, (and if such covenants, restrictions, conditions or provisions are to be for the protection of less than all series of Securities, stating that the same are expressly being included solely for the protection of such series) and to make the occurrence, or the occurrence and continuance, of a default in any such additional covenants, restrictions, conditions or provisions an Event of Default permitting the enforcement of all or any of the several remedies provided in this Indenture as herein set forth; provided, however, that in respect of any such additional covenant, restriction, condition or provision such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such an Event of Default or may limit the remedies available to the Trustee upon such an Event of Default or may limit the right of the Holders of a majority in aggregate principal amount of the Securities of such series to waive such an Event of Default; (d) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture, or to make any other provisions as the Issuer may deem necessary or desirable, provided, however, that no such action shall adversely affect the interests of the Holders of the Securities; (e) to establish the form or terms of Securities of any series as permitted by Sections 2.1 and 2.3; and (f) to evidence and provide for the acceptance of appointment hereunder by a successor trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one trustee, pursuant to the requirements of Section 6.11. The Trustee is hereby authorized to join with the Issuer in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Any supplemental indenture authorized by the provisions of this Section may be executed without the consent of the Holders of any of the Securities then Outstanding, notwithstanding any of the provisions of Section 8.2. SECTION 8.2 Supplemental Indentures with Consent of Securityholders. With the consent (evidenced as provided in Article Seven) of the Holders of not less than a majority in aggregate principal amount of the Securities then Outstanding of any series affected by such supplemental indenture, the Issuer, when authorized by a resolution of its Board of Directors (which resolution may provide general terms or parameters for such action and may provide that the specific terms of such action may be determined in accordance with or pursuant to an Issuer Order), and the Trustee may, from time to time and at any time, enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act of 1939 as in force at the date of execution thereof) for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders of the Securities of such series; provided, that no such supplemental indenture shall (a) extend the stated final maturity of the principal of any Security, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest, if any, thereon (or, in the case of an Original Issue Discount Security, reduce the rate of accrual of original issue discount thereon), or reduce or alter the method of computation of any amount payable on redemption, repayment or purchase by the Issuer thereof (or the time at which any such redemption, repayment or purchase may be made), or make the principal thereof (including any amount in respect of original issue discount), or interest, if any, thereon payable in any coin or currency other than that provided in the Securities or in accordance with the terms of the Securities, or reduce the amount of the principal of an Original Issue Discount Security that would be due and payable upon an acceleration of the maturity thereof pursuant to Section 5.1 or the amount thereof provable in bankruptcy pursuant to Section 5.2, or impair or affect the right of any Securityholder to institute suit for the payment thereof or, if the Securities provide therefor, any right of repayment or purchase at the option of the Securityholder, in each case without the consent of the Holder of each Security so affected, or (b) reduce the aforesaid percentage of Securities of any series, the consent of the Holders of which is required for any such supplemental indenture, without the consent of the Holders of each Security so affected. No consent of any Holder of any Security shall be necessary under this Section 8.2 to permit the Trustee and the Issuer to execute supplemental indentures pursuant to Sections 8.1 and 9.2. A supplemental indenture which changes or eliminates any covenant, Event of Default or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of Holders of Securities of such series, with respect to such covenant or provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series. Upon the request of the Issuer, accompanied by a copy of a resolution of the Board of Directors (which resolution may provide general terms or parameters for such action and may provide that the specific terms of such action may be determined in accordance with or pursuant to an Issuer Order) certified by the secretary or an assistant secretary of the Issuer authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of the Holders of the Securities as aforesaid and other documents, if any, required by Section 7.1, the Trustee shall join with the Issuer in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. It shall not be necessary for the consent of the Securityholders under this Section 8.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Issuer and the Trustee of any supplemental indenture pursuant to the provisions of this Section 8.2, the Trustee shall give notice thereof to the Holders of then Outstanding Securities of each series affected thereby, as provided in Section 11.4. Any failure of the Issuer to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. SECTION 8.3 Effect of Supplemental Indenture. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and shall be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Issuer and the Holders of Securities of each series affected thereby shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and shall be deemed to be part of the terms and conditions of this Indenture for any and all purposes. SECTION 8.4 Documents to Be Given to Trustee. The Trustee, subject to the provisions of Sections 6.1 and 6.2, shall be entitled to receive an Officers' Certificate and an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant to this Article Eight complies with the applicable provisions of this Indenture. SECTION 8.5 Notation on Securities in Respect of Supplemental Indentures. Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article Eight may bear a notation in form approved by the Trustee for such series as to any matter provided for by such supplemental indenture or as to any action taken by Securityholders. If the Issuer or the Trustee shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Issuer, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Issuer, authenticated by the Trustee and delivered in exchange for the Securities of such series then Outstanding. SECTION 8.6 Subordination Unimpaired. This Indenture may not be amended to alter the subordination of any Outstanding Securities without the written consent of each holder of Senior Indebtedness then outstanding that would be adversely affected thereby. ARTICLE NINE CONSOLIDATION, MERGER, SALE, LEASE, EXCHANGE OR OTHER DISPOSITION SECTION 9.1 Issuer May Consolidate, etc., on Certain Terms. Subject to the provisions of Section 9.3, nothing contained in this Indenture or in any of the Securities shall prevent any consolidation or merger of the Issuer with or into any other corporation or corporations (whether or not affiliated with the Issuer), or successive consolidations or mergers in which the Issuer or its successor or successors shall be a party or parties, or shall prevent any sale, lease, exchange or other disposition of all or substantially all the property and assets of the Issuer to any other corporation (whether or not affiliated with the Issuer) authorized to acquire and operate the same; provided, however, and the Issuer hereby covenants and agrees, that any such consolidation, merger, sale, lease, exchange or other disposition shall be upon the conditions that (a) immediately after such consolidation, merger, sale, lease, exchange or other disposition of the corporation (whether the Issuer or such other corporation) formed by or surviving any such consolidation or merger, or to which such sale, lease, exchange or other disposition shall have been made, shall not be in default in the performance or observance of any of the terms, covenants and conditions of this Indenture to be kept or performed by the Issuer; (b) the corporation (if other than the Issuer) formed by or surviving any such consolidation or merger, or to which such sale, lease, exchange or other disposition shall have been made, shall be a corporation organized under the laws of the United States of America, any state thereof or the District of Columbia; and (c) the due and punctual payment of the principal of and interest, if any, on all the Securities, according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed by the Issuer, shall be expressly assumed, by supplemental indenture satisfactory in form to the Trustee executed and delivered to the Trustee, by the corporation (if other than the Issuer) formed by such consolidation, or into which the Issuer shall have been merged, or by the corporation which shall have acquired or leased such property. SECTION 9.2 Securities to be Secured in Certain Events. If, upon any such consolidation, merger, or upon any such sale, lease, exchange or other disposition or upon any acquisition by the Issuer by purchase or otherwise of all or any part of the properties of any other corporation, any Principal Property owned by the Issuer or a Restricted Subsidiary immediately prior thereto would thereupon become subject to any mortgage, security interest, pledge, lien or encumbrance, not permitted by Section 3.6 hereof, the Issuer, prior to such consolidation, merger, sale, lease, exchange or other disposition or acquisition, will by indenture supplemental hereto secure the due and punctual payment of the principal of and interest, if any, on the Securities then outstanding (equally and ratably, or with such other relative priority specified in Section 3.6, with any other indebtedness of or guaranteed by the Issuer then entitled thereto, but only to the extent that such indebtedness is Subordinated Indebtedness) by a direct lien on such Principal Property, together with any other properties and assets of the Issuer or of any such Restricted Subsidiary, whichever shall be the owner of any such Principal Property, which would thereupon become subject to any such mortgage, security interest, pledge, lien or encumbrance, prior to all liens other than any theretofore existing thereon and other than liens on Senior Indebtedness. SECTION 9.3 Successor Corporation to be Substituted. In case of any such consolidation or merger or any sale, conveyance or lease of all or substantially all of the property of the Issuer and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the due and punctual payment of the principal of and interest, if any, on all of the Securities and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Issuer, such successor corporation shall succeed to and be substituted for the Issuer, with the same effect as if it had been named herein as the party of the first part, and the Issuer (including any intervening successor to the Issuer which shall have become the obligor hereunder) shall be relieved of any further obligation under this Indenture and the Securities; provided, however, that in the case of a sale, lease, exchange or other disposition of the property and assets of the Issuer (including any such intervening successor), the Issuer (including any such intervening successor) shall continue to be liable on its obligations under this Indenture and the Securities to the extent, but only to the extent, of liability to pay the principal of and interest, if any, on the Securities at the time, places and rate prescribed in this Indenture and the Securities. Such successor corporation thereupon may cause to be signed, and may issue either in its own name or in the name of the Issuer, any or all of the Securities issuable hereunder which theretofore shall not have been signed by the Issuer and delivered to the Trustee; and, upon the order of such successor corporation instead of the Issuer and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities which previously shall have been signed and delivered by the officers of the Issuer to the Trustee for authentication, and any Securities which such successor corporation thereafter shall cause to be signed and delivered to the Trustee for that purpose. All the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Securities had been issued at the date of the execution hereof. In case of any such consolidation or merger or any sale, lease, exchange or other disposition of all or substantially all of the property and assets of the Issuer, such changes in phraseology and form (but not in substance) may be made in the Securities, thereafter to be issued, as may be appropriate. SECTION 9.4 Opinion of Counsel to be Given Trustee. The Trustee, subject to Sections 6.1 and 6.2, may receive an Officers' Certificate and Opinion of Counsel as conclusive evidence that any such consolidation, merger, sale, lease, exchange or other disposition and any such assumption complies with the provisions of this Article Nine. ARTICLE TEN SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS SECTION 10.1 Satisfaction and Discharge of Indenture. (A) If at any time (a) the Issuer shall have paid or caused to be paid the principal of and interest, if any, on all the Securities Outstanding (other than Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.9) as and when the same shall have become due and payable, or (b) the Issuer shall have delivered to the Trustee for cancellation all Securities theretofore authenticated (other than Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.9); and if, in any such case, the Issuer shall also pay or cause to be paid all other sums payable hereunder by the Issuer, then this Indenture shall cease to be of further effect, and the Trustee, on demand of the Issuer accompanied by an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the satisfaction and discharge contemplated by this provision have been complied with, and at the cost and expense of the Issuer, shall execute proper instruments acknowledging such satisfaction and discharging this Indenture. The Issuer agrees to reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred, and to compensate the Trustee for any services thereafter reasonably and properly rendered, by the Trustee in connection with this Indenture or the Securities. (B) If at any time (a) the Issuer shall have paid or caused to be paid the principal of, premium, if any, and interest, if any, on all the Securities of any series Outstanding (other than Securities of such series which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.9) as and when the same shall have become due and payable, or (b) the Issuer shall have delivered to the Trustee for cancellation all Securities of any series theretofore authenticated (other than any Securities of such series which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.9), or (c) in the case of any series of Securities with respect to which the exact amount described in clause (ii) below can be determined at the time of making the deposit referred to in such clause (ii), (i) all the Securities of such series not theretofore delivered to the Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption, and (ii) the Issuer shall have irrevocably deposited or caused to be deposited with the Trustee as funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of Securities of such series, cash in an amount (other than moneys repaid by the Trustee or any paying agent to the Issuer in accordance with Section 10.4) or direct obligations of the United States of America, backed by its full faith and credit ("U.S. Government Obligations"), maturing as to principal and interest, if any, at such times and in such amounts as will insure the availability of cash, or a combination thereof, sufficient in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay (A) the principal of, premium, if any, and interest, if any, on all Securities of such series on each date that such principal of, premium, if any, or interest, if any, is due and payable, and (B) any mandatory sinking fund payments on the dates on which such payments are due and payable in accordance with the terms of the Indenture and the Securities of such series; then the Issuer shall be deemed to have paid and discharged the entire indebtedness on all the Securities of such series on the date of the deposit referred to in clause (ii) above and the provisions of this Indenture with respect to the Securities of such series shall no longer be in effect (except, in the case of clause (c) of this Section 10.1(B), as to (i) rights of registration of transfer and exchange of Securities of such series, (ii) rights of substitution of mutilated, defaced, destroyed, lost or stolen Securities of such series, (iii) rights of Holders of Securities of such series to receive payments of principal thereof and premium, if any, and interest, if any, thereon upon the original stated due dates therefor (but not upon acceleration), and remaining rights of the Holders of Securities of such series to receive mandatory sinking fund payments thereon, if any, when due, (iv) the rights, obligations, duties and immunities of the Trustee hereunder, (v) the rights of the Holders of Securities of such series as beneficiaries hereof with respect to the property so deposited with the Trustee payable to all or any of them and (vi) the obligations of the Issuer under Section 3.2 with respect to Securities of such series) and the Trustee, on demand of the Issuer accompanied by an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent contemplated by this provision have been complied with, and at the cost and expense of the Issuer, shall execute proper instruments acknowledging the same. (C) The following provisions shall apply to the Securities of each series unless specifically otherwise provided in a Board Resolution, Officers' Certificate or indenture supplemental hereto provided pursuant to Section 2.3. In addition to discharge of the Indenture pursuant to the next preceding paragraph, in the case of any series of Securities with respect to which the exact amount described in subparagraph (a) below can be determined at the time of making the deposit referred to in such subparagraph (a), the Issuer shall be deemed to have paid and discharged the entire indebtedness on all the Securities of such a series on the 91st day after the date of the deposit referred to in subparagraph (a) below, and the provisions of this Indenture with respect to the Securities of such series shall no longer be in effect (except as to (i) rights of registration of transfer and exchange of Securities of such series, (ii) substitution of mutilated, defaced, destroyed, lost or stolen Securities of such series, (iii) rights of Holders of Securities of such series to receive payments of principal thereof, premium, if any, and interest, if any, thereon upon the original stated due dates therefor (but not upon acceleration), and remaining rights of the Holders of Securities of such series to receive mandatory sinking fund payments, if any, (iv) the rights, obligations, duties and immunities of the Trustee hereunder, (v) the rights of the Holders of Securities of such series as beneficiaries hereof with respect to the property so deposited with the Trustee payable to all or any of them and (vi) the obligations of the Issuer under Section 3.2 with respect to Securities of such series) and the Trustee, on demand of the Issuer accompanied by an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent contemplated by this provision have been complied with, and at the cost and expense of the Issuer, shall execute proper instruments acknowledging the same, if (a) with reference to this provision the Issuer has irrevocably deposited or caused to be irrevocably deposited with the Trustee as funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of Securities of such series (i) cash in an amount, or (ii) U.S. Government Obligations, maturing as to principal and interest, if any, at such times and in such amounts as will insure the availability of cash, or (iii) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay (A) the principal of, premium, if any, and interest, if any, on all Securities of such series on each date that such principal or interest, if any, is due and payable, and (B) any mandatory sinking fund payments on the dates on which such payments are due and payable in accordance with the terms of the Indenture and the Securities of such series; (b) such deposit will not result in a breach or violation of, or constitute a default under, any agreement or instrument to which the Issuer is a party or by which it is bound; and (c) the Issuer has delivered to the Trustee an Opinion of Counsel based on the fact that (x) the Issuer has received from, or there has been published by, the Internal Revenue Service a ruling or (y), since the date hereof, there has been a change in the applicable United States federal income tax law, in either case to the effect that, and such opinion shall confirm that, the Holders of the Securities of such series will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to Federal income tax on the same amount and in the same manner and at the same times, as would have been the case if such deposit, defeasance and discharge had not occurred. SECTION 10.2 Application by Trustee of Funds Deposited for Payment of Securities. Subject to Section 10.4, all moneys and U.S. Government Obligations deposited with the Trustee pursuant to Section 10.1 shall be held in trust, and such moneys and all moneys from such U.S. Government Obligations shall be applied by it to the payment, either directly or through any paying agent (including the Issuer acting as its own paying agent), to the Holders of the particular Securities of such series for the payment or redemption of which such moneys and U.S. Government Obligations have been deposited with the Trustee, of all sums due and to become due thereon for principal and interest, if any, but such moneys and U.S. Government Obligations need not be segregated from other funds except to the extent required by law. SECTION 10.3 Repayment of Moneys Held by Paying Agent. In connection with the satisfaction and discharge of this Indenture with respect to Securities of any series, all moneys then held by any paying agent under the provisions of this Indenture with respect to such series of Securities shall, upon demand of the Issuer, be repaid to it or paid to the Trustee and thereupon such paying agent shall be released from all further liability with respect to such moneys. SECTION 10.4 Return of Moneys Held by Trustee and Paying Agent Unclaimed for Two Years. Any moneys deposited with or paid to the Trustee or any paying agent for the payment of the principal of or interest, if any, on any Security of any series and not applied but remaining unclaimed for two years after the date upon which such principal or interest, if any, shall have become due and payable, shall, upon the written request of the Issuer and unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, be repaid to the Issuer by the Trustee for such series or such paying agent, and the Holder of the Securities of such series shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property laws, thereafter look only to the Issuer for any payment which such Holder may be entitled to collect, and all liability of the Trustee or any paying agent with respect to such moneys shall thereupon cease. SECTION 10.5 Indemnity for U.S. Government Obligations. The Issuer shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 10.1 or the principal or interest received in respect of such obligations. ARTICLE ELEVEN MISCELLANEOUS PROVISIONS SECTION 11.1 Partners, Incorporators, Stockholders, Officers and Directors of Issuer Exempt from IndividuaPartners, Incorporators, Stockholders, Officers and Directors of Issuer Exempt from Individual Liability. No recourse under or upon any obligation, covenant or agreement contained in this Indenture, or in any Security, or because of any indebtedness evidenced thereby, shall be had against any incorporator, as such or against any past, present or future stockholder, officer or director, as such, of the Issuer, or any partner of the Issuer or of any successor, either directly or through the Issuer or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of the Securities by the Holders thereof and as part of the consideration for the issue of the Securities. SECTION 11.2 Provisions of Indenture for the Sole Benefit of Parties and Holders of Securities. Nothing in this Indenture or in the Securities, expressed or implied, shall give or be construed to give to any Person, other than the parties hereto and their successors and the Holders of the Senior Indebtedness and the Holders of the Securities, any legal or equitable right, remedy or claim under this Indenture or under any covenant or provision herein contained, all such covenants and provisions being for the sole benefit of the parties hereto and their successors and of the Holders of the Securities. SECTION 11.3 Successors and Assigns of Issuer Bound by Indenture. All the covenants, stipulations, promises and agreements in this Indenture contained by or on behalf of the Issuer shall bind its successors and assigns, whether so expressed or not. SECTION 11.4 Notices and Demands on Issuer, Trustee and Holders of Securities. Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the Holders of Securities to or on the Issuer, or as required pursuant to the Trust Indenture Act of 1939, may be given or served by being deposited postage prepaid, first-class mail (except as otherwise specifically provided herein) addressed (until another address of the Issuer is filed by the Issuer with the Trustee) to Seagull Energy Corporation, 1001 Fannin, Suite 1700, Houston, Texas 77002, Attention: Chairman of the Board. Any notice, direction, request or demand by the Issuer or any Holder of Securities to or upon the Trustee shall be deemed to have been sufficiently given or served by being deposited postage prepaid, first-class mail (except as otherwise specifically provided herein) addressed (until another address of the Trustee is filed by the Trustee with the Issuer) to The Bank of New York, 101 Barclay Street, Floor 21 West, New York, New York 10286, Attention: Corporate Trust Trustee Administration. Where this Indenture provides for notice to Holders of Securities, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder entitled thereto, at his last address as it appears in the Security register. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case, by reason of the suspension of or irregularities in regular mail service, it shall be impracticable to mail notice to the Issuer when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be reasonably satisfactory to the Trustee shall be deemed to be sufficient notice. SECTION 11.5 Officers' Certificates and Opinions of Counsel; Statements to Be Contained Therein. Upon any herein application or demand by the Issuer to the Trustee to take any action under any of the provisions of this Indenture, or as required pursuant to the Trust Indenture Act of 1939, the Issuer shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. Each certificate or opinion provided for in this Indenture (other than a certificate provided pursuant to Section 4.3(d)) and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture shall include (a) a statement that the person making such certificate or opinion has read such covenant or condition, (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based, (c) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an opinion as to whether or not such covenant or condition has been complied with, and (d) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with. Any certificate, statement or opinion of an officer of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of counsel may be based, insofar as it relates to factual matters, information with respect to which is in the possession of the Issuer, upon the certificate, statement or opinion of or representations by an officer or officers of the Issuer, unless such counsel knows that the certificate, statement or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of an officer of the Issuer or of counsel may be based, insofar as it relates to accounting matters, upon a certificate or opinion of or representations by an accountant or firm of accountants in the employ of the Issuer, unless such officer or counsel, as the case may be, knows that the certificate or opinion or representations with respect to the accounting matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate or opinion of any independent firm of public accountants filed with and directed to the Trustee shall contain a statement that such firm is independent. SECTION 11.6 Payments Due on Saturdays, Sundays and Holidays. If the date of maturity of principal of or interest, if any, on the Securities of any series or the date fixed for redemption, purchase or repayment of any such Security shall not be a Business Day, then payment of interest, if any, or principal need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date of maturity or the date fixed for redemption, purchase or repayment, and, in the case of payment, no interest shall accrue for the period after such date. SECTION 11.7 Conflict of Any Provision of Indenture with Trust Indenture Act of 1939. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with another provision included in this Indenture which is required to be included herein by any of Sections 310 to 317, inclusive, or is deemed applicable to this Indenture by virtue of the provisions, of the Trust Indenture Act of 1939, such required provision shall control. SECTION 11.8 GOVERNING LAW. THIS INDENTURE AND EACH SECURITY SHALL BE DEEMED TO BE A CONTRACT UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE. SECTION 11.9 Counterparts. This Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. SECTION 11.10 Effect of Headings. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. ARTICLE TWELVE REDEMPTION OF SECURITIES AND SINKING FUNDS SECTION 12.1 Applicability of Article. The provisions of this Article shall be applicable to the Securities of any series which are redeemable before their maturity or to any sinking fund for the retirement of Securities of a series except as otherwise specified, as contemplated by Section 2.3 for Securities of such series. SECTION 12.2 Notice of Redemption; Partial Redemptions. Notice of redemption to the Holders of Securities of any series to be redeemed as a whole or in part at the option of the Issuer shall be given by mailing notice of such redemption by first class mail, postage prepaid, at least 30 days and not more than 60 days prior to the date fixed for redemption to such Holders of Securities of such series at their last addresses as they shall appear in the Security register. Any notice which is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives the notice. Failure to give notice by mail, or any defect in the notice to the Holder of any Security of a series designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Security of such series. The notice of redemption to each such Holder shall specify the principal amount of each Security of such series held by such Holder to be redeemed, the date fixed for redemption, the redemption price, the place or places of payment, the CUSIP number relating to such Securities, that payment will be made upon presentation and surrender of such Securities, that such redemption is pursuant to the mandatory or optional sinking fund, or both, if such be the case, that interest, if any, (or, in the case of Original Issue Discount Securities, original issue discount) accrued to the date fixed for redemption will be paid as specified in such notice and that on and after said date interest, if any, (or, in the case of Original Issue Discount Securities, original issue discount) thereon or on the portions thereof to be redeemed will cease to accrue. In case any Security of a series is to be redeemed in part only, the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the date fixed for redemption, upon surrender of such Security, a new Security or Securities of such series in principal amount equal to the unredeemed portion thereof will be issued. The notice of redemption of Securities of any series to be redeemed at the option of the Issuer shall be given by the Issuer or, at the Issuer's request, by the Trustee in the name and at the expense of the Issuer. On or before the redemption date specified in the notice of redemption given as provided in this Section 12.2, the Issuer will deposit with the Trustee or with one or more paying agents (or, if the Issuer is acting as its own paying agent, set aside, segregate and hold in trust as provided in Section 3.5) an amount of money sufficient to redeem on the redemption date all the Securities of such series so called for redemption at the appropriate redemption price, together with accrued interest, if any, to the date fixed for redemption. The Issuer will deliver to the Trustee at least 45 days prior to the date fixed for redemption (unless a shorter notice period shall be satisfactory to the Trustee) an Officers' Certificate stating the aggregate principal amount of Securities to be redeemed. In case of a redemption at the election of the Issuer prior to the expiration of any restriction on such redemption, the Issuer shall deliver to the Trustee, prior to the giving of any notice of redemption to Holders pursuant to this Section, an Officers' Certificate stating that such restriction has been complied with. If less than all the Securities of a series are to be redeemed, the Trustee shall select, in such manner as it shall deem appropriate and fair, Securities of such series to be redeemed. Securities may be redeemed in part in multiples equal to the minimum authorized denomination for Securities of such series or any multiple thereof. The Trustee shall promptly notify the Issuer in writing of the Securities of such series selected for redemption and, in the case of any Securities of such series selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities of any series shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. SECTION 12.3 Payment of Securities Called for Redemption. If notice of redemption has been given as above provided, the Securities or portions of Securities specified in such notice shall become due and payable on the date and at the place or places stated in such notice at the applicable redemption price, together with interest, if any, accrued to the date fixed for redemption, and on and after said date (unless the Issuer shall default in the payment of such Securities at the redemption price, together with interest, if any, accrued to said date) interest (or, in the case of Original Issue Discount Securities, original issue discount) on the Securities or portions of Securities so called for redemption shall cease to accrue, and such Securities shall cease from and after the date fixed for redemption (unless an earlier date shall be specified in a Board Resolution, Officers' Certificate or executed supplemental indenture referred to in Sections 2.1 and 2.3 by or pursuant to which the form and terms of the Securities of such series were established) except as provided in Sections 6.5 and 10.4, to be entitled to any benefit or security under this Indenture, and the Holders thereof shall have no right in respect of such Securities except the right to receive the redemption price thereof and unpaid interest to the date fixed for redemption. On presentation and surrender of such Securities at a place of payment specified in said notice, said Securities or the specified portions thereof shall be paid and redeemed by the Issuer at the applicable redemption price, together with interest, if any, accrued thereon to the date fixed for redemption; provided that payment of interest, if any, becoming due on or prior to the date fixed for redemption shall be payable to the Holders of Securities registered as such on the relevant record date subject to the terms and provisions of Sections 2.3 and 2.7 hereof. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the redemption price shall, until paid or duly provided for, bear interest from the date fixed for redemption at the rate of interest or Yield to Maturity (in the case of an Original Issue Discount Security) borne by such Security. Upon presentation of any Security redeemed in part only, the Issuer shall execute and the Trustee shall authenticate and deliver to or on the order of the Holder thereof, at the expense of the Issuer, a new Security or Securities of such series, and of like tenor, of authorized denominations, in principal amount equal to the unredeemed portion of the Security so presented. SECTION 12.4 Exclusion of Certain Securities from Eligibility for Selection for Redemption. Securities shall be excluded from eligibility for selection for redemption if they are identified by registration and certificate number in an Officers' Certificate delivered to the Trustee at least 45 days prior to the last date on which notice of redemption may be given as being owned of record and beneficially by, and not pledged or hypothecated by either (a) the Issuer, or (b) a Person specifically identified in such written statement as an Affiliate of the Issuer. SECTION 12.5 Mandatory and Optional Sinking Funds. The minimum amount of any sinking fund payment provided for by the terms of the Securities of any series is herein referred to as a "mandatory sinking fund payment", and any payment in excess of such minimum amount provided for by the terms of the Securities of any series is herein referred to as an "optional sinking fund payment". The date on which a sinking fund payment is to be made is herein referred to as the "sinking fund payment date". In lieu of making all or any part of any mandatory sinking fund payment with respect to any series of Securities in cash, the Issuer may at its option (a) deliver to the Trustee Securities of such series theretofore purchased or otherwise acquired (except upon redemption pursuant to the mandatory sinking fund) by the Issuer or receive credit for Securities of such series (not previously so credited) theretofore purchased or otherwise acquired (except as aforesaid) by the Issuer and delivered to the Trustee for cancellation pursuant to Section 2.10, (b) receive credit for optional sinking fund payments (not previously so credited) made pursuant to this Section 12.5, or (c) receive credit for Securities of such series (not previously so credited) redeemed by the Issuer through any optional redemption provision contained in the terms of such series. Securities so delivered or credited shall be received or credited by the Trustee at the sinking fund redemption price specified in such Securities. On or before the 60th day next preceding each sinking fund payment date for any series, the Issuer will deliver to the Trustee an Officers' Certificate (a) specifying the portion of the mandatory sinking fund payment to be satisfied by payment of cash and the portion to be satisfied by credit of Securities of such series and the basis for such credit, (b) stating that none of the Securities of such series to be so credited has theretofore been so credited, (c) stating that no defaults in the payment of interest or Events of Default with respect to such series have occurred (which have not been waived or cured or otherwise ceased to exist) and are continuing, and (d) stating whether or not the Issuer intends to exercise its right to make an optional sinking fund payment with respect to such series and, if so, specifying the amount of such optional sinking fund payment which the Issuer intends to pay on or before the next succeeding sinking fund payment date. Any Securities of such series to be credited and required to be delivered to the Trustee in order for the Issuer to be entitled to credit therefor as aforesaid which have not theretofore been delivered to the Trustee shall be delivered for cancellation pursuant to Section 2.10 to the Trustee with such Officers' Certificate (or reasonably promptly thereafter if acceptable to the Trustee). Such Officers' Certificate shall be irrevocable and upon its receipt by the Trustee the Issuer shall become unconditionally obligated to make all the cash payments or payments therein referred to, if any, on or before the next succeeding sinking fund payment date. Failure of the Issuer, on or before any such 60th day, to deliver such Officers' Certificate and Securities (subject to the parenthetical clause in the second preceding sentence) specified in this paragraph, if any, shall not constitute a default but shall constitute, on and as of such date, the irrevocable election of the Issuer (i) that the mandatory sinking fund payment for such series due on the next succeeding sinking fund payment date shall be paid entirely in cash without the option to deliver or credit Securities of such series in respect thereof, and (ii) that the Issuer will make no optional sinking fund payment with respect to such series as provided in this Section 12.5. If the sinking fund payment or payments (mandatory or optional or both) to be made in cash on the next succeeding sinking fund payment date plus any unused balance of any preceding sinking fund payments made in cash shall exceed $50,000, or a lesser sum if the Issuer shall so request with respect to the Securities of any particular series, such cash shall be applied on the next succeeding sinking fund payment date to the redemption of Securities of such series at the sinking fund redemption price together with accrued interest, if any, to the date fixed for redemption. If such amount shall be $50,000 or less and the Issuer makes no such request, then it shall be carried over until a sum in excess of $50,000 is available. The Trustee shall select, in the manner provided in Section 12.2, for redemption on such sinking fund payment date a sufficient principal amount of Securities of such series to absorb said cash, as nearly as may be, and shall (if requested in writing by the Issuer) inform the Issuer of the serial numbers of the Securities of such series (or portions thereof) so selected. The Trustee, in the name and at the expense of the Issuer (or the Issuer, if it shall so request the Trustee in writing) shall cause notice of redemption of the Securities of such series to be given in substantially the manner provided in Section 12.2 (and with the effect provided in Section 12.3) for the redemption of Securities of such series in part at the option of the Issuer. The amount of any sinking fund payments not so applied or allocated to the redemption of Securities of such series shall be added to the next cash sinking fund payment for such series and, together with such payment, shall be applied in accordance with the provisions of this Section 12.5. Any and all sinking fund moneys held on the stated maturity date of the Securities of any particular series (or earlier, if such maturity is accelerated), which are not held for the payment or redemption of particular Securities of such series shall be applied, together with other moneys, if necessary, sufficient for the purpose, to the payment of the principal of, and interest, if any, on, the Securities of such series at maturity. On or before each sinking fund payment date, the Issuer shall pay to the Trustee in cash or shall otherwise provide for the payment of all interest, if any, accrued to the date fixed for redemption on Securities to be redeemed on such sinking fund payment date. The Trustee shall not redeem or cause to be redeemed any Securities of a series with sinking fund moneys or give any notice of redemption of Securities for such series by operation of the sinking fund during the continuance of a default in payment of interest on such Securities or of any Event of Default with respect to such series except that, where the giving of notice of redemption of any Securities shall theretofore have been made, the Trustee shall redeem or cause to be redeemed such Securities, provided that it shall have received from the Issuer a sum sufficient for such redemption. Except as aforesaid, and subject to Article Thirteen, any moneys in the sinking fund for such series at the time when any such default or Event of Default shall occur, and any moneys thereafter paid into the sinking fund, shall, during the continuance of such default or Event of Default, be deemed to have been collected under Article Five and held for the payment of all such Securities. In case such Event of Default shall have been waived as provided in Section 5.7 or the default cured on or before the 60th day preceding the sinking fund payment date in any year, such moneys shall thereafter be applied on the next succeeding sinking fund payment date in accordance with this Section to the redemption of such Securities. ARTICLE THIRTEEN SUBORDINATION SECTION 13.1 Securities Subordinated to Senior Indebtedness. (a) The Issuer covenants and agrees, and each Holder of Securities of each series, by his acceptance thereof, likewise covenants and agrees, that anything in this Indenture or the Securities of any series to the contrary notwithstanding, the indebtedness evidenced by the Securities of each series is subordinate and junior in right of payment, to the extent provided herein, to all Senior Indebtedness, whether outstanding on the date of execution of this Indenture or thereafter created, incurred or assumed, and that the subordination is for the benefit of the holders of Senior Indebtedness, but the Securities shall in all respects rank pari passu with all other Senior Subordinated Indebtedness of the Issuer. The Securities shall rank senior to all existing and future Indebtedness of the Issuer that is neither Senior Indebtedness nor Senior Subordinated Indebtedness and only Indebtedness of the Issuer that is Senior Indebtedness shall rank senior to the Securities in accordance with the provisions set forth herein. (b) Subject to Section 13.4, if (i) the Issuer shall default in the payment of any principal of, premium, if any, or interest, if any, on any Senior Indebtedness when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration of acceleration or otherwise, or (ii) any other default shall occur with respect to Senior Indebtedness and the maturity of such Senior Indebtedness has been accelerated in accordance with its terms, then, upon written notice of such default to the Issuer by the holders of Senior Indebtedness or any trustee therefor, unless and until, in either case, the default has been cured or waived, and any such acceleration has been rescinded or such Senior Indebtedness has been paid in full, no direct or indirect payment (in cash, property, securities, by set-off or otherwise) shall be made or agreed to be made on account of the principal of, premium, if any, or interest, if any, on any of the Securities, or in respect of any redemption, retirement, purchase or other acquisition of any of the Securities other than those made in capital stock of the Issuer (or cash in lieu of fractional shares thereof). (c) If any default (other than a default described in paragraph (b)) shall occur under the Senior Indebtedness, pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods occurs (a "Senior Nonmonetary Default"), then, upon the receipt by the Issuer and the Trustee of written notice thereof (a "Payment Notice") from or on behalf of holders of such Senior Indebtedness specifying an election to prohibit such payment and other action by the Issuer in accordance with the following provisions of this paragraph, the Issuer may not make any payment or take any other action that would be prohibited by paragraph (b) above during the period (the "Payment Blockage Period") commencing on the date of receipt of such Payment Notice and ending on the earlier of (i) the date, if any, on which the holders of such Senior Indebtedness or their representative notify the Trustee that such Senior Nonmonetary Default is cured or waived or ceases to exist or the Senior Indebtedness to which such Senior Nonmonetary Default relates is discharged or (ii) the 179th day after the date of receipt of such Payment Notice. Notwithstanding the provisions described in the immediately preceding sentence, the Issuer may resume payments on the Securities after such Payment Blockage Period. (d) If (i) (A) without the consent of the Issuer, a receiver, conservator, liquidator or trustee of the Issuer or of any of its property is appointed by the order or decree of any court or agency or supervisory authority having jurisdiction, and such decree or order remains in effect for more than 60 days or (B) the Issuer is adjudicated bankrupt or insolvent or (C) any of its property is sequestered by court order and such order remains in effect for more than 60 days or (D) a petition is filed against the Issuer under any state or federal bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution, liquidation or receivership law of any jurisdiction whether now or hereafter in effect (including without limitation the Bankruptcy Code), and is not dismissed within 60 days after such filing; or (ii) the Issuer (A) commences a voluntary case or other proceeding seeking liquidation, reorganization, arrangement, insolvency, readjustment of debt, dissolution, liquidation or other relief with respect to itself or its debt or other liabilities under any bankruptcy, insolvency or other similar law now or hereafter in effect (including without limitation the Bankruptcy Code) or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or (B) consents to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or (C) fails generally to, or cannot, pay its debts generally as they become due or (D) takes any corporate action to authorize or effect any of the foregoing; or (iii) any Subsidiary of the Issuer takes, suffers or permits to exist any of the events or conditions referred to in the foregoing clause (i) or (ii), then all Senior Indebtedness (including any interest thereon accruing after the commencement of any such proceedings) shall first be paid in full before any payment or distribution, whether in cash, securities or other property, shall be made to any Holder of any Securities on account thereof. Any payment or distribution, whether in cash, securities or other property (other than securities of the Issuer or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in these subordination provisions with respect to the indebtedness evidenced by the Securities, to the payment of all Senior Indebtedness then outstanding and to any securities issued in respect thereof under any such plan of reorganization or readjustment) which would otherwise (but for these subordination provisions) be payable or deliverable in respect of the Securities of any series shall be paid or delivered directly to the holders of Senior Indebtedness in accordance with the priorities then existing among such holders until all Senior Indebtedness (including any interest thereon accruing after the commencement of any such proceedings) shall have been paid in full. In the event of any such proceeding, after payment in full of all sums owing with respect to Senior Indebtedness, the Holders of the Securities, together with the holders of any obligations of the Issuer ranking on a parity with the Securities, shall be entitled to be paid from the remaining assets of the Issuer the amounts at the time due and owing on account of unpaid principal of and interest, if any, on the Securities and such other obligations before any payment or other distribution, whether in cash, property or otherwise, shall be made on account of any capital stock or any obligations of the Issuer ranking junior to the Securities and such other obligations. (e) If, notwithstanding the foregoing, any payment or distribution of any character, whether in cash, securities or other property (other than securities of the Issuer or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in the subordination provisions with respect to the indebtedness evidenced by the Securities, to the payment of all Senior Indebtedness then outstanding and to any securities issued in respect thereof under any such plan of reorganization or readjustment), shall be received by the Trustee or any Holder in contravention of any of the terms hereof, such payment or distribution of securities shall be received in trust for the benefit of and shall be paid over or delivered and transferred to the holders of the Senior Indebtedness then outstanding in accordance with the priorities then existing among such holders for application to the payment of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all such Senior Indebtedness in full. In the event of the failure of the Trustee or any Holder to endorse or assign any such payment, distribution or security, each holder of Senior Indebtedness is hereby irrevocably authorized to endorse or assign the same. (f) No present or future holder of any Senior Indebtedness shall be prejudiced in the right to enforce subordination of the indebtedness evidenced by the Securities by any act or failure to act on the part of the Issuer or any Holder of Securities. Nothing contained herein shall impair, as between the Issuer and the Holders of Securities of each series, the obligation of the Issuer to pay to such Holders the principal of and interest, if any, on such Securities or prevent the Trustee or the Holder from exercising all rights, powers and remedies otherwise permitted by applicable law or hereunder upon a default or Event of Default hereunder, all subject to the rights of the holders of the Senior Indebtedness to receive cash, securities or other property otherwise payable or deliverable to the Holders. (g) Senior Indebtedness shall not be deemed to have been paid in full unless the holders thereof shall have received cash, securities or other property equal to the amount of such Senior Indebtedness then outstanding. Upon the payment in full of all Senior Indebtedness, the Holders of Securities of each series shall be subrogated to all rights of any holders of Senior Indebtedness to receive any further payment or distributions applicable to the Senior Indebtedness until the indebtedness evidenced by the Securities of such series shall have been paid in full and such payments or distributions received by such Holders, by reason of such subrogation, of cash, securities or other property which otherwise would be paid or distributed to the holders of Senior Indebtedness, shall, as between the Issuer and its creditors other than the holders of Senior Indebtedness, on the one hand, and such Holders, on the other hand, be deemed to be a payment by the Issuer on account of Senior Indebtedness, and not on account of the Securities of such series. (h) The provisions of this Section 13.1 shall not impair any rights, interests, remedies or powers of any secured creditor of the Issuer in respect of any security interest the creation of which is not prohibited by the provisions of this Indenture. (i) The securing of any obligations of the Issuer, otherwise ranking on a parity with the Securities or ranking junior to the Securities, shall not be deemed to prevent such obligations from constituting, respectively, obligations ranking on a parity with the Securities or ranking junior to the Securities. SECTION 13.2 Reliance on Certificate of Liquidating Agent; Further Evidence as to Ownership of Senior InReliance on Certificate of Liquidating Agent; Further Evidence as to Ownership of Senior Indebtedness. Upon any payment or distribution of assets of the Issuer, the Trustee and the Holders shall be entitled to rely upon an order or decree issued by any court of competent jurisdiction in which such dissolution or winding up or liquidation or reorganization or arrangement proceedings are pending or upon a certificate of the trustee in bankruptcy, receiver, assignee for the benefit of creditors or other Person making such payment or distribution, delivered to the Trustee or to the Holders, for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other indebtedness of the Issuer, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Thirteen. In the absence of any such bankruptcy trustee, receiver, assignee or other Person, the Trustee shall be entitled to rely upon written notice by a Person representing himself to be a holder of Senior Indebtedness (or a trustee or representative on behalf of such holder) as evidence that such Person is a holder of Senior Indebtedness (or is such a trustee or representative). If the Trustee determines, in good faith, that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distributions pursuant to this Article Thirteen, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, as to the extent to which such Person is entitled to participate in such payment or distribution, and as to other facts pertinent to the rights of such Person under this Article Thirteen, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 13.3 Payment Permitted If No Default. Nothing contained in this Article Thirteen or elsewhere in this Indenture, or in any of the Securities, shall prevent (a) the Issuer at any time, except during the pendency of any default with respect to Senior Indebtedness described in Section 13.1(b) or Section 13.1(c) or of any of the events described in Section 13.1(d), from making payments of the principal of or interest, if any, on the Securities, or (b) the application by the Trustee or any paying agent of any moneys deposited with it hereunder to payments of the principal of or interest, if any, on the Securities, if, at the time of such deposit, the Trustee or such paying agent, as the case may be, did not have the written notice provided for in Section 13.5 of any event prohibiting the making of such deposit, or if, at the time of such deposit (whether or not in trust) by the Issuer with the Trustee or paying agent (other than the Issuer) such payment would not have been prohibited by the provisions of this Article Thirteen, and the Trustee or any paying agent shall not be affected by any notice to the contrary received by it on or after such date. SECTION 13.4 Disputes with Holders of Certain Senior Indebtedness. Any failure by the Issuer to make any payment on or under any Senior Indebtedness, other than any Senior Indebtedness as to which the provisions of this Section 13.4 shall have been waived by the Issuer in the instrument or instruments by which the Issuer incurred, assumed, guaranteed or otherwise created such Senior Indebtedness, shall not be deemed a default under Section 13.1 if (i) the Issuer shall be disputing its obligation to make such payment or perform such obligation, and (ii) either (A) no final judgment relating to such dispute shall have been issued against the Issuer which is in full force and effect and is not subject to further review, including a judgment that has become final by reason of the expiration of the time within which a party may seek further appeal or review, or (B) if a judgment that is subject to further review or appeal has been issued, the Issuer shall in good faith be prosecuting an appeal or other proceeding for review, and a stay of execution shall have been obtained pending such appeal or review. SECTION 13.5 Trustee Not Charged with Knowledge of Prohibition. Anything in this Article Thirteen or elsewhere in this Indenture contained to the contrary notwithstanding, the Trustee shall not at any time be charged with knowledge of the existence of any facts which would prohibit the making of any payment of moneys to or by the Trustee and shall be entitled to assume conclusively that no such facts exists and that no event specified in clauses (a) and (b) of Section 13.1 has happened unless and until the Trustee shall have received an Officers' Certificate to the effect or notice in writing to that effect signed by or on behalf of the holder or holders, or the representatives, of Senior Indebtedness who shall have been certified by the Issuer or otherwise established to the reasonable satisfaction of the Trustee to be such holder or holders or representatives or from any trustee under any indenture pursuant to which such Senior Indebtedness shall be outstanding; provided, however, that, if the Trustee shall not have received the Officers' Certificate or notice provided for in this Section 13.5 at least three Business Days preceding the date upon which by the terms hereof any moneys become payable for any purpose (including, without limitation, the payment of either the principal of or interest, if any, on any Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such moneys and apply the same to the purpose for which they were received and shall not be affected by any notice to the contrary that may be received by it within three Business Days preceding such date. The Issuer shall give prompt written notice to the Trustee and to each paying agent of any facts that would prohibit any payment of moneys to or by the Trustee or any paying agent, and the Trustee shall not be charged with knowledge of the curing of any default or the elimination of any other fact or condition preventing such payment or distribution unless and until the Trustee shall have received an Officers' Certificate to such effect. SECTION 13.6 Trustee to Effectuate Subordination. Each Holder of Securities by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination as between such Holder and holders of Senior Indebtedness as provided in this Article Thirteen and appoints the Trustee its attorney-in-fact for any and all such purposes. SECTION 13.7 Rights of Trustee as Holder of Senior Indebtedness. The Trustee shall be entitled to all the rights set forth in this Article Thirteen with respect to any Senior Indebtedness which may at the time be held by it, to the same extent as any other holder of Senior Indebtedness and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article Thirteen shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.6. SECTION 13.8 Article Applicable to Paying Agents. In case at any time any paying agent other than the Trustee shall have been appointed by the Issuer and be then acting hereunder, the term "Trustee" as used in this Article Thirteen shall in such case (unless the context shall otherwise require) be construed as extending to and including such paying agent within its meaning as fully for all intents and purposes as if the paying agent were named in this Article Thirteen in addition to or in place of the Trustee; provided, however, that Sections 13.5 and 13.7 shall not apply to the Issuer if it acts as paying agent. SECTION 13.9 Subordination Rights Not Impaired by Acts or Omissions of the Issuer or Holders of Senior InSubordination Rights Not Impaired by Acts or Omissions of the Issuer or Holders of Senior Indebtedness. No right of any present or future holders of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Issuer or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Issuer with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof which any such holder may have or be otherwise charged with. The holders of Senior Indebtedness, may at any time or from time to time and in their absolute direction, change the manner, place or terms of payment, change or extend the time of payment of, or renew or alter, any such Senior indebtedness, or amend or supplement any instrument pursuant to which any such Senior Indebtedness is issued or by which it may be secured, or release any security therefor, or exercise or refrain from exercising any other of their rights under the Senior Indebtedness, including, without limitation, the waiver of default thereunder, all without notice to or assent from the Holders of the Securities or the Trustee and without affecting the obligations of the Issuer, the Trustee or the Holders of Securities under this Article Thirteen. SECTION 13.10 Trustee Not Fiduciary for Holders of Senior Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the holders of the Senior Indebtedness, and shall not be liable to any such holders if it shall mistakenly pay over or distribute money or assets to Securityholders or the Issuer. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants or obligations as are specifically set forth in this Article Thirteen and no implied covenants or obligations with respect to holders of Senior Indebtedness shall be read into this Indenture against the Trustee. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, effective as of July 15, 1993. SEAGULL ENERGY CORPORATION By: Title: Attest: By: Title: THE BANK OF NEW YORK, as Trustee By: Title: Attest: By: Title: SEAGULL ENERGY CORPORATION 8-5/8% Senior Subordinated Note due 2005 SEAGULL ENERGY CORPORATION, a corporation duly organized and existing under the laws of Texas (herein called the "Company", which term indicates any successor corporation under the indenture hereinafter referred to), FOR VALUE RECEIVED, HEREBY PROMISES TO PAY TO , or registered assigns the principal sum of Dollars on August 1, 2005, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay interest, semi-annually on February 1 and August 1 of each year, on said principal sum, in like coin or currency, at the rate per annum specified in the title of this Security, to the registered holder hereof as of the close of business on the January 15 or July 15 next preceding such interest payment date, except as otherwise provided in the indenture referred to on the reverse hereof, all at the office or agency of the Company in the City of Houston, State of Texas, from the February 1 or August 1, as the case may be, next preceding the date of this Security to which interest has been paid (unless the date hereof is a February 1 or August 1 to which interest has been paid, in which case from the date hereof, or unless the date hereof is prior to the payment of any interest on the Securities, in which case from July 29, 1993, or unless the date hereof is between the January 15 or July 15, as the case may be, and the next following February 1 or August 1 to which interest has been paid or, if no interest has been paid on the Securities, from July 29, 1993) until payment of said principal sum has been made or duly provided for; provided, however, that payment of interest may be made at the option of the Company by check mailed on or before the payment date to the address of the person entitled thereto as such address shall appear in the Security register. Interest shall be computed on the basis of a 360-day year consisting of twelve 30-day months. This Security shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been signed by the Trustee or an Authenticating Agent under the Indenture referred to on the reverse hereof. REFERENCE IS MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON THE REVERSE HEREOF. SHUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH AT THIS PLACE. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: TRUSTEES'S AUTHENTICATION CERTIFICATE This is one of the Securities of the series designated herein referred to in the within-mentioned Indenture. THE BANK OF NEW YOURK, as Trustee By: Authorized Signatory SEAGULL ENERGY CORPORATION /s/ Sylvia Sanchez /s/ Barry J. Galt Secretary Chairman of the Board SEAGULL ENERGY CORPORATION 8-5/8% SENIOR SUBORDINATED NOTE DUE 2005 1. Designation This Security is one of a duly authorized series of Securities of the Company, designated as its 8-5/8% Senior Subordinated Notes Due 2005 (herein called the "Securities"), limited to the aggregate principal amount of $150,000,000, all issued or to be issued under and pursuant to a senior subordinated indenture dated as of July 15, 1993 (herein called the "Indenture"), duly executed and delivered by the Company and The Bank of New York, as trustee, to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the Holders of the Securities. Capitalized terms used but not defined herein are defined in the Indenture and are used herein with the same meanings as ascribed to them therein. 2. Paying Agent and Registrar Initially, the Trustee will act as paying agent, registrar and as the agent where notices and demands to or upon the Company in respect of the Securities may be served. The Company may appoint and change any paying agent, registrar or agent for notices without notice, other than notice to the Trustee. The Company or any of its Subsidiaries or any of their Affiliates may act as paying agent, registrar or agent of notices. 3. Denominations; Transfers; Exchange The Securities are in registered form, without coupons, in denominations of $1,000 in principal amount and integral multiples of $1,000. Upon due presentation for registration of transfer of this Security at the corporate trust office of the Trustee in the City of New York, State of New York or any other such designated office or agency of the Company, a new Security or Securities of authorized denominations for an equal aggregate principal amount will be issued to the transferee in exchange herefor, subject to the limitations imposed by the Indenture, without charges except for any tax or other governmental charge imposed in connection therewith, and the Security may in a like manner be exchanged for one or more new Securities for other authorized denominations but of the same aggregate principal amount. 4. Persons Deemed Owners The Company, the Trustee, any paying agent and any registrar may deem and treat the registered Holder hereof as the absolute owner of this Security (whether or not this Security shall be overdue and notwithstanding any notation of ownership or other writing hereon) for purposes of receiving payment hereof, or on account hereof, and for all other purposes, and neither the Company, the Trustee, any paying agent not any registrar shall be affected by any notice to the contrary. All payments made to or upon the order of such registered Holder shall, to the extent of the sum or sums so paid, satisfy and discharge the liability for moneys payable on this Security. 5. Defaults; Amendment; Waiver In case an Event of Default shall have occurred and be continuing, the principal hereof and the interest accrued thereon may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions permitting the Company and the Trustee with the consent of the Holders of not less than a majority in aggregate principal amount of each series of Securities then Outstanding under the Indenture and affected thereby, evidenced as provided in the Indenture, to execute supplemental indentures adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or modifying in manner the rights of the Holders of the Securities of such series; provided, however, that no such supplemental indenture shall (i) extend the stated final maturity of any Security, or reduce the principal amount hereof, or reduce the rate or extend the time of payment of interest hereon, or reduce or alter the method of computation of any amount payable on redemption, repayment or purchase by the Company, or change the coin or currency in which payments are to be made, or impair or affect her right of any Holder to institute suit for enforcement of any payment hereof or (ii) reduce the aforesaid percentage of any series of such Securities, without the consent of the Holders of each Security of any series so affected. It is also provided in the Indenture that the Holders of a majority in aggregate principal amount of the Securities of any series then Outstanding may on behalf of the Holders of all of the Securities of such series waive any past default or Event of Default under the Indenture and its consequences except a default in the payment of the principal of or interest on any of the Securities of such Series. Any such consent or waiver by the Holder of this Security (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Security and any Securities which may be issued in exchange or substitution hereof, irrespective of whether or not any notation thereof is made upon this Security or such other Securities. 6. Subordination The indebtedness evidenced by the Securities is subordinate and junior in right payment , to the extent provided in the Indenture, to all Senior Indebtedness, whether outstanding on the day e of execution of the Indenture or thereafter created, incurred or assumed, and the subordination is for the benefit of the holders of Senior Indebtedness, but the Securities shall in all respects rank pari passu with all other Senior Subordinated Indebtedness of the Company. The Securities rank senior to all existing and future indebtedness of the Company that is neither Senior Indebtedness or Senior Subordinated Indebtedness and only Indebtedness of the Company that is Senior Indebtedness ranks senior to the Securities in accordance with the provisions set forth in the Indenture. 7. Change of Control If a Change of Control shall occur at any time, than each Holder shall have the right to require that the Company repurchase such Holder's Securities in whole or in part in integral multiples of $1,000, at a purchase price in cash in an amount equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any to the date of purchase. The Company shall be obligated to give the holders of securities and the Trustee within 30 days following a Change of Control notice specifying (i) the purchase date, (ii) the place at which the Securities shall be presented and surrendered for purchase, (iii) that interest accrued to the purchase date will be paid upon such presentation and surrender and (iv) that interest shall cease to accrue on Securities surrendered for purchase as of such purchase date. 8. Redemption On or after August 1, 2000, the Senior Subordinated Notes shall be redeemable at any time at the option of the Company, in whole or from time to time in part, at the redemption prices set forth below (expressed as a percentage of principal amount), plus accrued interest to the redemption date: If redeemed during the 12-month Redemption period beginning August 1, Price ---------------------------------------- ---------- 2000.................................. 102.59% 2001.................................. 101.73% 2002.................................. 100.86% 2003 and thereafter................... 100.00%
Notice of redemption shall be mailed to each holder at least 30 days but not more than 60 days prior to the redemption date. On and after the redemption date, interest shall cease to accrue on Senior Subordinated Notes or portions thereof called for redemption. 9. No Recourse Against Others No recourse under or upon any obligation, covenant or agreement contained in the Indenture, or in any Security, or because of any indebtedness evidenced thereby or hereby, shall be had against any incorporator, as such or against any past, present or future stockholder, officer or director, as such of the Company, or any partner of the Company or of any successor, wither directly or though the Company or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of this Security by the Holder hereof and as part of the consideration of the issue of the Securities. 10. GOVERNING LAW THE INDENYURE AND THIS SECURITY SHALL BE DEEMED TO BE A CONTRACT UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE. ABBREVIATIONS The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with rights of survivorship and not as tenants in common UNIF GIFT MIN ACT ______________ Custodian ________________ (Cust) (Minor) Under Uniform Gifts to Minors Act _____________________ (State) Additional abbreviations may also be used though not in the above list. - ------------------------------------------------------------------------------- FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Please print or typewrite name and address including postal zip code of assignee - ------------------------------------------------------------------------------- the within Security and all rights thereunder, hereby irrevocably constituting and appointing - ------------------------------------------------------------------------------- attorney to transfer said Security on the books of the Company, with full power of substitution in the premises. Dated:_______________________ ____________________________________ Notice: The signature to this assignment must correspond with the name as written upon the face of the within instrument in every particular, without alteration or enlargement or any change whatever. SEAGULL ENERGY CORPORATION RESOLUTIONS ADOPTED BY THE CHAIRMAN OF THE BOARD OF DIRECTORS EFFECTIVE JULY 22, 1993 WHEREAS, on June 23, 1993, the Board of Directors of the Company approved the issuance by the Company, publicly or privately from time to time, of up to $350,000,000 aggregate initial offering prices of bonds, debentures, notes and/or other debt obligations (collectively, "Securities"); WHEREAS, the Board of Directors has authorized the Executive Committee of the Company or the Chairman of the Board of the Company to determine the terms and conditions of the Securities; NOW, THEREFORE, in furtherance of the foregoing, the Chairman of the Board of the Company hereby adopts the following resolutions: RESOLVED, that Seagull Energy Corporation (the "Company") issue and sell $100,000,000 aggregate principal amount of 7-7/8% Senior Notes Due 2003 (the "Senior Notes") on substantially the terms and conditions set forth in Exhibit A hereto; RESOLVED, that the Company issue and sell $150,000,000 aggregate principal amount of 8-5/8% Senior Subordinated Notes Due 2005 ("Senior Subordinated Notes") on substantially the terms and conditions set forth in Exhibit B hereto; RESOLVED, that the Senior Notes and Senior Subordinated Notes shall have the terms set forth in the Company's Prospectus Supplement dated July 22, 1993 to its Prospectus dated July 22, 1993; RESOLVED, that the form, terms and provisions of the Underwriting Agreement dated July 22, 1993 (the "Underwriting Agreement") by and among the Company and Dillon, Read & Co. Inc., Donaldson, Lufkin & Jenrette Securities Corporation, J.P. Morgan Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Underwriters"), as well as the execution and delivery of the Underwriting Agreement by the President, and Vice President or the Treasurer of the Company on behalf of the Company and the performance of the transactions contemplated by the Underwriting Agreement on behalf of the Company by the appropriate officers of the Company, be and they hereby are, adopted, ratified and approved; RESOLVED, that the public offering price for the Senior Notes and for the Senior Subordinated Notes set forth in the Prospectus Supplement dated July 22, 1993 be, and it hereby is, adopted, ratified and approved; RESOLVED, that the discounts and commissions for the sale of the Senior Notes and the Senior Subordinated Notes, payable tot he Underwriters pursuant to the Underwriting Agreement be, and they hereby are, ratified, adopted and approved; RESOLVED, that the Senior Notes and the Senior Subordinated Notes shall be in the form approved by the Chairman of the Board, the President or any Vice President of the Company, such officer's approval to be conclusively evidenced by his delivery of the Senior Notes and the Senior Subordinated Notes for and on behalf of the Company at the closing under Underwriting Agreement to be executed among the Company, Dillon, Read & Co. Inc., Donaldson, Lufkin & Jenrette Securities Corporation, J.P. Morgan Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated; and RESOLVED, that the Chairman of the Board, the President or any Vice President of the Company be, and each of them hereby is, authorized and empowered, for and on behalf of the Company and in its name, to execute and deliver all agreements, powers of attorney, certificates and other instruments and documents as he may deem necessary or appropriate to carry out the transactions approved by the preceding resolutions. EXECUTED to be effective as of July 22, 1993. /s/ Barry J. Galt Barry J. Galt Chairman of the Board EXHIBIT A TERMS OF THE SENIOR NOTES Title: 7-7/8% Senior Notes due 2003. Principal Amount: $100,000,000. Interest: 7-7/8% per annum, from July 29, 1993, payable semiannually on each February 1 and August 1, commencing on February 1, 1994, to holders of record on the preceding January 15 or July 15, as the case may be. Interest on the Senior Notes shall be calculated on the basis of a 360-day year of twelve 30-day months. Maturity: August 1, 2003. Mandatory Redemption: If a "Change of Control" shall occur at any time, than each holder shall have the right to require that the Company repurchase such holder's Senior Notes in whole or in part in integral multiples of $1,000, at a purchase price in cash in an amount equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any to the date of purchase. The Company shall be obligated to give holders of Senior Notes and the Trustee within 30 days following a Change of Control notice specifying (i) the purchase date (which date shall be no earlier than 30 days nor more than 60 days from the date the Company notifies the holders of the occurrence of a Change of Control), (ii) the place at which Notes shall be presented and surrendered for purchase, (iii) that interest accrued to the purchase date shall be paid upon such presentation and surrender and (iv) that interest shall cease to accrue on Senior Notes surrendered for purchase as of such purchase date. Any tender by a holder of Senior Notes shall be irrevocable. A-1 For purposes of the Senior Notes, a "Change of Control: shall mean a change resulting when any Unrelated Person or any Unrelated Persons acting together which would constitute a Group together with any Affiliates or Related Persons thereof (in each case also constituting Unrelated Persons) shall at any time either (i) Beneficially Own more than 50% of the aggregate voting power of all classes of Voting Stock of the Company or (ii) succeed in having sufficient of its or their nominees elected to the Board of Directors of the Company such that such nominees, when added to any existing director remaining on the Board of Directors of the Company after such election who is an Affiliate or Related Person of such person or Group, shall constitute a majority of the Board of Directors of the Company. As used herein (a) "Beneficially Own" means "beneficially own" as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the "exchange Act"), or any successor provision thereto; provided, however, that, for purposes of this definition, a person shall not be deemed to Beneficially Own securities tendered pursuant to a tender or exchange offer made by or on behalf of such person or any of such person's Affiliates until such tendered securities are accepted for purchase or exchange; (b) "Group" means "group" for purposes of Section 13(d) of the Exchange Act; (c) "Unrelated Person" means at any time any person other than the Company or any subsidiary of the Company and other than any trust for any employee benefit plan of the Company or any subsidiary of the Company; (d) "related Person" of any person shall mean any other person owning (1) 5% or more of the outstanding common stock of such person or (2) 5% or more of the Voting Stock of such person; (e) "Voting Stock" of any such person shall mean capital stock of such person that ordinarily has voting power for the election of directors (or persons performing similar functions) of such person, whether at all times or only so long as no senior class of securities has such voting power by reason of any contingency; and (f) "Affiliate" of any persons shall mean any other person that directly or indirectly control, or in under common control with, or is controlled by, such person. Sinking Fund: None. Offices for Notices and Payments, Etc.: Principal of and interest on the Senior Notes shall be payable, and the Senior Notes shall be exchangeable and transfers thereof shall be registrable, at the corporate trust office of the Trustee in New York, New York; provided however, that at the option of the Company, payment of interest may be made by check mailed to the address of the person entitled thereto at such person's registered address. A-2 Global Securities: The Senior Notes shall not be issuable as Global Securities. Trustee: The Bank of New York shall serve as the trustee, depositary, authenticating or paying agent, transfer agent and registrar with respect to the Senior Notes. Names and Addresses of Underwriters: Dillon, Read & Co. Inc. Donaldson, Lufkin & Jenrette Securities Corporation J.P. Morgan Securities Inc. Merrill Lynch, Pierce, Fenner & Smith Incorporated c/o Dillon, Read & Co. Inc. 535 Madison Avenue New York, New York 10022 A-3 EXHIBIT B TERMS OF THE SENIOR SUBORDINATED NOTES Title: 8-5/8% Senior Subordinated Notes due 2005. Principal Amount: $150,000,000. Interest: 8-5/8% per annum, from July 29, 1993, payable semiannually on each February 1 and August 1, commencing on February 1, 1994, to holders of record on the preceding January 15 or July 15, as the case may be. Interest on the Senior Subordinated Notes shall be calculated on the basis of a 360-day year of twelve 30-day months. Maturity: August 1, 2005. Optional Redemption: On or after August 1, 2000, the Senior Subordinated Notes shall be redeemable at any time at the option of the Company, in whole or from time to time in part, at the redemption prices set forth below (expressed as a percentage of principal amount), plus accrued interest to the redemption date:
If redeemed during the 12-month Redemption period beginning August 1, Price ---------------------------------------- --------------- 2000.................................. 102.59% 2001.................................. 101.73% 2002.................................. 100.86% 2003 and thereafter................... 100.00%
Notice of redemption shall be mailed to each holder at least 30 days but not more than 60 days prior to the redemption date. On and after the redemption date, interest shall cease to accrue on Senior Subordinated Notes or portions thereof called for redemption. B-1 Mandatory Redemption: If a "Change of Control" shall occur at any time, than each holder shall have the right to require that the Company repurchase such holder's Senior Subordinated Notes in whole or in part in integral multiples of $1,000, at a purchase price in cash in an amount equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any to the date of purchase. The Company shall be obligated to give holders of Senior Subordinated Notes and the Trustee within 30 days following a Change of Control notice specifying (i) the purchase date (which date shall be no earlier than 30 days nor more than 60 days from the date the Company notifies the holders of the occurrence of a Change of Control), (ii) the place at which Notes shall be presented and surrendered for purchase, (iii) that interest accrued to the purchase date shall be paid upon such presentation and surrender and (iv) that interest shall cease to accrue on Senior Subordinated Notes surrendered for purchase as of such purchase date. Any tender by a holder of Senior Subordinated Notes shall be irrevocable. For purposes of the Senior Subordinated Notes, a "Change of Control: shall mean a change resulting when any Unrelated Person or any Unrelated Persons acting together which would constitute a Group together with any Affiliates or Related Persons thereof (in each case also constituting Unrelated Persons) shall at any time either (i) Beneficially Own more than 50% of the aggregate voting power of all classes of Voting Stock of the Company or (ii) succeed in having sufficient of its or their nominees elected to the Board of Directors of the Company such that such nominees, when added to any existing director remaining on the Board of Directors of the Company after such election who is an Affiliate or Related Person of such person or Group, shall constitute a majority of the Board of Directors of the Company. As used herein (a) "Beneficially Own" means "beneficially own" as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the "exchange Act"), or any successor provision thereto; provided, however, that, for purposes of this definition, a person shall not be deemed to Beneficially Own securities tendered pursuant to a tender or exchange offer made by or on behalf of such person or any of such person's Affiliates until such tendered securities are accepted for purchase or exchange; (b) "Group" means "group" for purposes of Section 13(d) of the Exchange Act; (c) "Unrelated Person" means at any time any person other than the Company or any subsidiary of the Company and other than any trust for any employee benefit plan of the Company or any subsidiary of the Company; (d) "related Person" of any person shall mean any other person owning (1) 5% or more of the outstanding common stock of such person or (2) 5% or more of the Voting Stock of such person; (e) "Voting Stock" of any such person shall mean capital stock of such person that ordinarily has voting power for the election of directors (or persons B-2 performing similar functions) of such person, whether at all times or only so long as no senior class of securities has such voting power by reason of any contingency; and (f) "Affiliate" of any persons shall mean any other person that directly or indirectly control, or in under common control with, or is controlled by, such person. Sinking Fund: None. Offices for Notices and Payments, Etc.: Principal of and interest on the Senior Subordinated Notes shall be payable, and the Senior Subordinated Notes shall be exchangeable and transfers thereof shall be registrable, at the corporate trust office of the Trustee in New York, New York; provided however, that at the option of the Company, payment of interest may be made by check mailed to the address of the person entitled thereto at such person's registered address. Global Securities: The Senior Subordinated Notes shall not be issuable as Global Securities. Trustee: The Bank of New York shall serve as the trustee, depositary, authenticating or paying agent, transfer agent and registrar with respect to the Senior Notes. Names and Addresses of Underwriters: Dillon, Read & Co. Inc. Donaldson, Lufkin & Jenrette Securities Corporation J.P. Morgan Securities Inc. Merrill Lynch, Pierce, Fenner & Smith Incorporated c/o Dillon, Read & Co. Inc. 535 Madison Avenue New York, New York 10022 B-3 EX-10.1 4 1998 EXECUTIVE INCENTIVE PLAN Approved March 16, 1998 SEAGULL ENERGY CORPORATION 1998 EXECUTIVE INCENTIVE PLAN Background The 1998 Executive Incentive Plan (the "Incentive Plan") for Seagull Energy Corporation is designed to motivate key employees of the Company to achieve tough, but realistic, performance goals and to reward those employees who perform at or above the expected level. The Incentive Plan defines participants, award opportunities and performance goals for the 1998 performance year. It is, of course, based upon the 1998 Operating Plan (the "Operating Plan") and is designed to maximize performance incentives while allowing for the recognition of individual efforts through a significant discretionary component. Participation Participants in the Incentive Plan are those key employees whose positions have been valued in the salary structure in and above Grade 12. These are the persons responsible for the annual and longer-term success of the company. Timing of Payments One hundred percent of any Incentive Plan award earned for the 1998 performance year will be paid to the recipient during the first quarter of the year following the performance year. The recipient must be an employee on the payment date in order to receive such payment. Award Opportunities Annual incentive targets are expressed as a percentage of total salary earned during a given year and can increase to double the targeted amounts or decrease to zero, relative to the achievement of predetermined performance goals and subject to senior management and Board of Director discretion at year-end. The Compensation Committee of the Board reserves the right to modify the performance measures and award levels specified in the objective components of the Incentive Plan if presently unforeseen circumstances should occur during the year which invalidate any of the material assumptions that underlie the Operating Plan, or if, in the opinion of the Compensation Committee, such modifications are required to avoid a result that is inequitable to either the company or the Incentive Plan participants. Page 2 Performance Measures The performance measures for the Incentive Plan are summarized on the following pages. Four performance components are included with the following weightings: Pre-tax cash flow from operations 20% weight Reserve additions and production replacement costs 30% weight Company stock performance assessment 10% weight Discretionary individual performance assessment 40% weight
Pre-tax cash flow from operations (PCFO) - the first component is defined as earnings before income taxes, plus operating and non-operating depreciation, depletion and amortization, plus pre-tax incentive compensation expense, and is based on actual corporate performance for the year as compared to the Company's Operating Plan projection of PCFO. Reserve additions and production replacement costs - the second component is comprised of two subparts, reserve additions and production replacement costs, weighted at 15% each. Using the Company's Operating Plan projections for the Incentive Plan year, actual reserves added and actual production replacement costs are compared to the corresponding projections for each. Company stock performance assessment - the third component compares both the Company's average and year-end stock price for the Plan year to its average and year-end stock price for the preceding year and then compares the resulting percentage changes to the percentage changes (calculated in the same manner) for each of the peer group companies. Discretionary individual performance assessment - the fourth component will be determined individually and subjectively, based on each participant's individual job performance. The performance components will be measured independently of the other at year-end. At that time, the Chief Executive Officer will recommend specific awards, subject to final approval of each element of the total awards by the Compensation Committee and ultimately by the Board of Directors. Page 3 Performance Weightings: 20% on pre-tax cash flow from operations 30% on reserve additions and production replacement cost 10% on Company stock performance assessment 40% on discretionary individual performance assessment I. Objective Performance Assessments - 60%: Pre-Tax Cash Flow from Operations (PCFO) - 20% The performance award will be calculated as follows:
Column 1 Column 2 Column 3 Column 4 Percentage of Pre-Tax Cash Percentage of Percentage of Total Flow From Operating Plan PCFO Target Target Award Operations (1) Projection (2 Award Earned (3) Earned (3) $173,437 85 0 0 $183,640 90 25 5 $193,842 95 60 12 $204,044 100 100 20 $255,055 125 150 30 $306,066 150 200 40
(1) Earnings before income taxes plus operating and non-operating depreciation, depletion and amortization and also plus pre-tax incentive compensation expense (dollars in thousands). (2) If subsequent events over the course of the performance year invalidate any of the basic assumptions in the Operating Plan, then the original Operating Plan projections will be revised to conform the Operating Plan assumptions to reality. The initial PCFO performance criteria for the Incentive Plan shown in Column 1 will then be adjusted by applying the percentages shown in Column 2 to the revised Operating Plan projection of PCFO. (3) If, after the actual PCFO for the performance year is determined, it falls within the ranges shown in Column 1, the exact incentive award percentages from Columns 3 and 4 will be calculated by interpolation. Page 4 Reserve Additions and Production Replacement Cost - 30% The performance award will be comprised of two subparts as follows: 1. The first element is weighted at 15% and compares actual reserves added during the Plan year to the Company's Operating Plan projection for the Plan year.
Column 1 Column 2 Column3 Column 4 Reserves Percentage of Percentage of Percentage of Total Added Operating Plan Target Award Target Award (BCFE) (1) Projection (1) Earned (2) Earned (2) 205.2 80 0 0 230.9 90 25 3.75 243.7 95 60 9 256.5 100 100 15 282.2 110 150 22.5 307.8 120 200 30
(1) If subsequent events over the course of the performance year invalidate any of the basic assumptions in the Operating Plan, then the original Operating Plan projections will be revised to conform the Operating Plan assumptions to reality. The initial reserve addition performance criteria for the Incentive Plan shown in Column 1 will then be adjusted by applying the percentages shown in Column 2 to the revised Operating Plan projection of reserve additions. (2) If after the actual reserve additions for the performance year are determined, the aggregate total falls between the ranges shown in Column 1, the exact incentive award percentages from Columns 3 and 4 will be calculated by interpolation. Page 5 2. The second element is weighted at 15% and compares actual production replacement costs for the Plan year to the Company's Operating Plan projection for the Plan year, calculated in both cases in the manner reflected in the Operating Plan.
Column 1 Column 2 Column3 Column 4 Production Percentage of Percentage of Percentage of Total Replacement Operating Plan Target Award Target Award Cost (1) Projection (2) Earned (3) Earned (3) $1.20 120 0 0 $1.10 110 40 6 $1.00 100 100 15 $0.90 90 140 21 $0.80 80 200 30
(1) Considers cost of all reserve additions, including acquisitions. (2) If subsequent events over the course of the performance year invalidate any of the basic assumptions in the Operating Plan, then the original Operating Plan projections will be revised to conform the Operating Plan assumptions to reality. The initial production replacement cost performance criteria for the Incentive Plan shown in Column 1 will then be adjusted by applying the percentages shown in Column 2 to the revised Operating Plan projection of production replacement cost. (3) If after the actual production replacement cost for the performance year are determined, it falls within the ranges shown in Column 1, the exact incentive award percentages from Columns 3 and 4 will be calculated by interpolation. Page 6 Company Stock Performance Assessment - 10% The performance award will be based upon, A) the difference between the Company's average stock price ("Average Price") for the calendar year preceding the performance year and the Average Price for the performance year and, B) the difference between the stock's year-end closing price ("Closing Price") for the calendar year preceding the performance year and the stock's year-end closing price for the performance year. The Average Price for each respective year will be determined by dividing the number of trading days in the year into the sum of the respective closing prices of the Company's stock for each such trading day. The percentage changes in the Average Price and the Closing Price from the previous year to the performance year are calculated. Then the same comparisons are made for each of the peer companies selected for the Plan, and the Company is ranked accordingly. The performance award for this component will then be calculated as follows:
Column 1 Column 2 Column 3 Change In Percentage of Percentage of Total Average Price Target Award Target Award Relative to Peers Earned (1) Earned (1) 25th percentile 0 0 40th percentile 40 4 50th percentile 80 8 55th percentile 100 10 60th percentile 120 12 70th percentile 160 16 80th percentile 200 20
(1) If after the actual percentile is determined, it falls within the ranges shown in Column 1, the exact incentive award percentages for Columns 2 and 3 will be calculated by interpolation. Page 7
The peer companies are: 1. Anadarko Petroleum Corp. 13. Ocean Energy, Inc. 2. Apache Corp. 14. Oryx Energy Co. 3. Barrett Resources Corp. 15. Pioneer Natural Resources Co. 4. Burlington Resources, Inc. 16. Pogo Producing Co. 5. Devon Energy Corp. 17. Santa Fe Energy Resources, Inc. 6. EEX Corp. 18. Union Pacific Resources Group Inc. 7. Enron Oil & Gas Co. 19. Union Texas Petroleum Corp. 8. Equitable Resources, Inc. 20. United Meridian Corp. 9. Forcenergy, Inc. 21. Vastar Resources Inc. 10. Newfield Exploration Co. 22. Vintage Petroleum, Inc. 11. Noble Affiliates, Inc. 23. Trans Texas Gas Corp. 12. Nuevo Energy Co. 24. Triton Energy, Ltd.
II. Discretionary Individual Performance Assessment - 40% The discretionary individual performance assessment will be determined informally and subjectively on the basis of each participant's individual job performance and primarily governed by the extent to which individual and collective goals and objectives established at the beginning of the year are achieved. At year-end, the Chief Executive Officer will counsel with his direct reports in completing discretionary performance assessments for each participant and recommend specific awards, which will be subject to final approval by the Compensation Committee and ultimately by the Board of Directors. Total Plan Payout Potential: Maximum potential is 200% Target goal is 100% Minimum potential is 0% EX-10.2 5 1983 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement") is made and effective this 30th day of December, 1983 by and between Seagull Energy Corporation, a Texas corporation having its principal place of business in Houston, Harris County, Texas ("Company") and Barry J. Galt, an individual currently residing at 6730 South Evanston, Tulsa, Oklahoma ("Galt"). W I T N E S S T H: WHEREAS, the Company is desirous of employing Galt in an executive capacity on the terms and conditions, and for the consideration, hereinafter set forth and Galt is desirous of entering the employ of the Company on such terms and conditions and for such consideration; NOW, THEREFORE, for and in consideration of the mutual promises, covenants, and obligations contained herein, Company and Galt agree as follows: ARTICLE 1: EMPLOYMENT AND DUTIES 1.1 Company agrees to employ Galt and Galt agrees to be employed by Company, beginning as of the effective date of this Agreement and continuing for the period of time set forth in Article 2 of this Agreement, subject to the terms and conditions of this Agreement. 1.2 On the effective date of this Agreement, the Company shall cause Galt to be appointed Chief Executive Officer and elected a member of the Board of Directors, and Chairman of the Board of Directors, of the Company. Company shall maintain Galt in such positions, or in such other positions as the parties mutually may agree, for the full term of Galt's employment hereunder. 1.3 Galt agrees to serve as Chief Executive Officer, Director and Chairman of the Board of Directors of Company and to perform diligently and to the best of his abilities the duties and services appertaining to such offices as set forth in the Bylaws of the Company, as well as such additional duties and services appropriate to such offices which he from time to time may be reasonably directed to perform by the Board of Directors of the Company. 1.4 Galt agrees, during the period of his employment by Company, to devote his entire time, energy and best efforts to the business and affairs of the Company and not to engage, directly or indirectly, in any other business or businesses, whether or not similar to that of the Company, except with the consent of the Board of Directors. The foregoing notwithstanding, the parties recognize and agree (i) that Galt may engage in passive personal investments and other business activities that do not conflict with the business and affairs of the Company or interfere with Galt's performance of his duties hereunder, and (ii) that during the period of time from the effective date of this Agreement until April 1, 1984, Galt will devote such time as he finds necessary to fulfilling and completing to the extent possible his obligations as Chapter 11 Trustee for Nucorp Energy, Inc. and affiliated companies, and that periodically after said date he will be required to devote a limited amount of time to such activities until he is finally discharged as such Trustee by a Court of competent jurisdiction. ARTICLE 2: TERM AND TERMINATION OF EMPLOYMENT 2.1 Unless sooner terminated pursuant to other provisions hereof, Company agrees to employ Galt for a period beginning with the effective date of this Agreement and terminating December 31, 1986. Beginning December 31, 1984, said term of employment shall be extended automatically as of each December 31 for successive one (1) year periods until such time, prior to December 31 of any year during the term of employment, as either party shall give written notice to the other that no further such automatic extensions shall occur, in which event Galt's employment shall terminate on December 31 of the second calendar year following such notice. 2.2 Notwithstanding the provisions of paragraph 2.1, Company shall have the right to terminate Galt's employment under this Agreement at any time for any of the following reasons: (i) upon Galt's death; (ii) upon Galt's becoming incapacitated by accident, sickness or other circumstance which renders him mentally or physically incapable of performing the duties and services required of him hereunder for a period of at least 120 consecutive days or for a period of 180 business days during any twelve (12) month period; (iii)for cause, which for purposes of this Agreement shall mean Galt's gross negligence or willful misconduct in performance of the duties and services required of him pursuant to this Agreement, or Galt's final conviction of a felony or of a misdemeanor involving moral turpitude; (iv) for Galt's material breach of any material provision of this Agreement which, if correctable, remains uncorrected for thirty (30) days following written notice to Galt by the Company of such breach; or (v) for any other reason whatsoever, in the sole discretion of the Board of Directors of the Company. 2.3 Notwithstanding the provisions of paragraph 2.1, Galt shall have the right to terminate his employment under this Agreement at any time for any of the following reasons: (i) the assignment to Galt by the Board of Directors of duties materially inconsistent with the duties of the Company's Chief Executive Officer as such duties are constituted as of the effective date of this Agreement; (ii) the failure of the Company to elect or appoint, or to re-elect or reappoint, Galt to the offices described in paragraph 1.2 of this Agreement; (iii)the occurrence of a "change of control." For purposes of this paragraph 2.3(iii), a "change of control" shall be deemed to have occurred if: (i) any person (other than Galt, the Company, Dee S. Osborne and/or Finial Investment Corporation) including a "group" as determined in accordance with Section 13(d)(3) of the Securities Exchange Act of 1934, becomes the beneficial owner of shares of the Company having 40% or more of the total number of votes that may be cast for the election of directors of the Company; or (ii) as a result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions (a "Transaction"), the persons who were directors of the Company before the Transaction shall cease to constitute a majority of the Board of Directors of the Company or any successor to the Company; (iv) a material breach by the Company of any material provision of this Agreement which, if correctable, remains uncorrected for thirty (30) days following written notice of such breach by Galt to the Company; or (v) for any other reason whatsoever, in the sole discretion of Galt. 2.4 If the Company or Galt desires to terminate Galt's employment hereunder at any time prior to expiration of the term of employment as provided in paragraph 2.1, it or he shall do so by giving written notice to the other party that it or he has elected to terminate Galt's employment hereunder and stating the effective date and reason for such termination, provided that no such action shall alter or amend any other provisions hereof or rights arising hereunder. Such notice shall also, to the extent material to any right or obligation hereunder, constitute notice under paragraph 2.1 of the discontinuance of any further automatic extensions of the term of paragraph 2.1. ARTICLE 3: COMPENSATION AND BENEFITS 3.1 Base Salary. During the period beginning with the effective date of this Agreement and ending on March 31, 1984, Galt shall receive a base salary of $10,000 per month. Beginning April 1, 1984, and continuing for the remainder of the term of Galt's employment, Galt shall receive a base salary at the rate of $250,000 per calendar year, or such larger sum as may be fixed by the Board of Directors of the Company in its sole discretion, payable in equal installments not less often than monthly. The Compensation Committee of the Board of Directors of the Company shall make an annual review and recommendation to the Board regarding possible increases in Galt's base salary compensation. 3.2 Stock Grant. Effective January 2, 1984, the Company will grant to Galt in lieu of a cash bonus of thirty thousand (30,000) shares of the Company's common stock in consideration of Galt's agreement to become an employee of the Company and to execute this Agreement. Seven thousand five hundred (7,500) of such shares will be transferred free of any restriction. The remaining twenty-two thousand five hundred (22,500) shares of such stock will be subject to the restrictions and other terms and conditions set forth in Exhibit A, "Restricted Stock Agreement," attached to, and forming a part of, this Agreement. 3.3 Stock Options. As additional compensation, the Company has granted, or shall grant, to Galt the following stock options: (i) 1983 Incentive Stock Option - On the effective date of this Agreement, Company shall execute and deliver to Galt a ten (10) year option, under the "Seagull Energy Corporation 1981 Nonqualified and Incentive Stock Option Plan," to purchase up to 6,100 shares of the Company's common stock (being the maximum number of shares which may be optioned to Galt as of the effective date hereof under an incentive stock option plan pursuant to section 422A of the Internal Revenue Code). The form, price and other terms and conditions of such option are set forth in Exhibit B, "Incentive Stock Option Agreement," attached to, and forming a part of, this Agreement. (ii) 1984 Incentive Stock Option - Effective January 2, 1984, the Company shall execute and deliver to Galt a ten (10) year option, under the "Seagull Energy Corporation 1981 Nonqualified and Incentive Stock Option Plan," to purchase an additional number of shares of the Company's common stock, being the maximum number of shares which may be optioned to Galt at such time under an incentive stock option plan pursuant to section 422A of the Internal Revenue Code. The form, price and other terms and conditions of such option shall be substantially in accordance with Exhibit C, "Incentive Stock Option Agreement," attached to, and forming a part of, this Agreement. (iii)Non-Qualified Stock Option - Effective January 2, 1984, the Company shall execute and deliver to Galt a ten (10) year option, under the "Seagull Energy Corporation 1983 Stock Option Plan," to purchase up to 107,800 shares of the Company's common stock (being 120,000 shares less the total number of shares to be optioned under the 1983 Incentive Stock Option and the 1984 Incentive Stock Option pursuant to subparagraphs 3.3(i) and (ii) above). The form, price and other terms and conditions of such option are set forth in Exhibit D, "Nonqualified Stock Option Agreement," attached to, and forming a part of, this Agreement. If the Seagull Energy Corporation 1983 Stock Option Plan is not approved by the shareholders of the Company within one year after the date of this Agreement, the Company shall replace such option with a comparable benefit that provides for Galt substantially the same opportunity for realizing economic gain, when viewed prospectively from the date hereof (e.g., a "phantom" stock grant). 3.4 Life Insurance. The Company will provide, or cause to be provided, to Galt, at no cost to Galt, five hundred thousand dollars ($500,000), of term life insurance coverage payable to a beneficiary to be designated in writing by Galt. Notwithstanding the foregoing, however, if Galt fails to qualify medically for such insurance coverage at standard rates for his age group, Company shall not be required to provide such coverage unless Galt pays the cost of such coverage that is in excess of the standard rate cost. Such insurance, including replacement or substitute policies therefor, shall be maintained for the same period as Galt's compensation hereunder is continued pursuant to Article V hereof. 3.5 Incentive Compensation Program. Galt shall be entitled to participate in an executive incentive compensation program to be formulated and instituted by the Company as soon as reasonably practicable after the effective date of this Agreement, based upon the advice of a compensation consultant to be retained by the Company. Such incentive compensation program will be effective for calendar year 1984 and is expected to be based upon a mixture of objective criteria and subjective judgment by members of the Board of Directors concerning employee performance. 3.6 Payment In Lieu of 1984 Thrift Plan Contribution. Galt will not be eligible to participate in the Seagull Energy Corporation Thrift Plan until such time as he has satisfied the eligibility requirements for such Plan. In lieu of Galt's participation in such Plan prior to satisfying such eligibility requirements, the Company agrees to pay Galt, in January of 1985, a one-time payment equal to six percent (6%) of Galt's cash compensation taxable for federal income tax purposes received from the Company during the calendar year 1984. 3.7 Vacation and Sick Leave. During each year of his employment, Galt shall be entitled to vacation and sick leave benefits equal to the maximum available to any Company employee, without regard to the period of service that might otherwise be necessary to entitle Galt to such vacation or sick leave under standard Company policy. 3.8 Other Perquisites. During his employment hereunder, Galt shall be afforded the following benefits as incidences of his employment: (i) Company automobile - the Company will provide to Galt for his personal and business use a top-of-the-line automobile, and shall provide, or reimburse Galt for, maintenance and insurance (liability and collision coverage insuring both the Company and Galt and covering both business and personal use) for such automobile. Such automobile shall be owned or leased by the Company, or an affiliate of the Company, and, if requested by Galt, shall be replaced not less frequently than each three (3) years. (ii) Business and entertainment expenses - the Company will reimburse Galt for, or pay on behalf of Galt, reasonable and appropriate expenses incurred by Galt for business related purposes, including dues and fees to industry and professional organizations, costs of entertainment and business development, and costs reasonably incurred as a result of Galt's wife accompanying Galt on business travel. (iii)Club memberships - in addition to the other business and entertainment expenses reimbursable pursuant to subparagraph 3.8(ii) above, the Company shall pay membership fees, dues and assessments for (a) Galt's current memberships in the Eldorado Country Club and Castle Pines Country Club, (b) one country club located in Harris County, Texas, to be selected by Galt, (c) one luncheon club located in Houston, Texas, to be selected by Galt, (d) one luncheon club located outside of Houston, Texas, to be selected by Galt, and, (e) such other luncheon or country club memberships as the Compensation Committee of the Board of Directors of the Company may deem to be justified by business usage. The foregoing notwithstanding, the Company shall not be obligated to buy from Galt, or to reimburse Galt for the price of, his membership in any club of which Galt is a member as of the effective date of this Agreement. (iv) Annual physical examination - the Company shall pay for the cost of an annual physical examination to be conducted by a doctor or clinic of Galt's choosing in Houston, Texas. (v) Parking - the Company shall provide at no expense to Galt a parking place convenient to Galt's office. (vi) Other Company benefits - Galt and, to the extent applicable, Galt's family, dependents and beneficiaries, shall be allowed to participate in all benefits, plans and programs, including improvements or modifications of the same, which are now, or may hereafter be, available to similarly-situated Company employees. Such benefits, plans and programs may include, without limitation, profit sharing plan, thrift plan, health insurance or health care plan, life insurance, disability insurance, pension plan, and the like. The Company shall not, however, by reason of this paragraph be obligated to institute, maintain, or refrain from changing, amending or discontinuing, any such benefit plan or program, so long as such changes are similarly applicable to executive employees generally. The perquisites provided in this paragraph 3.8 (except subparagraph 3.8(ii)) shall be provided for the same period as Galt's compensation hereunder is continued pursuant to Article V hereof; provided, however, that to the extent that any benefit cannot be continued during a period when Galt is not an employee of the Company, the Company shall pay Galt an amount equal to the economic value of such benefit. ARTICLE 4: HOUSING ARRANGEMENTS 4.1 Temporary Housing. From the effective date of this Agreement, and continuing until Galt relocates his permanent residence to Houston, Texas, or until September 30, 1984, whichever is the earlier, the Company will provide Galt with a furnished apartment, utilities paid, in Houston, Texas, and, during the same period, will pay for travel, including air travel, between Houston and Tulsa, Oklahoma by Galt and his wife. 4.2 Moving Expenses. Company will pay, or reimburse Galt for, all reasonable expenses incurred by Galt in the course of moving his principal residence, family and goods from Tulsa, Oklahoma, to Houston, Texas, including packing, storage and cartage. 4.3 Loan and Note. Upon purchase by Galt of a principal residence in Houston, during the term of this Agreement, the Company will lend to Galt a sum of money equal to one-half the cost of such principal residence, including not only the cost of acquiring such residence but all costs and expenses incurred by Galt in improving, remodeling, enlarging and decorating same (hereinafter "Acquisition Cost"), or Three Hundred Thousand dollars ($300,000) whichever is the lesser. Such loan shall be evidenced by, and subject to the terms and conditions of, a promissory note (hereinafter "Note") from Galt payable to the order of Company and bearing interest at the rate of six percent (6%) per annum. Interest only shall be payable on said Note for the first three (3) years, after which said Note shall be payable in ten (10) equal annual installments of principal, each such principal payment to be accompanied by payment of all then accrued interest. Such loan and Note shall be secured by a second lien deed of trust (hereinafter "Deed of Trust") on Galt's Houston residence, or any replacement residence, such Deed of Trust to be in customary form. In the event of termination of Galt's employment hereunder by the Company pursuant to paragraphs 2.2(iii) or (iv) or by Galt pursuant to paragraph 2.3(v), such Note shall accelerate and be fully payable six (6) months following such termination. ARTICLE 5: EFFECT OF TERMINATION ON COMPENSATION 5.1 By Expiration. If Galt's employment hereunder shall terminate upon expiration of the term provided in paragraph 2.1 hereof as the same may have been automatically extended from time to time, then: (i) all compensation and all benefits to Galt hereunder shall terminate contemporaneously with termination of his employment; and (ii) the rights and obligations of Galt pursuant to Exhibits A through D to this Agreement, and pursuant to said Note and said Deed of Trust shall be specifically as provided in such instruments. This paragraph 5.1 shall not be applicable in the event of termination of employment prior to the expiration of the term provided in paragraph 2.1 hereof (as same may have been automatically extended from time to time) pursuant to paragraphs 2.2 or 2.3 hereof. 5.2 By Company. If Galt's employment hereunder shall be terminated by the Company prior to expiration of the term provided in paragraph 2.1 hereof as the same may have been automatically extended from time to time, then, upon such termination, regardless of the reason therefor, all compensation and all benefits to Galt hereunder shall terminate contemporaneously with the termination of such employment, except that: (i) the rights and obligations of Galt pursuant to Exhibits A through D to this Agreement, and pursuant to said Note and said Deed of Trust shall be specifically as provided in such instruments; and (ii) if such termination shall be for any reason other than those encompassed by paragraphs 2.2(iii) or (iv), then Galt's compensation and benefits pursuant to paragraphs 3.1 and 3.4 and subparagraphs 3.8(i), (iii), (iv), (v) and (vi) shall continue for the balance of such term. 5.3 By Galt. If Galt's employment hereunder shall be terminated by Galt prior to expiration of the term provided in paragraph 2.1 hereof as the same may have been automatically extended from time to time, then, upon such termination, regardless of the reason therefor, all compensation and benefits to Galt hereunder shall terminate contemporaneously with the termination of such employment, except that: (i) the rights and obligations of Galt pursuant to Exhibits A through D to this Agreement, and pursuant to said Note and said Deed of Trust shall be specifically as provided in such instruments; (ii) if such termination shall occur within twelve months following the occurrence prior to April 1, 1984 of a "change of control" as defined in paragraph 2.3(iii), then Galt's compensation and benefits pursuant to paragraphs 3.1 and 3.4 and subparagraphs 3.8(i), (iii), (iv), (v) and (vi) shall continue until October 31, 1984 or the last day of the sixth full month following such termination of employment, whichever is later; (iii)if such termination shall occur within twelve months following the occurrence subsequent to March 31, 1984, of a "change of control" as defined in paragraph 2.3(iii) then Galt's compensation and benefits pursuant to paragraphs 3.1 and 3.4 and subparagraphs 3.8(i), (iii), (iv), (v) and (vi) shall continue for the balance of such term; and (iv) if such termination shall be pursuant to paragraphs 2.3(i), (ii), or (iv) then Galt's compensation and benefits pursuant to paragraphs 3.1 and 3.4 and subparagraphs 3.8(i), (iii), (iv), (v) and (vi) shall continue for the balance of such term. ARTICLE 6: CONFIDENTIAL INFORMATION 6.1 Company Information. Galt acknowledges that the Company's business is highly competitive and that the Company's books, records and documents, the Company's technical information concerning its products, equipment, services and processes, procurement procedures and pricing techniques, the names of and other information (such as credit and financial data) concerning the Company's customers and business affiliates, all comprise confidential business information and trade secrets of the Company which are valuable, special, and unique assets of the Company, which the Company uses in its business to obtain a competitive advantage over the Company's competitors which do not know or use this information. Galt further acknowledges that protection of the Company's confidential business information and trade secrets against unauthorized disclosure and use is of critical importance to the Company in maintaining its competitive position. Accordingly, Galt hereby agrees that he will not, at any time during or after his employment by the Company, make any unauthorized disclosure of any confidential business information or trade secrets of the Company, or make any use thereof, except for the benefit of, and on behalf of, the Company. For the purposes of this paragraph, the term "Company" shall also include affiliates of the Company. 6.2 Third Party Information. Galt acknowledges that, as a result of his employment by the Company, he may from time to time have access to, or knowledge of, confidential business information or trade secrets of third parties, such as customers, suppliers, partners, joint venturers, and the like, of the Company. Galt agrees to preserve and protect the confidentiality of such third party confidential information and trade secrets to the same extent, and on the same basis, as Company confidential business information and trade secrets. 6.3 Information of Prior Employers. Galt agrees not to disclose to the Company, or to use on behalf of the Company, any confidential business information or trade secrets of any of Galt's prior employers. 6.4 Return of Documents. All written materials, records and other documents made by, or coming into the possession of, Galt during the period of his employment by the Company which contain or disclose Company confidential business information or trade secrets shall be and remain the property of the Company. Upon termination of Galt's employment by the Company, for any reason, he promptly shall deliver the same, and all copies thereof, to the Company. ARTICLE 7: INVENTIONS AND DISCOVERIES 7.1 Galt agrees promptly and freely to disclose to the Company, in writing, any and all ideas, conceptions, inventions, improvements, and discoveries, whether patentable or not, which are conceived or made by Galt, solely or jointly with another, during the period of his employment by Company and which are related to the business or activities of Company. Galt agrees to assign and hereby does assign to Company all his interest in said ideas, conceptions, inventions, improvements, and discoveries. Galt agrees that, whenever requested to do so by Company, he shall execute any and all applications, assignments or other instruments that Company shall deem necessary, in its sole discretion, to apply for and obtain protection, including patent protection, for said ideas, conceptions, inventions, improvements and discoveries in all countries of the world. The obligations in the preceding sentence shall continue beyond the termination of Galt's employment regardless of the reason for such termination. 7.2 Galt represents that he has not heretofore made any invention or discovery related to the Company's business which he wishes to exclude from the provisions of paragraph 7.1 above. 7.3 As used in this Article 7, "Company" shall include affiliates of the Company. ARTICLE 8: NON-COMPETITION 8.1 As part of the consideration for the compensation to be paid to Galt hereunder, and as an additional incentive for the Company to enter into this Agreement, Galt hereby agrees that he will not at any time during his employment by the Company, or at any time following his employment by the Company while he is still receiving base salary compensation from the Company pursuant to paragraph 3.1 or Article V above, directly or indirectly, for himself or for others, in any state of the United States or in any foreign country where the Company or any of its affiliates is then conducting any business, or has, during the previous twelve (12) months, conducted any business: (i) engage in any business similar to or competitive with that conducted by the Company or its affiliates; (ii) render advice or services to, or otherwise assist, any other person or entity who is engaged, directly or indirectly, in any business similar to, or competitive with, the business conducted by the Company or its affiliates; (iii)transact any business in any manner pertaining to suppliers or customers of the Company or any affiliate which, in any manner, would have, or is likely to have, an adverse effect upon the Company or any affiliate; or, (iv) induce any employee of the Company or any affiliate to terminate his or her employment with the Company or such affiliate. 8.2 Galt understands that the foregoing restrictions may limit his ability to engage in a business similar to the Company's business anywhere in the world during any time when he is receiving base salary compensation from the Company pursuant to paragraph 3.1 or Article V above, but acknowledges that he will receive sufficiently high remuneration and other benefits from the Company hereunder to justify such restriction. The Company and Galt agree that the Company's remedy for breach of the provisions of this Article 8 shall be, and shall be limited to, termination of all compensation and all benefits to Galt otherwise provided under this Agreement. 8.3 It is expressly understood and agreed that the Company and Galt consider the restrictions contained in paragraphs 8.1 above to be reasonable and necessary for the purposes of preserving and protecting the good will and proprietary information of the Company. Nevertheless, if any of the aforesaid restrictions are found by a court having jurisdiction to be unreasonable, or over broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions therein set forth to be modified by such court so as to be reasonable and enforceable and, as so modified by the court, to be fully enforced. ARTICLE 9: MISCELLANEOUS 9.1 Notices. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Company to: Seagull Energy Corporation First International Plaza Suite 2000 1100 Louisiana Street Houston, Texas 77002 Attention: Corporate Secretary If to Galt to: Mr. Barry J. Galt 6730 South Evanston Tulsa, Oklahoma 74136 or to such other address as either party may furnish to the other in writing in accordance herewith, except that notices of changes of address shall be effective only upon receipt. 9.2 Applicable Law. This contract is entered into under, and shall be governed for all purposes by, the laws of the State of Texas. 9.3 No Waiver. No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. 9.4 Severability. If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain. in full force and effect. 9.5 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement. 9.6 Withholding of Taxes. Company may withhold from any benefits payable under this Agreement all federal, state, city or other taxes as may be required pursuant to any law or governmental regulation or ruling. 9.7 Headings. The paragraph headings have been inserted for purposes of convenience and shall not be used for interpretive purposes. 9.8 Affiliate. As used in this Agreement, "affiliate" shall mean. any entity which owns or controls, is owned or controlled by, or is under common ownership or control with, the Company. 9.9 Assignment. This Agreement, and the rights and obligations of the parties hereunder, are personal and neither this Agreement, nor any right, benefit or obligation of either party hereto, shall be subject to voluntary or involuntary assignment, alienation or transfer, whether by operation of law or otherwise, without the prior written consent of the other party. 9.10 Term. This Agreement has a term co-extensive with the term of employment as defined in paragraph 2.1. Termination shall not affect any right or obligation of any party which is accrued or vested prior to such termination. 9.11 Entire Agreement. This Agreement, together with the Exhibits hereto, constitutes the entire agreement of the parties with regard to the subject matter hereof, and contains all the covenants, promises, representations, warranties and agreements between the parties with respect to employment of Galt by the Company. Each party to this Agreement acknowledges that no representation, inducement, promise or agreement, oral or written, has been made by either party, or by anyone acting on behalf of either party, which is not embodied herein, and that no agreement, statement, or promise relating to the employment of Galt by the Company, which is not contained in this Agreement or the Exhibits hereto, shall be valid or binding. Any modification of this Agreement will be effective only if it is in writing and signed by the party to be charged. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered as of the day and year first above written. SEAGULL ENERGY CORPORATION By: Its: BARRY J. GALT AMENDMENT TO EMPLOYMENT AGREEMENT WHEREAS, Seagull Energy Corporation ("Company") and Barry J. Galt ("Galt") have heretofore entered into an Employment Agreement ("Agreement"), effective as of December 30, 1983; and WHEREAS, Section 3.4 of the Agreement obligates the Company to provide certain term life insurance coverage to Galt during the term of the Agreement; and WHEREAS, the Company and Galt desire to enter into an agreement regarding the provision of insurance coverage for Galt, effective as of January 1, 1987, and in satisfaction of the Company's obligations under Section 3.4 of the Agreement; NOW, THEREFORE, the parties hereto agree as follows: 1. Commencing as of February 9, 1987 and during each year that the Agreement is in force and effect, the Company agrees to tender annual premiums in the amounts established pursuant to Schedule A attached hereto and made a part hereof to the Philadelphia Life Insurance Company to be applied by such company to increase the cash value of Flexible Premium Adjustable Life Insurance Policy Number 7226596. 2. Galt agrees that payment of the premiums by the Company as specified in Item 1 above will constitute full and complete performance by the Company of its obligations under Section 3.4 of the Agreement. IN WITNESS WHEREOF, the parties hereto have caused these presents to be executed this ____ day of ____________, 1987. SEAGULL ENERGY CORPORATION By: Joe T. Rye, Vice President, Finance & Administration Barry J. Galt SCHEDULE A Philadelphia Life Insurance Company Policy No: 7226596; Insured: Barry J. Galt; Owner: Kathryn M. Galt Annual Payment by Seagull Energy Corporation
Due Date Amount Age of Mr. Galt 2-9-87 $ 2,000.00 53 2-9-88 2,190.00 54 2-9-89 2,395.00 55 2-9-90 2,610.00 56 2-9-91 2,825.00 57 2-9-92 3,040.00 58 2-9-93 3,255.00 59 2-9-94 3,470.00 60 2-9-95 3,760.00 61 2-9-96 4,190.00 62 2-9-97 4,770.00 63 2-9-98 5,490.00 64 2-9-99 6,355.00 65 2-9-00 7,225.00 66 2-9-01 8,100.00 67 2-9-02 8,990.00 68 2-9-03 9,885.00 69 2-9-04 11,000.00 70 2-9-05 12,520.00 71 2-9-06 14,520.00 72 2-9-07 17,055.00 73 2-9-08 20,235.00 74 2-9-09 24,060.00 75 2-9-10 28,510.00 76 2-9-11 33,570.00 77 2-9-12 36,730.00 78 2-9-13 40,080.00 79 2-9-14 43,565.00 80
EX-10.3 6 1981 STOCK OPTION PLAN (RESTATED) SEAGULL ENERGY CORPORATION 1981 STOCK OPTION PLAN (RESTATED) I. History and Purpose of the Plan The Seagull Energy Corporation 1981 Stock Option Plan(the "Plan") was originally adopted by Seagull Energy Corporation, a Texas corporation (the "Company"), on December 31,1981 and was approved by the shareholders of the Company on May28, 1982. The Plan isintended to provide a means whereby certain employees of the Company and its subsidiaries maydevelop a sense of proprietorship and personal involvement in the development and financial success of the Company, and to encourage them to remain with and devote their best efforts to the business of the Company, thereby advancing the interests of the Company and its shareholders. Accordingly, the Company may grant to certain employees the option ("Option")to purchase shares of the common stock of the Company("Stock"), as hereinafter set forth. Options granted under the Plan may be either incentive stock options, within the meaning of section 422A(b) of the Internal Revenue Code of 1986, as amended (the "Code"), ("Incentive Stock Options") oroptions which do not constitute Incentive Stock Options. On September 20, 1988, the Company restated the Plan in the form of this Seagull Energy Corporation 1981 Stock Option Plan (Restated) for the purpose of incorporating certain amendments previously adopted with respect to the Plan into the text of the Plan and for purposes of amending the Plan incertain respects. The terms and provisions of this restatement of the Plan are effective only with respect to Options granted from and after September20, 1988 and Options granted prior to such date shall continue to be governed by the terms and provisions of the Plan (and amendments thereto) as in effect on September 20, 1988. II. Administration The Plan shall be administered by the CompensationCommittee (the "Committee") of the Board of Directors of the Company (the "Board"). Members of the Committee shall not be eligible, and shall not have been eligible at any time within one year prior to their appointment to the Committee, to participate in the Plan or in any other stock, stock option or stock appreciation rights plan of the Company or any of its affiliates ("Company Stock Plan"). The Committee shall have sole authority to select the individuals who are to be granted Options from among those eligible hereunder and to establish the number of shares which may be issued under each Option. The Committee is authorized to interpret the Plan and may from time to time adopt such rules and regulations, consistent with the provisions of the Plan, as it may deem advisable to carry out the Plan. All decisions made by th Committee in selecting the individuals to whom Options shall be granted, in establishing the number of shares which may be issued under each Option and in construing the provisions of the Plan shall be final. III. Option Agreements (a) Each Option shall be evidenced by an Option Agreement and shall contain such terms and conditions, and may be exercisable for such periods, as may be approved by the Committee. The terms and conditions of the respective Option Agreements need not be identical. Specifically, an Option Agreement may provide for the surrender of the right to purchase shares under the Option in return for a payment in cash or shares of Stock or a combination of cash and shares of Stock equal in value to the excess of the fair market value of the shares with respect to which the right to purchase is surrendered over the option price therefor ("Stock Appreciation Rights"), on such terms and conditions as the Committee in its sole discretion may prescribe; provided, that no Stock Appreciation Rights may be granted in conjunction with an Option which is an Incentive Stock Option; and provided, further, that with respect to Stock Appreciation Rights granted to employees who are subject to Section 16 of the Securities Exchange Act of 1934 (the "1934 Act"), exceptas provided in Subparagraph VIII(c) hereof, the Committeeshall retain final authority (i) to determine whether an optionee shall be permitted, or (ii) to approve an election by an optionee, to receive cash in full or partial settlementof Stock Appreciation Rights. Moreover, an Option Agreement may provide for the payment of the option price, in whole or in part, by the delivery of a number of shares of Stock (plus cash if necessary) having a fair market value equal to such option price. Finally, an Option Agreement may provide for cash less exercise by permitting an Optionee to withhold from shares of Stock acquirable upon exercise of such Option shares of Stock equal in value to all or a specified portion of the Option Price; all on such terms and subject to such conditions as shall be established from time to time by the Committee. For all purposes under the Plan, the fair market value of a share of Stock on a particular date shall be equal to the closing price of the Stock on the New York Stock Exchange Composite Tape on that date, or if no prices are reported on that date, on the last preceding date on which such prices of the Stock are so reported. Each Option andall rights granted there under shall not be transferable other than by will or the laws of descent and distribution, and shall be exercisable during the optionee's lifetime only by the optionee or the optionee's guardian or legal representative. (b) Paragraph (a) above to the contrary notwithstanding, an Option Agreement evidencing an Option granted underthe Plan shall include the following specific provisions: (i) A provision restricting exercise of theOption until the Optionee has performed one year ofemployment with the Company or any parent or subsidiary corporation (as defined in section 425 ofthe Code) of the Company following the date ofgrant of the Option;A (ii) A provision restricting exercise of theOption following termination of employment byreason of retirement or disability to an exerciseperiod of three months following the date of suchtermination of employment and further restrictingsuch exercise to the extent such Option was exercisable at the date of such termination of employment; andA (iii)A provision restricting exercise of theOption upon termination of employment by reason ofdeath to an exercise period of one year followingthe date of such death and further restricting suchexercise to the extent that the Option was exercisable as of the date immediately preceding suchdeath.A IV. Eligibility of Optionee Options may be granted only to individuals who are keyemployees (including officers and directors who are also keyemployees) of the Company or any parent or subsidiary corporation (as defined in section425 of the Code) of the Companyat the time the Option is granted and who, as of such time,are employed on a fulltime basis and who are compensated forsuch employment by a regular salary. Options may be grantedto the same individual on more than one occasion. No Incentive Stock Option shall be granted to an individual if, atthe time the Option is granted, such individual owns stockpossessing more than 10% of the total combined voting powerof all classes of stock of the Company or of its parent orsubsidiary corporation, within the meaning of section422A(b)(6) of the Code, unless (i)at the time such Option isgranted the option price is at least 110% of the fair marketvalue of the Stock subject to the Option and (ii)such Optionby its terms is not exercisable after the expiration of fivebyears from the date of grant. To the extent that the aggregate fair market value (determined at the time the respectiveIncentive Stock Option is granted) of stock with respect towhich Incentive Stock Options granted after 1986 are exercisable for the first time by an individual during any calendar year under all incentive stock option plans of the Company and its parent and subsidiary corporations exceeds$100,000, such Incentive Stock Options shall be treated asoptions which do not constitute Incentive Stock Options. TheCommittee shall determine, in accordance with applicableprovisions of the Code, Treasury Regulations and other administrative pronouncements, which of an optionee's IncentiveStock Options will not constitute Incentive Stock Optionsbecause of such limitation and shall notify the optionee ofsuch determination as soon as practicable after such determination. V. Shares Subject to the Plan The aggregate number of shares which may be issued under Options granted under the Plan shall not exceed 250,000 shares of Stock. Such shares may consist of authorized butunissued shares of Stock or previously issued shares of Stock reacquired by the Company. Any of such shares which remain unissued and which are not subject to outstanding Options atthe termination of the Plan shall cease to be subject to the Plan, but, until termination of the Plan, the Company shall at all times make available a sufficient number of shares to meet the requirements of the Plan. Should any Option hereunder expire or terminate prior to its exercise in full, the shares theretofore subject to such Option may again be subject to an Option granted under the Plan. The aggregate number of shares which may be issued under the Plan shall be subject to adjustment in the same manner as provided in Paragraph VIII hereof with respect to shares of Stock subject to Options then outstanding. Exercise of an Option in any manner, including an exercise involving a Stock Appreciation Right, shall result in a decrease in the number of shares of Stock which may thereafter be available, both for purposes ofthe Plan and for sale to any one individual, by the number of shares as to which the Option is exercised. Separate stock certificates shall be issued by the Company for those shares acquired pursuant to the exercise of an Incentive Stock Option and for those shares acquired pursuant to the exercise of any Option which does not constitute an Incentive Stock Option. VI. Option Price The purchase price of Stock issued under each Option shall be determined by the Committee, but in the case of an Incentive Stock Option, such purchase price shall not beless than the fair market value of Stock subject to the Option on the date the Option is granted. VII. Term of Plan The Plan became effective upon December 31, 1981, thedate of its adoption by the Board. Except with respect to Options then outstanding, if not sooner terminated under the provisions of Paragraph IX, the Plan shall terminate upon and no further Options shall be granted after the expiration often years from the date of its adoption by the Board. VIII. Recapitalization or Reorganization (a) The existence of the Plan and the Options granted hereunder shall not affect in any way the right or power of the Board or the shareholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company's capital structure or its business, any merger or consolidation of the Company, any issue of debt or equity securities ahead of or affecting Stock or the rights thereof, the dissolution or liquidation of the Company or any sale, lease, exchange or other disposition ofall or any part of its assets or business or any other corporate act or proceeding. (b) The shares with respect to which Options may begranted are shares of Stock as presently constituted, but if, and whenever, prior to the expiration of an Option theretofore granted, the Company shall effect a subdivision orconsolidation of shares of Stock or the payment of a stock dividend on Stock without receipt of consideration by the Company, the number of shares of Stock with respect to which such Option may there after be exercised (i)in the event of an increase in the number of outstanding shares shall be proportionately increased, and the purchase price per share shall be proportionately reduced, and (ii) in the event of a reduction in the number of outstanding shares shall be proportionately reduced, and the purchase price per share shall be proportionately increased. (c) If the Company recapitalizes or otherwise changes its capital structure, thereafter upon any exercise of an Option theretofore granted the optionee shall be entitled to purchase under such Option, in lieu of the number of shares of Stock as to which such Option shall then be exercisable,the number and class of shares of stock and securities to which the optionee would have been entitled pursuant to the terms of the recapitalization if, immediately prior to such recapitalization, the optionee had been the holder of record of the number of shares of Stock as to which such Option is then exercisable. If (i) the Company shall not be the surviving entity in any merger or consolidation (or survives only as a subsidiary of an entity other than a previously whollyowned subsidiary of the Company), (ii) the Company sells, leases or exchanges or agrees to sell, lease or exchange all or substantially all of its assets to any otherperson or entity (other than a wholly-owned subsidiary of the Company), (iii) the Company is to be dissolved and liquidated, (iv) any person or entity, including a "group" ascontemplated by Section 13(d)(3) of the 1934 Act, acquires orgains ownership or control (including, without limitation,power to vote) of more than 40% of the outstanding shares ofStock, or (v) as a result of or in connection with a contested election of directors, the persons who were directors of the Company before such election shall cease to constitute a majority of the Board (each such event is referred to herein as a "Corporate Change"), then, upon the occurrence of any such Corporate Change, each Option then outstanding shall become fully exercisable and effective as of a date (selected by the Committee) within (a) ten days after the approval by the shareholders of the Company of such merger, consolidation, sale, lease or exchange of assets or dissolution or such election of directors or (b) thirty days of such change of control, the Committee, acting in its sole discretion without the consent or approval of any optionee, shall effect one or more of the following alternatives, which may vary among individual optionees: (1) establish a limited period of time on or before a specified date (before or after such Corporate Change) fixed by the Committee during which such outstanding Options may be exercised, after which specified date all unexercised Options and all rights of optionees thereunder shall terminate, (2) require the mandatory surrender to the Company by selected optionees of some or all of the outstanding Options held by such optionees as of a date, before or after such Corporate Change, specified by the Committee, in which event the Committee shall there upon cancel such Options and pay to each optionee an amount of cash per share equal to the excess of the amount calculated in Subparagraph (d) below (the "Change of Control Value") of the shares subject to such Option over the exercise price(s)under such Options for such shares, (3) make such adjustments to Options then outstanding as the Committee deems appropriate to reflect such Corporate Change (provided, however, that the Committee may determine in its sole discretion that no adjustment is necessary to Options then outstanding) or (4) provide that thereafter upon any exercise of an Option theretofore granted the optionee shall be entitled to purchase under such Option, in lieu of the number of shares of Stock as to which such Option shall then be exercisable, the number and class of shares of stock or other securities or property to which the optionee would have been entitled pursuant to the terms of the agreement of merger, consolidation or sale of assets and dissolution if, immediately prior to such merger, consolidation or sale of assets and dissolution the optionee had been the holder of record of the number of shares of Stock as to which such Option is then exercisable. (d) For the purposes of clause (2) in Subparagraph (c)above, the "Change of Control Value" shall equal the amount determined in clause (i), (ii) or (iii), whichever is applicable, as follows: (i) the per share price offered to shareholders of the Company in any such merger, consolidation, sale of assets or dissolution transaction, (ii) the price per share offered to shareholders of the Company in any tender offer or exchange offer whereby a Corporate Change takes place, or (iii) if such Corporate Change occurs other than pursuant to a tender or exchange offer, the fair market value per share of the shares into which such Options being surrendered are exercisable, as determined by the Committee as of the date determined by the Committee to be the date of cancellation and surrender of such Options. In the event that the consideration offered to shareholders of the Company in any transaction described in this Subparagraph (d) or Subparagraph (c) above consists of anything other than cash, the Committee shall determine the fair cash equivalent of the portion of the consideration offered which is other than cash. (e) Any adjustment provided for in Subparagraphs(b) or(c) above shall be subject to any required share holder action. (f) Except as herein before expressly provided, the issuance by the Company of shares of stock of any class or securities convertible into shares of stock of any class, for cash, property, labor or services, upon direct sale, upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Stock subject to Options theretofore granted or the purchase price per share. IX. Amendment or Termination of the Plan The Board in its discretion may terminate the Plan at any time with respect to any shares for which Options have not theretofore been granted. The Board shall have the right to alter or amend the Plan or any part thereof from time to time; provided, that no change in any Option theretofore granted may be made which would impair the rights of the optionee without the consent of such optionee; and provided, further, that the Board may not make any alteration or amendment which would materially increase the benefits accruing to participants under the Plan, increase the aggregate number of shares which may be issued pursuant to the provisions of thePlan, change the class of individuals eligible to receiveOptions under the Plan or extend the term of the Plan, without the approval of the shareholders of the Company. EX-10.4 7 1983 STOCK OPTION PLAN (RESTATED) SEAGULL ENERGY CORPORATION 1983 STOCK OPTION PLAN (RESTATED) I. History and Purpose of the Plan The Seagull Energy Corporation 1983 Stock Option Plan(the "Plan") was originally adopted by Seagull Energy Corporation, a Texas corporation (the "Company"), on December 30,1983 and was approved by the shareholders of the Company on May15, 1984. The Plan is intended to provide a means whereby certain employees of the Company and its subsidiaries may develop a sense of proprietorship and personal involvement in the development and financial success of the Company, and to encourage them to remain with and devote their best efforts to the business of the Company, thereby advancing the interests of the Company and its shareholders. Accordingly, the Company may grant to certain employees the option ("Option")to purchase shares of the common stock of the Company("Stock"), as hereinafter set forth. Options granted under the Plan may be either incentive stock options, within the meaning of section 422A(b) of the Internal Revenue Code of 1986, as amended (the "Code"), ("Incentive Stock Options") or options which do not constitute Incentive Stock Options. On September 20, 1988, the Company restated the Plan in the form of this Seagull Energy Corporation 1983 Stock Option Plan(Restated) for the purpose of incorporating certain amendments previously adopted with respect to the Plan into the text of the Plan and for purposes of amending the Plan in certain respects. The terms and provisions of this restatement of the Plan are effective only with respect to Options granted from and after September 20, 1988 and Options granted prior to such date shall continue to be governed by the terms and provisions of the Plan (and amendments thereto) as ineffect on September 20, 1988. II. Administration The Plan shall be administered by the Compensation Committee (the "Committee") of the Board of Directors of the Company (the "Board"). Members of the Committee shall not be eligible, and shall not have been eligible at any time within one year prior to their appointment to the Committee, to participate in the Plan or in any other stock, stock option or stock appreciation rights plan of the Company or any of its affiliates ("Company Stock Plan"). The Committee shall have sole authority to select the individuals who are to be granted Options from among those eligible hereunder and to establish the number of shares which may be issued under each Option. The Committee is authorized to interpret the Plan and may from time to time adopt such rules and regulations, consistent with the provisions of the Plan, as it may deem advisable to carry out the Plan. All decisions made by the Committee in selecting the individuals to whom Options shall be granted, in establishing the number of shares which may beissued under each Option and in construing the provisions ofthe Plan shall be final. III. Option Agreements Each Option shall be evidenced by an Option Agreement and shall contain such terms and conditions, and may be exercisable for such periods, as may be approved by the Committee. The terms and conditions of the respective Option Agreements need not be identical. Specifically, an Option Agreement may provide for the surrender of the right to purchase shares under the Option in return for a payment in cash or shares of Stock or a combination of cash and shares of Stock equal in value to the excess of the fair market value of the shares with respect to which the right to purchase is surrendered over the option price therefor ("Stock Appreciation Rights"), on such terms and conditions as the Committee in its sole discretion may prescribe; provided, that with respect to Stock Appreciation Rights granted to employees who are subject to Section 16 of the Securities Exchange Act of 1934 (the "1934 Act"), except as provided in Subparagraph VIII(c) hereof, the Committee shall retain final authority (i) to determine whether an optionee shall be permitted, or (ii) to approve an election by an optionee, to receive cash in full or partial settlement of Stock Appreciation Rights. Moreover, an Option Agreement may provide for the payment of the option price, in whole or in part, by the delivery of a number of shares of Stock (plus cash if necessary) having a fair market value equal to such option price. Finally, an Option Agreement may provide for cashless exercise by permitting an Optionee to withhold from shares of Stock acquirable upon exercise of such Option shares of Stock equal in value to all or a specified portion of the Option Price; all on such terms and subject to such conditions as shall be established from time to time by the Committee. For all purposes under the Plan, the fair market value of a share of Stock on a particular date shall be equal to the closing price of the Stock on the New York Stock Exchange Composite Tape on that date, or if no prices are reported on that date,on the last preceding date on which such prices of the Stock are so reported. Each Option and all rights granted thereunder shall not be transferable other than by will or the laws of descent and distribution, and shall be exercisable during the optionee's lifetime only by the optionee or the optionee's guardian or legal representative. IV. Eligibility of Optionee Options may be granted only to individuals who are key employees (including officers and directors who are also key employees) of the Company or any parent or subsidiary corporation (as defined in section 425 of the Code) of the Company at the time the Option is granted. Options may be granted to the same individual on more than one occasion. No Incentive Stock Option shall be granted to an individual if, at the time the Option is granted, such individual owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of its parent or subsidiary corporation, within the meaning of section 422A(b)(6) of the Code, unless (i)at the time such Option is granted the option price is at least 110% of the fair market value of the Stock subject to the Option and (ii)such Option by its terms is not exercisable after the expiration of five years from the date of grant. To the extent that the aggregate fair market value (determined at the time the respective Incentive Stock Option is granted) of stock with respect to which Incentive Stock Options granted after 1986 are exercisable for the first time by an individual during any calendar year under all incentive stock option plans of the Company and its parent and subsidiary corporations exceeds $100,000, such Incentive Stock Options shall be treated as options which do not constitute Incentive Stock Options. The Committee shall determine, in accordance with applicable provisions of the Code, Treasury Regulations and other administrative pronouncements, which of an optionee's Incentive Stock Options will not constitute Incentive Stock Options because of such limitation and shall notify the optionee of such determination as soon as practicable after such determination. V. Shares Subject to the Plan The aggregate number of shares which may be issued under Options granted under the Plan shall not exceed 300,000 shares of Stock. Such shares may consist of authorized but unissued shares of Stock or previously issued shares of Stock reacquired by the Company. Any of such shares which remain unissued and which are not subject to outstanding Options atthe termination of the Plan shall cease to be subject to the Plan, but, until termination of the Plan, the Company shall at all times make available a sufficient number of shares to meet the requirements of the Plan. Should any Option here under expire or terminate prior to its exercise in full, the shares theretofore subject to such Option may again be subject to an Option granted under the Plan. The aggregate number of shares which may be issued under the Plan shall be subject to adjustment in the same manner as provided in Paragraph VIII hereof with respect to shares of Stock subject to Options then outstanding. Exercise of an Option in any manner, including an exercise involving a Stock Appreciation Right, shall result in a decrease in the number of shares of Stock which may thereafter be available, both for purposes of the Plan and for sale to any one individual, by the number of shares as to which the Option is exercised. Separate stock certificates shall be issued by the Company for those shares acquired pursuant to the exercise of an Incentive Stock Option and for those shares acquired pursuant to the exercise of any Option which does not constitute an Incentive Stock Option. VI. Option Price The purchase price of Stock issued under each Option shall be determined by the Committee, but in the case of an Incentive Stock Option, such purchase price shall not be less than the fair market value of Stock subject to the Option on the date the Option is granted. VII. Term of Plan The Plan became effective upon December 30, 1983, the date of its adoption by the Board. Except with respect to Options then outstanding, if not sooner terminated under the provisions of Paragraph IX, the Plan shall terminate upon and no further Options shall be granted after the expiration often years from the date of its adoption by the Board. VIII. Recapitalization or Reorganization (a) The existence of the Plan and the Options granted hereunder shall not affect in any way the right or power of the Board or the shareholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company's capital structure or its business, any merger or consolidation of the Company, any issue of debt or equity securities ahead of or affecting Stock orthe rights thereof, the dissolution or liquidation of the Company or any sale, lease, exchange or other disposition of all or any part of its assets or business or any other corporate act or proceeding. (b) The shares with respect to which Options may be granted are shares of Stock as presently constituted, but if,and whenever, prior to the expiration of an Option theretofore granted, the Company shall effect a subdivision or consolidation of shares of Stock or the payment of a stock dividend on Stock without receipt of consideration by the Company, the number of shares of Stock with respect to which such Option may thereafter be exercised (i)in the event of an increase in the number of outstanding shares shall be proportionately increased, and the purchase price per share shall be proportionately reduced, and (ii)in the event of a reduction in the number of outstanding shares shall be proportionately reduced, and the purchase price per share shall be proportionately increased. (c) If the Company recapitalizes or otherwise changes its capital structure, thereafter upon any exercise of an Option theretofore granted the optionee shall be entitled to purchase under such Option, in lieu of the number of shares of Stock as to which such Option shall then be exercisable, the number and class of shares of stock and securities to which the optionee would have been entitled pursuant to the terms of the recapitalization if, immediately prior to such recapitalization, the optionee had been the holder of record of the number of shares of Stock as to which such Option is then exercisable. If (i) the Company shall not be the surviving entity in any merger or consolidation (or survivesonly as a subsidiary of an entity other than a previously wholly owned subsidiary of the Company), (ii) the Company sells, leases or exchanges or agrees to sell, lease or exchange all or substantially all of its assets to any other person or entity (other than a wholly-owned subsidiary of the Company), (iii) the Company is to be dissolved and liquidated, (iv) any person or entity, including a "group" as contemplated by Section 13(d)(3) of the 1934 Act, acquires or gains ownership or control (including, without limitation, power to vote) of more than 40% of the outstanding shares of Stock, or (v) as a result of or in connection with a contested election of directors, the persons who were directors of the Company before such election shall cease to constitute a majority of the Board (each such event is referred to herein as a "Corporate Change"), then, upon the occurrence of any such Corporate Change, each Option then outstanding shall become fully exercisable and effective as of a date (selected by the Committee) within (a) ten days after the approval by the shareholders of the Company of such merger, consolidation, sale, lease or exchange of assets or dissolution or such election of directors or (b) thirty days of such change of control, the Committee, acting in its sole discretion without the consent or approval of any optionee, shall effect one or more of the following alternatives, which may vary among individual optionees: (1) establish a limited period of time on or before a specified date (before or after such Corporate Change) fixed by the Committee during which such outstanding Options may be exercised, after which specified date all unexercised Options and all rights of optionees thereunder shall terminate, (2) require the mandatory surrender to the Company by selected optionees of some or all of the outstanding Options held by such optionees as of a date,before or after such Corporate Change, specified by theCommittee, in which event the Committee shall thereuponcancel such Options and pay to each optionee an amount ofcash per share equal to the excess of the amount calculatedin Subparagraph (d) below (the "Change of Control Value") ofthe shares subject to such Option over the exercise price(s)under such Options for such shares, (3) make such adjustmentsto Options then outstanding as the Committee deems appropriate to reflect such Corporate Change (provided, however, thatthe Committee may determine in its sole discretion that noadjustment is necessary to Options then outstanding) or (4)provide that thereafter upon any exercise of an Option theretofore granted the optionee shall be entitled to purchaseunder such Option, in lieu of the number of shares of Stockas to which such Option shall then be exercisable, the numberand class of shares of stock or other securities or propertyto which the optionee would have been entitled pursuant tothe terms of the agreement of merger, consolidation or saleof assets and dissolution if, immediately prior to suchmerger, consolidation or sale of assets and dissolution theoptionee had been the holder of record of the number ofshares of Stock as to which such Option is then exercisable. (d) For the purposes of clause (2) in Subparagraph (c)above, the "Change of Control Value" shall equal the amount determined in clause (i), (ii) or (iii), whichever is applicable, as follows: (i) the per share price offered to shareholders of the Company in any such merger, consolidation, sale of assets or dissolution transaction, (ii) the price pershare offered to shareholders of the Company in any tender offer or exchange offer whereby a Corporate Change takes place, or (iii) if such Corporate Change occurs other than pursuant to a tender or exchange offer, the fair market value per share of the shares into which such Options being surrendered are exercisable, as determined by the Committee as of the date determined by the Committee to be the date of cancellation and surrender of such Options. In the event that the consideration offered to shareholders of the Company in any transaction described in this Subparagraph (d) or Subparagraph (c) above consists of anything other than cash, the Committee shall determine the fair cash equivalent of the portion of the consideration offered which is other than cash. (e) Any adjustment provided for in Subparagraphs (b) or (c) above shall be subject to any required shareholderaction. (f) Except as herein before expressly provided, the issuance by the Company of shares of stock of any class or securities convertible into shares of stock of any class, for cash, property, labor or services, upon direct sale, upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Stock subject to Options theretofore granted or the purchase price per share. IX. Amendment or Termination of the Plan The Board in its discretion may terminate the Plan at any time with respect to any shares for which Options have not theretofore been granted. The Board shall have the right to alter or amend the Plan or any part thereof from time to time; provided, that no change in any Option theretofore granted may be made which would impair the rights of theoptionee without the consent of such optionee; and provided, further, that the Board may not make any alteration or amendment which would materially increase the benefits accruing to participants under the Plan, increase the aggregate number of shares which may be issued pursuant to the provisions of the Plan, change the class of individuals eligible to receive Options under the Plan or extend the term of the Plan, without the approval of the shareholders of the Company. EX-10.5 8 1986 STOCK OPTION PLAN (RESTATED) SEAGULL ENERGY CORPORATION 1986 STOCK OPTION PLAN (RESTATED) I. History and Purpose of the Plan The Seagull Energy Corporation 1986 Stock Option Plan (the "Plan") was originally adopted by Seagull Energy Corporation, a Texas corporation (the "Company"), on February3, 1986 and was approved by the shareholders of the Company on May 13, 1986. The Plan is intended to provide a means whereby certain employees of the Company and its subsidiaries may develop a sense of proprietorship and personal involvement in the development and financial success of the Company, and to encourage them to remain with and devote their best efforts to the business of the Company, thereby advancing the interests of the Company and its shareholders. Accordingly, the Company may grant to certain employees the option ("Option") to purchase shares ofthe common stock of the Company ("Stock"), as hereinafter set forth. Options granted under the Plan may be either incentive stock options, within the meaning ofsection 422A(b) of the Internal Revenue Code of 1986, as amended (the "Code"),("Incentive Stock Options") or options which do not constitute Incentive Stock Options. On September 20, 1988, the Company restated the Plan in the form of this Seagull Energy Corporation 1986 Stock Option Plan (Restated) for the purpose of incorporating certain amendments previously adopted with respect to the Plan into the text of the Plan and for purposes of amending the Plan in certain respects. The terms and provisions of this restatement of the Plan are effective only with respect to Options granted from and after September 20, 1988 and Options granted prior to such date shall continue to be governed by the terms and provisions of the Plan (and amendments thereto) as in effect on September 20, 1988. II. Administration The Plan shall be administered by the Compensation Committee (the "Committee") of the Board of Directors of the Company (the "Board"). Members of the Committee shall not be eligible, and shall not have been eligible at any time within one year prior to their appointment to the Committee, to participate in the Plan or in any other stock, stock option or stock appreciation rights plan of the Company or any of its affiliates ("Company Stock Plan"). The Committee shall have sole authority to select the individuals who are to be granted Options from among those eligible hereunder and to establish the number of shares which may be issued under each Option. TheCommittee is authorized to interpret the Plan and may from time to time adopt such rules and regulations, consistent with the provisions of the Plan, as it may deem advisable to carry out the Plan. All decisions made by the Committee in selecting the individuals to whom Options shall be granted, in establishing the number of shares which may be issued under each Option and in construing the provisions of the Plan shall befinal. III. Option Agreements Each Option shall be evidenced by an Option Agreement and shall contain such terms and conditions, and may be exercisable for such periods, as may be approved by the Committee. The terms and conditions of the respective Option Agreements need not be identical. Specifically, an Option Agreement may provide for the surrender of the right to purchase shares under the Option in return for a payment in cash or shares of Stock or a combination of cash and shares of Stock equal in value to the excess of the fair market value of the shares with respect to which the right to purchase is surrendered over the option price therefor ("Stock Appreciation Rights"), on such terms and conditions as the Committee in its sole discretion may prescribe; provided, that with respect to Stock Appreciation Rights granted to employees who are subject to Section 16 of the Securities Exchange Act of 1934 (the "1934 Act"), except as provided in Subparagraph VIII(c) hereof, the Committee shall retain final authority (i) to determine whether an optionee shall be permitted, or (ii) to approve an electionby an optionee, to receive cash in full or partial settlement of Stock Appreciation Rights. Moreover, an Option Agreement may provide for the payment of the option price, in whole or in part, by the delivery of a number of shares of Stock (plus cash ifnecessary) having a fair market value equal to such option price. Finally, an Option Agreement may provide for cash less exercise by permitting an Optionee to withhold from shares of Stock acquirable upon exercise of such Option shares of Stock equal in value to all or a specified portion of the Option Price; all on such terms and subject to such conditions as shall be established from time to time by the Committee. For all purposes under the Plan, the fair market value of a share of Stock on a particular date shall be equal to the closing price of the Stock on the New York Stock Exchange Composite Tape on that date, or if no prices are reported on that date, on the last preceding date on which such prices of the Stock are so reported. Each Option and all rights granted thereunder shall not be transferable other than by will or the laws of descentand distribution, and shall be exercisable during the optionee's lifetime only by the optionee or the optionee's guardian or legal representative. IV. Eligibility of Optionee Options may be granted only to individuals who are key employees (including officers and directors who are also key employees) of the Company or any parent orsubsidiary corporation (as defined in section 425 of the Code) of the Company at the time the Option is granted. Options may be granted to the same individual on more than one occasion. No Incentive Stock Option shall be granted to an individual if, atthe time the Option is granted, such individual owns stock possessing more than 10%of the total combined voting power of all classes of stock of the Company or of its parent or subsidiary corporation, within the meaning of section 422A(b)(6) of the Code, unless (i)at the time such Option is granted the option price is at least 110% of thefair market value of the Stock subject to the Option and (ii)such Option by its terms is not exercisable after the expiration of five years from the date of grant. To the extent that the aggregate fair market value (determined at the time the respective Incentive Stock Option is granted) of stock with respect to which Incentive Stock Options granted after 1986 are exercisable for the first time by an individual during any calendar year under all incentive stock option plans of the Company and its parent andsubsidiary corporations exceeds $100,000, such Incentive Stock Options shall be treatedas options which do not constitute Incentive Stock Options. The Committee shall determine, in accordance with applicable provisions of the Code, Treasury Regulations and other administrative pronouncements, which of an optionee's Incentive Stock Options will not constitute Incentive Stock Options because of such limitation and shall notify the optionee of such determination as soon as practicable after such determination. V. Shares Subject to the Plan The aggregate number of shares which may be issued under Options granted under the Plan shall not exceed 300,000 shares of Stock. Such shares may consist of authorized but unissued shares of Stock or previously issued shares of Stock reacquired by the Company. Any of such shares which remain unissued and which are not subject to outstanding Options at the termination of the Plan shall cease to be subject to the Plan, but, until termination of the Plan, the Company shall at all times make available a sufficient number of shares to meet the requirements of the Plan. Should any Option here under expire or terminate prior to its exercise in full, the shares theretofore subject to such Option may again be subject to an Option granted under the Plan. The aggregate number of shares which may be issued under the Plan shall be subjectto adjustment in the same manner as provided in Paragraph VIII hereof with respect to shares of Stock subject to Options then outstanding. Exercise of an Option in any manner, including an exercise involving a Stock Appreciation Right, shall result in a decrease in the number of shares of Stock which may thereafter be available, both for purposes of the Plan and for sale to any one individual, by the number of shares as to which the Option is exercised. Separate stock certificates shall be issued by the Company for those shares acquired pursuant to the exercise of an Incentive Stock Option and for those shares acquired pursuant to the exercise of any Option which does not constitute an Incentive Stock Option. VI. Option Price The purchase price of Stock issued under each Option shall be determined by the Committee, but in the case of an Incentive Stock Option, such purchase price shall not be less than the fair market value of Stock subject to the Option on the date the Option is granted. VII. Term of Plan The Plan became effective upon February 3, 1986, the date of its adoption by the Board. Except with respect to Options then outstanding, if not sooner terminated under the provisions of Paragraph IX, the Plan shall terminate upon and no further Options shall be granted after the expiration of ten years from the date of its adoption by the Board. VIII. Recapitalization or Reorganization (a) The existence of the Plan and the Options granted hereunder shall notaffect in any way the right or power of the Board or the shareholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change inthe Company's capital structure or its business, any merger or consolidation of the Company, any issue of debt or equity securities ahead of or affecting Stock or the rights thereof, the dissolution or liquidation of the Company or any sale, lease, exchange or other disposition of all or any part of its assets or business or any othercorporate act or proceeding. (b) The shares with respect to which Options may be granted are shares of Stock as presently constituted, but if, and whenever, prior to the expiration of an Option theretofore granted, the Company shall effect a subdivision or consolidation of shares of Stock or the payment of a stock dividend on Stock without receipt of consideration by the Company, the number of shares of Stock with respect to which such Option may thereafter be exercised (i)in the event of an increase in the number of outstanding shares shall be proportionately increased, and the purchase price per shareshall be proportionately reduced, and (ii)in the event of a reduction in the number of outstanding shares shall be proportionately reduced, and the purchase price per shareshall be proportionately increased. (c) If the Company recapitalizes or otherwise changes its capital structure, thereafter upon any exercise of an Option theretofore granted the optionee shall be entitled to purchase under such Option, in lieu of the number of shares of Stock as to which such Option shall then be exercisable, the number and class of shares of stockand securities to which the optionee would have been entitled pursuant to the terms of the recapitalization if, immediately prior to such recapitalization, the optionee had been the holder of record of the number of shares of Stock as to which such Option is then exercisable. If (i) the Company shall not be the surviving entity in any merger or consolidation (or survives only as a subsidiary of an entity other than a previously wholly owned subsidiary of the Company), (ii) the Company sells, leases or exchanges or agrees to sell, lease or exchange all or substantially all of its assets to any other person or entity (other than a wholly-owned subsidiary of the Company), (iii) the Company is to be dissolved and liquidated, (iv) any person or entity, including a "group" as contemplated by Section 13(d)(3) of the 1934 Act, acquires or gains ownership or control (including, without limitation, power to vote) of more than 40% of the outstanding shares of Stock, or (v) as a result of or in connection with a contested election of directors, the persons who were directors of the Company before such election shall cease to constitute a majority of the Board (each such event is referred to herein as a"Corporate Change"), then, upon the occurrence of any such Corporate Change, each Option then outstanding shall become fully exercisable and effective as of a date (selected by the Committee) within (a) ten days after the approval by the shareholders of the Company of such merger, consolidation, sale, lease or exchange of assets or dissolution or such election of directors or (b) thirty days of such change of control, the Committee, acting in its sole discretion without the consent or approval of any optionee, shall effect one or more of the following alternatives, which may vary among individual optionees: (1) establish a limited period of time on or before a specified date (beforeor after such Corporate Change) fixed by the Committee during which such outstanding Options may be exercised, after which specified date all unexercised Options and allrights of optionees thereunder shall terminate, (2) require the mandatory surrender tothe Company by selected optionees of some or all of the outstanding Options held by such optionees as of a date, before or after such Corporate Change, specified by the Committee, in which event the Committee shall thereupon cancel such Options and pay to each optionee an amount of cash per share equal to the excess of the amount calculated in Subparagraph (d) below (the "Change of Control Value") of the shares subject to such Option over the exercise price(s) under such Options for such shares, (3) make such adjustments to Options then outstanding as the Committee deems appropriate to reflect such Corporate Change (provided, however, that the Committee may determinein its sole discretion that no adjustment is necessary to Options then outstanding) (4) provide that thereafter upon any exercise of an Option theretofore granted the optionee shall be entitled to purchase under such Option, in lieu of the number of shares of Stock as to which such Option shall then be exercisable, the number and class of shares of stock or other securities or property to which the optionee would have been entitled pursuant to the terms of the agreement of merger, consolidation or sale of assets and dissolution if, immediately prior to such merger, consolidation or sale of assets and dissolution the optionee had been the holder of record of the number of shares of Stock as to which such Option is then exercisable. (d) For the purposes of clause (2) in Subparagraph (c) above, the "Change of Control Value" shall equal the amount determined in clause (i), (ii) or (iii), whichever is applicable, as follows: (i) the per share price offered to shareholders of the Company in any such merger, consolidation, sale of assets or dissolution transaction, (ii) the price per share offered to shareholders of the Company in any tender offer or exchange offer whereby a Corporate Change takes place, or (iii) if such Corporate Change occurs other than pursuant to a tender or exchange offer, the fair market value per shareof the shares into which such Options being surrendered are exercisable, as determined by the Committee as of the date determined by the Committee to be the date of cancellation and surrender of such Options. In the event that the consideration offered to shareholders of the Company in any transaction described in this Subparagraph (d) or Subparagraph (c) above consists of anything other than cash, the Committee shall determine the fair cash equivalent of the portion of the consideration offered which is other than cash. (e) Any adjustment provided for in Subparagraphs(b) or (c) above shall be subject to any required shareholder action. (f) Except as herein before expressly provided, the issuance by the Company of shares of stock of any class or securities convertible into shares of stock of any class, for cash, property, labor or services, upon direct sale, upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, and in any case whether or notfor fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Stock subject to Options theretofore granted or the purchase price per share. IX. Amendment or Termination of the Plan "The Board in its discretion may terminate the Plan at any time with respect to any shares for which Options have not theretofore been granted. The Board shall have the right to alter or amend the Plan or any part thereof from time to time; provided, that no change in any Option theretofore granted may be made which would impair the rights of the optionee without the consent of such optionee; and provided, further, that the Board may not make any alteration or amendment which would materially increase the benefits accruing to participants under the Plan, increase the aggregate number of shares which may be issued pursuant to the provisions of the Plan, change the class of individuals eligible to receive Options under the Plan or extend the term of the Plan, without the approval of the shareholders of the Company. EX-10.6 9 PURCHASE AND SALE AGREEMENT PURCHASE AND SALE AGREEMENT Dated as of March 30, 1998 Between SEAGULL ENERGY E&P INC., AS BUYER and The shareholders of BRG Petroleum, Inc.; BRG 1998 Consolidated Limited Partnership, BRG 1997 Consolidated Limited Partnership, BRG 1996-I Oil & Gas Limited Partnership, BRG 1996-II Oil & Gas Income Fund Limited Partnership, BRG 1993-I Oil and Gas Limited Partnership, BRG 1992-I Oil & Gas Income Fund Limited Partnership, BRG 1990-II Oil and Gas Limited Partnership and BRG 1989-II Oil & Gas Income Fund Limited Partnership; and The participants in the BRG 1997-I Oil and Gas Program, AS SELLERS TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND INTERPRETATION....................................1 1.1 Definitions.................................................1 1.2 Interpretation.............................................12 ARTICLE II PURCHASE AND SALE; PURCHASE PRICE; EARNEST MONEY................12 2.1 Purchase and Sale..........................................12 2.2 Purchase Price; Earnest Money..............................13 2.3 Payment of Earnest Money...................................13 2.4 Allocation and Adjustment of Purchase Price................14 2.5 Purchase Price Adjustments.................................14 2.6 Calculation of Closing Statement...........................15 2.7 Adjusted Working Capital and Gas Balancing Reconciliation..16 ARTICLE III CLOSING........................................................17 3.1 Closing Date...............................................17 3.2 Sellers' Deliveries........................................17 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLERS........................18 4.1 Ownership of Shares; Organization and Authority............19 4.2 No Conflict................................................20 4.3 Organization and Capital Structure of BRG..................21 4.4 Subsidiaries...............................................21 4.5 Financial Statements.......................................22 4.6 Absence of Material Adverse Effect.........................22 4.7 Compliance with Agreements.................................23 4.8 Taxes......................................................24 4.9 Governmental Permits.......................................25 4.10 No Default.................................................25 4.11 Environmental Matters......................................25 4.12 Books and Records..........................................26 4.13 Oil and Gas Properties.....................................27 4.14 Compliance with Requirements of Laws.......................27 4.15 Payments...................................................27 4.16 Benefit Plans..............................................27 4.17 Litigation.................................................29 4.18 Insurance..................................................29 4.19 Gas Imbalances.............................................29 4.20 Public Utility Holding Company Act.........................30 4.21 Investment Company Act.....................................30 4.22 Wells......................................................30 4.23 Condition of Equipment.....................................30 4.24 Evaluation Data............................................30 4.25 Interaffiliate Transactions and Relationships..............31 4.26 Well Status................................................31 4.27 Section 29 Status of Certain Properties....................31 4.28 Liabilities; Indebtedness..................................32 4.29 No Material Misstatements or Omissions.....................32 4.30 Bankruptcy.................................................32 4.31 Representations Apply to Subsidiaries of BRG...............32 4.32 Allocation of Purchase Price...............................32 4.33 BRG 1997-I Oil and Gas Program Funds.......................32 ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER...........................32 5.1 Organization of Buyer......................................32 5.2 Authority of Buyer.........................................33 5.3 No Conflict................................................33 5.4 No Finder..................................................33 5.5 Investment Representation..................................33 5.6 Financial Ability..........................................33 ARTICLE VI ACTIONS PRIOR TO THE CLOSING DATE................................34 6.1 Investigation of the Company by Buyer......................34 6.2 Preserve Accuracy of Representations and Warranties........34 6.3 Consents to Third Parties; Governmental Approvals..........34 6.4 Excluded Assets............................................35 6.5 BRG .......................................................35 6.6 Covenants Regarding Employee Benefit Plan and Employees....36 6.7 Other Interim Covenants....................................36 6.8 Title Defects..............................................38 6.9 Audited Financials.........................................40 ARTICLE VII ADDITIONAL AGREEMENTS...........................................40 7.1 Access to Records after Closing............................40 7.2 Confidentiality Agreement..................................40 7.3 No Public Announcement.....................................41 7.4 Expenses and Sales Taxes...................................41 7.5 Further Assurances.........................................41 7.6 Change of Corporate Name...................................41 7.7 Indemnification of Sellers for Environmental Liabilities...42 7.8 Tax Returns; Payments and Refunds..........................42 7.9 Employee Relations and Benefits............................42 7.10 Release and Indemnification of Resigning Officers and Directors...................................43 7.11 Insurance Coverage..........................................43 ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF PARTIES.................43 8.1 Conditions to Buyer's Obligations..........................43 8.2 Conditions to Sellers' Obligations.........................45 ARTICLE IX TERMINATION.....................................................46 9.1 Termination................................................46 9.2 Notice of Termination......................................46 9.3 Effect of Termination......................................46 ARTICLE X GENERAL PROVISIONS...............................................47 10.1 Survival of Representations, Warranties, Covenants nad Agreemtns/Indemnities......................47 10.2 No Reliance................................................50 10.3 Notices....................................................50 10.4 Representation of Sellers by Sellers' Representative.......51 10.5 Successors and Assigns.....................................52 10.6 Entire Agreement; Amendments...............................52 10.7 Waivers....................................................53 10.8 Partial Invalidity.........................................53 10.9 Execution in Counterparts..................................53 10.10 Governing Law..............................................53 10.11 Certain Individuals........................................53 EXHIBIT A - Form of Conveyance, Assignment and Bill of Sale Schedule 2.4 - Allocation of Purchase Price Schedule 4.2 - No Conflict Schedule 4.3 - Organization and Capital Structure of BRG Schedule 4.5 - Financial Statements of BRG and the BRG Partnerships Schedule 4.6 - Absence of Material Adverse Effect Schedule 4.7 - Material Agreements Schedule 4.8 - Taxes Schedule 4.9 - Governmental Permits Schedule 4.11 - Environmental Matters Schedule 4.13 - Oil and Gas Properties Schedule 4.14 - Compliance With Requirements of Laws Schedule 4.15 - Payments Schedule 4.16 - Benefit Plans Schedule 4.17 - Litigation Schedule 4.18 - Insurance Schedule 4.19 - Gas Imbalances Schedule 4.25 - Interaffiliate Transactions and Relationships Schedule 4.26 - Plugging and Abandonment Obligations Schedule 4.27 - Section 29 Wells Schedule 4.28 - Undisclosed Liabilities Schedule 6.4 - Excluded Assets Schedule 7.9 - Severance Plan Schedule 10.1 - Principal Sellers PURCHASE AND SALE AGREEMENT THIS PURCHASE AND SALE AGREEMENT, dated as of March30, 1998, is between Seagull Energy E&P Inc. ("Buyer"); and the shareholders of BRG Petroleum, Inc., an Oklahoma corporation ("BRG") listed on the signature page hereto (being hereinafter collectively called the "BRG Shareholders"); BRG 1998 Consolidated Limited Partnership, BRG 1997 Consolidated Limited Partnership, BRG 1996-I Oil & Gas Limited Partnership, BRG 1996-II Oil & Gas Income Fund Limited Partnership, BRG 1993-I Oil and Gas Limited Partnership, BRG 1992-I Oil & Gas Income Fund Limited Partnership, BRG 1990-II Oil and Gas Limited Partnership and BRG 1989-II Oil & Gas Income Fund Limited Partnership (being hereinafter collectively called the "BRG Partnerships"); and the participants in the BRG 1997-I Oil and Gas Program ("1997-I Program Participants") (BRG Shareholders, BRG Partnerships and 1997-I Program Participants being hereinafter collectively called "Sellers"). PRELIMINARY STATEMENTS The BRG Shareholders are the owners, beneficially and of record, of all of the issued and outstanding capital stock of BRG. The BRG Shareholders desire to sell to Buyer, and Buyer desires to purchase from the BRG Shareholders, all of the capital stock of BRG on the terms and subject to the conditions set forth herein. The BRG Partnerships each desire to sell to Buyer, and Buyer desires to purchase from each of the BRG Partnerships, all of the oil and gas properties and related assets of the BRG Partnerships (collectively, the "BRG Partnership Properties," as more particularly described below) on the terms and subject to the conditions set forth herein. BRG, as the Program Administrator is the record owner of the interests acquired on behalf of the 1997-I Program Participants in certain oil and gas properties and related interests (collectively, the "1997-I Properties," as more particularly described below). The 1997-I Program Participants desire to sell to Buyer, and Buyer desires to purchase from the 1997-I Program Participants, the 1997-I Properties on the terms and subject to the conditions set forth herein. Accordingly, in consideration of the mutual agreements hereinafter set forth, Buyer and Sellers agree as follows: ARTICLE I DEFINITIONS AND INTERPRETATION 1.1 Definitions. In this Agreement, the following terms have the meanings specified or referred to in this Section 1.1 and shall be equally applicable to both the singular and plural forms. "Adjusted Working Capital" as of any date means the current assets less current liabilities of BRG, any BRG Partnership, or any 1997-I Program Participant on a consolidated basis (except that the balance sheets of BRG Holding Company, inc. and BRG Production Company shall not be deemed to be part of the BRG consolidated group for purposes of determining the Closing Adjusted Working Capital) at such date determined in accordance with GAAP, except that current assets will include amounts equal to (i) the estimate of the aggregate of quantity of the crude oil attributable to BRG, the BRG Partnerships, or the 1997-I Program Participant, as the case may be, contained at such date in each of the storage tanks in which production from the BRG Oil and Gas Properties or the relevant BRG Partnership Properties or 1997-I Properties is stored pending sale and/or transportation to the purchaser thereof multiplied by the price at which the crude oil from each of such storage tanks is then being sold to such purchaser, plus (ii) the amounts paid or payable to BRG in connection with consummation of the sale of the stock of BRG Holding Company, Inc. and BRG Production Company as contemplated by Section 6.4 and current liabilities will include (i) the outstanding amount of all long-term debt (both the current and long-term portions thereof at such date), (ii) the amounts necessary to pay all state franchise taxes that are or will become payable by BRG and are attributable to, or computed by reference to the income, operations, assets or capital of BRG arising or existing during the period prior to and including the Closing Date, (iii) the amounts paid or payable in respect of the BRG Options as contemplated by Section 6.5, plus (iii) all Transaction Expenses paid or payable on behalf of BRG, the BRG Partnerships or the 1997-I Program Participants, as the case may be. The amount of the accrued federal, state and local tax liability included in the current liabilities of BRG shall be determined after taking into account the deductions arising by virtue of the amounts paid or payable by BRG in respect of the BRG Options as set forth in Section 6.5 and the gain realized by BRG in connection with the sale of the stock of BRG Holding Company, Inc. and BRG Production Company and the gain allocated to BRG as the general partner of each of the BRG Partnerships by virtue of the sale of the BRG Partnership Properties. For purposes of this Agreement, the Adjusted Working Capital of (i) each 1997-I Program Participant shall be limited to the assets and liabilities which are directly attributable to his or her interests in the 1997-I Properties and the production and marketing activities conducted in connection therewith and (ii) the BRG Partnerships shall be limited to the BRG Partnership Properties and the liabilities directly attributable thereto and production and marketing activities conducted in connection therewith. "Accounting Firm" has the meaning specified in Section 2.7(c). "Affiliate" means, with respect to any Person, any other Person which directly or indirectly controls, is controlled by or is under common control with such Person. "Benefit Plans" has the meaning specified in Section 4.16. "Benefit Program or Agreement" has the meaning specified in Section 4.16(a). "BRG" means BRG Petroleum, Inc., an Oklahoma corporation. "BRG Petroleum Corporation" has the meaning specified in Section 6.4. "BRG Oil and Gas Properties" collectively means that portion of the BRG Property which consists of Leases, Wells, Units and other interests in Hydrocarbons prior to severance. "BRG Option" has the meaning specified in Section 6.5. "BRG Partnerships" has the meaning specified in the first paragraph of this Agreement. "BRG Partnership Properties" means (i) the interests in and to the Wells described or referred to in Schedule 4.13, together with all of the BRG Partnerships' respective rights, titles and interests in and to all property, interests and rights incident or in any way relating to the Wells or which are useful or appropriate in exploring for, developing, operating, producing, treating, storing, marketing and transporting oil, gas and other minerals in, under and that may be produced from the Wells, including but not limited to contracts, agreements, rights-of-way, easements, licenses, permits and orders; (ii) all of the BRG Partnerships' respective rights, titles and interests in and to all physical property, including but not limited to wells, well and lease equipment and surface equipment such as casing, tubing, connections, rods, pipelines, gathering systems, compressors, separators, tanks, connections, pumps, machinery, tools, materials, supplies, inventory, buildings and other property and equipment of every kind, located upon or used in connection with the Wells or the Leases relating thereto; (iii) without limiting and in addition to the foregoing, all of the BRG Partnerships' respective rights, titles and interests in and to the Wells and to the Leases and/or lands described or referred to in Schedule 4.13 or relating to such Wells, and the physical property thereon or used in connection therewith, even though such rights, titles and interests be incorrectly or insufficiently described or referred to in Schedule 4.13, and (iv) the additional assets and rights which are included in the Adjusted Working Capital of the BRG Partnerships. "BRG Property" means any and all real property (including, but not limited to, surface estates and mineral fees and leaseholds), plant, building, facility, structure, underground storage tank, personal property, equipment, unit, or other asset owned, leased or operated by BRG or Charter Servicing Company as of or prior to the Closing Date including without limitation the interests in Leases, Units and Wells described or referred to in Schedule 4.13. "BRG Shareholders" has the meaning specified in the first paragraph of this Agreement. "Buyer" has the meaning specified in the first paragraph of this Agreement. "Buyer Ancillary Agreements" means all agreements, instruments and documents being or to be executed and delivered by Buyer under this Agreement or in connection herewith. "CERCLA" means the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. ss.ss. 9601 et seq. "Closing" means the closing of the transfer of (i) the Shares from the BRG Shareholders to Buyer, (ii) the BRG Partnership Properties from the BRG Partnerships to Buyer, and (iii) the 1997-I Program Properties from the 1997-I Program Participants to Buyer. "Closing Adjusted Working Capital" has the meaning specified in Section 2.7(a). "Closing Balance Sheet" has the meaning specified in Section 2.6. "Closing Date" has the meaning specified in Section 3.1. "Code" means the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. "Common Stock" has the meaning specified in Section 4.3(b). "Confidentiality Agreement" means the Confidentiality Agreement between Buyer and BRG and delivered to BRG under cover of a transmittal letter dated February 18, 1998. "Contaminant" means any contaminant, waste, pollutant, petroleum waste, used oil, hazardous or toxic substance or waste (as such terms are currently defined in Environmental Laws), and any other substances that are regulated by any Governmental Body under any Environmental Laws or any Hazardous Material. "Court Order" means any judgment, order, award or decree of any foreign, federal, state, local or other court or tribunal and any award in any arbitration proceeding. "Damages" shall mean the amount of any actual liability, loss, cost, expense, claim, award or judgment incurred or suffered by any indemnified party (after taking into account any insurance proceeds actually received) arising out of or resulting from the indemnified matter, including reasonable Expenses incidental to matters indemnified against, and the costs of enforcement of the indemnity. "Earnest Money" has the meaning specified in Section 2.2. "Encumbrance" means any lien (statutory or other), claim, charge, security interest, mortgage, deed of trust, pledge, hypothecation, assignment, conditional sale or other title retention agreement, preference, priority or other security agreement or preferential arrangement of any kind or nature, and any easement, encroachment, covenant, restriction, right of way, defect in or cloud on title or other encumbrance of any kind. "Environmental Encumbrance" means an Encumbrance in favor of any Governmental Body for (i) any liability under any Environmental Law or (ii) damages arising from, or costs incurred by such Governmental Body in response to, a Release or threatened Release of a Contaminant into the environment. "Environmental Laws" means all applicable Requirements of Laws derived from or relating to foreign, federal, Indian, state and local laws and regulations relating to or addressing the environment or occupational health or safety, including but not limited to (i) CERCLA, OSHA and RCRA and any state equivalent thereof and (ii) all applicable Requirements of Laws relating to the emission, discharge, disposal, treatment, recycling, reclamation, permitting, manufacture, processing, distribution, generation, storage, transportation, Release or threatened Release of, or exposure of persons or property to, contaminants, wastes, pollutants, petroleum wastes, used oil, hazardous or toxic substances or wastes, or any other regulated substances. "Environmental Liabilities" means any and all costs (including remedial, removal, response, abatement, cleanup, investigative, and/or monitoring costs), damages, liabilities (whether accrued, absolute, contingent, unliquidated or otherwise), settlements, expenses (including charges and assessments, and expenses and costs of investigating, preparing or defending any action or proceeding), liens, penalties, fines, taxes, prejudgment and post-judgment interest, court costs and attorneys' fees incurred or imposed in connection with an Environmental Matter or any Environmental Law, including, without limitation, any of the foregoing which are incurred or imposed (i) pursuant to any agreement, order, notice of responsibility, directive (including requirements embodied in Environmental Laws), injunction, judgment or similar documents (including settlements) attributable to or arising out of or under Environmental Laws, or (ii) pursuant to any claim by a Governmental Body or other entity or Person for personal injury, property damage, damage to natural resources, remediation or response costs arising out of or attributable to any Environmental Matter. "Environmental Matters" means matters (i) resulting from or attributable to actual, threatened, or alleged emissions, discharges, or releases of Contaminants into ambient air, surface water, groundwater or land, (ii) otherwise resulting from or attributable to the manufacture, generation, processing, distribution, use, treatment, storage, disposal, transport, or handling of Contaminants or (iii) otherwise relating to any Environmental Law. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended and the regulations promulgated thereunder. "Evaluation Data" has the meaning specified in Section 4.24. "Excluded Assets" means the assets of BRG as set forth on Schedule 6.4, which will be transferred to BRG Holding Company, Inc. as contemplated by Section 6.4. "Expenses" means any and all expenses incurred in connection with investigating, defending or asserting any claim, action, suit or proceeding incident to any matter indemnified against hereunder (including court filing fees, court costs, arbitration fees or costs, witness fees, and reasonable fees and disbursements of legal counsel, investigators, expert witnesses, consultants, accountants and other professionals). "Financial Statements" has the meaning specified in Section 4.5. "GAAP" means United States generally accepted accounting principles as in effect from time to time. "Good and Defensible Title" means, with respect to BRG's, the BRG Partnerships' or the 1997-I Program Participants' respective ownership of interests in a Lease, Unit or well, a record or beneficial title that (a) entitles BRG, the BRG Partnerships or the 1997-I Program Participants, as the case may be, to receive, throughout the life of a Lease, Unit or well, at least the NRI for (i) the Wells shown in Schedule 4.13 (Producing Wells) and (ii) any well drilled within the surface area of the Units or Leases shown in Schedule 4.13 (Undeveloped) as to the objective formation(s) identified, except for (x) decreases in connection with those operations to which BRG or Buyer elects after Closing or with Buyer's consent to become a non-consenting co-owner and (y) decreases resulting from those wells where the owner is obligated to allow others to make up past underproduction; (b) obligates either BRG, the BRG Partnerships or the 1997-I Program Participants to bear, throughout the life of a Lease, Unit or well (and the plugging, abandonment and salvage thereof), no greater WI than the WI shown (i) for the Well in question on Schedule 4.13 (Producing Wells) or (ii) any well drilled within the surface area of the Unit or Lease in question on Schedule 4.13 (Undeveloped) as to the objective formation(s) identified, except increases in such WI that result in at least a proportionate increase in BRG's, the BRG Partnerships', or the 1997-I Program Participants' NRI for such Well or wells (including, without limitation, increases resulting from co-owner non-consents) and increases that result from contribution requirements with respect to defaulting co-owners, (c) is free and clear of all Encumbrances except for Permitted Encumbrances, and (d) is held of record by BRG. "Good and Defensible Title" means, with respect to any BRG Oil and Gas Properties, BRG Partnership Properties or the 1997-I Properties which is not a Lease attributable to a Well, a record title that (x) is free from reasonable doubt as to all matters of law and fact such that a reasonably prudent person, engaged in the ownership, development and operation of oil and gas properties or assets (including gas plants, treating and measurement facilities, and pipelines), with knowledge of all the facts and appreciation of their legal significance, would be willing to accept title to such property without a reduction in the value of such property and (y) is free and clear of all Encumbrances, except for Permitted Encumbrances. "Governmental Body" means any foreign, federal, Indian, state, local or other governmental authority or regulatory body. "Governmental Permits" has the meaning specified in Section 4.9(a). "Hazardous Material" means (a) any "hazardous substance," as defined by CERCLA, (b) any "hazardous waste," as defined by the Resource Conservation and Recovery Act, as amended, (c) any hazardous, dangerous or toxic chemical, material, waste or substance, within the meaning of and regulated by any Environmental Law, (d) any radioactive material, including any naturally occurring radioactive material, and any source, special or byproduct material as defined in 42 U.S.C. 2011 et seq. and any amendments or authorizations thereof, (e) any asbestos-containing materials in any form or condition, or (f) any polychlorinated biphenyls in any form or condition. "Hydrocarbons" means oil, condensate, natural gas, casinghead gas and liquid and gaseous hydrocarbons and any combination or mixture of the foregoing. "Individual Shareholder Interests" has the meaning specified in Section 2.1. "Insurance Policies" has the meaning specified in Section 4.18. "IRS" means the Internal Revenue Service. "Leases" means the interests in the oil and gas leases, oil, gas and mineral leases, royalties, overriding royalties, production payments, net profits interests, fee minerals, and other oil, gas or mineral interests (together with contractual rights, options or interests in and to any of the foregoing) owned by either BRG, the BRG Partnerships or the 1997-I Program Participants, including those associated with the Wells listed in Schedule 4.13. "Losses" means any and all losses, costs, obligations, liabilities, settlement payments, awards, judgments, fines, penalties, damages, expenses, deficiencies or other charges. "Material Adverse Effect" means any condition, circumstance, change or effect that is materially adverse to the assets (or title thereto or the value thereof), business, condition (financial or otherwise), results of operations or prospects of BRG, the BRG Partnerships, the 1997-I Program Participants (as a group) or the BRG Property other than (i) general industry, economic or regulatory conditions or developments that affect oil and gas companies or their assets or operations, or (ii) conditions affecting oil and gas companies generally in the areas in which BRG or any of the BRG Partnerships conduct their operations or where their properties or assets, or the 1997-I Properties, are located. "1997-I Program Participants" has the meaning specified in the first paragraph of this Agreement. "1997-I Properties" means (i) the interests in and to the Wells described or referred to in Schedule 4.13 that are owned in the name of BRG on behalf of the 1997-I Program Participants, together with all of the rights, titles and interests in and to all property, interests and rights incident or in any way relating to such Wells or which are useful or appropriate in exploring for, developing, operating, producing, treating, storing, marketing and transporting oil, gas and other minerals in, under and that may be produced from such Wells, including but not limited to contracts, agreements, rights-of-way, easements, licenses, permits and orders; (ii) all of the rights, titles and interests in and to all physical property that is owned in the name of BRG on behalf of the 1997-I Program Participants, including but not limited to wells, well and lease equipment and surface equipment such as casing, tubing, connections, rods, pipelines, gathering systems, compressors, separators, tanks, connections, pumps, machinery, tools, materials, supplies, inventory, buildings and other property and equipment of every kind, located upon or used in connection with such Wells or the Leases relating thereto; (iii) without limiting and in addition to the foregoing, all of the rights, titles and interests in and to the Wells and to the Leases and/or lands described or referred to in Schedule 4.13 or relating to such Wells that are owned in the name of BRG on behalf of the 1997-I Program Participants, and the physical property thereon or used in connection therewith, even though such rights, titles and interests be incorrectly or insufficiently described or referred to in Schedule 4.13, and (iv) the additional assets and rights which are included in the Adjusted Working Capital of the 1997-I Program Participants. "NRI" means a fractional or percentage interest in and to all Hydrocarbons produced from or allocated to (i) a Well described in Schedule 4.13 (Producing Wells) or (ii) any well drilled within the surface area of a Unit or Lease identified on Schedule 4.13 (Undeveloped) as to the objective formation(s) identified, after deduction of all lessors' royalties, overriding royalties, and other burdens and payments out of production that burden such fractional or percentage interest in such Well. "Offsite Environmental Liability" means an Environmental Liability arising from or relating or attributable to either (i) Contaminants that have been transported (whether for treatment, storage, disposal, reclamation, recycling or otherwise), or that have otherwise migrated or been moved, from any BRG Property, the BRG Partnership Properties or the 1997-I Properties to any other property owned by a third party or (ii) a property previously owned by BRG, the BRG Partnerships or the 1997-I Program Participants and conveyed or alienated by BRG, the BRG Partnerships or the 1997-I Program Participants prior to Closing. "Onsite Environmental Liability" means an Environmental Liability (i) that arises from or relates or is attributable to BRG Property, the BRG Partnership Properties or the 1997-I Properties as of the Closing Date, but (ii) is not an Offsite Environmental Liability. "Organizational Document" means the charter, bylaws, partnership agreement, limited partnership agreement, certificate of limited partnership, certificate of organization, regulations or other organizing or constituent document governing the general affairs or existence of a corporation, partnership, limited liability company or other entity. "OSHA" means the Occupational Safety and Health Act, 29 U.S.C.ss.ss. 651 et seq. "Permitted Encumbrances" means: (i) liens for taxes and other governmental charges and assessments arising in the ordinary course of business which are not yet due and payable, or, if due, are being challenged in good faith by appropriate proceedings and as to which adequate reserves have been established and are reflected on the Financial Statements; (ii) liens of landlords, carriers, warehousemen, mechanics and materialmen and other like liens arising in the ordinary course of business for sums not yet due and payable, and that will be paid or discharged in the ordinary course of business or, if delinquent, that are being contested in good faith in the ordinary course of business and as to which adequate reserves have been established and are reflected on the Financial Statements; (iii)liens under operating agreements, unitization and pooling arrangements and Hydrocarbon sales contracts that secure payment of amounts not yet due and payable, or, if due, being contested in good faith in the ordinary course of business, which are of a nature and scope customary in connection with oil and gas drilling and producing operations and as to which adequate reserves have been established and are reflected on the Financial Statements; (iv) easements, rights-of-way, servitudes, permits, surface leases, and other rights in respect of surface operations that do not materially interfere with BRG's, the BRG Partnerships' or the 1997-I Program Participants' operations of the portion of the property burdened thereby or otherwise have a Material Adverse Effect on the ownership, operation, value or use of such Person's property; (v) rights reserved to or vested in any Governmental Body to control or regulate any of the Wells or Units and all applicable laws, rules, regulations, and orders of such authorities so long as the same do not (i) decrease BRG's, the BRG Partnerships' or the 1997-I Program Participants' NRI below the NRI shown in Schedule 4.13, or increase BRG's, the BRG Partnerships' or the 1997-I Program Participants' WI above the WI shown in Schedule 4.13, without at least a proportionate increase in BRG's, the BRG Partnerships' or the 1997-I Program Participants' NRI, (ii) create any liens in respect of such Wells or Units, or (iii) otherwise have a Material Adverse Effect on the ownership, operation, value or use of such Wells or Units. (vi) any title defects that Buyer may have expressly waived in writing; (vii)the terms and conditions of contracts and agreements relating to the Leases, Wells and Units including, without limitation, exploration agreements, gas sales contracts, processing agreements, farmins, farmouts, operating agreements, and right-of-way agreements, to the extent such terms and conditions (i) do not decrease BRG's, the BRG Partnerships' or the 1997-I Program Participants' NRI below the NRI shown in Schedule 4.13, or increase BRG's, the BRG Partnerships' or the 1997-I Program Participants' WI above the WI shown in Schedule 4.13, without at least a proportionate increase in BRG's, the BRG Partnerships' or the 1997-I Program Participants' NRI, (ii) are normal and customary in the oil and gas industry, and (iii) do not have a Material Adverse Effect on the ownership, operation, value or use of such Leases, Wells or Units; (viii) royalties, overriding royalties, net profits interests, production payments, reversionary interests, and similar interests that do not decrease BRG's, the BRG Partnerships' or the 1997-I Program Participants' NRI below the NRI shown in Schedule 4.13, or increase BRG's, the BRG Partnerships' or the 1997-I Program Participants' WI above the WI shown in Schedule 4.13, without at least a proportionate increase in the owner's NRI; (ix) conventional rights of reassignment requiring notice to the holders of the rights prior to surrendering or releasing a Lease; and (x) consents to assignment and preferential rights to purchase any or all of the BRG Property, the BRG Partnership Properties or the 1997-I Properties so long as (a) any required consents or waivers are obtained from the appropriate Persons prior to Closing, (b) the appropriate time period for asserting such rights, if any, has expired without an exercise of such rights prior to Closing, or (c) such consents or rights are not triggered or put into effect as a result of the transactions provided for in this Agreement. "Person" means any individual, corporation, partnership, joint venture, limited liability company, association, joint-stock company, trust, unincorporated organization or Governmental Body. "Post-Closing Taxable Period" means (i) any taxable period beginning after the Closing Date and (ii) with respect to any taxable period beginning on or before the Closing Date and ending after the Closing Date, the portion of such taxable period that is after the Closing Date. "Pre-Closing Taxable Period" means all or a portion of (i) any taxable period up to and including the Closing Date or (ii) any taxable period with respect to which the Tax is computed by reference to Tax items, assets, capital or operations of BRG or any BRG Partnership arising on or before, or existing as of, the Closing Date. "Purchase Price" has the meaning specified in Section 2.2. "RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C. ss.ss. 6901 et seq. "Release" means any release, spill, emission, leaking, pumping, pouring, emitting, emptying, injection, deposit, disposal, discharge, dispersal, escaping, leaching, dumping (including the abandonment or discarding of barrels, containers, and other closed receptacles containing any Contaminant), or migration of a Contaminant into the environment or into or out of any BRG Property, the BRG Partnership Properties or the 1997-I Properties, including the movement of Contaminants through or in the air, soil, surface water, groundwater, BRG Property, the BRG Partnership Properties or the 1997-I Properties. "Remedial Action" means actions required under Environmental Laws to (i) clean up, remove, treat or in any other way address Contaminants in the indoor or outdoor environment, (ii) prevent the Release or threatened Release or minimize the further Release of Contaminants or (iii) investigate and determine if a remedial response is needed and to design such a response and post-remedial investigation, monitoring, operation and maintenance and care. "Requirements of Laws" means (i) any foreign, federal, Indian, state and local laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued or promulgated by any Governmental Body, (ii) any injunctions, judgments, orders, decrees, or rulings of any court or Governmental Body, and (iii) common law, including, in each case, any such requirements of laws pertaining to electrical, building, zoning, subdivision, land use, environmental, or occupational safety and health requirements, in all cases as currently enacted, interpreted, enforced or implemented by the Governmental Bodies having jurisdiction thereunder. "Section 29 Well" has the meaning specified in Section 4.27. "Sellers" has the meaning specified in the first paragraph of this Agreement. "Sellers Ancillary Agreements" means all agreements, instruments and documents being or to be executed and delivered by the Sellers under this Agreement or in connection herewith. "Sellers' Representative" has the meaning specified in Section 10.4. "Shares" means all of the issued and outstanding Common Stock of BRG. "Subsidiary Transfer" has the meaning specified in Section 6.4. "Tax" (and, with correlative meaning, "Taxes" and "Taxable") shall mean any federal, Indian, state, local or foreign income, gross receipts, property, sales, use, license, excise, franchise, employment, payroll, withholding, alternative or add-on minimum, ad valorem, value added, transfer or excise tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or penalty, imposed by any Governmental Body. "Tax Return" means any return, report or similar statement (including any attached schedules), required to be filed with respect to any Tax including any information return, claim for refund, amended return or declaration of estimated Tax. "Transaction Expenses" has the meaning specified in Section 7.4. "Units" means (i) all unitization, communication, and pooling agreements and orders covering the lands subject to the Leases, or any portion thereof, and the units and pooled or communitized areas created thereby, and (ii) all existing or projected future units and pooled or communitized areas, including those described in, or associated with the Wells listed in, Schedule 4.13. "Wells" means wells for the production of Hydrocarbons which are listed in Schedule 4.13. "WI" means a fraction or percentage of the costs and expenses associated with the maintenance, exploration, development, operation and abandonment of the BRG Oil and Gas Properties, the BRG Partnership Properties or the 1997-I Properties as it applies to a (i) Well described in Schedule 4.13 (Producing Wells) or (ii) any well drilled within the surface area of a Unit or Lease identified on Schedule 4.13 (Undeveloped) as to the objective formation(s) identified. 1.2 Interpretation. As used in this Agreement, the word "including" means without limitation, the word "or" is not exclusive and the words "herein", "hereof", "hereby", "hereto" and "hereunder" refer to this Agreement as a whole. Unless the context otherwise requires, references herein: (i) to Articles, Sections, Exhibits and Schedules mean the Articles and Sections of and the Exhibits and Schedules attached to this Agreement; (ii) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and by this Agreement; and (iii) to a statute means such statute as amended from time to time and includes any successor legislation thereto. The Schedules and Exhibits referred to herein shall be construed with and as an integral part of this Agreement to the same extent as if they were set forth verbatim herein. Titles to Articles and headings of Sections are inserted for convenience of reference only and shall not be deemed a part of or to affect meaning or interpretation of this Agreement. References herein to the knowledge of a party or matters or information known to a party mean the actual knowledge or conscious awareness, after reasonable investigation, of such party or a director or an officer of such party or a direct or indirect subsidiary of such party or a manager or employee of such party or a direct or indirect subsidiary of such party in charge of a discrete business area or function having responsibility for the referenced matter. References herein to BRG's knowledge shall include the knowledge of each of the Sellers who has signed this Agreement personally (as opposed to signing it by an attorney-in-fact). ARTICLE II PURCHASE AND SALE; PURCHASE PRICE; EARNEST MONEY 2.1 Purchase and Sale. Upon the terms and subject to the conditions of this Agreement, at the Closing, the following transactions shall occur, in the sequence set forth below: (a) First, the BRG Partnerships shall sell and convey to Buyer, and Buyer shall purchase from the BRG Partnerships, the BRG Partnership Properties and the 1997-I Program Participants shall sell and convey to Buyer, and Buyer shall purchase from the 1997-I Program Participants, the 1997-I Properties; (b) Second, immediately following the foregoing transaction, BRG shall transfer as a capital contribution to BRG Holding Company, Inc. all of its rights, obligations and liabilities as a general partner of the BRG Partnerships (less and except any proceeds distributed or distributable to such general partner in connection with the sales described in Section 2.1(a) above) and, in consideration for such contribution, BRG Holding Company, Inc. shall assume all of BRG's obligations and liabilities (whether attributable to the time period prior to or after the contribution) arising from its serving as a general partner of the BRG Partnerships; (c) Third, immediately following the foregoing transactions, BRG and BRG Petroleum Corporation shall consummate the Subsidiary Transfer described in Section 6.4; and (d) Fourth, immediately following the foregoing transactions, the BRG Shareholders shall sell, transfer, assign, convey and deliver to Buyer, and Buyer shall purchase from the BRG Shareholders, the Shares, free and clear of all Encumbrances; It is understood and agreed that certain of the BRG Shareholders own interests in certain of the BRG Oil and Gas Properties and such interests are not being sold hereto but are to be retained by such BRG Shareholders (the "Individual Shareholder Interests"). 2.2 Purchase Price; Earnest Money. Upon the terms and subject to the conditions of this Agreement and the adjustment provided for in Section 2.5 hereof, the Buyer shall pay to Sellers an aggregate of $102,000,000 (the "Purchase Price") for the Shares, the BRG Partnership Properties and the 1997-I Properties, to be allocated and paid as provided in Schedule 2.4 below. Contemporaneous with Buyer's execution of this Agreement, Buyer shall pay the sum of $1,000,000 (the "Earnest Money") to Sellers' Representative (as defined in Section 10.4) for the benefit of Sellers. In the event the Closing occurs, the Earnest Money shall be applied upon the Purchase Price but held and distributed in accordance with Section 2.3, or if the Closing does not occur, the Earnest Money shall be paid in accordance with Section 2.3. The Purchase Price, less the Earnest Money, and as adjusted pursuant to Sections 2.4 and 2.5, shall be payable in immediately available funds at Closing as specified by the Sellers' Representative and shall be held and distributed by the Sellers' Representative to the Sellers in accordance with the allocation set forth in Schedule 2.4. Sellers agree that Buyer shall have no responsibility or liability for the distribution of the adjusted Purchase Price by Sellers' Representative. As further consideration, the Buyer will assume and agree to pay all of the liabilities, obligations, indebtedness and commitments of each of the BRG Partnerships and 1997-I Program Participants to the extent specifically included in the Adjusted Working Capital of such BRG Partnership or 1997-I Program Participant calculated for purposes of Section 2.5 hereof in accordance with the allocation set forth in Schedule 2.4. 2.3 Payment of Earnest Money. Upon its receipt, the Sellers' Representative shall deposit the Earnest Money in a segregated account (which may be interest paying) and shall pay out and distribute it only in accordance with this Section 2.3. In the event Buyer breaches this Agreement by failing or refusing to close the sale contemplated hereby on the Closing Date and provided that the conditions contained in this Agreement to which the duties and obligations of Buyer are subject as set forth in Section 8.1 shall have been fulfilled in all material respects and not waived by Buyer, Sellers shall retain the Earnest Money as liquidated damages in lieu of all other damages (and as Sellers' sole remedy in such event). The parties hereby acknowledge that the extent of damages to Sellers occasioned by such failure or refusal by Buyer would be impossible or extremely impractical to ascertain and that the amount of the Earnest Money is a fair and reasonable estimate of such damages under the circumstances. In the event the Closing does not occur and the Earnest Money is not applied pursuant to Section 2.2 or retained pursuant to the foregoing provisions of this Section 2.3, the Earnest Money shall be returned to Buyer without interest. In the event the Closing occurs, Sellers' Representative will retain the Earnest Money in the segregated account until such time as the Adjusted Working Capital reconciliation contemplated by Section 2.7 has been completed and the final Closing Adjusted Working Capital has been determined. If, as a result of such determination, any amount is owing to Buyer, Sellers' Representative shall pay such amount to Buyer on behalf of Sellers and shall distribute the balance of the Earnest Money to the Sellers as appropriate. 2.4 Allocation and Adjustment of Purchase Price. The allocation of the Purchase Price for the Shares, the BRG Partnership Properties of each BRG Partnership and the 1997-I Properties being acquired by Buyer, from Sellers shall be as set forth in Schedule 2.4. Sellers and Buyer agree that they will not take any position inconsistent with such allocation in preparing all Tax Returns and reports to Governmental Bodies. Sellers and Buyer shall duly prepare and timely file such reports and information returns as may be required under Section 1060 of the Code and any corresponding or comparable provisions of applicable foreign, state and local Tax laws to report the allocation of the Purchase Price. The Purchase Price is based on all of the Shares, the BRG Partnership Properties owned by all BRG Partnerships and the interests of all 1997-I Program Participants in the 1997-I Properties. Should any of the BRG Partnership Properties or the 1997-I Properties not be included in the purchase and sale hereunder because the requisite approvals of the limited partners in any of the BRG Partnerships or any of the 1997-I Program Participants are not obtained and Buyer agrees in writing to waive the condition to closing set forth in Section 8.1(f), then the Purchase Price shall be decreased by the amount of such property not included in the purchase and sale as such amount is set forth in Schedule 2.4. 2.5 Purchase Price Adjustments. At Closing the aggregate Purchase Price payable to the BRG Shareholders for the Shares, to each of the BRG Partnerships for the BRG Partnership Properties and to each of the 1997-I Program Participants for his or her interests in the 1997-I Properties shall be adjusted as follows: (a) upward by the amount of the positive Adjusted Working Capital attributable to BRG, the BRG Partnership or the 1997-I Program Participant, as the case may be, as of the Closing Date, or downward by the amount of the negative Adjusted Working Capital attributable to BRG, each of the BRG Partnerships or the 1997-I Program Participant, as the case may be, as of such date; (b) downward by the aggregate Defect Value of all uncured Title Defects determined in accordance with Section 6.8 below if and to the extent that such aggregate Defect Value (as offset by the aggregate value of any increase in the NRI of any Well/objective formation(s) listed on Schedule 4.13 because the actual NRI of such Well/objective formation(s) is determined to be greater than the NRI indicated therefor on Schedule 4.13) exceeds $100,000, and upward by an amount equal to the aggregate value of any increase in the NRI of any Well/objective formation(s) listed on Schedule 4.13 because the actual NRI of such Well/formation(s) is determined to be greater than the NRI indicated therefor on Schedule 4.13, if and to the extent that such aggregate value (as offset by the aggregate Defect Value of all uncured Title Defects determined in accordance with Section 6.8 below) exceeds $100,000; and (c) downward by the amount of $1.00 per Mcf to the extent of any net gas overproduction attributable to the BRG Oil & Gas Properties, BRG Partnership Properties of any BRG Partnership or all of the 1997-I Properties as a group as of the Closing Date, and upward by the amount of $1.00 per Mcf to the extent of any net gas underproduction attributable to the BRG Oil & Gas Properties, BRG Partnership Properties of any BRG Partnership or the 1997-I Properties, as a group, as of the Closing Date. After taking into account the foregoing adjustments, the aggregate Purchase Price payable to the BRG Shareholders shall then be reduced by the amount, if any, paid or payable by BRG to the holders of outstanding options to purchase Shares as contemplated by Section 6.5 hereof. The per share price payable for the Shares after the adjustments provided for herein shall be determined as follows: (y) The aggregate Purchase Price payable for the Shares after taking into account the adjustment provided for in the first sentence of this Section 2.5 shall be increased by an amount equal to the total purchase price that would be payable by the holders of all of the options referred to in Section 6.5 upon exercise of all of the options for the total number of Shares subject thereto. (z) The amount determined in accordance with subparagraph (y) above shall then be divided by an amount equal to the total number of Shares that would be issued upon exercise of all of such options for the full number of Shares covered thereby plus the total number of Shares that are issued and outstanding on the Closing Date. The resulting amount shall be the per share Purchase Price paid to the BRG Shareholders for each of the Shares purchased pursuant to this Agreement. 2.6 Calculation of Closing Statement. On the day that is two (2) business days prior to the date scheduled for Closing, Sellers shall furnish to Buyer a pro forma consolidated balance sheet of BRG (provided that the subsidiaries of BRG being sold pursuant to Section 6.4 hereof shall not be deemed part of the BRG consolidated group and will be shown separately), balance sheets reflecting the Adjusted Working Capital of each of the BRG Partnerships and a balance sheet reflecting the Adjusted Working Capital of the BRG 1997-I Oil and Gas Program to be determined for Purchase Price adjustments (each, a "Closing Balance Sheet") at the date scheduled for Closing, certified by Sellers' Representative as having been prepared in good faith using the best information then available. On the day that is one business day prior to the Closing, Sellers and Buyer will cooperatively prepare a Closing statement listing each of the Purchase Price adjustments to be effected at the Closing pursuant hereto and the estimated Purchase Price after such Adjustments. Such estimate, less the Earnest Money, shall be paid by Buyer to Sellers at Closing in accordance with Section 2.2 above. 2.7 Adjusted Working Capital and Gas Balancing Reconciliation. (a) Within the period ending ninety (90) days after the Closing Date, Buyer shall furnish to Sellers' Representative (i) a Closing Balance Sheet of BRG, of each of the BRG Partnerships and of the 1997-I Oil and Gas Program, together with a calculation of the actual Adjusted Working Capital for each determined for Purchase Price adjustments (the "Closing Adjusted Working Capital") and (ii) a statement of the net gas overproduction or underproduction for BRG, each of the BRG Partnerships and the 1997-I Properties, each certified by the chief financial officer of the Buyer as having been prepared based upon the best information reasonably available. Sellers' Representative shall have such access to the offices, records, files, books of account and other information of BRG and the Buyer as may be reasonably necessary to audit and verify the information set out on the balance sheets and gas production statements furnished by Buyer. Buyer shall cause its and BRG's personnel to reasonably assist Sellers' Representative in conducting such audit. Upon completion of such audit, Sellers' Representative and Buyer shall meet and attempt to reach agreement on the actual Adjusted Working Capital of each as of the date of such balance sheet and as to the accuracy of the gas production statements. Any such agreement shall be evidenced by a written memorandum of agreement executed by Sellers' Representative and Buyer and shall be final, conclusive and binding on the parties. (b) If within 30 days after receipt by Sellers' Representative of the Closing Balance Sheet or the gas production statements furnished by Buyer pursuant to (a) above, the parties are unable to reach agreement on the actual amount of the Adjusted Working Capital or gas overproduction or underproduction figures, then (i) if the parties so agree, the period for attempting to reach agreement shall be extended for an additional specified period, or (ii) if the parties cannot or do not choose to agree on an extension, the amount of the Adjusted Working Capital or the gas net overproduction or underproduction shall be determined pursuant to subsection (c) of this Section 2.7. (c) Buyer shall submit to Sellers' Representative the names of two national independent public accounting firms, neither of which shall have been engaged by Sellers or the Buyer during the three-year period ending on the Closing Date. Sellers' Representative shall select one of said firms by written notice to Sellers within three business days after receipt of Buyer's nomination. The independent public accounting firm selected by Sellers' Representative (the "Accounting Firm") shall be engaged jointly by Buyer and Sellers' Representative and shall meet with representatives of Buyer and Sellers' Representative and his representatives and be apprised of their respective calculations of the Closing Adjusted Working Capital and the gas overproduction or underproduction. The Accounting Firm then shall make such independent study as it shall deem appropriate to determine, as nearly as possible, the actual Closing Adjusted Working Capital or gas overproduction or underproduction. Sellers' Representative and Buyer shall make available to the Accounting Firm all information reasonably requested by the Accounting Firm to make such determination. Said determination when made shall be conveyed to Sellers' Representative and Buyer in writing and shall be final, conclusive and binding on the parties with respect to such issue. All fees and expenses charged by the Accounting Firm in connection with the above-described engagement and the costs and expenses of any audit performed pursuant to subparagraph 2.7(a) above, shall be paid by the party whose calculation of the Closing Adjusted Working Capital or gas overproduction or underproduction originally submitted to the Accounting Firm bears the greatest difference from the Closing Adjusted Working Capital or gas overproduction or underproduction determined by the Accounting Firm. (d) Promptly after the Closing Adjusted Working Capital or net gas overproduction or underproduction is determined by agreement of the parties pursuant to (b) above or by the Accounting Firm pursuant to (c) above, a revised Closing statement shall be prepared with the only changed entry being the adjustment for Closing Adjusted Working Capital or the net gas overproduction or underproduction, as the case may be. Promptly thereafter the party in whose favor such changed entry is made shall be paid by the other party the amount of the change, to the same end as if the revised Closing statement had been the Closing statement upon which the payments at Closing were based. ARTICLE III CLOSING 3.1 Closing Date. The Closing shall take place at 10:00 A.M., local time, on June 1, 1998, or such other date as may be agreed upon by Buyer and Sellers at the offices of BRG, 7134 South Yale, Suite 600, Tulsa, Oklahoma 74136, or at such other place or at such other time as shall be agreed upon by Buyer and Sellers. The time and date on which the Closing is actually held are sometimes referred to herein as the "Closing Date". 3.2 Sellers' Deliveries. At the Closing, Sellers shall deliver to Buyer all of the following: (a) Copy of the certificate of incorporation of BRG certified as of a recent date by the Secretary of State of the State of Oklahoma; (b) Certificate of good standing of BRG issued as of a recent date by the Secretary of State of the State of Oklahoma; (c) Certificate of the secretary or an assistant secretary of BRG, dated the Closing Date, in form and substance reasonably satisfactory to Buyer, as to (i) no amendments to the certificate of incorporation of BRG other than as attached and (ii) the By-laws of BRG, together with all amendments thereto; (d) All consents, waivers or approvals obtained by the Sellers or BRG with respect to the consummation of the transactions contemplated by this Agreement, including without limitation, evidence of (i) the requisite approval of the limited partners of each of the BRG Partnerships (ii) the requisite approval of each of the participants in the 1997-I Program, and (iii) any required consents or waivers of preferential purchase rights applicable to the transfer of assets by the BRG Partnerships and the 1997-I Program Participants. (e) The certificates contemplated by Sections 8.1(a) and 8.1(b), duly executed by Sellers' Representative; (f) A signed resignation by each of the directors and officers of BRG and terminations of all powers of attorney granted by BRG; (g) The Organizational Documents of BRG and the books of minutes of meetings of the boards of directors, committees thereof, shareholders, managers, management committees and other similar records of BRG certified as true and correct by the secretary or assistant secretary of BRG; (h) Certificates representing the Shares duly endorsed for transfer to Buyer or with duly executed stock powers attached; (i) The entities/persons included within the group comprising Sellers that own interests in the BRG Partnership Properties and the 1997-I Properties shall execute and deliver a Conveyance, Assignment and Bill of Sale in substantially the form set forth in Exhibit A attached hereto and made a part hereof in as many counterparts as may be required to convey the beneficial ownership of such properties to BRG; (j) The BRG Partnerships and the 1997-I Program Participants shall deliver possession of the BRG Partnership Properties and the 1997-I Properties, respectively, to Buyer; (k) An executed statement described in Treasury Regulation ss. 1.1445-2(b)(2) from or on behalf of each party constituting Sellers certifying that such party Seller is not a foreign person within the meaning of the Code; (l) A copy of the executed stock purchase agreement entered into by BRG pursuant to Section 6.4; and (m) A copy of the executed form of assignment and assumption agreement or other instrument referred to in Section 8.1(g). ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLERS As an inducement to Buyer to enter into this Agreement and to consummate the transactions contemplated hereby, each of the Persons that make up Sellers, severally, but not jointly, represents and warrants to Buyer (i) if such Seller is a BRG Shareholder, as to himself/herself/itself, BRG and his/her/its Shares, (ii) if such Seller is a BRG Partnership, as to such partnership and such partnership's assets , or (iii) if such Seller is a 1997-I Program Participant, as to himself/herself/itself and its interests in the 1997-I Properties, as follows: 4.1 Ownership of Shares; Organization and Authority.uthority (a) Each of the BRG Shareholders is the owner, free and clear of any lien, charge or Encumbrance, of the number of Shares set opposite his or her name in Schedule 2.4 and each has full right and authority to transfer the Shares to Buyer. Schedule 2.4 also reflects each holder of the outstanding BRG Options and the amounts payable to such holder as contemplated by Section 6.5. None of the BRG Shareholders is a party to any option, warrant, purchase right, or other contract or commitment (other than this Agreement) that could require him or her to sell, transfer, or otherwise dispose of any Shares. None of the BRG Shareholders is a party to any voting trust, proxy, or other agreement or understanding with respect to the voting of any of the Shares. Upon the consummation of the transaction described herein, Buyer will have good and valid title to the Shares free and clear of all liens, charges and Encumbrances and the Shares will be validly issued, fully paid and nonassessable. (b) Each of the BRG Partnerships is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Oklahoma and is duly qualified to do business and is in good standing in each jurisdiction in which the nature of its business activities or its ownership or leasing of property makes such qualification necessary and in which the failure to qualify would not or could not reasonably be expected to have a Material Adverse Effect. Each of the BRG Partnerships has full power and authority to own or lease and to operate and use its properties and to carry on its business as now conducted. True and correct copies of each of the partnership agreements of the BRG Partnerships, as amended to date, have been delivered to Buyer. (c) Each of the BRG Partnerships has full power and authority to execute, deliver and perform this Agreement and all of the Sellers Ancillary Agreements. The execution, delivery and performance of this Agreement and the Sellers Ancillary Agreements by the BRG Partnerships have been duly authorized and approved by all requisite action on the part of the BRG Partnerships, subject to the requirement that this Agreement be approved by the limited partners of each BRG Partnership. Each Person executing this Agreement as attorney in fact for a BRG Shareholder or a 1997-I Program Participant has the full power and authority to execute this Agreement and any of the Sellers Ancillary Agreements on behalf of such party. This Agreement has been duly authorized, executed and delivered by each of Sellers and, subject to the requirement that this Agreement be approved by the limited partners of each BRG Partnership in accordance with the terms of its partnership agreement, is the legal, valid and binding obligation of each of Sellers enforceable in accordance with its terms. Each of the Sellers Ancillary Agreements has been duly authorized by each of Sellers and upon execution and delivery by each of Sellers who is a party thereto will be a legal, valid and binding obligation of each of Sellers enforceable in accordance with its terms. (d) BRG has full power and authority to execute, deliver and perform this Agreement and all of the Sellers Ancillary Agreements as Program Administrator and Attorney-In-Fact for the 1997-I Program Participants under the terms of the BRG 1997-I Oil and Gas Program Agreement. This Agreement has been duly authorized, executed and delivered by BRG as Program Administrator and Attorney-In-Fact for the 1997-I Program Participants and is the legal, valid and binding obligation of the 1997-I Program Participants enforceable in accordance with its terms (subject to normal equitable principles and subject to bankruptcy, insolvency, fraudulent conveyance and similar laws affecting the rights of creditors), and upon execution and delivery by BRG as Program Administrator and Attorney-In-Fact for the 1997-I Program Participants will be a legal, valid and binding obligation of the 1997-I Program Participants enforceable in accordance with its terms (subject to normal equitable principles and subject to bankruptcy, insolvency, fraudulent conveyance and similar laws affecting the rights of creditors). (e) BRG Holding Company, Inc. is a corporation duly organized, validly existing and in good standing under the laws of the State of Oklahoma and it has full power and authority to own or lease and to operate and use its properties and to carry on its business as now conducted and to become and serve as the substitute general partner of the BRG Partnerships. Neither the consummation of any of the transactions contemplated hereby nor the substitution of or service by BRG Holding Company, Inc. as a general partner of the BRG Partnerships will conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights under, or result in the creation or imposition of any Encumbrance upon any of the assets or properties of BRG Holding Company, Inc. under (i) the Organizational Documents of BRG Holding Company, Inc., (ii) any note, instrument, agreement, mortgage, lease, license, franchise, permit or other authorization, right, restriction or obligation to which BRG Holding Company, Inc. is a party or any of its assets or properties or by which BRG Holding Company, Inc. is bound, (iii) any Court Order to which BRG Holding Company, Inc. is a party or any of its assets or properties or by which it is bound, or (iv) any Requirements of Laws affecting BRG Holding Company, Inc. or its assets or properties; or require the approval, consent, authorization, order or act of, or the making by BRG Holding Company, Inc. of any declaration, filing or registration with, any Person or court. 4.2 No Conflict. Except as set forth in Schedule 4.2, neither (i) the execution and delivery of this Agreement or any of the Sellers Ancillary Agreements to which it is a party, (ii) the consummation of any of the transactions contemplated hereby or thereby nor (iii) compliance with or fulfillment of the terms, conditions and provisions hereof or thereof will: (a) violate or conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights under, or result in the creation or imposition of any Encumbrance upon any of the assets or properties of BRG, the BRG Partnerships or the 1997-I Program Participants, under (i) the Organizational Documents of BRG or the BRG Partnerships, (ii) any note, instrument, mortgage, lease, license, franchise, permit or other authorization, right, restriction, obligation or agreement to which BRG, the BRG Partnerships or the 1997-I Program Participants is a party or any of the respective assets or properties of BRG, the BRG Partnerships or the 1997-I Program Participants is subject or by which BRG, the BRG Partnerships or the 1997-I Program Participants is bound, (iii) any Court Order to which BRG, the BRG Partnerships or the 1997-I Program Participants is a party or any of the respective assets or properties of BRG, the BRG Partnerships or the 1997-I Program Participants is subject or by which BRG, the BRG Partnerships or the 1997-I Program Participants is bound, or (iv) any Requirements of Laws affecting BRG, the BRG Partnerships or the 1997-I Program Participants or their respective assets or properties; or (b) require the approval, consent, authorization, order or act of, or the making by BRG, the BRG Partnerships or the 1997-I Program Participants of any declaration, filing or registration with, any Person or court. 4.3 Organization and Capital Structure of BRG.e of BRG. (a) BRG is a corporation duly organized, validly existing and in good standing under the laws of the State of Oklahoma. BRG is duly qualified to transact business as a foreign corporation and is in good standing in each of the jurisdictions set forth in Schedule 4.3, and there are no other jurisdictions in which the ownership or leasing of any of BRG's assets or the conduct of its business requires such qualification, except where the failure to be so qualified would not or could not reasonably be expected to have a Material Adverse Effect. BRG has full corporate power and authority to own or lease and to operate and use its properties and assets and to carry on its business as now conducted. (b) The authorized capital stock of BRG consists of 50,000 shares of Common Stock, par value $1.00 per share (the "Common Stock"), of which 9,500 shares are issued and outstanding, 500 shares are issued and held in the Company's treasury (all of which are reserved for issuance upon the exercise of currently outstanding stock options) and 40,000 shares are unissued and not reserved for any purpose. Except for this Agreement and as set forth in Schedule 4.3, there are no agreements, arrangements, options, warrants, calls, rights or commitments of any character relating to the issuance, sale, purchase or redemption of any shares of capital stock of BRG. No holder of the Common Stock has any preemptive, stock purchase or other rights to acquire Common Stock. All of the outstanding shares of the Common Stock are validly issued, fully paid and nonassessable and were not issued in violation of any preemptive or similar rights. The BRG Shareholders are the record and beneficial owners of all of the issued and outstanding shares of the Common Stock. (c) Attached hereto as part of Schedule 4.3(c) are true and complete copies of the certificate of incorporation and all amendments thereto and of the By-laws, as amended to date. A true and complete copy of the stock ledger of BRG has been delivered to Buyer prior to the execution hereof. 4.4 Subsidiaries. Other than BRG Holding Company, Inc., BRG Production Company, Charter Servicing Company, the BRG Partnerships and the Excluded Assets, BRG does not own, directly or indirectly, any interest or investment in any corporation, association, joint venture, partnership, limited liability company or other business organization, firm or enterprise of any character whatsoever. Charter Servicing Company is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has full corporate power and authority to conduct its business as it is now being conducted and to own, operate or lease the properties and assets it currently owns, operates or holds under lease. Charter Servicing Company is duly qualified to do business and is in good standing in each jurisdiction where the character of its business or the nature of its properties makes such qualification necessary and in which the failure to qualify would have a Material Adverse Effect. All of the outstanding shares of capital stock or similar equity interests of Charter Servicing Company are validly issued, are fully paid and nonassessable, and are owned by BRG free and clear of any Encumbrance. Charter Servicing Company is not a party to, or otherwise subject to any legal restriction or any agreement (other than this Agreement and customary limitations imposed by corporate law statutes) restricting the ability of such entity to pay dividends out of profits or make any other similar distributions of profits to BRG. 4.5 Financial Statements. Attached as Schedule 4.5 are the following financial statements of BRG and the BRG Partnerships (collectively the "Financial Statements"): (i) the audited consolidated financial statements for the year ended December 31, 1996, and (ii) the unaudited consolidated financial statements for the year ended December 31, 1997. The Financial Statements (including the notes thereto) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby (except, in the case of (ii), for normally recurring audit adjustments) and present fairly the financial condition as of such dates and the results of operations for such periods. 4.6 Absence of Material Adverse Effect. Except as disclosed in Schedule 4.6 or as contemplated by this Agreement, since December 31, 1997: (a) To the knowledge of BRG, there has been no Material Adverse Effect; (b) Each of BRG, the BRG Partnerships and the 1997-I Program Participants has conducted its business in the ordinary course and in conformity with past practice; and (c) Each of BRG, the BRG Partnerships and the 1997-I Program Participants has not (i) discharged or satisfied any Encumbrance or paid any obligation or liability, absolute or contingent, other than current liabilities incurred and paid in the ordinary course of business and consistent with past practices; (d) Except for Permitted Encumbrances, each of BRG, the BRG Partnerships and the 1997-I Program Participants has not suffered or permitted any Encumbrance to arise or be granted or created against or upon any of its assets; (e) None of BRG or any of the BRG Partnerships has amended its Organizational Documents; (f) None of BRG, any of the BRG Partnerships or the 1997-I Program Participants has agreed, whether in writing or otherwise, to do any of the foregoing. 4.7 Compliance with Agreements.reements (a) None of BRG, any of the BRG Partnerships or the 1997-I Program Participants is in violation of, or in default in any material respect under, and no event has occurred that (with notice or the lapse of time or both) would constitute a violation of or default under, (i) its Organizational Documents, as applicable, or (ii) any agreement, except for any violation or default that would not or could not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect. (b) Set forth in Schedule 4.7 hereto are the following agreements to which BRG or Charter Servicing Company are subject or to which their respective properties or the BRG Partnership Properties or the 1997-I Program Properties are bound: (i) all employment or consulting contracts; (ii) all capital redemption or purchase agreements; (iii) all agreements providing for the indemnification of others against any liabilities or the sharing of the tax liability of others (except for such obligations incurred in the ordinary course of business as an operator of oil and gas properties under service, drilling or other similar agreements); (iv) all license agreements (as licensor or licensee); (v) all material operating agreements; (vi) all production sales or purchase contracts that are not terminable without penalty on 30 days notice or less; (vii) all material transportation and gas balancing agreements; (viii) all agreements for the purchase of any commodity, material or equipment except purchase orders in the ordinary course of business consistent with past practice; (ix) all other agreements creating any obligations that require aggregate future payments in excess of $100,000 by (a) BRG, (b) Charter Servicing Company, (c) the BRG Partnerships with respect to the BRG Partnership Properties, or (d) the 1997-I Program Participants with respect to the 1997-I Properties; (x) all agreements containing covenants limiting or restricting the freedom of BRG, the BRG Partnerships or their respective affiliates to compete in any line of business or territory or with any person or entity; (xi) area of mutual interest agreements, (xii) all agreements for capital expenditures or the acquisition or construction of fixed assets that requires aggregate future payments in excess of $100,000, (xiii) all agreements for or that contemplate the sale of any of the BRG Properties, the BRG Partnership Properties or the 1997-I Properties, and (xiv) all indentures, mortgages, promissory notes, loan agreements, guaranties or other agreements or commitments for the borrowing of money or any related security agreements. Except as set forth in Schedule 4.7 hereof, none of the contracts described in such schedule have been amended or modified except as set forth in Schedule 4.7. BRG has no knowledge of any notice or threat of or basis for the termination, expiration or modification of any contract described in Schedule 4.7 within one year from the date hereof, which termination, expiration or modification would have a Material Adverse Effect. Buyer has been provided with access to true and complete copies of each contract, agreement and instrument listed in Schedule 4.7. 4.8 Taxes. (a) Except as set forth in Schedule 4.8, (i) all Tax Returns of or with respect to any Tax which are required to be filed on or before the Closing Date by or with respect to BRG or any BRG Partnership or the business operations of BRG or any BRG Partnership have been or will be duly and timely filed, (ii) all items of income, gain, loss, deduction and credit or other items required to be included in each such Tax Return have been or will be so included and all information provided in each such Tax Return is true, correct and complete, (iii) all Taxes which have become or will become due with respect to the period covered by each such Tax Return have been or will be timely paid in full, (iv) all withholding Tax requirements imposed on or with respect to BRG or any BRG Partnership have been or will be satisfied in full in all respects, and (v) no penalty, interest or other charge is or will become due with respect to the late filing of any such Tax Return or late payment of any such Tax. (b) There is no claim against BRG or any BRG Partnership for any Taxes, and no assessment, deficiency or adjustment has been asserted or proposed with respect to any Tax Return of or with respect to BRG or any BRG Partnership. (c) Except as set forth in Schedule 4.8, there is not in force any extension of time with respect to the due date for the filing of any Tax Return of or with respect to BRG or any BRG Partnership or any waiver or agreement for any extension of time for the assessment or payment of any Tax of or with respect to BRG or any BRG Partnership. (d) The total amounts set up as liabilities for current and deferred Taxes in the December 31, 1997 Balance Sheet are sufficient to cover the payment of all Taxes, whether or not assessed or disputed, which are, or are hereafter found to be, or to have been, due by or with respect to BRG, its subsidiaries and their business up to and through the periods covered thereby. (e) None of BRG or any BRG Partnership is a party to any Tax allocation or sharing agreement and no payments are due or will become due by BRG or any BRG Partnership pursuant to any such agreement or arrangement. (f) Except as set forth in Schedule 4.8, none of the property of BRG (other than its interests in the BRG Partnerships and the 1997-I Properties) or any BRG Partnership is held in an arrangement that could be classified as a partnership for Tax purposes. (g) Except as set forth in Schedule 4.8, neither BRG nor any BRG Partnership will be required to include any amount in income for any taxable period beginning after or including the Closing Date as a result of a change in accounting method for any taxable period ending on or before the Closing Date or pursuant to any agreement with any Tax authority with respect to any such taxable period. (h) BRG has not consented to have the provisions of section 341(f)(2) of the Code apply with respect to a sale of its stock. 4.9 Governmental Permits. (a) Except as set forth on Schedule 4.9, each of BRG, the BRG Partnerships and the 1997-I Program Participants owns, holds or possesses all material licenses, franchises, permits, privileges, immunities, concessions, approvals and other authorizations from all Governmental Bodies which are necessary to entitle it to own or lease, operate and use its assets and to carry on and conduct its business as currently conducted (herein collectively called "Governmental Permits"). (b) Each of BRG, the BRG Partnerships and the 1997-I Program Participants has fulfilled and performed their respective obligations under each of the Governmental Permits, and no event has occurred or condition or state of facts exists which constitutes or, after notice or lapse of time or both, would constitute a breach or default under any such Governmental Permit or which permits or, after notice or lapse of time or both, would permit revocation or termination of any such Governmental Permit, and which would or reasonably could be expected to have a Material Adverse Effect. 4.10 No Default. There is no uncorrected event of default by BRG or the BRG Partnerships under the terms of their Organizational Documents. In addition, there is no uncorrected event of default or breach by BRG, the BRG Partnerships or the 1997-I Program Participants or, to Sellers' knowledge, by any other party which has occurred under the terms of any contract, agreement, document, lease, commitment, license, franchise, permit, authorization, concession, order, law, rule or regulation, which violation could reasonably be expected to have a Material Adverse Effect, and no event has occurred that is, or which with notice or lapse of time or both would constitute, such a default under any such contract, agreement, documents, lease, commitment, license, franchise, permit, authorization, concession, order, law, rule or regulation. 4.11 Environmental Matters. Except as set forth in Schedule 4.11: (a) Each of BRG and the BRG Partnerships has conducted its business and operated its assets, and is conducting its business and operating its assets, in material compliance with all Environmental Laws and the BRG Properties, the BRG Partnership Properties and the 1997-I Properties are in material compliance with all applicable Environmental Laws; (b) Each of BRG and the BRG Partnerships has not been notified by any Governmental Body that any of the operations or assets of BRG or the BRG Partnerships is the subject of any investigation or inquiry by any Governmental Body evaluating whether any remedial action is needed to respond to a release of any Contaminant or to the improper storage or disposal (including storage or disposal at offsite locations) of any Contaminant; (c) Neither BRG, the BRG Partnerships nor any other Person has filed any notice under any federal, state or local law indicating that (i) BRG, any of the BRG Partnerships or any of the 1997-I Program Participants is responsible for the improper release into the environment, or the improper storage or disposal, of any Hazardous Material, or (ii) any Contaminant is improperly stored or disposed of upon any BRG Property, BRG Partnership Property or 1997-I Property; (d) None of BRG, any of the BRG Partnerships nor any of the 1997-I Program Participants has any material contingent liability in connection with (i) the release into the environment at or on (x) any property now or previously owned or leased by BRG, or any BRG Partnerships or (y) any 1997-I Program Property, or (ii) the storage or disposal of, any Contaminant; (e) Neither BRG nor the BRG Partnerships has received any claim, complaint, notice, inquiry or request for information which remains unresolved as of the date hereof with respect to any alleged material violation of any Environmental Law or regarding potential liability under any Environmental Law relating to operations or conditions of any facilities or property owned, leased or operated by BRG, the BRG Partnerships or the 1997-I Program Participants (to the extent of their interests in the 1997-I Properties); (f) No property now or previously owned, leased or operated by BRG , the BRG Partnerships or the 1997-I Program Participants (to the extent of their interests in the 1997-I Properties) is listed on the National Priorities List pursuant to CERCLA or on any other federal or state list as sites requiring investigation or cleanup; (g) Neither BRG nor the BRG Partnerships is directly transporting, has directly transported, is directly arranging for the transportation of, or has directly transported, any Contaminant to any location which is listed on the National Priorities List pursuant to CERCLA or on any similar federal or state list or which is the subject of federal, state or local enforcement actions or other investigations that may lead to material claims against such company for remedial work, damage to natural resources or personal injury, including claims under CERCLA; and (h) There are no sites, locations or operations at which either BRG or the BRG Partnerships is currently undertaking, or has completed, any remedial or response action relating to any such disposal or release, as required by Environmental Laws. 4.12 Books and Records. To BRG's knowledge, all books, records and files of BRG, the BRG Partnerships and the BRG 1997-I Oil and Gas Program (including those pertaining to the BRG Oil and Gas Properties, the BRG Partnership Properties, the 1997-I Properties, wells and other assets, those pertaining to the production, gathering, transportation and sale of Hydrocarbons, and corporate, accounting and financial records) (a) have been prepared, assembled and maintained in accordance with usual and customary policies and procedures and (b) fairly and accurately reflect the ownership, use, enjoyment and operation of BRG and the BRG Partnerships of their respective assets and the 1997-I Program Participants of the 1997-I Properties. 4.13 Oil and Gas Properties (a) Each of BRG, and the BRG Partnerships and the 1997-I Program Participants has Good and Defensible Title to its respective interests in the BRG Oil and Gas Properties, the BRG Partnership Properties and the 1997-I Properties. None of the reserve or financial information relating to the transactions described herein and provided to Buyer cover the Individual Shareholder Interests. (b) Each of BRG and the BRG Partnerships and the 1997-I Program Participants has complied in all material respects with the terms of its Leases and other agreements relating to the BRG Oil and Gas Properties, the BRG Partnership Properties and the 1997-I Properties, and no claim adverse to the rights of BRG or the BRG Partnerships and the 1997-I Program Participants as lessee or assignee under any of such Leases or questioning their respective rights to the continued possession of the lands subject to the Leases has been asserted by any party. 4.14 Compliance with Requirements of Laws. Except as listed or referred to in Schedule 4.14, and except as to matters not having a Material Adverse Effect, to BRG's knowledge, BRG, the BRG Partnerships and the 1997-I Program Participants and their respective properties are in compliance with all applicable Requirements of Laws. 4.15 Payments. Except as set forth in Schedule 4.15, all accrued rentals, royalties, operating costs and expenses and other costs and expenses which are due from or are the responsibility of owners of the BRG Properties, the BRG Partnership Properties or the 1997-I Properties, as the case may be, have been timely paid, or if not paid, are being contested in good faith in the normal course of business under circumstances where adequate reserves have been established therefor and reflected in all appropriate financial statements. Schedule 4.15 lists all outstanding payments or obligations exceeding the sum of $1,000 which are being contested by BRG, the BRG Partnerships or the 1997-I Program Participants. 4.16 Benefit Plans. (a) Schedule 4.16(a) provides a description of each of the following which is sponsored, maintained or contributed to by BRG for the benefit of the employees of BRG, or has been so sponsored, maintained or contributed to within six years prior to the Closing Date: (i) each "employee benefit plan," as such term is defined in Section 3(3) of ERISA (including, but not limited to, employee benefit plans, such as foreign plans, which are not subject to the provisions of ERISA) ("Benefit Plan"); (ii) each personnel policy, stock option plan, collective bargaining agreement, bonus plan or arrangement, incentive award plan or arrangement, vacation policy, severance pay plan, policy, or agreement, deferred compensation agreement or arrangement, executive compensation or supplemental income arrangement, consulting agreement, employment agreement, and each other employee benefit plan, agreement, arrangement, program, practice, or understanding which is not described in Section 4.16(a)(i) ("Benefit Program or Agreement"). (b) True, correct, and complete copies of each of the Benefit Plans, and related trusts, if applicable, including all amendments thereto, have been furnished or made available to Buyer. There has also been furnished or made available to Buyer, with respect to each Benefit Plan required to file such report and description, the most recent report on Form 5500 and the summary plan description. True, correct, and complete copies or descriptions of all Benefit Programs and Agreements have also been furnished or made available to Buyer. (c) Except as otherwise set forth on Schedule 4.16(c), (i) BRG does not contribute to or have an obligation to contribute to, and has not at any time within six years prior to the Closing Date contributed to or had an obligation to contribute to, a multiemployer plan within the meaning of Section 3(37) of ERISA; (ii) All reports and disclosures relating to the Benefit Plans required to be filed with or furnished to governmental agencies, Benefit Plan participants or Benefit Plan beneficiaries have been filed or furnished in accordance with applicable law in a timely manner, and each Benefit Plan and each Benefit Program or Agreement has been administered in substantial compliance with its governing documents; (iii) Each of the Benefit Plans intended to be qualified under Section 401 of the Code, (A) satisfies in form and operation the requirements of such Section except to the extent amendments are not required by law to be made until a date after the Closing Date, (B) has received a favorable determination letter from the Internal Revenue Service regarding such qualified status, (C) has not, since receipt of the most recent favorable determination letter, been amended, and (D) has not been operated in a way that would adversely affect its qualified status; (iv) No Benefit Plan subject to Title IV of ERISA is sponsored, maintained or contributed to or has been sponsored, maintained or contributed to within six years prior to the Closing Date by BRG or any corporation, trade business or entity under common control with BRG, within the meaning of Section 414(b), (c) or (m) of the Code or Section 4001 of ERISA; (v) As to any Benefit Plan intended to be qualified under Section 401 of the Code, there has been no termination or partial termination of the Benefit Plan within the meaning of Section 411(d)(3) of the Code; (vi) No act, omission or transaction has occurred which would result in imposition on BRG of (A) breach of fiduciary duty liability damages under Section 409 of ERISA, (B) a civil penalty assessed pursuant to subsections (c), (i) or (l) of Section 502 of ERISA, or (C) a tax imposed pursuant to Chapter 43 of Subtitle D of the Code; (vii) No Benefit Plan is or has been funded by BRG through a trust which is intended to be exempt from federal income taxation pursuant to Section 501(c)(9) of the Code; (d) Except as otherwise set forth in Schedule 7.9, BRG is not a party to any agreement, nor has it established any policy or practice, requiring it to make a payment or provide any other form of compensation or benefit to any person performing services for BRG upon termination of such services which would not be payable or provided in the absence of the consummation of the transactions contemplated by this Agreement. (e) Each Benefit Plan which is an "employee welfare benefit plan," as such term is defined in Section 3(1) of ERISA, may be unilaterally amended or terminated in its entirety without liability except as to benefits accrued thereunder prior to such amendment or termination. 4.17 Litigation. Except as set forth in Schedule 4.17, there is no judgment, order, decree, injunction or award, or claim, suit, action or administrative, arbitration or other proceeding (including but not limited to bankruptcy proceedings) or any kind of investigation pending or, to BRG's knowledge, threatened against or relating to BRG, the BRG Partnerships, the BRG Properties, the BRG Partnership Properties or the 1997-I Properties which seeks injunctive or other equitable relief or which reasonably may be expected to have a Material Adverse Effect, and none of BRG, the BRG Partnerships, any of their present directors, officers or employees, or, to the knowledge of BRG, any of their former directors, officers or employees or the 1997-I Program Participants has received or been advised of any unsatisfied request for information, notice, administrative inquiry or claim that could reasonably be expected to result in such judgment, order, decree, injunction, award, claim, suit, action or proceeding. 4.18 Insurance. Schedule 4.18 sets forth a true and correct description of the insurance policies maintained by BRG and the BRG Partnerships (the "Insurance Policies"), including the amounts and type of coverage, applicable deductibles and any material exclusions thereto. No notice of cancellation or termination has been given to BRG or the BRG Partnerships by an insurer and none of BRG and the BRG Partnerships have any reason to believe that any insurer is contesting or intends to contest the validity, enforceability or collectibility of any of the Insurance Policies or intends to deny coverage thereunder. All premiums required to be paid have been paid in full through the Closing Date. No claims have been made against BRG or the BRG Partnerships with respect to the types of loss or damage covered by any of the Insurance Policies in excess of coverage under such policies or in excess of adequate reserves established therefor and reflected on the proper financial statements. 4.19 Gas Imbalances. Schedule 4.19 sets forth (a) imbalances for overproduction and underproduction of Hydrocarbons from the BRG Oil and Gas Properties, the BRG Partnership Properties and the 1997-I Properties as of the dates shown on such Schedule 4.19, or as a result of the sale or transportation of Hydrocarbons by BRG, the 1997-I Program Participants or the BRG Partnerships or the pipeline operations of Charter Servicing Company, and (b) obligations of BRG, the 1997-I Program Participants and the BRG Partnerships as of the dates shown on such Schedule 4.19, for the delivery of Hydrocarbons attributable to the BRG Oil and Gas Properties, the BRG Partnership Properties and the 1997-I Properties in the future on account of prepayment, advance payment, take-or-pay or similar obligations without then or thereafter being entitled to receive full value therefor. 4.20 Public Utility Holding Company Act. Neither BRG nor any subsidiary of BRG is subject to regulation under the Public Utility Holding Company Act of 1935, as amended, and the rules and regulations thereunder. 4.21 Investment Company Act.panNeither BRG nor any of Sellers is an "investment company" or a company "controlled" by an "investment company," in each case within the meaning of the Investment Company Act of 1940, as amended. 4.22 Wells. During any period operated by BRG, and to the knowledge of BRG, during other periods (a) all of the wells in which BRG, the BRG Partnerships and the 1997-I Program Participants have an interest have been drilled and completed within the boundaries of the Leases or Units relating to such wells or within the limits otherwise permitted by contract, pooling or unitization agreement and by applicable law and (b) all such wells have been produced in compliance with allowables allocated thereto by the applicable governmental authority, except for such violations that would not or could not reasonably be expected to have a Material Adverse Effect. 4.23 Condition of Equipment. To the knowledge of BRG, all wells, platforms, facilities, equipment, machinery and personal property owned or leased by BRG, the BRG Partnerships and the 1997-I Program Participants (a) are in an operable state of repair, subject to ordinary wear and tear, so as to be adequate for normal operations in accordance with standard industry practice, and to comply with the requirements of all applicable contracts, and (b) meet and comply with all Requirements of Law, in each case except where any such failure to be in good repair or comply with Requirements of Law would not or could not reasonably be expected to have a Material Adverse Effect. NOTWITHSTANDING THE FOREGOING, BUYER UNDERSTANDS AND AGREES THAT THE CONVEYANCE OF THE PERSONAL PROPERTY REFERRED TO HEREIN AT THE CLOSING SHALL BE MADE ON AN "AS IS, WHERE IS" BASIS, WITHOUT ANY WARRANTIES AS TO THE CONDITION OF THE PERSONAL PROPERTY INCLUDING, WITHOUT LIMITATION, ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 4.24 Evaluation Data. BRG, the BRG Partnerships, and the 1997-I Program Participants own or have the right to use without any limitations or restrictions adversely affecting the use of the same in the ordinary conduct of its business, all material technology, processes, maps, seismic records, shot points, field notes, interpretations and programs, all seismic, geological and geophysical information and libraries, and other proprietary information relating to the BRG Properties, the BRG Partnership Properties and the 1997-I Properties (collectively, "Evaluation Data"), and this Agreement has not altered or impaired, nor will alter or impair, any such rights or has breached, or will breach, any agreements with third party vendors or has required, or may require (whether in Sellers' or BRG's opinion or a third party vendor's opinion), payments of additional sums thereto, or has required, or may require (whether in BRG's opinion or a third party vendor's opinion), the return of any records or information, except in each case as would not or could not reasonably be expected to have a Material Adverse Effect. No person has any right to use or obtain access to any of the Evaluation Data, and no person has overtly challenged or questioned the validity or effectiveness of any license or agreement relating to the same or the right of BRG, the BRG Partnerships or the 1997-I Program Participants, as applicable, to use the same, except for such challenges or questions that could not reasonably be expected to have a Material Adverse Effect. 4.25 Interaffiliate Transactions and Relationships. Except as set forth in Schedule 4.25, BRG is not a party to and none of the BRG Properties, BRG Partnership Properties or the 1997-I Program Properties is subject to any agreement with any of Sellers, or BRG Holding Company or BRG Production Company that survive the Closing. 4.26 Well Status. Except as set forth in Schedule 4.26, there are no wells located on the Leases or included in the BRG Properties, the BRG Partnership Properties or the 1997-I Properties: (i) that any of BRG, the BRG Partnerships or the 1997-I Program Participants is currently obligated by law or contract to plug and abandon or will be obligated by law or contract to plug and abandon with the lapse of time or notice or both because the wells are not currently capable of producing in commercial quantities; (ii) are subject to exceptions to a requirement to plug and abandon issued by a regulatory authority having jurisdiction over the BRG Properties, the BRG Partnership Properties or the 1997-I Properties; or (iii) to the knowledge of BRG, have been plugged and abandoned but have not been plugged or reclaimed in accordance with all applicable requirements of each regulatory authority having jurisdiction over such properties. 4.27 Section 29 Status of Certain Properties. (a) Each Well listed in Schedule 4.27 (a "Section 29 Well") (i) was drilled and fully completed as a well capable of producing from the formation(s) specified on such schedule after December 31, 1979 and prior to January 1, 1993, and (ii) produces gas that is a "qualified fuel" under section 29(c) of the Code and that qualifies for the maximum production tax credit under section 29(a) of the Code and is not subject to any limitation under section 29(b) of the Code; (b) no property (as such term is used in section 29(d)(4) of the Code) included in the properties listed on Schedule 4.27 produced gas in marketable quantities from Devonian shale, coal seams, geopressurized brine or tight formation(s) prior to January 1, 1980; and (c) the Section 29 Wells are perforated only in the formation(s) specified on such schedule and the gas produced from each Section 29 Well is not commingled with any gas that is not produced from such formation(s). 4.28 Liabilities; Indebtedness. Except for liabilities incurred in the ordinary course of business and not material individually or in the aggregate to BRG and the BRG Partnerships on a consolidated basis, none of BRG, its subsidiaries or the BRG Partnerships (with respect to the BRG Partnership Properties) have any material (individually or in the aggregate) liabilities, direct or contingent except as provided for the Financial Statements or disclosed in Schedule 4.28 or any of the other Schedules hereto. 4.29 No Material Misstatements or Omissions. Neither this Agreement nor any certificates or documents made or delivered in connection herewith contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein not misleading, in view of the circumstances in which they were made. To the knowledge of BRG, there is no fact or information relating to the business, prospects, condition (financial or otherwise), affairs, operations, or assets of BRG that has not been disclosed to Buyer in writing by Sellers' Representative which could result in a Material Adverse Effect. 4.30 Bankruptcy. There is no bankruptcy, reorganization or arrangement proceedings pending, being contemplated by or, to the knowledge of Sellers, threatened against any of Sellers or their respective affiliates. 4.31 Representations Apply to Subsidiaries of BRG. The representations and warranties contained in this Article IV to the extent applicable to BRG or its assets shall also be deemed to cover and extend to Charter Servicing Company and its assets in all respects. 4.32 Allocation of Purchase Price. The allocation of the Purchase Price with respect to each of the BRG Partnerships and to the BRG 1997-I Oil and Gas Program has been independently made by BRG and has been made (i) in accordance with the partnership agreements of the BRG Partnerships and the program agreement of the BRG 1997-I Oil and Gas Program, and (ii) in full satisfaction of BRG's fiduciary responsibilities and duties to the limited partners of the BRG Partnerships and the 1997-I Program Participants. 4.33 BRG 1997-I Oil and Gas Program Funds. All monies in program funds relating to the BRG 1997-I Oil and Gas Program have been expended and no further drilling obligations by BRG as program administrator, exist or are continuing under the BRG 1997-I Oil and Gas Program ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER As an inducement to Sellers to enter into this Agreement and to consummate the transactions contemplated hereby, Buyer hereby represents and warrants to Sellers and agrees as follows: 5.1 Organization of Buyer. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is duly qualified to do business and is in good standing in each jurisdiction in which the nature of its business activities or its ownership or leasing of property makes such qualification necessary. Buyer has full corporate power and authority to own or lease and to operate and use its properties and assets and to carry on its business as now conducted. 5.2 Authority of Buyer. Buyer has full power and authority to execute, deliver and perform this Agreement and all of the Buyer Ancillary Agreements. The execution, delivery and performance of this Agreement and the Buyer Ancillary Agreements by Buyer have been duly authorized and approved by Buyer's board of directors and do not require any further authorization or consent of Buyer or its stockholders. This Agreement has been duly authorized, executed and delivered by Buyer and is the legal, valid and binding agreement of Buyer enforceable in accordance with its terms, and each of the Buyer Ancillary Agreements has been duly authorized by Buyer and upon execution and delivery by Buyer will be a legal, valid and binding obligation of Buyer enforceable in accordance with its terms. 5.3 No Conflict. Neither the execution and delivery of this Agreement or any of the Buyer Ancillary Agreements or the consummation of any of the transactions contemplated hereby or thereby nor compliance with or fulfillment of the terms, conditions and provisions hereof or thereof will: (a) violate or conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights under (i) the certificate or articles of incorporation or By-laws of Buyer, (ii) any material note, instrument, agreement, mortgage, lease, license, franchise, permit or other authorization, right, restriction obligation or agreement to which Buyer is a party or any of its properties is subject or by which Buyer is bound, (iii) any Court Order to which Buyer is a party or by which it is bound or (iv) any Requirements of Laws affecting Buyer; or (b) require the approval, consent, authorization or act of, or the making by Buyer of any declaration, filing or registration with, any Person or court. 5.4 No Finder. None of Buyer, any of its Affiliates nor any Person acting on behalf of any of them has paid or become obligated to pay any fee or commission to any broker, finder or intermediary for or on account of the transactions contemplated by this Agreement. 5.5 Investment Representation. The Shares, the BRG Partnership Properties and the 1997-I Properties are being acquired by Buyer for its own account for investment purposes only, and not with a view to the sale or distribution of any part thereof. 5.6 Financial Ability. Buyer has sufficient cash, commitments from responsible lending institutions, available lines of credit or such other sources of immediately available cash, to enable it to deliver the Purchase Price (less the Earnest Money) at the Closing. ARTICLE VI ACTIONS PRIOR TO THE CLOSING DATE The respective parties hereto covenant and agree to take the following actions between the date hereof and the Closing Date: 6.1 Investigation of the Company by Buyer. Sellers shall afford to the officers, employees and authorized representatives of Buyer (including its independent public accountants and attorneys) complete access during normal business hours to the offices, properties, employees, books, contracts, documents and business and financial records of BRG and the BRG Partnerships (and the 1997-I Program Participants to the extent relating to the 1997-I Properties) to the extent Buyer shall deem necessary or desirable and shall furnish to Buyer or its authorized representatives such additional information, including an opportunity to discuss such information with senior management, concerning the assets, business and the operations of BRG and the BRG Partnerships (and the 1997-I Program Participants to the extent relating to the 1997-I Properties) as shall be reasonably requested, including all such information as shall be necessary to enable Buyer or its representatives to verify the accuracy of the representations and warranties contained in this Agreement, to verify that the covenants of Sellers contained in this Agreement have been complied with, to determine whether the conditions set forth herein have been satisfied or to satisfy due diligence requirements of Buyer's lender, if any, or as may otherwise be necessary to enable Buyer to obtain financing. Without limiting the foregoing, Buyer shall have the right to conduct an environmental audit of the BRG Properties, the BRG Partnership Properties and the 1997-I Properties. Buyer agrees that all such investigations shall be conducted in such a manner as not to interfere unreasonably with the operations of BRG or the BRG Partnerships. All inspections pursuant to this Section 6.1 shall be at Buyer's sole risk, cost and expense and Buyer agrees to comply with the rules, regulations and instructions issued by Sellers and other operators regarding the actions of Buyer while upon, entering or leaving the property of BRG and the BRG Partnerships. 6.2 Preserve Accuracy of Representations and Warranties. Each of the parties hereto shall refrain from taking any action which would render any representation or warranty contained in Article IV or V of this Agreement inaccurate as of the Closing Date. Each party shall promptly notify the other of any action, suit, claim, investigation or proceeding that shall be instituted or threatened against such party to restrain, prohibit or otherwise challenge the legality of any transaction contemplated by this Agreement. Sellers shall promptly notify Buyer of any lawsuit, claim, proceeding or investigation that may be threatened, brought, asserted or commenced against BRG or the BRG Partnerships or affecting the BRG Properties, the BRG Partnership Properties or the 1997-I Properties. 6.3 Consents to Third Parties; Governmental Approvals. During the period prior to the Closing Date, Sellers and Buyer shall act diligently and reasonably, and shall cooperate with each other, in making any required filing or notification and in securing any consents, approvals and waivers of any Governmental Body or any third Persons required to be obtained in order to permit the consummation of the transactions contemplated by this Agreement. Sellers' Representative shall use its reasonable efforts to obtain the consents and approvals to the applicable transactions contemplated hereby from all of the limited partners of the BRG Partnerships and all of the 1997-I Program Participants. Sellers' Representative shall consult with Buyer regarding the form and substance of requests for consents, waivers and approvals. 6.4 Excluded Assets. Prior to the Closing, BRG shall contribute to BRG Holding Company, Inc. the Excluded Assets specifically set forth in Schedule 6.4 and BRG Holding Company, Inc. shall assume all liabilities associated with such Excluded Assets, whether attributable to the time period prior to or after such contribution. It is understood and acknowledged that BRG and BRG Petroleum Corporation have entered into, or will enter into, a stock purchase agreement reasonably acceptable in form and substance to Buyer, pursuant to which, at the time specified in Section 2.1 hereof, BRG Petroleum Corporation will purchase from BRG all of the outstanding capital stock of BRG Holding Company, Inc. and BRG Production Company for an aggregate purchase price of $2,472,000 and the indemnification of BRG, its affiliates, shareholders, officers, directors, employees and agents for all liabilities associated with the ownership of BRG Holding Company, Inc. or BRG Production Company or the assets or operations of such companies (the "Subsidiary Transfer"). Also, the Principal Sellers will guarantee unto BRG (and each indemnified party above mentioned) the performance and payment of all obligations of BRG Petroleum Corporation under the terms of such stock purchase agreement. In addition, prior to the Closing, BRG Holding Company, Inc. shall be substituted for, to the extent reasonably possible, as program administrator of the 1997-I Oil and Gas Program with respect to the 1997-I Program Participants. To the extent BRG Holding Company, Inc. is not substituted as program administrator of the 1997-I Oil and Gas Program, at Buyer's request prior to the Closing, it shall contract with BRG to perform all of the services required of the program administrator. BRG Holding Company, Inc. shall indemnify BRG, its affiliates, shareholders, officers, directors, employees and agents and hold it harmless from any liability, loss, cost, expenses or damages BRG may incur or suffer after Closing as a current or former general partner of any of the BRG Partnerships or as program administrator of the 1997-I Oil and Gas Program (whether such liability, loss, cost, expenses or damages relate to periods of time prior to or after the Closing Date). Buyer and the BRG Shareholders specifically acknowledge and consent to such transfer and assignment of assets and the proposed sale of BRG Holding Company, Inc. and BRG Production Company to BRG Petroleum Corporation. 6.5 BRG Options. On the Closing Date, each outstanding employee stock option to purchase shares of the capital stock of BRG (a "BRG Option") shall be converted into the right to receive a cash amount equal to (i) the product of the number of the shares which are issuable upon exercise of such BRG Option in full, multiplied by the Purchase Price per Share as set forth on Schedule 2.4 after taking into account the adjustments provided for in Section 2.5 above, less (ii) the aggregate exercise price of such BRG Option. BRG shall take all necessary action prior to the Closing Date to facilitate the conversion and payment in consideration for the BRG Options described in this Section 6.5, including without limitation, the agreement and consent from each holder of a BRG Option agreeing to exchange his or her BRG Options at the Closing Date for the cash payment set forth above. BRG shall withhold all income or other taxes as required under applicable law prior to distribution of the cash amount received under this Section 6.5 to the holders of BRG Options. 6.6 Covenants Regarding Employee Benefit Plan and Employees. BRG shall: (a) not adopt, amend (other than amendments that reduce the amounts payable by BRG, or amendments required by law to preserve the qualified status of a Benefit Plan) or assume an obligation to contribute to any Benefit Plan or collective bargaining agreement or enter into any employment, severance or similar contract with any person (including without limitation, contracts with management of BRG that might require that payments be made upon the consummation of the transactions contemplated hereby) or amend any such existing contracts to increase any amounts payable thereunder or benefits provided thereunder; (b) not grant any increase in compensation or pay any bonus to any employees except for bonuses or other payments to employees which result in corresponding adjustments to the Adjusted Working Capital of BRG at the Closing Date; (c) not (i) engage in any transaction (either acting alone or in conjunction with Seller, any Benefit Plan or trust created thereunder) in connection with which BRG could be subjected (directly or indirectly) to either breach of fiduciary duty liability damages under Section 409 of ERISA, a civil penalty assessed pursuant to subsections (c), (i) or (1) of Section 502 of ERISA or a tax imposed pursuant to Chapter 43 of Subtitle D of the Code, (ii) terminate any Benefit Plan in a manner, or take any other action with respect to any Benefit Plan, that could result in the liability of BRG to any person, (iii) take any action that could adversely affect the qualification of any Benefit Plan or its compliance with the applicable requirements of ERISA or (iv) fail to make full payment when due of all amounts which, under the provisions of any Benefit Plan, any agreement relating thereto or applicable law, BRG is required to pay as contributions thereto; and (d) file, on a timely basis, all reports and forms required by federal regulations with respect to any Benefit Plan. 6.7 Other Interim Covenants. Until the Closing, BRG and its subsidiaries and the BRG Partnerships shall comply, and Sellers shall cause BRG and its subsidiaries and the BRG Partnerships to comply, with the provisions set forth below except as may otherwise be agreed to by Buyer in writing: (a) BRG and the BRG Partnerships shall operate their respective businesses and the BRG Properties and the BRG Partnership Properties in the ordinary course; (b) None of BRG, the BRG Partnerships (with respect to the BRG Partnership Properties) or the 1997-I Program Participants (with respect to the 1997-I Properties) will, without the prior written consent of Buyer, which consent shall not be unreasonably withheld, commit to any operation reasonably anticipated by Sellers to require future capital expenditures by any of such parties, individually or in the aggregate, in excess of $100,000, or terminate, materially amend, execute or extend any material agreements affecting the BRG Properties, the BRG Partnership Properties or the 1997-I Properties; (c) none of BRG or any BRG Partnership shall (i) amend its Organizational Documents or enter into any merger or consolidation agreement, (ii) acquire or agree to acquire all or substantially all of the assets of another entity, (iii) authorize for issuance, issue, sell, deliver or agree or commit to issue, sell or deliver (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase or otherwise) any capital stock of any class or any other securities or equity equivalents or amend any of the terms of any such securities or agreements or enter into any voting agreements with respect to any capital stock of the Company, (iv) except for distribution and/or dividends of cash (without duplication) (A) not in excess of the amount of cash in bank accounts immediately prior to May 1, 1998, or (B) from revenues, proceeds and/or receivables attributable to the period of time prior to May 1, 1998, declare or pay of any dividend on, or make any other distribution with respect to, the BRG Shares or BRG Partnerships; (d) none of BRG, the BRG Partnerships or the 1997-I Program Participants shall transfer, sell, hypothecate, encumber or otherwise dispose of any of the material BRG Properties, BRG Partnership Properties or the 1997-I Properties, or incur or assume any material liabilities except for dispositions made, or liabilities incurred, in the ordinary course of business consistent with past practices; (e) none of BRG, the BRG Partnerships or the 1997-I Program Participants shall, with respect to the BRG Properties, the BRG Partnership Properties or the 1997-I Properties, assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other Person or entity except in the ordinary course of business consistent with past practices and in amounts not material taken as a whole or make any loans, advances or capital contributions to or investments in any other Person, other than in the ordinary course of business consistent with past practices and in amounts not material taken as a whole; (f) Sellers shall maintain generally insurance coverage on the BRG Properties, the BRG Partnership Properties and the 1997-I Properties presently furnished by nonaffiliated third parties in the amounts and of the types currently in force; (g) BRG shall not implement or adopt (i) any material change in its accounting methods or principles or the application thereof (including depreciation lives) or (ii) any material change in its tax methods or principles or the application thereof (including depreciation lives) except as may be required by Requirements of Law; (h) BRG shall not identify any additional prospects to become subject to the terms of those certain participation program agreements dated various dates between BRG and James L. Burkhart, B. J. Reid, Robert E. Gee, Michael W. Burkhart and J. Keith Burkhart; and (i) during the period prior to the Closing Date, Sellers' Representative shall use its reasonable efforts to obtain a release of liability from the 1997-I Program Participants associated with BRG acting in the capacity as program administrator of the BRG 1997-I Oil & Gas Program in a form acceptable to Buyer. No provisions of this Section 6.7 shall prohibit Sellers from performing any of their respective obligations under any of the provisions of this Agreement. 6.8 Title Defects. (a) At least 15 days prior to Closing (the "Notification Deadline"), Buyer shall notify BRG in writing (such notice being herein referred to as a "Defect Notice") of any matter that causes the title of BRG or any of the BRG Partnerships or any of the 1997-I Program Participants to any of the Units, Lease or Wells not to be Good and Defensible Title (a "Title Defect"). Such Defect Notice shall include: (i) a description of the Title Defect and the basis for claiming same; (ii) the Lease, Unit or Well (or portions thereof) affected by such Title Defect; (iii) the Buyer's proposed Designated Value of the property subject to such Title Defect; and (iv) the amount that Buyer believes to be the Defect Value attributable to such Title Defect. Additionally, from the date hereof until the fifth day prior to the Notification Deadline, BRG shall, and shall cause their respective officers and employees to, notify Buyer in writing of any Title Defects discovered by such Person promptly following such discovery. (b) BRG shall use its best efforts to cure, at BRG's sole cost and expense (which costs and expenses will be reflected in the Adjusted Working Capital reflected in the Closing Balance Sheet), all Title Defects of which it becomes aware prior to Closing, and in each case with respect to any Title Defects that are cured, shall provide Buyer with reasonably satisfactory proof thereof; provided, however, that Sellers shall not be required to use such best efforts with respect to any Title Defects for which Sellers' Representative and Buyer have agreed upon a Defect Value. (c) The "Designated Value" for any Lease, Unit or Well shall be the amount agreed upon by Buyer and BRG which the parties commit to negotiate in good faith, provided, however, that in the event that the parties are unable to reach agreement on the Designated Value after a period of one full business day after the receipt by BRG of the Defect Notice containing Buyer's proposed Designated Value, the Designated Value shall be determined by the independent petroleum engineering firm of Ryder Scott Company. Each of the parties commits to promptly provide all information and material relevant to the issue in its possession to such firm as promptly as practical. Such firm shall provide its opinion of the Designated Value within two business days from the date of receipt of the information and materials from all parties and the decision of such firm shall be final and binding on all parties. The costs and expenses of obtaining such determination shall be paid and borne by the parties equally. (d) As used herein, the term "Defect Value" shall mean with respect to each Title Defect, the reduction in the Designated Value of the affected Lease, Unit or Well, as applicable, as a result of the existence of such Title Defect. (e) If BRG does not agree with Buyer's proposed Defect Value with respect to a Title Defect or the parties are unable to agree upon whether a Title Defect exists, then Buyer and BRG shall enter into good-faith negotiations and shall attempt to agree upon such matter, and any values to be agreed upon shall be based on the allocated value on Schedule 2.4 for the group of properties to which such Lease, Unit, or Well relates; provided that if the Title Defect is the result of a discovery that BRG, any of the BRG Partnerships or any of the 1997-I Program Participants owns less than the NRI for such Well or Unit, then Buyer and BRG agree that the reduction to the Purchase Price shall be equal to the product of the Designated Value of such Well or Unit and the percentage reduction in such NRI as a result of the Title Defect. (f) If Buyer and BRG cannot reach agreement on the existence of a Title Defect, or the Defect Value attributable to a Title Defect, in any case within 10 days after the commencement of good-faith negotiations pursuant to subparagraph (e) above, at either party's option, upon notice to the other party, such matter shall be determined by a title attorney with at least 10 years' experience in oil and gas titles in the state in which the Units or Wells (or majority of Units or Wells) in question are located as selected by mutual agreement of Buyer and BRG or absent such agreement during the 10-day period, by the Houston office of the American Arbitration Association (the "Title Arbitrator"). The arbitration proceeding shall be held in Houston, Texas and shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association, to the extent such rules do not conflict with the terms of this Section. The Title Arbitrator's determination shall be made within 10 days after submission of the matters in dispute and shall be final and binding upon both parties, without right of appeal. The Title Arbitrator shall act as an expert for the limited purpose of determining the specific disputed Title Defect or Defect Value submitted by either party and may not award damages, interest or penalties to either party with respect to any matter. Sellers and Buyer shall bear their own respective legal fees and other costs of presenting its case. Each party shall bear one-half of the costs and expenses of the Title Arbitrator. (g) To the extent that Buyer has knowledge of any Title Defect prior to the execution of this Agreement, the Sellers acknowledge that Buyer shall not be deemed to have waived any of its rights hereunder to an adjustment in the Purchase Price on account of any such Title Defect. 6.9 Audited Financials. On or before April 15, 1998, Sellers shall deliver to Buyer the audited consolidated financial statement for the year ended December 31, 1997. The defined term "Financial Statements" shall be deemed to include (in addition to the other financial statements included in such defined term) such audited financial statements for all purposes after the delivery thereof. Such audited financials shall not be materially different from the draft audited financials previously submitted to Buyer by Sellers. ARTICLE VII ADDITIONAL AGREEMENTS 7.1 Access to Records after Closing. (a) For a period of six years after the Closing Date, Sellers and their representatives shall have reasonable access to all of the files, data, books and records of BRG, the BRG Partnerships and the BRG 1997-I Oil and Gas Program relating to the period of time prior to and including the Closing Date and shall have an opportunity to make copies of such materials. Such access shall be afforded by Buyer upon receipt of reasonable advance notice and during normal business hours. Sellers shall be solely responsible for any costs or expenses incurred by it pursuant to this Section 7.1. If Buyer shall desire to dispose or permit the disposal of any of such files, data, books and records prior to the expiration of such six-year period, Buyer shall, prior to such disposition, give Sellers a reasonable opportunity, at Sellers' expense, to segregate and remove such files, data, books and records as Sellers may select. Sellers shall keep, and shall cause their respective agents, employees, representatives and affiliates to keep, confidential, and not use for any competitive purposes, any confidential information to which they have access pursuant hereto for a period of two years from the date after the Closing Date that they access such confidential information. (b) For a period of six years after the Closing Date, Buyer and its representatives shall have reasonable access to all of the files, data, books and records relating to BRG, the BRG Partnerships and the BRG 1997-I Oil and Gas Program, if any, which Sellers may retain after the Closing Date and shall have an opportunity to make copies of such materials. Such access shall be afforded by Sellers upon receipt of reasonable advance notice and during normal business hours. Buyer shall be solely responsible for any costs and expenses incurred by it pursuant to this Section 7.1. If Sellers shall desire to dispose or permit the disposal of any of such files, data, books and records prior to the expiration of such six-year period, Sellers shall, prior to such disposition, give Buyer a reasonable opportunity, at Buyer's expense, to segregate and remove such files, data, books and records as Buyer may select. 7.2 Confidentiality Agreement. The Confidentiality Agreement shall remain in full force and effect following the execution of this Agreement until Closing or as provided in Section 9.3 and is hereby incorporated herein by reference and shall constitute a part of this Agreement for all purposes. Any and all information received by Buyer pursuant to the terms and provisions of this Agreement shall be governed by the applicable terms and provisions of the Confidentiality Agreement. 7.3 No Public Announcement. Except as Buyer and Sellers may otherwise consent to in writing (which consent shall not be unreasonably withheld), neither Buyer nor Sellers shall, without the approval of the other, make any press release or other public announcement concerning the transactions contemplated by this Agreement, except as and to the extent that any such party shall be so obligated by law or the rules of any stock exchange or quotation system, in which case, to the extent practicable, the other party shall be advised and the parties shall use their best efforts to cause a mutually agreeable release or announcement to be issued; provided that the foregoing shall not preclude communications or disclosures necessary to implement the provisions of this Agreement or to comply with the accounting and, if applicable, Securities and Exchange Commission disclosure obligations. 7.4 Expenses and Sales Taxes. All legal, accounting and other fees, costs and expenses incurred in connection with, or arising out of the obligations contained in this Agreement and the transactions contemplated hereby ("Transaction Expenses") which are attributable to the BRG Shareholders shall be payable by BRG, all Transaction Expenses attributable to each BRG Partnership shall be paid by that BRG Partnership and all Transaction Expenses attributable to each 1997-I Program Participant shall be payable by such 1997-I Program Participant. All such Transaction Expenses shall be paid by the Purchase Price adjustment provided for in the first sentence of Section 2.5 hereof, except for Transactional Expenses incurred pursuant to Section 2.7(c) hereof. All Transaction Expenses attributable to Buyer shall be paid by Buyer. All sales taxes, if any, payable by reason of the transfers of the BRG Partnership Properties and the 1997-I Properties will be paid by Buyer and Buyer shall, or shall cause BRG to, file all returns, reports or statements, if any, that may be required or appropriate in connection with the transactions contemplated by this Agreement. 7.5 Further Assurances. From time to time following the Closing, each of the parties hereto shall execute, acknowledge and deliver or cause to be executed, acknowledged and delivered such instruments and take such other action as may be necessary or advisable to carry out their obligations under this Agreement and under any document, certificate or other instrument delivered pursuant hereto. 7.6 Change of Corporate Name. Buyer will cause BRG to change its corporate name to a name not confusingly similar to "BRG Petroleum" within 120 days following the Closing Date. Prior to such change of name, Buyer shall, if requested by Sellers' Representative, give Sellers' Representative or its designee consent to use of the name "BRG" or "BRG Petroleum." Following such change of name, Buyer shall (a) remove or cause to be removed the name, marks and logos of BRG from the BRG Property, the BRG Partnership Properties and the 1997-I Properties, and (b) file an appropriate notice of such change of name in the real estate records of each county of each state where the BRG Oil and Gas Properties, the BRG Partnership Properties and the 1997-I Properties are located. 7.7 Indemnification of Sellers for Environmental Liabilities. All Environmental Liabilities attributable to conditions existing and operations conducted on the BRG Property (except for the Excluded Assets), the BRG Partnership Properties and the 1997-I Properties, whenever discovered, shall be liabilities of BRG, and from and after the Closing Buyer shall indemnify, defend, and hold harmless Sellers from and against all loss, cost, liability or expense attributable thereto or resulting therefrom. 7.8 Tax Returns; Payments and Refunds. Following the Closing Date, Sellers' Representative shall prepare, with the assistance of Magee Rausch & Shelton, LLP, Tulsa, Oklahoma, and timely file with the appropriate federal, state and local agencies all Tax Returns relating to BRG, the BRG Partnerships and the tax partnership comprised of 1997-I Program Participants for periods ending on or prior to the Closing Date, including the consolidated federal income Tax Return of the affiliated group of which BRG is the common parent for the short period ending on the Closing Date. Not later than 30 days prior to the due date (including extensions) for filing any Tax Return described in the preceding sentence, Sellers' Representative shall deliver to Buyer a copy of such Tax Return and shall allow Buyer to review, comment upon and approve such Tax Return without unreasonable delay. The parties good faith estimate of the costs associated with the preparation of such Tax Returns and the Taxes due by BRG for the period ending on the Closing Date shall be a liability of each of BRG and the BRG Partnerships for purposes of calculating its Adjusted Working Capital. The parties good faith estimate of any refund of Taxes due to BRG for the period ending on the Closing Date shall be an asset of BRG for purposes of calculating its Adjusted Working Capital. Buyer shall pay to Sellers' Representative the amount of any refund of federal income Taxes related to the carryback of any losses incurred during the taxable year of BRG that includes the Closing Date, but only to the extent the amount of such Tax refund (i) is actually received by the Buyer, (ii) is specifically attributable to the carryback of such losses, and (iii) is not reflected or otherwise provided for in the Closing Date Balance Sheet. Buyer shall have no obligation to pursue any such claim for refund. 7.9 Employee Relations and Benefits. Sellers' Representative shall take such action as is necessary to transfer the employment of the employees of BRG and Charter Servicing Company to BRG Petroleum Corporation prior to the Closing Date. Sellers' Representative shall take such action as is necessary and possible under the terms of the Benefit Plans to cause (i) the Benefit Plans and all liabilities thereunder (whether occurring prior to or after the Closing Date) to be assumed by BRG Petroleum Corporation, (ii) BRG to cease as of the Closing Date to be participating employers in any of the Benefit Plans and (iii) BRG to have no liability as of and after the Closing Date in respect of any Benefit Plan. It is understood that Buyer has no commitment or plans to employ any of the employees of BRG or any of its subsidiaries after the Closing. Nevertheless, in the event that any such employee is offered employment with and is employed by Buyer or BRG or any Affiliate thereof within three months after Closing, service by such employees with BRG shall be recognized under the employee benefit plans maintained by the Buyer, BRG or any Affiliate thereof for the benefit of such employees, for all purposes, including without limitation participation, coverage, vesting and level of benefits, as applicable, but not in excess of the maximum credit available to Buyer's employees under such plans. Schedule 7.9 describes the severance benefits to be provided by BRG for its employees. Any amounts payable to such employees by BRG shall be taken into account in connection with the calculation of the Closing Adjusted Working Capital of BRG for purposes of Section 2.5. 7.10 Release and Indemnification of Resigning Officers and Directors. Upon receipt of the resignation of each of the officers and directors of BRG at the Closing, Buyer and BRG shall agree to release such individual from any and all claims, costs, liabilities and actions that they may have against such individual (except in connection with the transactions contemplated hereby). Buyer further agrees to not allow BRG to amend its Organizational Documents to eliminate or alter (except to provide more generous indemnification or limitation of liability provisions for former officers and directors) any indemnification or limitation of liability provisions intended to benefit the officers and directors of BRG. 7.11 Insurance Coverage. Subject to approval by the BRG insurance carrier or carriers, prior to the Closing Date, BRG and Sellers shall take such action as may be necessary and as is reasonably acceptable to Buyer to split the current insurance coverage of BRG, the BRG Partnerships and the 1997-I Properties so that the Excluded Assets and operations to be conducted in connection therewith will continue to be covered as will the BRG Properties, BRG Partnership Properties, 1997-I Properties and the ongoing operations and activities of BRG. ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF PARTIES 8.1 Conditions to Buyer's Obligations. The obligations of Buyer to purchase the Shares, the BRG Partnership Properties and the 1997-I Properties pursuant to this Agreement shall, at the option of Buyer, be subject to the satisfaction, on or prior to the Closing Date, of the following conditions: (a) There shall have been no material breach or breaches by Sellers in the performance of any of their covenants and agreements herein; each of the representations and warranties of Sellers contained or referred to herein shall be true and correct on the Closing Date as though made on the Closing Date, except for changes therein specifically permitted by this Agreement or resulting from any transaction expressly consented to in writing by Buyer; and there shall have been delivered to Buyer a certificate to such effect, dated the Closing Date and signed on behalf of BRG and the BRG Partnerships by the chief executive officer of Sellers' Representative in addition to the other deliveries specified in Section 3.2. (b) There shall not be any injunction, judgment, order, decree, ruling, or charge in effect preventing consummation of any of the transactions contemplated by this Agreement; and Sellers shall have delivered to Buyer a certificate to such effect, dated the Closing Date and signed on behalf of BRG and the BRG Partnerships by Seller's Representative. (c) The parties shall have received all approvals and actions of or by all Governmental Bodies and other Persons which are necessary to consummate the transactions contemplated hereby and which are required to be obtained prior to the Closing by applicable Requirements of Laws or contractual or other obligations. (d) BRG and the BRG Partnerships shall have received consents or waivers of preferential purchase rights from the other parties to all contracts, leases, agreements and permits to which either BRG or the BRG Partnerships is a party or by which BRG or the BRG Partnerships or any of its assets or properties is affected and which are required to consummate the transactions contemplated hereby. (e) All actions to be taken by Sellers in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to Buyer. (f) All of the BRG Partnerships shall have received the necessary consents required from the limited partners thereof as may be required for the sale of the BRG Partnership Properties. (g) BRG Holding Company, Inc. shall have become the general partner of the BRG Partnerships (and the liabilities associated therewith assumed by BRG Holding Company, Inc.) pursuant to an assignment and assumption form or other appropriate instrument acceptable to Buyer. (h) The transactions contemplated by the stock purchase agreement entered into by BRG pursuant to Section 6.4 hereof shall have been consummated on terms acceptable to Buyer and any demand note or other payment obligations given by the purchaser in connection therewith shall have been fully satisfied. (i) A majority in interest of the limited partners of the BRG Partnerships shall have provided a release of liability associated with BRG acting in the capacity as general partner of the BRG Partnerships in a form acceptable to Buyer. (j) Buyer shall have received an opinion of Conner & Winters, A Professional Corporation, dated as of the Closing Date, that addresses the matters set forth in Sections 4.1(a), 4.1(b), 4.1(c), 4.2, 4.3(a), 4.3(b) and 10.4 hereof, including such exceptions and assumptions as are customary in such opinions, in form and substance acceptable to Buyer. (k) The consents of all of the holders of the outstanding options to purchase shares of BRG stock and/or the amendments to the stock option agreements contemplated by Section 6.5 hereof shall have been obtained or agreed to by each of the holders of such stock options and Buyer shall have received evidence of such consents or amendments. (l) All credit cards and turnpike passes held in the name of BRG shall have either been canceled or a release of liability shall have been obtained and delivered to Buyer evidencing the release of any and all liability or obligation of BRG as to such credit cards and turnpike passes and such accounts shall have been transferred out of the name of BRG. (m) All of the participation program agreements entered into between BRG and James L. Burkhart, B.J. Reid, Robert E. Gee, Michael W. Burkhart and J. Keith Burkhart, shall have been terminated; provided, however, all obligations and benefits arising under such participation program agreements for prospects identified prior to the execution of this Agreement shall remain in full force and effect. (n) All amounts owing under the Special Loan Agreement dated August 30, 1996, between BRG and NationsBank, N.A. as ultimate successor to Bank IV Oklahoma, National Association and the Supplemental Loan Agreement dated December 31, 1996, between BRG and NationsBank, N.A., as successor to Boatman's National Bank of Oklahoma, shall have been fully satisfied and releases of all liens on BRG Properties shall have been obtained from the respective bank. (o) All intercompany indebtedness among BRG and its subsidiaries shall have been paid in full or otherwise eliminated and evidence thereof shall be provided to Buyer. 8.2 Conditions to Sellers' Obligations. The obligations of Sellers to sell the Shares, the BRG Partnership Properties and the 1997-I Properties pursuant to this Agreement shall, at the option of Sellers, be subject to the satisfaction, on or prior to the Closing Date, of the following conditions: (a) There shall have been no material breach by Buyer in the performance of any of its covenants and agreements herein; each of the representations and warranties of Buyer contained or referred to in this Agreement shall be true and correct on the Closing Date as though made on the Closing Date; and there shall have been delivered to Sellers a certificate to such effect, dated the Closing Date and signed on behalf of Buyer by the chief executive officer of Buyer. (b) There shall not be any injunction, judgment, order, decree, ruling, or charge in effect preventing consummation of any of the transactions contemplated by this Agreement; and Buyer shall have delivered to Sellers a certificate to such effect, dated the Closing Date and signed on behalf of Buyer by the chief executive officer of Buyer. (c) The parties shall have received all approvals and actions of or by all Governmental Bodies necessary to consummate the transactions contemplated hereby and which are required to be obtained prior to the Closing by applicable Requirements of Laws. (d) BRG shall have received the requisite approvals from the participants of the 1997-I Program for the sale of the 1997-I Properties and the BRG Partnerships shall have received the necessary consents required from the limited partners of the BRG Partnerships for the sale of the BRG Partnership Properties. (e) BRG shall have consummated a stock purchase agreement with BRG Petroleum Corporation, providing for, among other things, the sale of all of the capital stock of BRG Holding Company, Inc. and BRG Production Company to BRG Petroleum Corporation, and the consummation of the transactions contemplated thereunder shall have occurred prior to the Closing. (f) All actions to be taken by Buyer in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to Sellers. ARTICLE IX TERMINATION TERMINATION 9.1 Termination. Anything contained in this Agreement to the contrary notwithstanding, this Agreement may be terminated at any time prior to the Closing Date: (a) by the mutual consent of Buyer and Sellers; (b) by Buyer or Sellers if the Closing shall not have occurred on or before June 15, 1998 (or such later date as may be mutually agreed to by Buyer and Sellers), for any reason other than the breach or default by the party desiring to terminate; (c) by Buyer in the event of any material breach or breaches by Sellers of any of Sellers' agreements, representations or warranties contained herein; (d) by Sellers in the event of any material breach by Buyer of any of Buyer's agreements, representations or warranties contained herein. 9.2 Notice of Termination. Any party desiring to terminate this Agreement pursuant to Section 9.1 shall give notice of such termination to the other party to this Agreement. 9.3 Effect of Termination. In the event that this Agreement shall be terminated pursuant to this Article IX, all further obligations of the parties under this Agreement shall be terminated without further liability of any party to the other, provided that nothing herein shall relieve any party from liability for its breach of this Agreement. Notwithstanding the preceding sentence, the provisions of Sections 2.3, 7.3 and 7.4 , and the Confidentiality Agreement (which shall continue pursuant to its terms) shall survive any termination hereof pursuant to Section 9.1. ARTICLE X GENERAL PROVISIONS 10.1 Survival of Representations, Warranties, Covenants and Agreements/Indemnities (a) Except as provided in this Section 10.1(a), none of the representations, warranties, covenants or agreements contained in this Agreement or in any instrument delivered pursuant to this Agreement, and no agreements or obligations arising under the Confidentiality Agreement, shall survive the consummation of the transactions contemplated hereunder. The representations and warranties contained in Sections 4.2, 4.3, 4.8, and 4.28 and the agreements contained in Sections 6.7, 7.1, 7.3, 7.5, 7.6, and 7.8, and the certificates delivered at Closing, to the extent pertaining to such representations, warranties and agreements, shall survive the Closing until the first anniversary of the Closing Date at which time they shall expire. The representations and warranties contained in Sections 4.1, 4.16, 4.32, 6.4, 6.6., 7.7., 7.9 and 7.10 and Article 10 and the certificates delivered at Closing, to the extent pertaining to such representations, warranties and agreements, shall survive the Closing until the expiration of the applicable limitations period. Notwithstanding the foregoing, any representation, warranty or agreement that is the subject of a Claim Notice timely delivered shall survive with respect to the specific matter described in the such Claim Notice until the earlier to occur of (i) the date on which a final nonappealable resolution of the matter described in such Claim Notice has been reached or (ii) the date on which the matter described in such Claim Notice has otherwise reached final resolution. (b) Sellers severally and not jointly hereby agree to protect, defend, indemnify and hold harmless Buyer and BRG and their respective affiliates, officers, directors, agents and representatives (the "Indemnitees") from and against, (i) all Taxes imposed and all costs and expenses (including, without limitation, litigation costs and reasonable attorneys' and accountants' fees and disbursements) incurred as a result of a claim, notice of deficiency, or assessment by, or any obligation owing to, any taxing authority for: (A) Any Taxes of BRG or any BRG Partnership attributable to any Pre-Closing Taxable Period to the extent such Taxes exceed the aggregate amount accrued or reserved for Taxes on the Closing Date Balance Sheet (the "Tax Accrual"); provided, however, that amounts accrued or reserved for deferred Taxes established to reflect timing differences between book and Tax income shall not be included in the Tax Accrual. (B) Any Taxes of any entity (other than BRG and the BRG Partnerships) that is or was a member of any group of entities filing a consolidated, combined or unitary Tax Return of which BRG or any BRG Partnership was a member at any time on or prior to the Closing Date; (C) Any Taxes attributable to the transactions contemplated by this Agreement other than any Taxes that may be incurred as a result of an election made or other action taken by Buyer or BRG after the Closing, including any election under Section 338 of the Code; and (ii) all Damages arising out of, resulting from or relating to any breach of the representations and warranties or obligations of Sellers that survive the Closing under this Agreement. Notwithstanding anything in this Agreement to the contrary, no indemnification payment for Damages suffered or incurred by an Indemnitee shall be made to such Indemnitee, until the amount which all Indemnitees under this Agreement would otherwise be entitled to receive as indemnification under this Agreement aggregates in excess of the sum of $1,000,000 (such sum, hereinafter, the "Threshold"), at which time each Indemnitee shall be entitled to recover any and all amounts for which a claim for indemnity has theretofore been made, in excess of the amount of the Threshold. Each Seller other than those Sellers listed in Schedule 10.1 (the "Principal Sellers"); shall be obligated to indemnify the Indemnitees only for such Seller's pro rata portion (based on such Sellers' relative ownership interests) of any Damages which are attributable to the entity or assets in which such Seller had an ownership interest. The Sellers listed in Schedule 10.1 shall be jointly and severally liable to any Indemnitee for indemnification claims hereunder; provided, however, that the limitation provided in the last sentence of this subparagraph (b) shall still be applicable and that such Sellers shall have rights of contribution from all other Sellers who may be liable for any such claim. No claim for indemnification may be submitted under subparagraph (i) hereof after the limitations period for asserting or claiming an assessment by a Governmental Body or other taxing authority has expired or would have expired but for extensions of filing any returns or tolling or extensions of the applicable limitations period that may have been obtained, requested or agreed to subsequent to Closing. No claim for indemnification may be submitted under subparagraph (ii) after the expiration of the survival period provided for in subparagraph (a). No Seller shall be liable for indemnification hereunder for an amount in excess of the portion of the Purchase Price finally received by him, her or it after all adjustments. (c) All claims for indemnification under this Agreement shall be asserted and resolved as follows: (i) To make claim for indemnification under this Agreement, an indemnified party shall notify the indemnifying party of its claim under the applicable indemnity, including the specific details of and specific basis under this Agreement for its claim (the "Claim Notice"). In the event that the claim for indemnification is based upon a claim by a third party against the indemnified party (a "Claim"), the indemnified party shall provide its Claim Notice promptly after the indemnified party has actual knowledge of the Claim and shall enclose a copy of all papers (if any) served with respect to the Claim; provided that the failure of any indemnified party to give notice of a Claim as provided in this Section 10.1(c) shall not relieve the indemnifying party of its obligations under the indemnities set forth in this Agreement except to the extent such failure results in insufficient time being available to permit the indemnifying party to effectively defend against the Claim or otherwise prejudices the indemnifying party's ability to defend against the claim. In the event that the claim for indemnification is based upon an inaccuracy or breach of a representation, warranty, covenant or agreement that survives the Closing, then the Claim Notice shall specify the representation, warranty, covenant or agreement which was inaccurate or breached. (ii) In the case of a claim for indemnification based upon a Claim, the indemnifying party shall have 30 days from its receipt of the Claim Notice to notify the indemnified party whether it admits or denies its liability to defend the indemnified party against such Claim at the sole cost and expense of the indemnifying party. The indemnified party is authorized, prior to and during such 30-day period, to file any motion, answer or other pleading that it shall deem necessary or appropriate to protect its interests or those of the indemnifying party and that is not prejudicial to the indemnifying party. (iii) If the indemnifying party admits its liability, it shall have the right and obligation to diligently defend, at its sole cost and expense, the Claim. The indemnifying party shall have full control of such defense and proceedings, including any compromise or settlement thereof. If requested by the Indemnifying Party, the indemnified party agrees to cooperate in contesting any Claim which the indemnifying party elects to contest. The indemnified party may participate in, but not control, any defense or settlement of any Claim controlled by the indemnifying party pursuant to this Section. An indemnifying party shall not, without the written consent of the indemnified party, (i) settle any Claim or consent to the entry of any judgment with respect thereto which does not include an unconditional written release of the indemnified party from all liability in respect of such Claim or (ii) settle any Claim or consent to the entry of any judgment with respect thereto in any manner that may materially and adversely affect the indemnified party (other than as a result of money damages covered by the indemnity). (iv) If the indemnifying party does not admit its liability or admits its liability but fails to diligently prosecute or settle the Claim, then the indemnified party shall have the right to defend against the Claim at the sole cost and expense of the indemnifying party, with counsel of the indemnified party's choosing, subject to the right of the indemnifying party to admit its liability and assume the defense of the Claim at any time prior to settlement or final determination thereof. If the indemnifying party has not yet admitted its liability for a Claim, the indemnified party shall send written notice to the indemnifying party of any proposed settlement and the indemnifying party shall have the option for 10 days following receipt of such notice to (i) admit in writing its liability for the Claim and (ii) if liability is so admitted, reject, in its reasonable judgment, the proposed settlement. (v) In the case of a claim for indemnification not based upon a Claim, the indemnifying party shall have 30 days from its receipt of the Claim Notice to (i) cure the losses or damages complained of, (ii) admit its liability for such losses or damages or (iii) dispute the claim for such losses or damages. If the indemnifying party does not notify the indemnified party within such 30 day period that it has cured the losses or damages or that it disputes the claim for such losses or damages, the amount of such losses or damages shall conclusively be deemed a liability of the indemnifying party hereunder. (d) Any outstanding breach on or as of the Closing Date of the representations, warranties, covenants or agreements contained in this Agreement or in any instrument delivered pursuant to this Agreement is deemed to be waived by the party entitled to the benefit thereof, upon the Closing of the transactions contemplated hereunder to the extent such breach is known to such party as acknowledged in writing. Following the Closing Date, no suit or action may be commenced for claims based on a breach of the representations, warranties, covenants or agreements contained in this Agreement or in any instrument delivered pursuant to this Agreement that do not survive the Closing which is alleged to have occurred on or prior to the Closing Date. To the extent that Buyer has knowledge of any breach by Sellers of their representations or warranties herein prior to the execution of this Agreement, Sellers acknowledge that Buyer shall not be deemed to have waived any of its rights or remedies hereunder with respect to any such breach. 10.2 No Reliance. Except as to the representations and warranties of Sellers expressly set forth in Article IV hereof any of the closing certificates and schedules delivered pursuant to this Agreement, Buyer has not relied upon any oral or written statements, representations, or warranties which may have been made by or on behalf of Sellers or upon any written reports, financial data, business plans, projections, forecasts or any environmental reports, audits, studies or assessments, copies of which may have been furnished to Buyer or as to which Buyer may have been provided access in connection with the transactions contemplated by this Agreement. TO THE EXTENT THAT BUYER HAS BEEN FURNISHED COPIES OF OR BEEN PROVIDED ACCESS TO ANY OF THE FOREGOING, BUYER ACKNOWLEDGES THAT NEITHER SELLERS NOR ANY OF THEIR RESPECTIVE SUBSIDIARIES, OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES AND AGENTS, HAS MADE, AND HEREBY EXPRESSLY DISCLAIM, ANY REPRESENTATIONS OR WARRANTIES AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION, DATA OR MATERIALS (WHETHER WRITTEN OR ORAL) WHICH MAY HAVE BEEN FURNISHED TO BUYER OR ITS REPRESENTATIVES OR AGENTS BY OR ON BEHALF OF SELLERS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY. Notices. All notices or other communications required or permitted hereunder shall be in writing and shall be deemed given or delivered (i) when delivered personally, (ii) if transmitted by fax, when confirmation of transmission is received, or (iii) if sent by registered mail, return receipt requested, or by private courier, when received; and shall be addressed as follows: If to Buyer, to: Seagull Energy E&P Inc. 1001 Fannin, Suite 1700 Houston, Texas 77002 Attention: K. R. Sanders, Vice President-Exploitation, Engineering & Acquisitions With a copy to: Vinson & Elkins L.L.P. 2300 First City Tower 1001 Fannin Houston, Texas 77002 Attention: J. Mark Metts If to Sellers or Sellers' Representative, to: BRG Petroleum Corporation 7134 South Yale Suite 600 Tulsa, Oklahoma 74136 Attention: President with a copy to: Conner & Winters, A Professional Corporation 3700 First Place Tower 15 East Fifth Street Tulsa, Oklahoma 74103 Attention: Lynnwood R. Moore, Jr. or to such other address as such party may indicate by a notice delivered to the other party hereto. 10.4 Representation of Sellers by Sellers' Representative. Each of the Sellers hereby irrevocably appoints BRG Petroleum Corporation (the "Sellers' Representative") the agent and attorney-in-fact of each of the Sellers for the purposes of acting in the name and stead of such Seller in: (i) receiving, holding and distributing the Purchase Price and paying any associated costs and expenses of the transactions hereunder required to be paid by such Seller; (ii) giving and receiving all notices permitted or required by this Agreement and acting on Sellers' behalf under Section 6.8 hereof for all purposes; (iii) delivering the certificates for the Shares endorsed by Sellers or accompanied by stock powers executed by Sellers to Buyer at Closing and any and all assignments relating thereto; (iv) agreeing with Buyer as to any amendments to this Agreement which the Sellers' Representative may deem necessary or advisable, including but not limited to the extension of time in which to consummate the transactions contemplated by this Agreement, and the waiver of any closing conditions; (v) employing legal counsel; (vi) paying any legal and any other fees and expenses incurred by the Sellers' Representative in consummating the transactions contemplated by this Agreement; and (vii) making, executing, acknowledging, and delivering all such contracts, orders, receipts, notices, requests, instructions, certificates, letters, and other writings, and in general doing all things and taking all actions which the Sellers' Representative, in its sole discretion, may consider necessary or proper in connection with or to carry out the terms of this Agreement, as fully as if such Sellers were personally present and acting. This power of attorney and all authority conferred hereby is granted and conferred subject to the interests of the other parties to this Agreement, and in consideration of those interests and for the purpose of completing the transactions contemplated hereby, this power of attorney and all authority conferred hereby shall be irrevocable and shall not be terminated by Sellers or by operation of law, whether by the death, incompetency or incapacity of the BRG Shareholders or 1997-I Program Participants, or any of them, or by the occurrence of any other event. If any BRG Shareholder should die or become incompetent or incapacitated, or any other event should occur before the delivery of certificates representing the Shares pursuant to this Agreement, such certificates shall be delivered by or on behalf of such BRG Shareholder in accordance with the terms and conditions of this Agreement, and all actions taken by the Sellers' Representative pursuant to this Agreement shall be as valid as if such death, incompetence, or incapacity or other event had not occurred, regardless of whether Buyer or the Sellers' Representative, or any of them, shall have received notice of such death, incompetence, incapacity, or other event. 10.5 Successors and Assigns. Assigns (a) The rights of the parties under this Agreement shall not be assignable by any such parties hereto prior to the closing without the written consent of the other. Following the Closing, either party may assign any of its rights hereunder, but no such assignment shall relieve it of its obligations hereunder. (b) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors and permitted assigns. The successors and permitted assigns hereunder shall include, without limitation, any permitted assignee as well as the successors in interest to such permitted assignee (whether by merger, liquidation (including successive mergers or liquidations) or otherwise). Nothing in this Agreement, expressed or implied, is intended or shall be construed to confer upon any Person other than the parties and successors and assigns permitted by this Section 10.5(b) or any indemnified Person any right, remedy or claim under or by reason of this Agreement. 10.6 Entire Agreement; Amendments. This Agreement and the Exhibits and Schedules referred to herein and the documents delivered pursuant hereto and the Confidentiality Agreement contain the entire understanding of the parties hereto with regard to the subject matter contained herein or therein, and supersede all prior agreements, understandings or letters of intent between or among any of the parties hereto. This Agreement shall not be amended, modified or supplemented except by a written instrument signed by an authorized representative of Buyer and the Sellers' Representative. 10.7 Waivers. Any term or provision of this Agreement may be waived, or the time for its performance may be extended, by the party or parties entitled to the benefit thereof. Any such waiver shall be validly and sufficiently given for the purposes of this Agreement if, as to any party, it is in writing signed by an authorized representative of such party. The failure of any party hereto to enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of any party thereafter to enforce each and every such provision. No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach. 10.8 Partial Invalidity. Wherever possible, each provision hereof shall be interpreted in such manner as to be effective and valid under applicable law, but in case any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such provision shall be ineffective to the extent, but only to the extent, of such invalidity, illegality or unenforceability without invalidating the remainder of such provision or provisions or any other provisions hereof, unless such a construction would be unreasonable. 10.9 Execution in Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be considered an original instrument, but all of which shall be considered one and the same agreement, and shall become binding when one or more counterparts have been signed by each of the parties hereto and delivered to each of Sellers and Buyer. 10.10 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws (as opposed to the conflicts of law provisions) of the State of Oklahoma. 10.11 Certain Individuals. Each of James L. Burkhart and Robert E. Gee are executing this Agreement in his individual capacity and as a trustee of a trust. All references in this Agreement to "Sellers" and to the "BRG Shareholders" shall be deemed to also include each such individual in his individual capacity to the extent that such references would be applicable to the trust on whose behalf such individual executed this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed the day and year first above written. BUYER: SEAGULL ENERGY E&P INC. By: Barry J. Galt, Chairman of the Board SELLERS: James L. Burkhart,Individually, and as Trustee of the James L. Burkhart Living Trust dated September 17, 1997 B. J. Reid Robert E. Gee, Individually, and as Trustee of the Gee Family Trust u/t/d 12/23/92 BKM Family Limited Partnership By: Robert E. Gee, General Partner Jere Lynn Burkhart, Individually, and as Trustee of the Jere Lynn Burkhart Living Trust dtd /17/97 Michael W. Burkhart J. Keith Burkhart Jamie Lynn Burkhart Hunt, by James L. Burkhart, Attorney-in-Fact James Bryan Burkhart, by James L. Burkhart, Attorney-in-Fact Matthew Michael Burkhart, by James L. Burkhart, Attorney-in-Fact Joshua Keith Hunt, by James L. Burkhart, Attorney-in-Fact John Michael Hunt, by James L. Burkhart, Attorney-in-Fact M. Faye Irwin, by James L. Burkhart, Attorney-in-Fact Boyce W. Irwin, by James L. Burkhart, Attorney-in-Fact William R. Irwin, by James L. Burkhart, Attorney-in-Fact Denise G. Irwin MacDougall, by James L. Burkhart, Attorney-in-Fact Sarah H. Marcum, by Robert E. Gee, Attorney-in-Fact Bruce C. Johnson, by Robert E. Gee, Attorney-in-Fact Meg Stuart Maloney, by Robert E. Gee, Attorney-in-Fact William L. Gee, by Robert E. Gee, Attorney-in-Fact BRG 1998 Consolidated Limited Partnership By: BRG Petroleum, Inc., General Partner By: James L. Burkhart, President BRG 1997 Consolidated Limited Partnership By: BRG Petroleum, Inc., General Partner By: James L. Burkhart, President BRG 1996-I Oil & Gas Limited Partnership By: BRG Petroleum, Inc., General Partner By: James L. Burkhart, President BRG 1996-II Oil & Gas Income Fund Limited Partnership By: BRG Petroleum, Inc., General Partner By: James L. Burkhart, President BRG 1993-I Oil and Gas Limited Partnership By: BRG Petroleum, Inc., General Partner By: James L. Burkhart, President BRG 1992-I Oil & Gas Income Fund Limited Partnership By: BRG Petroleum, Inc., General Partner By: James L. Burkhart, President BRG 1990-II Oil and Gas Limited Partnership By: BRG Petroleum, Inc., General Partner By: James L. Burkhart, President BRG 1989-II Oil & Gas Income Fund Limited Partnership By: BRG Petroleum, Inc., General Partner By: James L. Burkhart, President Each of those Participants in the BRG 1997-I Oil and Gas Program Listed on Attachment A hereto By: BRG Petroleum, Inc., as Program Administrator By: James L. Burkhart, President SELLERS' REPRESENTATIVE: BRG PETROLEUM CORPORATION By: James L. Burkhart, Chairman of the Board EXHIBIT A Form of Conveyance, Assignment and Bill of Sale EX-27.1 10 FDS 3/31/98
5 1,000 3-MOS DEC-31-1998 MAR-31-1998 17,729 0 132,319 0 14,345 179,754 2,107,581 947,956 1,381,525 183,648 469,016 0 0 6,391 644,540 1,381,525 122,325 122,325 14,763 104,740 (532) 0 8,547 6,186 3,031 3,155 0 0 0 3,155 0.05 0.05
EX-27.2 11 FDS - QTR 1997 RESTATED
5 1,000 3-mos 6-mos 9-mos Dec-31-1997 Dec-31-1997 Dec-31-1997 Mar-31-1997 Jun-30-1997 Sep-30-1997 27,283 29,465 15,755 0 0 0 135,949 149,346 146,049 0 0 0 15,486 13,638 18,271 191,539 207,720 196,505 2,099,143 2,177,335 2,241,442 844,353 890,298 933,638 1,490,268 1,537,768 1,548,277 189,982 210,415 207,534 564,936 588,752 604,783 0 0 0 0 0 0 6,334 6,343 6,375 609,884 613,919 615,789 1,490,268 1,537,768 1,548,277 159,573 281,753 402,408 159,573 281,753 402,408 16,722 23,966 28,523 110,657 211,913 314,218 (698) (913) (1,539) 0 0 0 10,410 19,995 29,985 36,894 45,335 49,427 19,640 25,460 26,350 17,254 19,875 23,077 0 0 0 0 0 0 0 0 0 17,254 19,875 23,077 0.27 0.31 0.36 0.27 0.31 0.36 Earnings per share has been restated to reflect the Company's adoption of Statement of Financial Accounting Standards No. 128, "Earnings Per Share."
EX-27.3 12 FDS - QUARTER 1996 RESTATED
5 1,000 3-mos 6-mos 9-mos Dec-31-1996 Dec-31-1996 Dec-31-1996 Mar-31-1996 Jun-30-1996 Sep-30-1996 38,044 31,205 32,937 0 0 0 139,778 120,982 107,232 0 0 0 6,618 6,806 14,080 199,301 168,233 165,355 1,807,328 1,862,023 1,973,664 689,218 717,319 751,857 1,364,512 1,358,892 1,432,383 136,534 137,984 133,193 546,535 538,882 604,583 0 0 0 0 0 0 6,280 6,296 6,304 571,227 569,960 577,915 1,364,512 1,358,892 1,432,383 136,575 248,864 358,795 136,575 248,864 358,795 16,200 22,457 26,974 95,471 189,510 277,607 (1,155) (1,919) (7,151) 0 0 0 11,446 22,683 33,478 27,084 30,227 43,864 8,772 14,849 21,028 18,312 15,378 22,836 0 0 0 0 0 0 0 0 0 18,312 15,378 22,836 0.29 0.24 0.36 0.29 0.24 0.36 Earnings per share has been restated to reflect the Company's adoption of Statement of Financial Accounting Standards No. 128, "Earnings Per Share."
EX-27.4 13 FDS - 1996 AND 1995 RESTATED
5 1,000 Year Year Dec-31-1996 Dec-31-1995 Dec-31-1996 Dec-31-1995 15,284 21,477 0 5,004 193,659 133,190 0 0 12,285 5,488 227,617 181,431 2,049,356 1,783,163 804,715 652,985 1,515,063 1,359,125 231,370 146,192 573,455 557,107 0 0 0 0 6,307 6,598 591,423 556,023 1,515,063 1,359,125 517,211 406,280 517,211 406,280 42,600 46,328 396,335 421,281 3,745 (90,791) 0 0 44,842 52,978 54,856 1,044 25,895 2,782 25,895 (1,738) 0 0 0 0 0 0 25,895 (1,738) 0.46 (0.03) 0.46 (0.03) Earnings per share has been restated to reflect the Company's adoption of Statement of Financial Accounting Standards No. 128, "Earnings Per Share."
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